HealthCo Healthcare & Wellness REIT posted solid half-year results amid ongoing efforts to resolve the Healthscope hospital portfolio situation, maintaining strong operational metrics and capital discipline.
- 1H FY26 FFO of 2.2 cents per unit, $12.3 million
- 100% rent collection and 99% occupancy across portfolio
- $77 million in asset sales settled during the half
- Alternative operator agreements secured for all 11 Healthscope hospitals
- Distributions paused pending resolution of Healthscope situation
Strong Operational Performance Amidst Uncertainty
HealthCo Healthcare & Wellness REIT (ASX, HCW) has delivered a resilient financial and operational performance for the half year ended 31 December 2025, despite the ongoing complexities surrounding its Healthscope hospital portfolio. The REIT reported funds from operations (FFO) of 2.2 cents per unit, translating to $12.3 million, alongside a net tangible asset (NTA) per unit of $1.39. These figures underscore the underlying strength of the portfolio even as the REIT navigates significant tenant transition challenges.
Operationally, HealthCo maintained a flawless rent collection rate of 100% and an occupancy level of 99%, reflecting the stability of its diversified healthcare property assets. Like-for-like net operating income (NOI) grew by 4.2%, signalling robust demand and effective asset management across the portfolio.
Progress on Healthscope Hospital Portfolio Resolution
The REIT’s primary focus remains on resolving the Healthscope situation, which involves 11 hospitals jointly owned by HealthCo and the Unlisted Healthcare Fund. All hospitals have paid full rent through February 2026, providing short-term cash flow certainty. Importantly, HealthCo and its partners have secured executable agreements with alternative operators on a state-by-state basis, ensuring continuity of healthcare services.
These new lease agreements maintain face rents at current levels but include rental incentives designed to foster sustainable commercial arrangements. However, these incentives are expected to cause a near-term 10-15% reduction in asset valuations. HealthCo has not yet received formal proposals related to the “PurposeCo” model promoted by Healthscope’s receiver, but remains open to constructive dialogue to protect unitholder interests.
Capital Management and Future Outlook
HealthCo’s balance sheet remains strong, with $155 million in cash and undrawn debt and gearing at a conservative 28.5%, below the target range of 30-40%. The REIT also completed $77 million in asset sales during the half, demonstrating disciplined capital recycling to support portfolio optimisation.
Distributions to unitholders are currently paused pending resolution of the Healthscope situation. Management has refrained from issuing forward guidance until a clear path emerges. Both Sid Sharma, Managing Director of Real Estate at HMC Capital, and Fund Manager Christian Soberg emphasised their commitment to securing a long-term solution that ensures operational continuity, protects jobs, and maximises value for investors.
Looking Ahead
While the Healthscope hospital portfolio remains a material overhang, HealthCo’s broader portfolio fundamentals remain resilient. The REIT’s strategic focus on alternative operators and maintaining strong lease covenants positions it well for eventual recovery and growth. Investors will be watching closely for updates on negotiations and the timing of distribution resumption, which will be key indicators of the REIT’s trajectory in the coming months.
Bottom Line?
HealthCo’s steady half-year performance masks a pivotal transition phase, with the Healthscope resolution set to define its near-term outlook.
Questions in the middle?
- What are the detailed terms and timelines of the alternative operator agreements for the Healthscope hospitals?
- How will the anticipated 10-15% valuation reduction impact HealthCo’s longer-term asset values and distributions?
- When can unitholders expect distributions to resume, and under what conditions?