Victorian government allocates $80 million-plus to recommission hospital wards

The former Warburton hospital includes six interconnected buildings with a total internal area of more than 11,000 square metres.

The Victorian government will spend more than $80 million recommissioning hospital wards to create 129 beds – part of a $437 million funding boost for the healthcare sector.

Over the next three months, 84 places will open at the former Peter Mac Hospital in East Melbourne while 45 will become available at Bendigo Hospital.

Baxter House Hospital in Geelong is also to be recommissioned with consulting rooms and a virus clinic, Premier Daniel Andrews said last Thursday.

A further $115 million will be spent to help healthcare operators cope with demand while $107 million will be invested on equipment.

The government added that it intends to backfill positions of healthcare workers in isolation.

News of the spending package follows an announcement that Casey Hospital, in Melbourne’s south east Berwick, will also accommodate 129 new beds.

Early estimates of beds Victoria might need

Based on various reports, at least 5000 hospital admissions are expected in Victoria when COVID-19 peaks – a time which has been suggested as July/August.

A further 2000 will require intensive care, it is speculated.

Some 45,000 people are expected to present at emergency departments in coming months.

As of this morning, 411 Victorians have coronavirus. Yesterday there were 355 and last Thursday morning, 121.

Cures are also said to be advanced and more than 100,000 people have recovered including on Sunday, a 95 year old. However about 16,000 have died, some 6100 in Italy and eight in Australia. Over 370,000 people have so far been diagnosed.

Last weekend, Western Australian Premier Mark McGowan said his government was considering opening Rottness Island and acquiring hotels, to quarantine people.

Quest Apartment Hotels this week also offered to open up vacant inns to accommodate hospital overflows.

Construction costs and avoiding another RAH

According to CBRE Healthcare and Social Infrastructure’s Marcello Caspani-Muto, the industry quotes construction costs per bed as well as sqm.

“Hospitals can cost anywhere from $500,000-$2 million per bed depending on the quality of build and amount of common area (excluding equipment and operating costs)”

The Royal Adelaide Hospital opened in 2017 following a blowout (to $2.3 billion) which the ABC reported made it Australia’s most expensive building and the third priciest in the world.

Mr Caspani-Muto said the RAH case prices costs at the very upper end: about $2.5 million per bed or $20,000 per sqm.

The nine year old Royal Children’s Hospital in Melbourne’s Parkville, which replaced much of the 1963 facility, was a public-private partnership.

It added 340 beds and was reported to have cost the Victorian government just under $1 billion (inclusive of equipment).

Agents rework Warburton Hospital campaign

The highest profile former hospital on the market is at Warburton, 74 kilometres east of the city.

When CBRE launched the marketing campaign three weeks ago, it was targeted to developers which might replace the land near the Yarra River with a luxury resort hotel, similar to Germany’s Lanserhof Spa.

Last Friday, the “highly valuable existing hospital improvements” became the advertisement tagline.

On an eight hectare mostly undeveloped site, the property includes six interconnected buildings containing a total area of 11,060 square metres.

Closed in 2003 – when it was last tenanted by Healthscope and occupied as a drug rehabilitation clinic – the facility has been immaculately maintained by the vendor, Berton Investments, which acquired 25 Donna Buang Road in 2000.

Sandro Peluso said it is rare for a marketing strategy to change mid-campaign – but the current situation is unprecedented.

The agent added that since last Monday, the number of inquiries from investors and owner occupiers seeking to reopen the facility has increased. Institutions and now the government, are also suitors.

Josh Twelftree, Jimmy Tat and Marcello Caspani-Muto are co-marketing it.

Embracia, Hampton, Hengyi on in-demand sites

Several ex-Victorian hospitals sold over the past 14 months – some which could be re-purposed to prior use.

In late 2018 Hampton paid $9.92 million for the former Cotham Private Hospital, in Kew, then rented it to Epworth.

On a 2245 sqm block, the facility includes four operating theatres, numerous consulting suites and can accommodate 60 beds. It also has a 31 bay car park.

In March 2019 – toward the trough of the last property cycle – developer Hengyi spent $17.5 million on the 3.4 hectare former Peninsula Hospital at 33 Jacksons Road, Mount Eliza.

Aged care accommodation provider Embracia paid $4.95 million for the historic, former Kyneton District Hospital, six months ago. This medical facility closed in 2005 and the site has become rundown.

A small vacant medical centre – the former Linley Clinic Private Hospital – traded in November, 2019.

Marketed as “a substantial day procedure facility ready to operate” – and on 2007 sqm of land – it exchanged for $6 million following a campaign also targeting residential developers.

A former Parkdale hospital acquired for $11 million by failed developer Steller in early 2019 sold two months ago for $10.2 million to Cavalry Health Care Bethlehem which had just moved in as a tenant.

Cavalry is planning to build a 120-bed high rise aged care facility on the 4765 sqm parcel at 152 Como Parade West, about 20 kilometres south of the Melbourne CBD.

The operator is also constructing an 11-level medical facility at Caulfield after plans for a 19-storey complex failed at planning two years ago.

Hospital developments

Construction of Australia’s first heart hospital, at Monash University’s Clayton campus, commenced in December, 2018.

Ten months later the Andrews government announced that it shortlisted three parties to build the new Footscray Hospital – which is expected to have an end value of $1.5 billion.

Upon completion it was anticipated the outgoing Footscray facility would be sold for housing.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco