Two healthcare assets sell at auction

Two healthcare assets in Melbourne have attracted keen interest from private investors, at what has been billed as Australia’s first auction event within the sector.

CBRE’s inaugural Healthcare & Childcare Portfolio Auction, held in Melbourne on August 24, saw high net worth private investors snap up properties in Sydenham and Montrose, following competitive bidding.

This medical facility in Montrose sold for $1.82 million at the auction. Picture: realcommercial.com.au/sold

In Melbourne’s eastern suburbs 10 Leith Road, Montrose, a 252 sqm building occupied by Sia Medical, was purchased by a domestic investor for $1.82m.

The tenant has a seven-year lease with two five-year options, with the sale price reflecting a yield of 5.5 %.

In Melbourne’s north west, 530-532 Melton Highway, Sydenham sold under the hammer for $2.345 million.

The 339sqm building is leased to Capital Radiology on a five-year lease with an additional five-year option; the sale price reflects a yield of 5.07 %.

CBRE healthcare and social infrastructure senior negotiator Marcello Caspani-Muto – who was among a team of agents to develop the event – said there were 22 interested bidders for the Victorian assets, and a couple for a South Australian asset.

“There was a pretty strong number of bidders the room, which was probably a testament to the medical sector and that people are still looking to buy and there is still plenty of money out there trying to buy healthcare assets, as opposed to a lot of others that have kind of been pulled from auction at the moment [that are] not kind of achieving the same type of results,” he said.

“Now the yields have to be priced accordingly as well. The results at the end of 2021 to start of 2022 in the mid four per cents, are not going to be there today but the low five per cents at the moment is still a very strong result for a lot of people.

“Both properties sold to a decent amount above their reserve.”

Mr Caspani-Muto said there was a “big uplift” on the Montrose property, which was bought by the vendors two years ago for about $900,000.

 A third property –  90 Henley Beach Road in Mile End in Adelaide – was passed in and is under offer.

 Demand for healthcare assets to continue

 Scott O’Neill, director of commercial property buyers’ agency Rethink Investing, said medical assets had become one of the highest in-demand assets of any commercial property class.

“They are viewed by the general public as a safe haven/recession proof type of asset, which is obviously a drawcard as we have had years of uncertainty due to Covid and now the high inflation scenario,” he said.

“Medical assets like this are targeted also for their long lease. Due to this high security and recession proof nature, investors often pay a premium for these types of assets.”

Looking ahead to 2023, Mr O’Neill said demand for medical assets would remain high.

“However, due to medical assets generally selling at tighter yields than other asset classes, they may be prone to a yield softening due to the higher lending costs many investors may face,” he said.

“For example, for most commercial investors their lending rates will be four to five per cent now. So, if the asset is seeking a sub five per cent sale, you will be more reliant on cash buyers.”

Meanwhile, Ray White Commercial head of research Vanessa Rader all said medical assets were a small segment of the market but had grown during the past decade.

“The increase in specialist medical services has seen more and more of these allied health assets around as our population – not only is worrying about the young and old and more traditional health services –  but all age groups are utilising services such as physio, chiro, plastic surgery, cosmetic surgery, alternative therapies,” she said.

“So, now there is more opportunity to purchase and many investors continue to seek alternatives to diversify their portfolio, and also in the case of good yielding investments buyers look further afield from more traditional asset types.”

Ms Rader said there had always been good investment opportunities within the medical sector but the pandemic really shone a light on the industry.

“Our use of pathology, for example, increased so these facilities needed to grow and became quite lucrative investment options,” she said.