Australian investment manager Real Asset Management (RAM) has launched a healthcare-focused property fund in a joint venture with an unnamed partner understood to be Singaporean sovereign fund GIC.
The RAM Australia Healthcare Opportunity Fund (HOF) will build a “low risk, build-to-core” portfolio of premium healthcare assets in metropolitan and larger regional cities in Australia through development and asset repositioning, and is targeting a 12 to 14 percent total return over a medium-term horizon, according to the fund’s fact sheet.
Terms of the joint venture were undisclosed, although Sydney-based RAM said in a press release it will invest “a substantial amount” alongside the partner. The company declined to confirm or deny the identity of the partner but noted it is “a large Southeast Asian sovereign wealth fund.” RAM’s website links to an Australian Financial Review report naming GIC as the partner, while GIC declined to comment.
“We are very pleased to broaden our reach into the healthcare sector with a major global capital partner,” said Matthew Strotton, head of real estate at RAM, who oversees the company’s portfolio of 45 properties valued at more than A$1.6 billion ($1 billion).
The joint venture aims to capitalise on growing demand for medical facilities amidst increased healthcare expenditures in Australia, with the sector experiencing growing interest from institutional investors.
HOF’s seed assets include a development site at 19-21 Middle Street in Cleveland, an eastern suburb of Brisbane, which was acquired for A$6.5 million and is approved for development into a 5,000 square metre (53,820 square foot), four-storey integrated medical hub. Located approximately 29 kilometres from downtown Brisbane, the future facility will incorporate a hospital and specialist consulting services and will be operated by ASX-listed hospital provider Ramsay Health Care on a 25-year lease.
HOF also has an A$51.25 million asset under development at 20 Nellie Street in Nundah, located seven kilometres from Brisbane’s central business district adjacent to the Queensland Health Nundah community centre. With the project nearing completion, the asset will serve as a health, medical, and lifestyle precinct totaling over 10,418 square metres which will be anchored by an unnamed “top-tier private hospitality operator” on a 25-year lease.
After first venturing into healthcare real estate in 2018, RAM now manages a portfolio of 28 assets in the sector across Australia valued at almost A$500 million, of which 23 are held in ASX-listed REIT RAM Essential Services Property Fund (REP). RAM says it, “envisions the potential to deploy in excess of $1 billion in this sector in the near term.”
In addition to healthcare, RAM also invests in non-discretionary retail properties anchored by supermarkets such as Coles, Woolworths, and IGA through REP, as well as suburban offices, neighbourhood retail assets, warehouses, logistics facilities, child care centres, medi-offices, and laboratories through its unlisted RAM Australia Diversified Property Fund.
“RAM’s objective has been to position for a wider range of risk assets and to create synergy in operations, which will complement our flagship listed vehicle REP. We have expanded our development and deal origination capabilities and see this as a natural progression for RAM and our investors,” said Strotton. “Much of our deal origination is derived from the strong relationships and bottom-up approach that we adopt with our operating partners.”
RAM, which had A$4.2 billion in total assets under management across its real estate, private equity, credit, and wealth management businesses as of September, has begun soliciting expressions of interest for HOF with a minimum investment of A$50,000 and a 4 to 6 percent distribution target post-portfolio establishment. The fund is targeting an asset-level loan-to-value ratio of 50 percent with a maximum 60 percent at the portfolio level.
Investing in Your Health
Australia’s healthcare sector has attracted institutional investors as the country’s population sees healthcare spending rise. Over the last 20 years, healthcare expenditures have increased from A$91 billion to A$201 billion, an average growth rate of 4.0 percent per year, compared to average annual inflation of 2.4 percent over the same period, according to Australian government data.
The joint venture sees GIC, which opened a Sydney office in June 2022, expanding its healthcare portfolio Down Under.
The sovereign fund in 2018 established an Australian joint venture with Toronto-listed NorthWest Healthcare Properties REIT with an initial A$2 billion in funding to acquire and develop healthcare facilities across Australia and New Zealand. The partners have since injected additional funds to bring the vehicle’s total capitalisation to A$6 billion.
In December 2022, Australia’s Elanor Funds Management reportedly received a capital injection from Malaysian asset manager Permodalan Nasional Berhad to complete the A$289 million recapitalisation of the Elanor Healthcare Real Estate Fund to allow Elanor to expand its six-asset portfolio of healthcare properties across Australia.