Growthpoint Properties has launched the country’s first healthcare-focused property company as it looks to expand into a specialised real estate sector that offers significant security to landlords. Business Day reports that the real estate investment trust (Reit), called Growthpoint Healthcare Property Holdings, will initially be unlisted and will have a R2.4bn portfolio.
Fund managers have been calling for more specialised property funds, saying they tend to outperform general diversified property funds.
Growthpoint Healthcare would be a subsidiary of Growthpoint and the intention is to grow it to hold R10bn in assets before listing it separately on the JSE in about five years. Growthpoint CEO Norbert Sasse said in the report that the healthcare subsidiary would invest exclusively in healthcare assets in South Africa occupied by licensed operators of hospitals, clinics, pharmacies and laboratories.
Sasse said Growthpoint Healthcare already held five assets in the healthcare property fund, with the weighted average lease length of about nine years reflecting the defensive nature of investing in healthcare property. Two of its healthcare properties are operated by private healthcare provider Busamed, and one each by JSE-listed Mediclinic and Netcare. In addition, Netcare rents 50% of the space in N1 City Medical Chambers, the medical suites adjacent to the N1 City Hospital.
Sasse said there had been strong market interest in Growthpoint Healthcare as it began to raise capital, with its first close attracting capital commitments of R285m from third parties. It was expected to raise at least double that again in the next year.
Growthpoint Healthcare will be managed by Growthpoint Management Services and will collect fee income for the larger Growthpoint group.
Meago Asset Management director Jay Padayatchi said in the report, however, that Growthpoint would not necessarily find it easy to create value out of healthcare, especially if it relied on emerging healthcare companies as tenants. "There is no doubt that the healthcare sector is a very defensive one, and consequently property allied to this earnings stream will normally be defensive as well. This is a very well-established property subsector globally but the security of the earnings is normally the most important to ascertain.
"In South Africa though, it is not a given that this is the case, with emerging healthcare providers often struggling to remain profitable in a competitive environment where funding channels are not as available as they once were," he said.
Nesi Chetty, head of listed property at Momentum Investments, said hospitals tended to be defensive assets which would have more attractive yields than offices. This made sense for Growthpoint as it looked to maintain consistent inflation-beating dividend growth for years to come.
[link url="https://www.businesslive.co.za/bd/companies/property/2018-06-14-growthpoint-launches-sas-first-healthcare-focused-property-company/"]Business Day report[/link]