Charter Hall Exec Sees Life Science Real Estate Driven
A Charter Hall executive says Australia's ageing population is creating long-term demand for life science real estate, citing a recently oversubscribed
Steve Bennett, head of Charter Hall's A$9.2 billion direct property business, says real estate serving the life sciences sector will benefit from long-term demographic trends. He made the comments at the Mingtiandi Australia Forum after the firm's Charter Hall Direct Life Sciences Fund was oversubscribed by investors in August.
Bennett pointed to government data showing Australia's population aged over 65 is expected to reach nearly a quarter of the total by 2066. He argued this creates a powerful investment theme. I don't care whether you're a listed REIT, an institutional investor or private high-net worth money, people understand the benefits of the life sciences sector, they love the thematics, the ageing population, Bennett said.
He linked the trend directly to government spending priorities. From a government point of view it's much cheaper to pay for a bulk-billed blood test than have someone presenting with a major illness in a hospital, Bennett stated. The aim, he said, is for governments to save money through preventative healthcare.
Fund Backed by Key Brisbane Asset
The oversubscribed fund is a five-year wholesale vehicle providing access for high-net-worth investors. Its sole asset is a Brisbane pathology complex fully leased to Sullivan Nicolaides, a subsidiary of ASX-listed Sonic Healthcare. Charter Hall highlights the facility's role in providing diagnostic services.
Bennett said the firm won the competitive tender for the asset partly because it could invest directly from its balance sheet, avoiding a slower capital-raising process. "If our offer was subject to capital raising we definitely would have missed out," he noted, adding that Charter Hall was not necessarily the highest bidder.
The fund's appeal is heavily tied to the tenant. Sonic Healthcare has a market capitalisation of almost A$10 billion and signed a 20-year triple-net lease for the facility. Under this lease, the tenant covers property taxes, insurance, and maintenance costs, with rent increases linked to the Consumer Price Index (CPI).
Tenant Covenant Provides Investment Confidence
Bennett described the tenant agreement as critical for the single-asset fund. "You've really got to make sure it's bulletproof, because if it doesn't go well you've got nowhere to hide," he said. The long-term lease from a major listed company provided the necessary security.
If we didn't have comfort that Sonic were going to be there for 20 years, paying that lease, paying that rent to us every month, we absolutely would not have done this deal, Bennett explained. He cited Sonic's market leadership and strong management as key factors in the investment decision.
Structured for an Eventual Exit
The lease structure also informed the exit strategy for the five-year fund. Bennett said Charter Hall always builds in the ability to exit investments early to manage capital effectively for its clients. The competitive initial bidding process, which included international pension funds and Australian superannuation providers, gave further confidence in a future sale.
It gave me a lot of comfort that when we go to sell, that's a very likely buyer, Bennett said. He explained that such long-duration, certain cash flow assets match the liability profiles and business models of large pension funds perfectly.
The fund represents an opportunity for Charter Hall to offer its high-net-worth clients access to an asset class not commonly available in the Australian market. Bennett framed the life science sector as one where demographic understanding is driving investor appetite across all capital types.
