People living longer brings opportunities to invest in their care, reports Paul Strohm in the latest edition of EuroProperty.
It is no secret that Europe’s ageing population is one of the greatest social and economic problems facing the region, or that the growing proportion of the population over 65 and through to the 85-and-over cohort is placing increasing pressure on resources, both individual and national. Medicine’s triumph in extending life expectancy is also a challenge for public and private providers of healthcare facilities that become necessary with a growing population of dependent elderly people. It is also an opportunity for real estate investors.
The attractive returns possible in the sector were recently illustrated when Nordic asset manager Northern Horizon exited its second care home fund via a sale to a vehicle managed by Finnish investment bank Evli.
The deal values Healthcare II fund’s 30-asset Finnish portfolio at €140.8 mln. Furthermore, the exit from the fund, which was launched in December 2013, delivered a net internal rate of return of approximately 29% and an equity multiple of 1.7x to its investors, according to Northern Horizon.
Jussi Rouhento, fund manager of the Healthcare II fund and Northern Horizon’s head of Finland, says: ‘The exit completes the story of one of the highest-quality healthcare real estate portfolios in Finland. The portfolio consists of new assets 100% let on leases with an average remaining term exceeding 12 years. By exiting now, we were able to achieve a 50% capital gain on the equity invested – this is why we feel it was in the investors’ best interest to exit now.’
Andreas Michelsson, co-fund manager of Healthcare II, adds: ‘In terms of net IRR, the fund has surpassed its original goal by a factor of three while delivering the targeted equity multiple in less than half the expected time. From our point of view, the portfolio is currently at its peak and there was no more work for us to be done to further enhance the value.’
OECD/UN forecasts indicate that while the population of Japan will have the highest proportion of over-80s by 2050 at around 17%, Spain and Germany will respectively be in second and third place with about 15% in this age group. GERMAN INTEREST The market in Germany is attracting investor attention.
In February the German asset management arm of Internos, now part of the US Principal Real Estate Investors, based in Des Moines, Iowa, announced the launch of Care Invest II, its second open-end fund focusing on healthcare property. Care Invest II is targeting a total investment volume of €300 mln over the next three years, of which up to €150 mln will be equity.
The fund aims to achieve a distribution yield of up to 6% over a 10-year average. It says it will invest in a balanced, regionally diversified portfolio of healthcare properties, with stable long-term value.
The full article appears in the latest edition of EuroProperty
