Hospitals fund in expansion phase

THE Generation Healthcare REIT, now under the management of APN Property, will focus on new developments and expansion this year as it consolidates its new branding.

THE Generation Healthcare REIT, now under the management of APN Property, will focus on new developments and expansion this year as it consolidates its new branding.

The $200 million fund was previously managed by ING but the rights were sold late last year by the Dutch ING parent company to APN Property. It is the only listed healthcare trust on the stock exchange and competes with unlisted operators such as Australian Unity.

Although in its infancy, the group owns, partially or wholly, a range of seven private hospitals in Victoria including the Epworth hospitals. Speaking after its interim results yesterday the chief executive, Miles Wentworth, said the fund, with the backing of APN, would step up its expansion program this year, including into NSW.

The APN chief executive, David Blight, said private healthcare was attractive and plans were afoot for expansion into the sector.

For the half year to December 31, the group reported a profit of $2.5 million, up 19 per cent. The interim distribution was 3.34? per security. Mr Wentworth forecast a full year operating income of $5 million, and a full year distribution of 6.68?.

The properties have an average lease expiry of 11.6 years and at least two have adjoining land that can be developed for added value.

"We are looking for greenfields opportunities where we can construct a site with a pre-committed tenant. Under our system, we build the shell and the tenant installs the necessary equipment to their own specifications," he said.

"Healthcare investment through hospitals gets the advantage of the ageing population as well as general admissions, and is a growing sector."

Mr Wentworth said after the sale of the management to APN, the group now had the stability to expand and as more properties were added the income would be self-generating. As with the rest of the Australian real estate investment trust sector, Generation Healthcare's net tangible asset backing is at a deep discount to the share price. And while it is one of the smallest REITs listed, it will aggressively pursue opportunities to close that gap.

Mr Wentworth said the directors were about to go on a "roadshow" to see property analysts because accurate valuations of a healthcare REIT have so far not been undertaken.

However, share analysts have said they believe the private hospital and healthcare sector is lucrative because more people use such facilities compared with the more limited retirement and aged care industry.

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