A strong pulse beats in health properties

There are only two opportunities for investing in hospitals and healthcare properties and it comes down to whether you want something listed or unlisted.

The only real estate investment trust (REIT) dedicated to healthcare properties is Generation Healthcare, which trades on the ASX under the code GHC.

"It's even better owning the property because it's more secure," says Howard Brenchley, the executive director of APN Property Group, which manages it. "Rents are steadily going up. And it's hard to get exposure to this sector."

Generation has also had a good year, despite a big profit drop due to an unfortunate derivatives play, but its 27 per cent price rise lags the 33 per cent gain in healthcare stocks and, more to the point, still leaves it valued at less than its properties are worth even after taking borrowings into account.

It trades a few cents below its underlying value, a common feature of REITs. The positive is that REITs aren't shy about giving either profit or payout forecasts for the next year, unlike the rest of corporate Australia.

In this case, profits are expected to rise 10 per cent and the distribution would be 7.34? a share, mostly tax deferred, giving a yield of 7.6 per cent.

Another listed REIT, Ingenia (INA), has a portfolio of retirement villages. Its price has doubled in a year but is still below the value of its properties.

The unlisted healthcare fund is the Healthcare Property Trust run by Australian Unity. Its recent performance has been disappointing, but it has averaged an annual 10.9 per cent return for the past seven years.

Its biggest client is the successful Ramsay Health Care operation, which runs a chain of private hospitals.