Three medical assets set to attract strong interest

Three healthcare facilities are set to go under the hammer this month, in what is being marketed as Australia’s inaugural dedicated portfolio auction within the sector.

In Melbourne, one site in Montrose in the eastern suburbs, and the another in Sydenham in the north west in addition to a site in Mile End, west of the Adelaide CBD will form CBRE’s maiden Australian Healthcare & Childcare Portfolio Auction in Melbourne on August 24.

CBRE healthcare and social infrastructure director Sandro Peluso said it was the first dedicated medical auction and likened the three assets’ “bulletproof ” secure tenants as akin to investing in a bank.

He said healthcare was a gold signature asset for a number of investors and the collective auction was an innovative idea for several reasons.

“Considering that a couple of these assets, the price points are similar; considering that a number of the investors are quite nimble and flexible if they purchase a radiology clinic, or a medical centre… there is an opportunity for a vendor to maximise price on the day,” he said.

“I think there’s always going to be a significant appetite for investors that would want to buy into this asset class because we have seen during the pandemic, in the worst part in stage four, when the majority of the facilities, when the majority of services were shut, that it’s pretty clear in the biggest pandemic the world has ever experienced, we have still got these businesses to operate, and service a customer base.”

The popularity of healthcare assets

More commercial property investors were looking to diversify their portfolios towards assets within the healthcare sector, PropTrack economist Anne Flaherty said.

“If you look at demand for healthcare assets, Australia has an ageing population, [which is] good news for the sector. Governments always provide assistance to the healthcare sector, so basically for investors looking for a defensive play, healthcare is a really good opportunity, ” she said.

“The pandemic was really a boon for the sector, we saw a big spike on realcommercial.com.au, and the numbers looking to purchase health related assets. Things like laboratories and pathology centres saw an increase and the need for those, which drove up demand for real estate for those kinds of businesses.”

Colliers head of healthcare and retirement living Ian Sanders said long WALEs, the nature of the underlying tenant and growth that was being fueled through government grants and investments, all the way through to health and education assistance, were among the incentives inducing investors in medical assets.

“We have seen a lot of competition for assets in premium places next to tertiary institutions and major tertiary hospitals,” he said.

When it came to looking at buy searches on realcommercial.com.au, searches to purchase medical and consulting assets remained strong, Ms Flaherty said.

“There were 5% more searches to buy these assets comparing June 2022 with June 2021,” she said.

“In contrast, every other asset type except office saw buy searches decline over this time.”

Properties set for auction

In Melbourne, the medical centre at 10 Leith Road, Montrose, spans 252 sqm and the tenant Sia Medical  has a seven year lease term with two five-year options. It has a per annum income of $108,000 and 3.5% fixed annual rent increases.

In Sydenham, 530-532 Melton Highway is tenanted by Capital Radiology with a five year lease term, with a five-year option. It has an annual income of $132,000 per annum and 3.5% fixed rent increases each year.

In South Australia, 90 Henley Beach Road, Mile End, has a floor space of 647 sqm and The Sports and Arthritis Clinic has a ten year lease with an income of $275,000 per annum.

10 Leith Road, Montrose is up for auction, and its tenant Sia Medical has a seven year lease in place. Picture: Supplied by CBRE

Mr Peluso said healthcare investments were incredibly rare in the broader commercial market, with only a handful transacted each year, mostly to high-net-worth privates or institutional buyers.

“When you talk about medical investments in the sub-$10million bracket this scarcity is compounded, and we regularly hear from private investors seeking quality opportunities in this space,” he said.

“This lack of availability fuelled our team’s desire to develop a dedicated auction event, giving private investors a platform to compete on a level and transparent playing field for what might be the only assets of this type offered in 2022.”