GERMANY - Small pension funds from outside Germany will invest in a fund dedicated to German nursing homes, according to fund manager Felix von Braun, a former managing director of Savills.
The institutional fund will be one of three planned by Berlin-based Deutsche Pflegheim Fonds (DPF), the others being closed-end funds with two-three assets aimed at high net worth investors. Von Braun set up DPF earlier this year under a specialist board stacked with industry experts.
"We're already talking to pension funds, not in Germany but internationally. We will talk to German pension funds also - it's not that we have anything against them - but they usually invest directly in the domestic market," said von Braun. "Mostly we're talking to our existing network but we're open to talking with others."
He believes the fund's appeal will be mainly smaller pension funds. "You have to look at the transaction sizes. These are smaller transactions at between €6-10m per asset. Larger pension funds want to invest in a €50-100m vehicle and they're likely to want at least 25% of the fund. It isn't easy to find high-value assets in the sector and we don't want to be pressured into buying overpriced assets."
At least in the short term, the fund will focus exclusively on the "still large" German market for nursing homes, eschewing medical centres and other forms of social infrastructure.
"We're seeing annual demand for €1-2bn for new nursing homes annually - and that's without considering the €2-4bn needed to refurbish existing stock," said von Braun.
The firm is in discussion with foreign banks to buy loans, including distressed loans, in nursing homes. "It's not are big part of our business model - it's not a big thing - but we are looking at it," he said.