Alternatives Outlook 2024 Report

KEY TRANSACTIONS

Size AUD

Type

Name

Yield Buyer/Investor

Date

Direct

Healthscope Portfolio

1.2bn 5.3% HMC (HealthCo)

May-23

Southport Private Hospital

Direct

51.4m 5.6%

Dexus

Aug-23

HEALTHCARE Over the past five years the acquisition environment for Australian healthcare assets has been highly competitive with investors attracted to the sector’s strong covenants and the non-discretionary nature of underlying demand . While North-American REIT Northwest remains the largest owner of Australian healthcare real estate (approximately 13% of the investable universe), domestic investment managers (including Dexus, Barwon, Australian Unity, Centuria and HMC have dominated transaction volumes in recent years.

Epping Private Hospital & Medical Centre

KM Property Funds

Direct

76.0m 7.03%

Oct-23

Institutional capital continues to absorb prime assets, while secondary stock has appeal among syndicates and private investors. The sector has experienced some headwinds in 2023, including valuation pressure with capitalisation rates softening in response to the macroeconomic environment, including higher interest rates. In addition, an interesting dynamic facing the Australian healthcare sector are tightening margins across healthcare tenants / operators which poses risk to current rent levels in some instances.

It is likely that many secondary assets or those with weaker covenants will see continued valuation pressure in the first half of 2024, prompting investors to consider divesting lower grade assets. Prime hospitals are likely to remain tightly held. Cushman & Wakefield foresees an active 2024 for the healthcare sector with all major players expected to focus on development pipelines, as well as reassess their portfolios and capital requirements. Sector size estimate: AUD 40 billion Prime yields: 4.75%-6.00%

| AUSTRALIA ALTERNATIVES 7

CUSHMAN & WAKEFIELD