Update 18 January 2022

I hope that you have enjoyed the first two weeks of 2022 and that the year will only get better as it progresses. Recent news from the Dutch healthcare sector includes:

• Investment in healthcare related real estate again above €1 billion. Will trend continue?
• New entrant in healthcare real estate investing buys large portfolio. Will other new investors follow?
• Medux acquires company in the UK. Will further European expansion follow?
• Traditional Dutch mental healthcare providers issues bonds. Will the role of traditional banks in financing healthcare operators continue to decline?

Investment volume in Dutch healthcare real estate above € 1 billion for third year in a row

A recent report from Capital Value gives an interesting overview of the Dutch healthcare real estate market in 2021. While total volume declines slightly from 2020 it is still higher than the transaction volume of 2019 and above € 1 billion for the third year in a row. Investments are for the largest part local, as 60% of the total volume has been purchased by Dutch investors (mostly institutional and private). International companies have invested €400 million in Dutch healthcare related real estate in 2021. Two thirds of this volume consisted of investments by listed companies such as Cofinimmo, Aedifica (both from Belgium) and Northwest Healthcare Properties (Canada).

Main sellers in the market were healthcare providers (29%) and developers (34%). The strong role of developers as sellers of healthcare real estate is a consequence of (large) area development projects including healthcare related locations (typically elderly care).

The average size of transaction increased from€7.9 million in 2020 to €9.9 million in 2021. Typical transactions in the sector are still small, with 90% of all transactions being smaller than €20 million. The relatively small size of most transactions is a challenge for large international investors and increases the competition for larger transactions. Overall yields have decreased, and Capital; Value expects that this trend will continue.

New entrant in healthcare real estate makes large investment

A deal  that drove the average size of real estate investments in 2021 upwards was the purchase of a large portfolio of healthcare-related assets by Rubens Capital Partners. The portfolio consisted of 39 locations with more than 900 units in the north-eastern part of the Netherlands (Friesland). Parts of the portfolio has long-term rental agreements with healthcare providers and other are rented out to individuals (senior living). The seller of the portfolio was the real estate investing company Estea. Estea had built the portfolio through purchases of smaller portfolios from housing associations.

Rubens Capital Partners is a Dutch real estate fund with €3 billion total assets under management. More than 50% of the assets are residential, and the purchase of the Vitality portfolio appears to be their first investment in the healthcare sector. Rubens Capital Partners is an example of a new party entering a crowded field with limited investment opportunities buying a relative unattractive portfolio in order to rapidly develop a position. Will more new investors follow?

Medux expands to the UK market

Medux is a large Dutch companies providing healthcare related equipment and support for individual clients at home and in hospital settings. Medux is owned by NPM Capital and is a holding company for different brands operating in the Dutch market. In a typical year the company provides 1.5 million product deliveries to clients. Examples of key brands and areas covered include:

• Medipoint – a provider of relatively low-tech equipment to patients at home (wheelchairs, walkers, etc.) These products are typically financed by municipalities
• Orthototal – a provider of products for clients with problems sitting or being in bed
• MHG – a provider of high-tech wheelchairs

Medux has recently acquired Medequip, a UK company operating in the same areas as Medux. Medequip has more than 1.000 employees and had a turnover of GBP 200 million in 2021. The combined company will have a turnover of €600 million per year. The two companies are expected to operate independently but are clearly well positioned to expand to other markets. The trends driving the Dutch and UK markets (growing elderly population that is increasingly infirm, etc.) are also relevant for other markets in Europe. It will be interesting to see if other acquisitions follow.

Dutch mental healthcare provider raises €150 million via bond placement

Approximately one year ago we described how Meander had received a Fitch AA-rating with the goal of being able to place bonds. Parnassia (revenues approximately €1 billion) is one of the largest traditional providers of mental healthcare in the Dutch market. It has recently also received a Fitch AA-rating and has used it to place bonds totaling €150 million in the market.

According to Parnassia this was a simpler and cheaper option than getting a loan from one or more of the large Dutch banks. In addition, the bond investors have not placed any limitations of how the proceeds of the placement are used nor have they requested any security. Parnassia will use two thirds of the proceeds to finance investments in real estate and IT and the rest to repay existing loans with Dutch banks. This appears to be another example of banks decreasing their role in financing the healthcare sector, but are they happy with this new situation?