International investors target German healthcare

As healthcare moves into the mainstream, more international investors are snapping up assets in the German market.

This month, Swedish property investor Hemsö announced that it would develop care homes and senior living facilities with Berlin’s Scheven Group. Together, they eventually plan to develop between eight and 12 projects a year, with an annual investment volume of between €100m and €150m.

‘This year, we’d like to start four projects,’ Jens Nagel, Hemsö’s head of operations in Germany, told REFIRE. ‘We want to develop care homes because buying existing properties has become too expensive in Germany. We’re long-term owners, so it’s important for us to determine what a property should look like. No-one knows what care homes will look like in 10 years time but we are building them to be flexible.’

Hemsö has been active in the German market since 2011, during which time it has invested around €900m in property, of which around €700m is in healthcare, according to Nagel. ‘In our three markets – Sweden, Finland and Germany – 75% of our properties must be in metropolitan areas,’ he said. ‘We look at suburban areas of major cities where you can still afford to develop a nursing home. There’s no other segment of real estate where you are more aware of the supply/demand side than for nursing homes. The underlying figures are easy to calculate and it’s a low-risk investment because it’s influenced by demographics rather than the economy.’

Also this month, AviaRent Invest, a subsidiary of AviaRent Capital Management, a Luxembourg-based fund company, acquired a senior care centre in Diemelstadt, Hesse, for its open-ended property fund, CareVision IV, for an undisclosed sum. The fund has €104.4m of AUM and a target annual return of 4.75 % net with an IRR of 5% to 6 %.

The facility comprises 139 inpatient care places in 43 single and 48 twin rooms spread across more than 5,200 sqm. Amenities include an in-house cafe, gardens, a library and common rooms for a wide range of activities.‘The Lustgarten senior care centre in Diemelstadt is located in the heart of a first-class recreational area and is equipped with modern, age-appropriate facilities to create a homely, cosy and familiar atmosphere for residents,’ said Sascia Hauke, head of asset management at AviaRent Invest. Diemelstadt is set in the heart of a densely wooded, low mountain landscape in Hesse’s Waldeck-Frankenberg district, roughly 38 kilometres from Paderborn and 50 kilometres from Kassel. The Lustgarten senior care centre is centrally located, on the edge of the historic old town.

‘Our total target size for this fund is about €500m and this year we plan to invest €250m to €350m,’ said Hannes Ressel, chief sales officer at AviaRent. ‘By the year 2035, around 3.8m people in Germany will require care services. Against this backdrop and demographic change, we see our investments as an opportunity to invest in stable and inflation-proof assets. The challenges in the market are the increased demand of this asset and low supply at the same time.’

CareVision IV is an open-ended property fund designed exclusively for institutional investors such as insurance companies, pension funds, superannuation schemes, family offices, banks and foundations. The fund invests primarily in Germany. The investment strategy focuses on core investments with long-term cash flow, with a term of ten years and extension options for a total of two years. CareVision IV targets investments in a diversified portfolio of nursing properties, assisted living and nursing homes that specialize in dementia and alternative forms of living. The fund also aims to invest in state-funded nursing homes with sustainable operator concepts. The fund is targeting a regular distribution of 4.75% p.a. retrospectively. AviaRent has a combined fund volume of more than €5.5bn in the care and education sectors, investing exclusively in social infrastructure. Its portfolio consists of care properties with around 5,200 nursing beds, 1,400 assisted living units, 2,000 places in day-care centres and 2,300 micro-apartments.

Other investors have launched care healthcare funds. Last month, Luxembourg-based group REInvest launched its REInvest Outpatient Medical Infrastructure Germany fund, with a target size of around €350m. REInvest has already raised around 60% of the €125m to €175m of equity it is seeking, with a view to launching the fund in the first quarter of 2020. The fund will be structured as a Luxembourg-based SICAV-FIS. The fund will invest in healthcare properties, including medical centres, in select cities with a population of at least 50,000, targeting deals of between €8m and €40m. It will only consider properties built from 2000 onwards with at least five years on the lease. The fund has a target return of 5%.

Fund manager Swiss Life has also been very active on the healthcare side and is on the brink of launching a new fund, Nikolai Schmidt, the group’s head of healthcare transactions, told us last month. The group plans to invest around €500m in healthcare assets in Germany this year, targeting properties of €8m to €50m. Of the €500m, around 60% to 70% will likely be invested in care homes and assisted living facilities, with the remaining 30% invested in medical centres. Swiss Life Asset Managers has €1bn of healthcare assets under management across six funds, all of which are in Germany and Western Europe and it has been investing in medical care centres since 2015.

CBRE is forecasting around €1.5bn of healthcare deals in Germany this year. Last year, €2.1bn was invested healthcare properties in Germany, a drop of 32% compared to the previous year, according to CBRE. Care homes accounted for €1.2bn of the total, followed by retirement homes and residences (€470m), medical centres (€263m) and clinics (€135m). The fourth quarter was the strongest ever on record, with €757m of deals.