HealthCo Secures Rent, Lines Up Backup Tenants, Suspends Q2 Distribution

Lease Compliance and Rent Collection

HealthCo Healthcare & Wellness REIT (ASX – HCW) has confirmed that Healthscope remains fully compliant with its lease obligations, having paid the December 2025 rent in full. The REIT and its partner, the Unlisted Healthcare Fund (UHF), received $18.3 million in cash rent during the second quarter of fiscal year 2026, providing a degree of stability amid ongoing uncertainty.

Alternative Tenant Arrangements

In a proactive move, HCW and UHF have entered into conditional agreements with alternative tenants for all 11 hospitals they own. These agreements include detailed commercial terms acceptable to the landlords and are designed to be activated if the current Healthscope sale process does not yield suitable assignees or lease arrangements. This strategy underscores HCW’s commitment to safeguarding rental income streams and mitigating risk.

Asset Sales and Capital Management

As part of its capital management strategy, HCW has completed the sale of the Nambour and Shepparton hospitals, generating aggregate proceeds of $76.8 million from asset sales settled or exchanged in FY26. This has contributed to a strong balance sheet position, with December 2025 cash and undrawn debt totaling $152.2 million. The REIT’s pro-forma gearing ratio stands at a conservative 28.7%, comfortably below its target range, providing financial flexibility to navigate ongoing market conditions.

Distribution Suspension

In a cautious but prudent decision, HCW will not declare a quarterly distribution for the period from October to December 2025. This suspension aims to preserve liquidity while the Healthscope situation remains unresolved. The REIT expects to recommence distributions once clarity is achieved, signaling confidence in the long-term outlook despite short-term challenges.

Looking Ahead

HCW’s latest update reflects a balancing act between maintaining income stability and managing risk amid uncertainty surrounding Healthscope’s future. The conditional tenant agreements and asset sales demonstrate strategic foresight, while the distribution pause highlights a cautious approach to capital preservation. Investors will be watching closely for developments in the Healthscope sale process and any binding lease agreements with alternative tenants.