Ann: Healthscope Update, page-92

Which properties are you referring to?
'four mental health properties owned by HCW '

HCW doesn't list any properties as 'mental health properties'.
It has:
Private Hospitals (4/5 are Healthscope)
Primary & Specialist Care (none are Healthscope)
Aged Care (none are Healthscope)
Government & Research (none are Healthscope)
Child Care (none are Healthscope)
+ 50% Share of UHF (7 Healthscope properties).


'If even one of the properties owned by HCW is not purchased as a continued operation, the numbers look much worse. '

That's a very generalised & sweeping statement considering the Healthscope properties held by value by HCW range from $15m (50% of Ringwood) to $175m (50% of Knox).
That's a huge difference in impact depending on what hospital you are referring to.
Losing 100% rent from Ringwood (cap rate 5%) would $0.75m p.a.
Losing 100% rent from Knox (cap rate 5%) would be $8.75m p.a.


'For HCW, this structural misalignment presents an ongoing challenge with no easy solution.'
This not a HCW issue, this is a hospital operator issue.

Rents aren't based on what a business can afford to pay, rents are based on the cost of building & maintaining a property.
If you work on the basis that operators will only pay what they can 'can afford to pay' then eventually they will not have a property to carry out their business in, because no one will build any more hospitals for the private sector.


Since COVID Health insurance profits have been going up & hospital operator profits have been going down.
Over the same period construction & maintenance costs have gone through the roof (property owners).
So which one out of the health insurers & property owners do you think is most likely to be under pressure to give more to the operators?


15%-20% rental reductions are not going to happen.
HCW know that's not sustainable for a property owner.
In fact I doubt there will be any reduction in the actual rents but short term incentives only. For the very reason you eluded to because it impacts the property valuations & leverage.