There is a rapidly growing need for healthcare real estate. Healthcare providers are hesitantly looking for new financiers. For institutional investors it is a nice addition to their portfolio, with a financial and social return.
“Every day, 28 Dutch people are diagnosed with dementia,” says Victor Gulickx. “ In 30 years’ time, the number of over-70s will double, and more than 500 new primary care centers will be needed. ” He gives the examples, which he takes from research by the Alzheimer Nederland Foundation, among other things, to show that the need for healthcare real estate increases. Three and a half years ago, Gulickx, together with partner Michel van Oostvoorn, started an inventory round of pension funds and insurers. Were they interested in healthcare real estate? “That turned out to be the case, but the offering was limited. Although there was a lot of healthcare real estate, it was not in the hands of institutional investors. Moreover, most of it was outdated, “said Gulickx. Demographic development, changes in healthcare and changing consumer wishes are leading to a growing need for a new type of healthcare real estate. To respond to this, Hartelt Fund Management set up the NLII Apollo Zorgvastgoedfonds this spring, of which Gulickx and Van Oostvoorn are managers. After the Doctors’Pension Fund committed eighty million euros shortly afterwards, the first real estate was purchased: a nursing home in Heerde, Gelderland, for 96 residents with a serious need for care. Based on a simple diagram, Gulickx explains the real estate need that arises now that the elderly are encouraged to stay at home for as long as possible. The first category is ‘assisted living’, homes where all kinds of care facilities are available, but in which the elderly can live independently. In addition, it concerns small-scale nursing homes, where residents can be helped by small teams of familiar faces. And finally, Gulickx sees an increasing need for care and treatment centres: places where GPs, pharmacists and other healthcare providers practice together to provide care to the growing group of elderly living at home. Nowadays, doctors, more and more women, prefer to focus their attention on healthcare rather than investment in real estate.
When institutional investors and healthcare providers work together, a win-win situation quickly arises.
The NLII Apollo Zorgvastgoedfonds wants to invest 30% of its assets in assisted living, 40% in nursing homes and 30% in care and treatment centres. Their initial purchase amounted to about 14 million, and Gulickx says there are already about 110 million in potential acquisitions in the pipeline. Over the next three years, the assets of the healthcare real estate fund must be expanded to two hundred million euros. “It is of course no coincidence that the Doctors’ Pension Fund is the first to do business with us. They saw that the need for new healthcare real estate is growing, “Gulickx explains. “But there is a lot of interest from other pension funds and insurers. We aim to attract the second or perhaps third investor before the end of this year. “In 2007, Gulickx, from Van Lanschot, started at Syntrus Achmea, first as an account manager, later as a fund manager. “We already saw that pension funds were interested in healthcare real estate. Healthcare providers were used to rely on the traditional financiers for housing: corporations and banks. There was no need to work with institutional investors, “he explains. “Now that corporations are withdrawing and banks are no longer so eager to expand their loan portfolios due to regulations, healthcare providers are looking for alternatives. Since healthcare providers and investors are new to each other, both healthcare providers and investors are somewhat suspicious. That is why we have to talk to each other already in the initiation phase. “When institutional investors and healthcare providers work together, however, a win-win situation quickly arises, Gulickx is convinced of that. “Healthcare providers want to be less concerned with the risks and maintenance of their real estate and focus more on the quality of care. When they finance their real estate themselves, it costs them about 3% in financing costs. Wouldn’t it be better to rent for approximately 6%, so that the major maintenance, the depreciation and the real estate risk lie with the investor? ”Gulickx expects the NLII Apollo Zorgvastgoedfonds to achieve a return of 7% (IRR) over the planned term. of fifteen years of the fund. By using leverage, 8.3% return is on the horizon.
“If you limit the use of borrowed money to a maximum of 30%, you hardly run any additional risk. For healthcare real estate, the underlying contracts with healthcare providers have an average term of fifteen years. As a result, the fund has limited risk with an inflation-indexed return. In addition, an investment in healthcare real estate provides a diversification advantage within the real estate portfolio, “said Gulickx. Finally, he points out to investors what he calls “upside potential.” “In ten years’ time, the demand for healthcare real estate will be much higher, and the market will mature. This will benefit the value of the property. ”
In ten years’ time, the demand for healthcare real estate will be much higher and the market will mature. This will benefit the value of the property.
Gulickx is not afraid that the government will change the rules of the game in the coming years, as has happened repeatedly in the past. “The policy that was already implemented in 2006 is quite consistent. But we keep in mind that it can change. The trend that housing and care are separated can continue. This could also apply to people with dementia. That is why we make sure that the rental prices to be asked per square meter are in line with the market. We focus on the middle segment, say rental prices between 715 and 1,100 euros. Incidentally, healthcare is not something you can easily cut back on. “Pension funds are regularly called upon to invest “in society”. Investing in healthcare real estate is part of this. “A lot of new healthcare real estate has to be built and pension funds and insurers can make an important contribution to this by investing in it,” says Gulickx. “We present ourselves as a real estate investment with a clear impact. We would like to point out to investors that it delivers not only a stable financial but also a social return. “Gulickx has no plans to invest abroad. “On the other hand, we see that Belgian investors are interested in investing in Dutch healthcare real estate,” he says. “In Belgium, but also in Germany, people have been familiar with this market for much longer. As a result, they benefit from the hesitations of Dutch investors. “