HealthCo Healthcare and Wellness REIT unveils a mouth-watering $1.2bn deal

Nick Sundich, March 30, 2023

HealthCo Healthcare and Wellness REIT (ASX:HCW) has announced a $1.2bn deal to buy 11 private US hospitals from Medical Properties Trust (NYSE:MPW). The assets will be included in a new unlisted fund and may see HCW join the ASX 300.

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HealthCo Healthcare and Wellness REIT aspiring to grow in a tough period for REITs

It has been a difficult period for REITs as rising interest rates across the world hit the property market.

But evidently not all sectors have been as hard hit as others – the health sector has held strong given that it is critical infrastructure.

The properties were secured by HealthCo Healthcare and Wellness REIT at a purchase price representing an acquisition NOI yield of 5.8% and an unlevered IRR of >9%. The properties are leased at 16-year initial terms with 8 10 year options and CPI-linked rent increases.

Going for further growth

This deal brings HealthCo Healthcare and Wellness REIT’s Assets Under Management (AUM) to $7.5bn and it is aspiring to reach $10bn by the end of 2023.

It will be funded by a $125m capital raising and increased debt facilities, although it has promised to use $350m of its own cash.

HealthCo Healthcare and Wellness REIT’s reiterated its FY23 DPS guidance of 12c per share, representing an impressive 8.4% yield at yesterday’s closing price.

This deal could well see this REIT join the ASX 300 at the next index rebalancing, something which would trigger mandatory institutional buying of the stock.