HealthCo Reports Resilient FY26 with Full Rent Collection Amid Healthscope Transition

Full Rent Collection Sustains Portfolio Amid Healthscope Uncertainty

HealthCo Healthcare & Wellness REIT (ASX:HCW) has reported a robust FY26 performance, maintaining 100% rent collection and 99% occupancy across its diversified healthcare property portfolio. This resilience comes despite ongoing complexities surrounding the Healthscope hospital assets, which represent a significant portion of the REIT’s holdings.

The REIT posted funds from operations (FFO) of 4.0 cents per unit (cpu), or $21.9 million, with an underlying FFO of 7.7 cpu that includes HCW’s 49.6% share of the Unlisted Healthcare & Life Sciences Fund (UHF). Distributions were suspended in FY26 to preserve balance sheet flexibility amid the Healthscope transition, but the REIT is targeting a 6.0 cpu distribution per unit (DPU) in FY27, contingent on resolving the hospital lease arrangements.

Alternative Operators Secured for Healthscope Hospitals

Critical progress has been made in replacing Healthscope as the hospital operator across the $1.3 billion portfolio of 11 private hospitals spanning Sydney, Melbourne, Brisbane, and Perth. HCW and UHF have agreed on lease terms with experienced Australian private hospital operators for all hospitals, subject to approvals from receivers and Healthscope’s lenders.

Notably, the transition of the Mount Private Hospital in Western Australia remains on track, with a new lease commencing in October 2026. Independent valuations reflecting these new lease arrangements indicate no material impact on the REIT’s net tangible assets (NTA), which stood at $1.35 per unit at 30 June 2026.

Portfolio Quality and Development Pipeline Support Long-Term Growth

HCW’s portfolio, valued at approximately $1.34 billion, boasts a weighted average lease expiry of 10.6 years and like-for-like net operating income growth of 4.1%. The portfolio is diversified across hospitals (64%), primary and specialty care (14%), government and life sciences (9%), and aged care (5%), with 81% of rents linked to CPI.

Geographically, 97% of assets are located in major metropolitan healthcare catchments with strong population growth, including Sydney, Melbourne, Brisbane, and Perth. The REIT also holds a development pipeline of around $500 million, primarily in Sydney, offering future growth opportunities without near-term funding commitments.

Balance Sheet Strength and Capital Management

HCW’s balance sheet remains solid, with gearing at 29%, comfortably below its target range, and $158 million in combined cash and undrawn debt facilities. The REIT successfully extended its senior debt maturity to December 2027 and maintains an 81% hedging level on its debt, with a weighted average cost of debt rising slightly to 6.0%.

The REIT’s strategic focus includes narrowing the discount to NTA, with selective asset sales under consideration to enhance liquidity and capital efficiency. The management team emphasised that distributions will recommence once the Healthscope situation is fully resolved, reflecting confidence in the portfolio’s underlying cash flow generation.