EUROPE - Investors in UK healthcare property assets should not assume that long leases and government backing represent a guarantee against investment failure, according to Bolt Partners, the firm mandated to manage a £300m (€361m) portfolio of 150 UK primary healthcare facilities for Blackrock's £2.1bn UK property fund.
Pension fund investors such as the East Riding local authority pension scheme have shown considerable appetite for healthcare largely because of its liability-matching income characteristics.
In contrast to retail and residential, healthcare leases average 20-25 years.
Jonathan Knight, partner at Bolt, said: "Investors are interested in that, even if the assets won't grow as quickly. They do well when the market isn't booming."
Recent IPD data for UK healthcare show it has outperformed commercial property by 7.1% over the past five years.
But Knight warned it would be a mistake to assume demographic trends such as an ageing population could "be taken to mean you can't go wrong".
"You need the right people, the right opportunities and the right partners in place to make it work," he said. "If you do it wrong, it becomes expensive."
Bolt Partners recently led the working out of 750 assets after nursing home operator Southern Cross collapsed.
Knight said: "You have to be smart about having the right kind of property. In some places, you could find that there was no demand, or that the facility wouldn't be publicly funded.
"It involves reasonably specialist property management. It isn't like managing retail, where, in theory, you could slot in another retailer when the property becomes vacant."
According to Knight, the healthcare PFI model developed in the past 10 years will soon become obsolete.
"PFI won't solve problems in the future," he said. "It just isn't the flavour of the month anymore.
"What you'll see is new forms of public-private partnership for the deployment of private capital - because the government hasn't got sufficient capital to fund healthcare."
In contrast to the old PFI model, which built hospitals, healthcare property asset managers in future will focus on local variations.
Knight contrasted the capital, which has five major teaching hospitals, with the sparse healthcare infrastructure of some rural areas.
A government white paper currently before Parliament proposes reforms that would increase community-based facilities and introduce GP-led commissioning.
Despite what amounts to a government guarantee, there is likely to be considerable variation in local preparedness for the reforms.
The British Medical Association, a professional organisation, recently claimed 70% of GPs were concerned about potential conflicts of interest within the proposals.
Although he acknowledged that regulatory uncertainty remained a concern for investors, Knight suggested assets associated with private healthcare companies were in a more precarious position than those managed for the National Health Service.