A booming market segment: 100 new medival service centres created annually

CORPUS SIREO expects rapid growth in this market segment of healthcare real estate, creating challenges for both project developers and asset managers alike.

Medical Office Buildings (MOBs), the properties housing the new medical centres, represent a growth driven segment in Germany’s real estate market, assisted by the emergence of a new and dynamic tenant base – the “Medizinische Versorgungszentren” (MVZ). Between 2006 and 2012, the development and growth of MVZs, assisted by proactive legislation, tripled in number, climbing to around 2,000, whilst the number of physicians employed in these facilities doubled to an average of six per MVZ during the same period of time. CORPUS SIREO expects a longterm annual completion rate of circa 100 new MVZs, which will continue to drive demand for the development of new MOBs.

Recent publications by the German National Association of Statutory Health Insurance Physicians (KBV) substantiated the sustained growth of the MVZ segment. Totaling around 2,000 facilities by the end of 2012, their number increased several fold since the introduction of the 2004 legislation which allowed for their creation. This growth trend is expected to continue in the wake of the 2012 Supply Structure Act (VStG). There is also a defined upward trend in the scale and networking intensity within the existing MVZ segment, in particular when they are co-sponsored by a hospital organization.

MVZ: A growing tenant base

What sets MVZs apart from the traditional medical centers (“Ärztehäuser”) and medical service centres (“Gesundheitszentren”) is mainly their organizational and legal form. In the former two types, physicians rent out office space in their own right. Resident physicians operating within an MVZ, are by contrast, jointly organized in a private limited company (GmbH) or a private partnership (GbR). An MVZ is able to be a multi-disciplined organization having within its operating structure a variety of healthcare professionals, other than just physicians, all of whom seek are able to offer patients with their ambulatory care needs. MVZs are frequently operated by hospitals, the idea being to expand their service spectrum. These cooperative business models generate organizational and financial synergistic benefits, whilst patients benefit from direct contact to an array of specialist physicians and healthcare professionals within a single entity.

MOBs: Continued rise in demand

The properties housing MVZs are referred to as “medical office buildings” (MOB). The current rise in demand for these assets is forecast to continue to expand:

– given Germany’s demographic trend,

– the Governmental drive for enhanced cost efficiencies in the ambulatory healthcare sector,

– as well as the sector’s medical professionals wishing to establish interdisciplinary practices to enhance service offerings.

The above changing dynamics represents a real challenge for project developers and asset managers alike, due to the specials requirements associated with purpose-built properties of this type.

An MOB typically accommodates 10 – 25 tenants on a net lettable area of 3,000 to 5,000 square meters. The investment volume for this type of property can range from €5 – €30mn, which creates a need to arrogate and manage the assets on a regional, sub regional basis, ensuring economies of scale and ability to attract institutional capital into the sector.

The current project developers constructing MOBs still tend to be regional or city focused, meaning an investor has to be able to reach across a number of markets to facilitate a wider investment strategy in the sector. The fact that the MVZs are rooted in their local communities, and the MOBs housing them tend to let space to them on leases as long as 15, or even 20 years, makes investment in this real estate segment highly interesting for safetyconscious, income driven, investors. The US market has seen the strongest development by far in this field of healthcare real estate, with numerous listed REITs and institutions operating within the MoB sector.

Having been active in the “healthcare real estate” segment for many years with its own institutional funds, CORPUS SIREO has recently established, with capital partners, its own managed MoB fund with a view to capture the value growth in this exciting healthcare sector.

Contact:

CORPUS SIREO

International S. à r. l.

4a rue Albert Borschette

Plateau de Kirchberg

1246 Luxembourg

Douglas Edwards

Managing Director

douglas.edwards@corpussireo.com

For further information go to www.corpussireo.com