New Calvary John James Hospital Exemplifies Barwon’s Healthcare Expertise

Barwon Investment Partners’ Institutional Healthcare Property Fund speaks in its marketing material of how it focuses on specialist healthcare assets. These assets provide differentiated investment exposure and result in low correlation with other property sectors.

This suits an investor looking for a truly defensive holding, says the fund manager. Australia’s growing and ageing population is driving strong demand for healthcare services. That demand is largely unaffected by the economic cycle.

The Institutional Healthcare Property Fund carefully builds a portfolio around assets that include a variety of primary and secondary care facilities. These are tenanted by some of Australia’s largest private medical providers, as well as state government tenants.

Demand driven by advances in care

“Advances in methods of care and technology are driving demand for new and more specialised care facilities,” says Tom Patrick, Head of Healthcare Property at Barwon Investment Partners. “The sector’s strong fundamentals and significant government funding bring high-quality tenants, which require specialised and expensive fit-outs and equipment, which, in turn, makes those tenants ‘sticky.’”

This combination, he says, results in assets that have high barriers to entry for competing properties, long weighted average lease expiries (WALEs), with inflation-hedged income streams.

Tenant relationships and risk mitigation

The drawback of this approach is that the specialist nature of the assets limits the number of natural tenants.

Barwon mitigates against this by spending a lot of time understanding the tenant’s future requirements. This ensures that an asset and its facilities continue to suit the tenant.

It also works to keep the rent affordable, knowing that any vacancy could take time to fill.

This approach enables Barwon to cite, and offer, strong total returns compared to the property asset class in general. It also delivers lower volatility.

Partnership with Calvary Health Care

If the Barwon team had sat down to design a ground-up investment that captures all of these factors, it would look very similar to the fund’s recent commitment to partner with Calvary Health Care. The project will redevelop the Calvary John James Hospital in the Canberra suburb of Deakin.

The partnership will deliver a contemporary Calvary John James Hospital. It will serve as the centrepiece of a modern healthcare precinct and innovation hub.

The proposed redevelopment will set a new benchmark for healthcare infrastructure in the ACT and its surrounding region. It will be anchored by a state-of-the-art, multi-disciplinary surgical hospital planned in collaboration with Calvary.

An integrated health ecosystem

The new building will accommodate the hospital, and will include:

• 98 beds including maternity, special-care nursery and adult intensive-care.
• ten cutting-edge operating theatres with endoscopy facilities accommodated.
• ten pre-operative holding bays.
• stage one/two/three recovery bays (beds and chairs).
• a Central Sterilising Services Department (CSSD).
• access to a privately tenanted on-site radiology practice; and
• a rehabilitation gymnasium.

Barwon has completed a master-planning exercise for the Calvary John James Hospital site to create opportunities for an integrated health ecosystem to include life sciences, clinical trials, education and training, research facilities, specialist services and other healthcare-related activities.

Long-term impact and transformative investment

The partners expect the hospital redevelopment to ensure Calvary John James Hospital continues to support staff in providing quality surgical and medical services, as well as maintaining delivery of the only private maternity unit and only purpose-built private rehabilitation unit in Canberra.

It is exactly the kind of asset envisaged in the fund’s investment philosophy and mission.

“This project represents a transformative investment in the ACT’s healthcare landscape,” says Patrick. “We have completely re-imagined the blueprint for the entire site to deliver critical infrastructure that improves access to essential services and fosters innovation, collaboration and growth. This precinct will truly set a benchmark for healthcare precincts across Australia.”

Investor benefits

Barwon’s specialist knowledge, experience and expertise in identifying assets of the quality of the Calvary John James Hospital redevelopment allow it to offer its investors even more tightly honed diversification in assets with high natural barriers to entry, longer WALEs, higher income, and reduced tenant turnover risk. “It represents a very high-quality group of tenancies and assets, and we think it will be a great long-term performer for our investors,” says Patrick.