HealthCo Healthcare & Wellness REIT (ASX: HCW) has entered into arrangements alongside a newly established Unlisted Fund (Unlisted Fund) to acquire from Medical Properties Trust, Inc., a 100% interest in 11 private hospitals leased to Healthscope for a purchase price of $1,200m.
Key Highlights
- $1.2bn acquisition ($730m HCW share) secured on attractive terms with HMC Capital Limited (ASX: HMC) working jointly with Healthscope to negotiate a compelling transaction for all parties
- Key lease terms amended which materially improve the tenant covenant and rental growth
- Attractive 5.8% implied NOI yield with a forecast unlevered IRR of >9%
- Transformational acquisition which significantly improves the income security, scale and quality of HCW’s portfolio, underpinned by the 16-year WALE, absolute net lease and CPI-linked escalations6
- New Unlisted Fund provides complementary funding partner for HCW to unlock ~$1bn of accretive development opportunities post acquisition with a target ungeared ROIC of 6-8%
- HCW acquiring a 100% interest in four hospitals for $256m (Tranche 1); and a ~50% equity interest in the Unlisted Fund, which will acquire 7 hospitals for $944m (Tranches 2 & 3) (HCW Acquisition)
- $320m underwritten Equity Raising (Equity Raising) comprising a $89m institutional placement (Placement) and a $231m 1 f or 1.90 pro rata Accelerated Non-Renounceable Entitlement Of f er (Entitlement Offer)
- Strong support from HMC by committing to take up to $123m in the Entitlement Offer (including $75m of sub-underwriting), an HMC funded bonus unit (Bonus Unit) and an improved cost structure for HCW
- Attractive f inancial returns driving 7% FFO accretion on pro forma forecast 4Q FY23 FFO of 7.5cpu, with pro forma look through gearing maintained at midpoint of 30-40% target range9
- FY23 DPU guidance upgraded from 7.5 to 7.6cpu, implying a 5.9%10 yield on 4Q FY23 annualised DPU
- Increased free float and liquidity . HCW expected to be eligible for f ture S&P/ASX300 index inclusion
Today’s announcement marks a significant milestone in HCW’s strong growth trajectory since IPO less than two years ago,” HCW Senior Portfolio Manager, Sam Morris, said.
“An acquisition of this scale and quality is a rare opportunity to invest in an integrated network of private hospitals that serve as critical healthcare infrastructure. The result is a materially transformed HealthCo as it relates to income security, scale and quality of the portfolio, which is positioned to benefit from favourable long-term industry fundamentals.
“Our partnership with Healthscope has resulted in a much more compelling transaction with HCW benefiting from a significantly improved tenant covenant and rental growth upside via CPI-linked indexation and higher development returns. We expect the increase in free float and liquidity following the equity raising will result in HCW satisfying eligibility requirements for future S&P/ASX300 index inclusion.”
