15
Aug 2024
Healthcare Property Fund: Private Hospital Challenges Expected to Be Temporary
Published in General on August 15, 2024
 
                                                            Sid Sharma, Managing Director of Real Estate at HMC Capital, has expressed confidence in the stability of private hospitals within the fund manager's portfolio, stating that there is "very limited risk" of these facilities closing. This outlook is supported by the strong demand for critical care services, which bodes well for the sector's long-term prospects.
These comments were made following the announcement that HealthCo Healthcare & Wellness REIT, listed on the ASX, reported a 16% increase in full-year earnings for FY24, aligning with expectations. The trust, part of David Di Pilla's HMC Capital, anticipates a 5% growth in earnings and distributions for the upcoming financial year, driven by inflation-indexed rents and income from newly completed projects, including hospital expansions.
Despite the broader trend of declining commercial property values, HCW reported a 2.3% gross gain across its $1.6 billion portfolio. This was primarily due to rental growth, which offset the impact of rising cap rates.
Mr Sharma emphasized the critical role private hospitals play in Australia's healthcare system, pointing out that while some private hospitals have closed recently, the facilities in HCW's portfolio are different in nature. These are acute care centres located in high-quality metropolitan areas with a high volume of patients, making them essential social infrastructure.
Even as Healthscope, owned by Brookfield, recorded a $919 million write-down earlier this year amid rising costs, it maintained its lease obligations to HCW and the $1.3 billion unlisted healthcare trust, which includes seven Healthscope hospitals.
Sharma believes the ongoing discussions between private hospital operators and insurers regarding revenue and costs are temporary and expects a balanced resolution. He also noted that as a real estate owner, HCW is in a strong legal position, ensuring protection regardless of the outcomes of these debates.
In FY24, HCW achieved funds from operations (FFO) of 8¢ per unit, totaling $45.3 million, in line with forecasts. The trust paid an 8¢ per unit distribution and expects FFO of 8.4¢ per unit for FY25, with similar distribution expectations. HCW's portfolio maintained a 99% occupancy rate and collected 100% of rent invoiced. However, statutory profit declined by 66% to $7.3 million.
Analysts, like Bell Potter's Andy MacFarlane, have noted that HCW's guidance for FY25 places it among the few REITs expected to see earnings growth. Investors responded positively, with the trust’s stock price rising 2.1% to $1.20 on Monday.
Private hospitals contributed 57% of HCW's income in FY24, making up nearly two-thirds of its $1.6 billion portfolio, including pharmacies, aged care facilities, government research laboratories, and childcare centres. The trust's hospital investments include a 50.4% stake in a $1.3 billion unlisted healthcare trust (UHT) that owns seven Healthscope hospitals and recently raised $650 million in equity.
Over FY24, HCW sold $195 million worth of assets, primarily childcare and medical centres, at around a 6% discount to their book value. Senior portfolio manager Christian Soberg described this as an "attractive" outcome, given the sharper declines in other real estate subsectors.
According to analysts at Jarden, combining a solid FY25 outlook, additional asset sales to fund a buyback, lower gearing, and efforts to reduce the stock's large discount suggests that HCW's shares should perform well.
When considering hospital stays, especially for critical care, patients often require specialized accommodation, either within the hospital or nearby. According to studies, the length of hospital stays can significantly impact the need for such hospital accommodations, particularly in cases involving complex or long-term treatments. Private hospitals, like those in HCW's portfolio, play a crucial role in providing these facilities, ensuring that patients and their families have access to the necessary care and support during their stay.
 
                                                                                     
                                                                                     
                                                                                     
                                                                                     
                                                                                     
                                                                                     
                                                                                     
                                                                                    ![“Surprise Noises Can Feel Like Pain”: New Airport Rule Eases Travel for Autistic Passengers Emma Beardsley once dreaded going through airport security. “I used to panic every time they made me take my headphones off at security,” she recalls. “The noise and the unpredictability can be overwhelming.” Now, thanks to a new policy allowing noise-cancelling headphones to remain on during security checks, Beardsley says she can “travel more confidently and safely.”
In Australia, one in four people lives with a disability, yet the travel system has often failed to accommodate varied needs. Autism-inclusion advocates at Aspect Autism Friendly have welcomed the government’s updated guidelines that let autistic travellers keep their noise-reducing headphones on during screening, calling it a “major step” toward more accessible air travel.
Dr Tom Tutton, head of Aspect Autism Friendly, emphasises the significance of travel in people’s lives: it connects them with family, supports work and learning, and offers new experiences. But he notes the typical airport environment can be especially intense for autistic travellers:
“Airports are busy, noisy, random and quite confusing places … you’ve got renovations, food courts, blenders, coffee grinders, trolleys clattering … and constant security announcements. It’s really, really overwhelming.”
“What might be an irritation for me is something that would absolutely destroy my colleague [who has autism]. Surprise noises of a certain tone or volume can genuinely be experienced as painful.”
Under the new policy — now published on the Australian Government’s Department of Home Affairs website — passengers who rely on noise-cancelling headphones as a disability support may request to wear them through body scanners. The headphones may undergo secondary inspection instead of being forcibly removed.
Dr Tutton describes this adjustment as small in procedure but huge in impact: it removes a key point of sensory distress at a critical moment in the journey. Aspect Autism Friendly is collaborating with airports to ensure that all security staff are informed of the change.
For many autistic travellers, headphones aren’t just optional — they are essential to navigating loud, unpredictable environments. Until now, being required to remove them during security has caused distress or even deterred travel.
Aspect Autism Friendly also works directly with airports, offering staff training, autism-friendly audits, visual stories, sensory maps, and other accommodations. Their prior collaborations include autism-friendly initiatives with Qantas. Dr Tutton notes:
“Airports have become this big focus for us of trying to make that little bit of travel easier and better.”
He advises people planning trips for travellers with disabilities to consult airport websites ahead of time. Some airports already offer quiet rooms or sensory zones — Adelaide, for instance, provides spaces where travellers can step away from the noise and regroup before boarding.
Beyond helping autistic individuals, Dr Tutton believes that more accessible airports benefit everyone. “These supports help lots of other people too,” he says. “When people are more patient, kind and supportive, the benefits flow to everyone. We all prefer environments that are well-structured, sensory-friendly, predictable and easy to navigate.”](https://c3eeedc15c0611d84c18-6d9497f165d09befa49b878e755ba3c4.ssl.cf4.rackcdn.com/photos/blogs/article-1061-1759742013.jpg) 
                                                                                    