Michael Türk Group
Michael Türk, CEO, Michael Türk Group
Nurseries are regarded as a prime example of a social property: socially desirable, politically supported and popular with investors. But is the business model viable in the long term – despite falling birth rates?
Absolutely, says Michael Türk. He should know, as the Michael Türk Group has built a large number of nurseries, particularly in the Ruhr region, and is familiar with the typical investors.
We are reproducing this interview courtesy of Der Fondsbrief, whose editor Markus Gotzi conducted the interview.
Der Fondsbrief: How many nursery places have you created so far?
Michael Türk: We have created around 2,500 new places in our kindergartens that didn’t exist before. And yet we are still a long way from meeting the demand. There is a shortfall of 300,000 places nationwide, and 84,000 in North Rhine-Westphalia alone.
Is this a viable long-term strategy? Demographics are working against you. Won’t this lead to an oversupply of places in the long run?
It’s true that the birth rate is generally falling. But that doesn’t change the fact that there will always be a shortage of places in conurbations. We base our calculations for our nurseries on two to three lease cycles of 25 years each. Furthermore, most of the existing kindergartens in our area are generally much older. If kindergartens do eventually have to close, it won’t be our modern, sustainable properties. That said, the accessible properties in central city locations could also be put to other uses, for example as group homes for the elderly, for dementia care or as respiratory care units.
You mainly build in the Ruhr region, an area facing structural challenges.
A location with challenges, but also with opportunities. Over the next 30 to 40 years, I expect the region and the entire federal state to grow significantly stronger. North Rhine-Westphalia already possesses incredible economic clout. 200 companies each generate more than one billion euros in turnover. And a large proportion of this is generated through manual labour, unlike in Switzerland, for example, with its many banks. If North Rhine-Westphalia were a separate country, it would rank 19th amongst the world’s strongest nations.
When I speak to investors and fund managers, they complain about low returns from social housing. Buyers would have to pay, on average, 25 times the annual income.
Türk: That’s a short-sighted view. A kindergarten pays for itself in the long term and thus meets the requirements of our typical investors. These are generally small and medium-sized enterprises and family-run businesses that wish to preserve their wealth and pass it on to the next generation. One advantage here is the annual full indexation of the properties. Following the pandemic, we were able to pass on a rent increase of just under 7.7 per cent to the operators. In no year has the increase been less than two per cent. You can’t achieve that with residential property.
Are the operators even in a position to absorb such increases?
Kindergartens are funded by public money. The funds come from the federal government, channelled through the state and local authorities. The federal government deliberately seeks a mix of different providers, including churches and independent youth welfare organisations, in order to fulfil its social mandate. Kindergarten places are therefore an extremely secure investment.
What role does social benefit play in the investment decision?
Of course, altruistic goals also play a role for our typical investors. Kindergarten places allow mothers to work, and most of them want to do so. The children aren’t just looked after. They learn German, how to interact appropriately with one another, and they are provided with good food featuring fresh fruit and vegetables, either from our in-house kitchens or from high-quality caterers.
For your own portfolio, you’re also developing residential complexes in the Ruhr region, for example in Gelsenkirchen. I’m very drawn to this – after all, Gelsenkirchen is my home town. But I’m also aware of developments in the housing market. How can an investment there pay off?
I believe in a city like Gelsenkirchen. Or in the Nordstadt district of Dortmund. I believe in positive development, but here too, a long-term perspective is crucial. Gelsenkirchen will recover and will once again create enough jobs. After all, there’s nothing worse than robbing people of the dignity of earning money through their work. But I also believe in the new federal states. When I talk to people in Frankfurt an der Oder, for example, I can tell how much they’d like to work for a small or medium-sized business. However, politicians must create the right conditions for this. They must support small and medium-sized enterprises. We need more tradespeople and technicians. More patents. To ensure that successful entrepreneurs come and stay, they must be supported through tax incentives. That is where our future lies.