Dutch healthcare real estate investment volume again exceeds 1 billion euros
11 januari 2022
The healthcare real estate investment volume in the Netherlands remained stable in 2021, exceeding 1 billion euros for the third year in a row. Investments totalled 1.1 billion euros. Care homes represented the largest share of the transactions (76%), accounting for 11% of the residential investment market overall. Research by Capital Value shows that investors have more than 7 billion euros available for investments in healthcare real estate in the coming three years, which means that demand among investors is greater than ever. Despite this, investments in recent years have done very little to address the shortage of care homes. The sector's new build target remains high, and efforts to build more high-quality senior citizens' housing are essential.
Following a strong first six months, with an investment volume of 458 million euros, growth appeared to stagnate in the third quarter. However, a strong fourth quarter with a number of sizeable transactions ensured that the yearly volume still exceeded 1 billion euros. High-profile transactions in this quarter included the acquisition of residential care properties in Hellendoorn and Nijverdal by Cofinimmo and the purchase of a residential care portfolio in Friesland by Rubens Capital Partners.
More than 400 million euros (37%) of the investment volume consisted of acquisitions by foreign investors. Listed investors in particular were very active in the Dutch market (28%), including the Belgian investors Aedifica and Cofinimmo, as well as NorthWest Healthcare Properties from Canada. Dutch investors and housing associations accounted for 688 million euros, 63% of the total volume. These were primarily institutional and private property funds. Housing associations purchased 108 million's euros worth (10%) of healthcare real estate and properties for senior citizens in 2021; in the preceding years, this figure was 163 million euros.
Healthcare institutions free up financial resources through sales
Healthcare institutions were the primary sellers of existing healthcare property in 2021, accounting for 29% of all sales. These institutions are increasingly investigating the strategic opportunities afforded by the removal of part of their property from the balance sheet while still continuing its long-term operation. This often concerns older properties in good locations that require significant renovations to guarantee their continued suitability for use in the future. A sale & leaseback transaction between a healthcare institution and an investor can be a good solution in such situations. The transaction between Stichting Warande and Fidelity International (two residential care properties in Bilthoven and Houten) is a good example of such an arrangement, allowing the healthcare institution to use the proceeds of the sale for investments in its own property portfolio or to repay loans.
Developers also played an important role in sales, being responsible for 34% of the transaction volume (compared to 25% in 2020). This included both new-build developments and conversions. An important driver of this development is that it is increasingly common for care homes to form part of area developments, as a measure to help tackle the rising national shortage of care homes.
Fewer transactions, average transaction size increases
2021 was characterised by a relative lack of new investment opportunities and a higher average transaction volume than in previous years. Despite the stabilisation of the investment volume, the number of transactions was 30% lower than in 2020. Of particular note is that transaction size increased by 25%: while the average transaction size in 2020 was 7.9 million euros, transactions in 2021 averaged 9.9 million euros. Almost 90% of all transactions were below 20 million euros, representing slightly over half of the total investment volume.
The increase in transaction size relates to a larger trend of upscaling. Both the user and investor markets desire larger scales, as can be seen for instance in the private residential sector. Here, the investment volume remained essentially unchanged in 2021 as compared to 2020, despite a 10% reduction in the number of transactions. One explanation is that the size of private residential care locations has increased. With extramural residences increasingly forming part of overall concepts, this could resolve the increasing demand for care as well as the staffing issues that care institutions face. Furthermore, expectations are that intensive senior care and care for disabled persons will increasingly be provided at care recipients' homes in the future. The new government coalition agreement explicitly states this intention.
Limited availability of investment opportunities leads to alternative strategies
The demand for Dutch healthcare real estate is at a historic high. The available capital for the next three years among established and new investors in healthcare real estate already exceeds 7 billion euros. However, the limited availability of opportunities on the market is holding back a further increase in the investment volume. The available capital cannot be utilised due to the limited availability of existing properties in particular.
Manon Kuipers, Director of Healthcare real estate at Capital Value, says: "This is particularly the case for portfolios and investment volumes of more than 10 million euros. Investors are jumping at the few investment opportunities that do occur, and are prepared to accept increasingly lower initial yields. Initial yields for care homes are following the decreasing trend of regular residential investments, and in view of the aforementioned circumstances, we expect this trend to persist in the coming year."
Investment pressure is growing for investors having trouble to acquire sufficient real estate and meet their investment targets, leading them to seek alternative strategies. As a result, investors in healthcare property have been expanding their scope: several investors in private residential care and first-line healthcare properties are now also investing in intramural and extramural healthcare properties. New partnerships are also emerging between investors and developers; a good example of this trend is the collaboration between Dunavast (investor), Sonneborgh (developing investor) and Aedifica (listed investor).