How HealthCo Is Steering Through Tenant Uncertainty with Strong FY25 Results
HealthCo Healthcare & Wellness REIT posted solid FY25 financials amid ongoing tenant transition challenges with Healthscope. The REIT is proactively securing alternative tenants while maintaining a robust balance sheet.
- FY25 funds from operations of 6.6 cents per unit
- 99% portfolio occupancy and 5.2% like-for-like NOI growth
- Healthscope continues full rent payments despite receiver-led sale process
- Proactive tenant replacement plans with conditional agreements in place
- Strong balance sheet with 31% gearing and $103.8 million liquidity
Financial Performance Amidst Market Challenges
HealthCo Healthcare & Wellness REIT (ASX – HCW) has delivered a resilient financial performance for the year ended 30 June 2025, reporting funds from operations (FFO) of 6.6 cents per unit and distributions of 4.2 cents per unit. The net tangible asset value per unit stood at $1.44, reflecting steady asset quality despite the uncertainties surrounding its key tenant, Healthscope.
The REIT’s portfolio demonstrated robust operational metrics, with occupancy rates holding firm at 99% and like-for-like net operating income (NOI) growing by 5.2%. These figures underscore the underlying strength of HealthCo’s diversified healthcare property assets, which continue to benefit from enduring demand in the healthcare sector.
Tenant Transition and Strategic Response
Healthscope, the tenant of 11 hospitals owned by HealthCo and the Unlisted Healthcare Fund, remains current on rent payments despite being under a receiver-led sale process. This stability has been crucial in maintaining cash flow, with 98% of contracted cash rent collected.
However, HealthCo is preparing for potential changes. The REIT is actively collaborating with the Receiver to facilitate a smooth transition, prioritising continuity of healthcare services for patients and staff. Conditional agreements with alternative operators have been reached, positioning HealthCo to swiftly replace Healthscope if necessary. Importantly, all existing legal protections, including cross-default and termination rights, remain intact to safeguard the REIT’s interests.
Balance Sheet Strength and Outlook
HealthCo’s balance sheet remains robust, with pro-forma gearing at a conservative 31% and pro-forma cash and undrawn debt facilities totaling $103.8 million. This financial flexibility provides a solid foundation to manage the tenant transition and pursue growth opportunities.
Looking ahead, HealthCo has indicated that distributions will recommence once the Healthscope situation is resolved, though it has refrained from issuing formal guidance until greater clarity emerges. The management team’s confidence in the private hospital asset class and the broader healthcare sector remains unwavering.
Overall, HealthCo’s FY25 results reflect a company navigating complexity with strategic foresight and operational resilience, maintaining investor confidence while managing tenant risk.
Bottom Line?
HealthCo’s next chapter hinges on resolving the Healthscope tenant transition, a pivotal moment for its income stability and growth trajectory.
Questions in the middle?
- Who will ultimately secure tenancy of the 11 hospitals currently leased to Healthscope?
- How soon can HealthCo expect to resume distributions to unitholders?
- What impact might alternative tenants have on portfolio income and valuation?
