How HealthCo Is Steering Through Healthscope’s Receivership Crisis

FY25 Financial Overview

HealthCo Healthcare & Wellness REIT (HCW) has released its FY25 results, revealing a year shaped by cautious capital stewardship and operational resilience amid significant tenant challenges. The REIT reported funds from operations (FFO) of 6.6 cents per unit, down 18% from FY24, and distributions per unit (DPU) of 4.2 cents, which were suspended in the second half of the year due to the ongoing Healthscope receivership. This suspension reflects a strategic decision to preserve balance sheet flexibility during uncertain times.

Healthscope Receivership and Tenant Risk

Healthscope, a major tenant accounting for approximately 53% of HCW’s income, entered receivership in May 2025, triggering a complex sale process that remains unresolved. Despite this, all 11 hospitals under HCW and its joint venture UHF continue operations with 100% contracted rent paid, supported by a partial rent deferral agreement. HCW is actively collaborating with the Receiver to secure a stable tenant replacement or alternative lease arrangements, having reached conditional agreements with other operators to safeguard continuity of healthcare services and protect long-term value for unitholders.

Portfolio Strength and Operational Performance

HCW’s portfolio remains robust, valued at approximately $1.5 billion with a weighted average lease expiry (WALE) of 11.5 years and occupancy at 99%. The portfolio delivered a 5.2% like-for-like net operating income (NOI) growth, underscoring strong underlying asset performance despite external pressures. The diversified portfolio spans private hospitals, primary and specialty care, aged care, and government-related health infrastructure, predominantly located in high-growth metropolitan areas across Sydney, Melbourne, Brisbane, and the Gold Coast.

Capital Management and Liquidity

Prudent capital management remains a cornerstone of HCW’s strategy, with gearing maintained at the lower end of the 30-40% target range, currently around 31% pro forma. The REIT holds pro forma cash and undrawn debt facilities totaling approximately $104 million, ensuring liquidity to navigate the Healthscope situation and potential lease transitions. The senior debt facility was extended to November 2026, and 84% of debt is hedged, reflecting a conservative approach to interest rate risk amid market volatility.

Development Pipeline and ESG Initiatives

HCW’s $500 million development pipeline, including projects like Camden Stages 2 & 3 and the Rouse Hill Private Hospital & Health Research Precinct, remains on hold pending resolution of the Healthscope tenancy. Meanwhile, the REIT continues to advance its environmental, social, and governance (ESG) agenda, achieving a 32% reduction in scope 1 and 2 emissions since FY22 through solar installations and energy management systems. The portfolio boasts an average 5.9-star NABERS Energy rating, reflecting a commitment to sustainable healthcare real estate.

Outlook and Strategic Priorities

Looking ahead, HCW’s primary focus is resolving the Healthscope tenancy to restore distribution payments and unlock the development pipeline. The REIT remains confident in the long-term growth prospects of healthcare real estate, supported by demographic megatrends such as an ageing population and increasing demand for private healthcare services. While guidance remains withdrawn until the Healthscope situation is clarified, HCW’s strategic emphasis on tenant stability, capital discipline, and portfolio quality positions it to navigate current challenges and capitalise on future opportunities.