3 minute read
MEDICAL REITS
Cintocare Hospital
INNOVATIONS WITHIN
THE HEALTHCARE SECTOR
Healthcare real estate investment funds open the doors for better medical facilities, writes JAMES FRANCIS
The Cintocare Hospital in Menlyn Maine, east of Tshwane is a remarkable modern building, covered by glass and elegant curves. A spine-like design fl ows across the front of the building, refl ecting the hospital’s exclusive focus on ear, nose, throat, head, neck, spinal, facial and vascular surgery.
Cintocare is the crown jewel of Growthpoint Healthcare Property Holdings (GHPH), an unlisted fund and subsidiary of Growthpoint Properties, the prominent South African REIT (real estate investment trust). Built by Growthpoint, Cintocare was sold to GHPH, which operates the site and leases space to medical specialists and staff. “It is the fi rst specialist head, neck and spine surgical hospital of its kind on the African continent, and one of only a handful globally,” says Dr Linda Sigaba, GPHP’s fund manager.
FAST FACT
South Africa only provides 2.3 hospital beds for every 1 000 people, presenting enormous growth opportunities, states a parliamentary commissioned report on inequality and access to quality healthcare.
A NEW SPIN
Launched in 2018, GHPH is widely called a healthcare REIT – a reasonably new model in the REIT market. A REIT pools real estate assets under a single investment umbrella, making returns through various means such as rent and asset ownership. Healthcare REITs focus on medical facilities, including nursing homes, and bank their future on the long-term stability of the medical market and the patronage of ageing populations. GHPH
is technically not a REIT as it’s not listed, but it serves a similar purpose for Growthpoint. “In the half-year to 31 December 2020, the fund delivered distribution per share growth of 7.5 per cent and a dividend of 40.8 cents per share,” Sigaba says. Growth of 10 per cent for the full fi nancial year (ending June 2021) is anticipated. “Healthcare properties enjoy far longer leases than, for instance, offi ce and retail property, and most of our leases have seven-plus per cent annual escalations,” Sigaba explains. GHPH has a R2.64-billion portfolio of four hospitals and a medical chamber and a medium-term pipeline of R4.5 billion. It focuses on Dr Linda Sigaba acquisitions, but this is just the start; the medical real estate market is still new. According to Million Acres, less than 15 per cent of US healthcare
ESCALATIONS.” – DR LINDA SIGABA, GROWTHPOINT HEALTHCARE PROPERTY HOLDINGS
A HEALTHY BUILDING
Cintocare is Africa’s fi rst green hospital – rated 5-Green Star by the Green Building Council South Africa – and one of only a handful of global medical facilities sharing that distinction.
Among the green building features are an HVAC system that places infection control and indoor air quality at the fore, a recycling waste storage facility, a rainwater storage tank for routine fi re protection, entryway walk-off mats, which capture particulates from occupants’ shoes, and the inclusion of as much daylight as possible.
The hospital is also remarkably high-tech, featuring a robotic pharmacist and an on-site oxygen production plant, among many other innovations.
facilities are REIT-owned, compared to 40 per cent of malls and hotels. Such funds offer real potential, not just for investment but also for market development.
INNOVATION FOR MEDICAL MARKETS
Medical REITs can innovate for market growth as Sigaba points out, referring to two specifi c examples.
“The fi rst is to provide a special touch,” says Sigaba. “We work closely with the tenant operators of the healthcare facilities to ensure that the buildings support their goals and objectives.”
At Cintocare, the theatre and ICU facilities are on the same fl oor so frail and vulnerable patients don’t have to ride in elevators with other people. The ICU rooms are also well lit with plenty of natural light – a feature that Sigaba lauds, lamenting that often ICU facilities “are in the basement”.
The second example relates to the expense involved in developing healthcare sites, so accessing a large REIT’s funding and development muscle is particularly helpful. This model is also useful when expanding healthcare facilities to rural and underserved areas.
“Townships and nontraditional centres are generally underserved when it comes to healthcare. Meeting this demand is an emerging opportunity,” explains Sigaba. “The government’s licencing programme encourages new, smaller and empowered players in the sector. However, the bricks-and-mortar component of new healthcare facilities requires a hefty capital outlay of up to three-quarters of setup costs. Backed by the balance sheet strength of big brother, Growthpoint Properties, our healthcare fund is well placed to partner operators.”
