How big data powers healthcare decisions (and how you can invest in the opportunity)

Big data is like Bigfoot sometimes - often talked about but rarely seen. Unlike Bigfoot, we all know it exists but we seldom understand the connection between it and the decisions it is helping to make. 

Well, I have got a treat for you! Real Asset Management (RAM) is using big data and, in particular, the location of the healthcare workforce, to make better decisions about where healthcare facilities should be built (which is much more wholesome than flogging products on social media). According to Sam Wood, the director of funds management at RAM; 

"We've invested heavily in data systems mapping the workforce, mapping both the specialists by sub-sector category. A key constraint at the moment is a shortage of nursing. 

Typically specialists and nurses don't live in the same location. However, we're concentrating on identifying opportunities between the workforce of specialists and the nursing community to ensure that that asset has access to both ends of the spectrum for the workforce".

Interrogating data sets is just one piece of the puzzle for RAM in the new RAM Australia Healthcare Opportunity Fund, which also works hard to build quality relationships with its healthcare operator partners, to understand their needs. 

That, in turn, helps RAM to reduce the risks associated with any asset - particularly in the construction and leasing stages. To find out more about how RAM goes about this and to better understand the opportunities it pursues, check out the following interview. 

Edited Transcript

What attracted you to the opportunity, and how has the space evolved since you've been at RAM?

Sam Wood: What initially attracted me to RAM was that they were developing a healthcare program, and starting to invest in healthcare properties. It's a sector I've always been interested in. I like the growth fundamentals that are in the sector, and so I certainly wanted to pursue my property career in healthcare, and RAM presented a great opportunity.

Initially, when I joined RAM in 2019, we were investing in passive healthcare assets and growing funds under management. Since then, we've listed on the stock exchange, and we've developed two unlisted funds, one of which is our new healthcare development fund.

Part of the strategy that underpins the fund is a focus on de-risk development and value-add. What exactly does that mean for investors?

 Sam Wood: It's a program that we are concentrating on because in healthcare you can undertake opportunistic development and value-add programs, and significantly de-risk them prior to settling an asset. 

Typically in any normal development, you've got three buckets of risk, being; 

1. planning risk,
2. construction risk, 
3. and leasing risk. 

In healthcare, by partnering with our operators and choosing the right real estate asset, you can significantly de-risk the development opportunity or the value-added opportunity by committing the anchor tenant prior to settling on the property and also getting the necessary planning approvals prior to settling on the property. 

It's a sector that is very relationship-based, and that's certainly RAM's approach. 

Key to our program is establishing and maintaining really good relationships with our operators and identifying assets that suit their growth strategies.

What percentage of the opportunities that cross your desk do you invest in? (it is 1-in-100?)

Sam Wood: It's probably even less than that. I think going back to partnering with our operators, we understand what makes them tick. We understand what assets are important. 

At the moment, a key characteristic in healthcare is access to the healthcare workforce. That's a major constraint in healthcare and new opportunities - i.e. the healthcare workforce. Locating new healthcare assets close to the residing workforce creates a good opportunity for our operators to open successful healthcare facilities.

How is that workforce moving around and do you have to stay on top of that?

Sam Wood: Absolutely. So we've invested heavily in data systems mapping the workforce, mapping both the specialists by sub-sector category. A key constraint at the moment is a shortage of nursing. And so typically specialists and nurses don't live in the same location. However, we're concentrating on identifying opportunities between the workforce of specialists and the nursing community to ensure that that asset has access to both ends of the spectrum for the workforce.

Like everything big data is driving big investment decisions, isn't it?

Sam Wood: Absolutely. And there's so much opportunity for data to drive those location decisions in healthcare real estate. It hasn't been done exceptionally well to date, so there is an enormous opportunity to identify these under-serviced catchments for sure.

Let's talk about an investment opportunity in the portfolio right now that brings those factors that we were just talking to life

Sam Wood: An asset that we settled on three weeks ago was in Brisbane, six kilometres north of the Brisbane CBD. 

It was off the back of receiving a mandate from one of our operator partners for a requirement for a new 60-bed private mental health hospital in the northern corridor of Brisbane. We went about and identified three assets, and with the operating partner worked through the details of those assets, and selected the one that best suited them and also fit with our investment criteria. 

We optioned that site up and made it a condition to get a material change of use to a private hospital. We achieved that prior to settlement, as well as taking the leasing from about a 20% pre-commitment when we took the option, to settling at around 70% pre-committed. 

So by the time we'd settled the asset, we had it substantially leased. 

The base building was completed, and we had the necessary planning approvals. So, out of the three buckets of risk, we'd mitigated against leasing significantly, and there was no residual planning risk.

For more information, you can head to the Real Asset Management website here.