Australian Unity is moving to sell roughly one-fifth of the properties in its $3.2 billion healthcare property fund as higher interest rates erode asset values and strain its balance sheet. The flagship fund, created almost 30 years ago and backed by about 8000 wholesale and retail investors, now faces the squeeze of lower valuations against fixed borrowings.
Australian Unity is trading prized bricks-and-mortar holdings for breathing room on its debt pile.
The healthcare vehicle, known as the Australian Unity Healthcare Property Trust, has told investors it sees asset sales of more than $600 million as the most practical way to relieve balance sheet pressure. Among the assets earmarked is one of its most prominent holdings and second-largest property, Peninsula Private Hospital on Victoria’s Mornington Peninsula.
The facility, leased to Ramsay Healthcare, carried a valuation of $317 million at its last assessment, highlighting the scale of the potential disposals. Additional properties will still need to be identified and sold to reach the overall sell-down target.
Peninsula Private Hospital’s inclusion shows that Australian Unity is not limiting the process to secondary or non-core assets and is prepared to trim key holdings to meet its deleveraging goals. Selling such a high-profile hospital could attract strong institutional interest, particularly from investors focused on long-leased healthcare infrastructure, but it also reduces future rental income for the fund.
The manager is weighing the trade-off between maintaining distribution capacity and shoring up capital ratios in a more volatile rate environment. That balancing act underpins the decision to launch a sizeable divestment programme rather than rely on smaller incremental measures.
Even long-established sector-specific funds are being forced to adjust strategies as financing costs rise and valuations soften across commercial property markets. Healthcare real estate has generally held up better than office or retail, yet Australian Unity’s plan indicates that pressure from higher rates is broad-based rather than confined to weaker asset classes.
Other managers are watching this kind of repositioning closely, as large-scale sales by prominent funds can reset pricing benchmarks for similar assets. Investors in the trust now confront a period where capital protection and debt reduction take priority over portfolio growth, and that tension will shape what happens next for the fund.
