The COVID-19 crisis has not had a major impact on healthcare real estate assets and the sector is predicted to have a strong 2021.
The message, delivered by BNP Paribas REIM, is based on the both the performance and interest generated by the manager’s Healthcare Property Fund Europe (HPF Europe), which it launched in March 2020. It has attracted more than €300 million in equity commitments since its launch, originating from pension funds and insurance companies based in France, Germany and Italy.
The lead fund manager for HPF Europe, Paul Darribère, says that the crisis has not lead to a demand for rent cancellations, nor has it lead to an impact on returns. The fund invests in European short-, medium- and long-stay properties, consisting of general hospitals and clinics, rehabilitation centres, and nursing homes.
“It has been more difficult after lockdowns [in various countries] to admit new residents into nursing homes,” says Darribère, “but this has been a temporary impact.”
“Equally, the situation has had an impact on our short-stay and medium-stay assets due to postponements of some medical services. However, this is also a temporary suspension in activity that will pick up once lockdowns end.”
Darribère and his colleague Henri Romnicianu, head of institutional sales at BNP Paribas REIM, expect to see further equity commitments to HPF Europe this year, with new investors coming from the Netherlands, Nordics and the United Kingdom.
The fund invested in two German assets worth €100 million at the end of 2020 and is targeting new investments in Italy and Spain.
Investors are attracted by the demographic and structural megatrends that are driving demand for the expansion and development of many subsectors within the healthcare sector. The property sector currently attracts approximately €6 billion to €7 billion of investment each year in Europe, but this is expected to rise over the course of the next decade. Southern European countries will contribute a large proportion of new developments and investments as countries such as Italy and Spain attempt to meet the needs of their rapidly ageing populations.
In addition, investors are entering the sector to benefit from its diversification characteristics and long lease contracts, which can last as long as 30 years for some properties. “Investors are looking for stable cashflows and de-correlation from GDP. The healthcare sector makes a strong case in this sense,” says Romnicianu.
“The COVID-19 crisis has led to a general understanding in many countries that they have not invested sufficiently in healthcare facilities,” adds Darribère. “A significant portion of this future investment will have to be provided by private capital to help operators to build the buildings that are required to meet demand.”
BNP Paribas REIM says that Europe’s elderly population is set to double within the next 30 years and that the sector currently accounts for some 10 percent of Europe’s GDP.
Source: IREI