This article is from the Australian Property Journal archive
CENTURIA has launched into the healthcare real estate sector by acquiring a 63.06% stake in Heathley for $24.4 million.
The deal is a major shift for Heathley which initially entered into an arrangement with Dexus in October last year, selling a 28.5% stake for $11.3 million with an option for Dexus to acquire another 21.5%.
Dexus also committed to become a 10% cornerstone investor in an ASX-listed healthcare property trust. The initial public offering sought to raise $226.4 million for the new REIT, which would comprise 42 properties valued at $528.4 million. However, the IPO was shelved a month later with Heathley citing volatility in global capital markets.
Heathley has $620 million of assets under management in a variety of healthcare properties, including medical centres, day hospitals and tertiary aged care.
Centuria and Heathley will together form Centuria Heathley, boosting Centuria’s AUM to $6.2 billion.
Centuria group CEO John McBain said the transaction introduces a new asset class to Centuria’s expanding real estate platform and fully aligns it to the healthcare property sector though a preferred, specialised manager.
Healthcare real estate has produce higher total returns compared to traditional real estate sectors and is underpinned by Australia’s growing and ageing population. Healthcare expenditure accounted for $170 billion, growing a 4.7% over the 10 years to 2015-16 and is one of the largest contributors to Australia’s GDP at 10.3%.
“The Australian real estate healthcare sector is highly fragmented with a limited number of securitisation and institutional real estate managers servicing the asset class.
“Centuria Heathley has a unique opportunity to leverage Centuria’s in house real estate management and extensive national distribution capabilities in combination with Heathley’s extensive healthcare market experience, its deep relationships with healthcare partners and its strong pipeline,”
McBain said Centuria Heathley has capacity to expand to circa $1.0 billion AUM in the near term with known potential projects and has the ability to expand its asset footprint and unlock new retail and wholesale mandates within the sector.
“Heathley’s track record in healthcare property is second to none and we are delighted to be associated with Andrew Hemming and his management team. Centuria and Heathley are both mature funds management platforms with a long-standing respect for each other. Whilst it is intended that both groups will share services/offices in the near term it is important to note that Andrew Hemming will continue to lead Centuria Heathley with Centuria providing capital and equity distribution capability plus back office support, as required,” he added.
Heathley CEO Andrew Hemming added, “We are extremely confident that the combination of skills and attributes each partner brings to Centuria Heathley will not only accelerate growth in our traditional vehicles but will allow us to bring our pipeline forward, enabling us to execute on much larger assets and crystalise wholesale mandate discussions we are presently finalising.”
Centuria head of real estate Jason Huljich said establishing a large footprint in healthcare with such a well credentialed manager provides exposure to an asset class with sound underlying fundamentals and increasing national demand.
“Along with office and industrial, Centuria’s core real estate platform is now aligned to three strong performing real estate sectors and will gain further access to new unlisted retail and wholesale mandates.”
Under the arrangement, Centuria will hold a 63.06% economic interest and a 50% voting interest in Centuria Heathley, and will have a first right of refusal to acquire further Heathley shares and there is a call option and a put option over any remaining shares held by Heathley management after the first five years. On FY18 EBIT of $3.19 million the transaction implies a normalised EBIT multiple of 10x and adjusted NTA of $6.9 million.
Furthermore, Heathley is currently seeking to fund approximately $62 million to rebalance commercial obligations relating to two funds, HDMF2 and HACPF1. Centuria Heathley will seek to raise these funds by way of subscription into HDMF2 and HACPF1 using Centuria’s unlisted distribution network to raise new equity capital.
Australian Property Journal
