Healthcare REIT interest ever stronger and unswayed by operator woes

Long leases and attractive yields are the cornerstones of healthcare real-estate which have greased the wheels of investments over the last 10-15 years. More healthcare-specialised funds are emerging now as laws open markets up to foreign capital and fund managers look to decrease investor risk.

Take the UAE. Last spring, it legislated to open its healthcare market up further by allowing investors to fund labs, polyclinics, ophthalmology clinics and a number of other healthcare services – previously they were restricted to large hospitals only. In the last 18 months, Saudi Arabia has allowed the creation of healthcare REITs and specialised investors have increased in both Saudi and the UAE.

In Finland, real-estate investors seem unperturbed by building activity drastically falling in the nursing home sector. One of Europe’s largest REITs Aedifica, which has investments in Belgium, the UK, Germany and the Netherlands to the tune of €2.3bn, recently put a public tender offer on healthcare property developer Hoivatilat – which would spell its very first entry into the Nordics.

The UK has seen particular interest from international investors and boasted the largest investment volumes in Europe in 2018 at €2.7bn. In January 2019, Aedifica entered the UK for the first time. Yet conversely, the UK operator market is struggling with tight budgets and political uncertainty. The sector’s largest provider by revenue Four Seasons is facing a potential carve-up in a desperate bid for a sale, and is in the process of renegotiating rent with its landlords (one of which is Aedifica).

As residential care markets are increasingly consolidated and healthcare groups from hospitals to clinics get larger, providers may look to specialised property funds to manage ever-growing portfolios. It looks like investors will be only too happy to oblige – but who will they be?

Whilst there is a cohort of well-informed healthcare service-savvy investors bringing experience to the table, the attractiveness of the sector is bringing investors hitherto inexperienced in healthcare to the sector. Some operators stridently tell HBI that they only want investors with an awareness of the particular needs and sensibilities of healthcare. Could this be storing up problems for the future?

We would welcome your thoughts on this story. Email your views to Anaïs Charles or call 0207 183 3779.