NorthWest to Buy $900M Hospital Portfolio in Australia

Brisbane Private Hospital

Toronto-based NorthWest Healthcare Properties Real Estate Investment Trust recently entered into a definitive agreement that will increase its presence in Australia by 11 properties. The REIT will purchase a 1,539-bed portfolio from Sydney-based Healthscope Ltd. in a sale-leaseback transaction valued at approximately $920 million. Northwest announced the potential deal last year.

“The scale and strategic nature of the acquisition also positions the REIT to leverage its existing global platform and capital relationships,” Paul Dalla Lana, chairman & CEO of NorthWest Healthcare Properties Real Estate Investment Trust, said in a prepared statement

The Healthscope portfolio—located predominantly in leading metropolitan centers in Melbourne, Sydney and Brisbane—encompasses acute, rehabilitation and psychiatric hospitals, including the 181-bed Brisbane Private Hospital in Brisbane, Queensland, and the 277-bed Norwest Private Hospital in suburban Sydney. According to a 2018 report by CBRE, “Private hospitals are an integral part of Australia’s health-care system and have outperformed commercial core commercial real estate returns.”

Healthscope, the second largest private hospital operator in Australia, will continue to occupy the facilities in their entirety under long-term, quadruple net leases with an average length of 20 years. Additionally, the portfolio comes with a $400 million pipeline of brownfield developments and capital projects. 

NorthWest plans to partially finance the portfolio acquisition with an approximately $540 million property-level debt facility. The transaction is on schedule to close in the second quarter of 2019, after which the REIT will serve as manager of the 11 properties.

Buying and selling

NorthWest has been busy fine-tuning its portfolio through acquisitions and dispositions, large and small. Transactions in 2018 included the sale of the approximately 416,600-square-foot Dundas-Edward Center office development in Toronto for roughly $129 million. The REIT also entered into agreements to purchase three medical office assets and two post-acute care hospitals in Germany, as well as five hospitals in Australia and New Zealand for a total of approximately $239.5 million. More major acquisitions are likely on the horizon for the company.

“In our markets, most of our operators, most of our partners continue to be relatively asset-heavy and need the capital sources that we provide, whether it’s part of natural growth or in the extreme situations like Healthscope,” Lana said during NorthWest’s third quarter 2018 earnings conference call, Nov. 12, 2018.

Image via Google Street View