Nursing home investment hits record high

Investment in German nursing homes has hit a record high, with around €3 bn in deals recorded last year, according to CBRE.

And that figure is set to grow significantly: CBRE is forecasting around €55b of new investment in the sector by 2030, according to its recent ‘German Care Homes 2016/2017’ report in conjunction with immoTISS Care.

Interest in the sector is being driven, unsurprisingly, by the increase in the number of people living in such facilities, according to Germany’s Federal Statistical Office (Destatis). Currently, there are around 889,000 care beds in the country, a figure that is expected to grow by 300,000 by 2030, which will require an enormous capital investment. Non-profit private residents account for 53% of places, followed by private residents (42%) and state-sponsored ones (5%).

Several large deals show that investors are willing to commit big bucks to the sector. In October last year, France's Primonial REIM acquired a 68-facility nursing home portfolio in Germany from an unnamed Swiss investor for €995m. Deutsche Wohnen paid €420m to acquire the Pegasus Portfolio from Berlinovo last August. Also, in December, Swedish community services specialist Hemsö bought a portfolio of four nursing homes in Kiel, Rehren, Bonn and Nittenau for €40m from a German fund manager advised by Terranus.

Subsequently, nursing homes are accounting for a bigger slice of the real estate pie than ever before, or 6% in Germany last year, up from just 1-2% in previous years, according to CBRE. Top yields are now in the region of 5.5%. The price of German nursing homes has also rocketed since 2012 by 26%, according to the vdp Property Price Index, compared to increases of 27% and 25%, respectively, in the residential and office sectors.

Nonetheless, it is not an easy sector for international investors to access, due to the lack of transparency and its fragmented nature. French operator Korian has beaten the odds to become the biggest provider of care home facilities in Germany, with more than 25,000 beds, according to Savills. Other German providers, such as Pro Seniore, Alloheim and French-German operator Orpea/Silver Care typically provide between 11,000 and 13,000 beds in Germany, according to Savills.