After housing associations, now healthcare institutions also valued according to market value

22 januari 2021

Professionalisation of healthcare real estate continues

Dutch healthcare institutions are facing an enormous challenge. From mid 2022 onwards, healthcare institutions will be required to have valuations carried out of their real estate assets according to the market value. The measure stems from a guideline from the European Banking Authority. The DNB has indicated that it will implement the guideline in its entirety. 

The new guideline comes from lessons learned during the credit crisis with regard to non-performing loans. By implementing the market value for healthcare institutions, the value of underlying real estate assets should be examined more stringently. All real estate is expected to be valued based on the market value by mid 2022, however, the new regulations will be applicable for the application of new loans from mid 2021 since the market value will be used to determine collateral value.

A major change for the sector
In the healthcare sector, real estate valuations are rarely performed according to market value. The implementation of this guideline will have a major impact on the way healthcare institutions approach real estate and data management. Healthcare institutions can learn the from lessons housing associations learned when they were confronted with this change in 2016. These experiences showed that taking inventory of data and making sure it was in order ahead of time is of major importance.

Opportunities to expand financing capabilities
Within the framework of determining collateral value for financing, valuations according to market value offer opportunities for expanding financing capabilities in order to invest in the quality of real estate. The majority of healthcare real estate is outdated and often does not meet the requirements of current users. Through investment in its real estate, the preferred healthcare activity can be supported sustainably. This offers healthcare institutions the opportunity and possibility of focusing on their core business, namely, providing healthcare.

In addition to improving financial statements and financing, the market value can also create greater added value for further optimisation of the portfolio. This could possibly lead to more demand for asset management within healthcare institutions. With the help of an active asset management body, the market value can be optimally applied for real estate management and the preferred portfolio strategy.

Currently, in most cases healthcare institutions use the value according to the Valuation for the Immovable Property Act to substantiate collateral value. Danny La Rose, valuation surveyor healthcare real estate at Capital Value, "It is a logical step in the professionalisation process that the healthcare real estate sector is currently experiencing. When the changes for housing associations were implemented, we assisted a large number of housing associations during the valuation process. We observed how the measure helped professionalise the valuation process for housing associations enormously and that housing associations started actively applying market value for strategic decisions within their portfolio. We anticipate that this will also be a positive development in the healthcare sector. Healthcare institutions are facing a mammoth task with the implementation of market value. This challenge will require a different approach from both healthcare institutions and professionals; however, the ultimate goal is a qualitative portfolio that can optimally support the user in providing healthcare."

News overview