Update 21 January 2020
I hope that you are all up to speed again and are enjoying the winter weather. In this update we cover:
- Health insurance company refusing to support hospital in financial problems. Will another hospital be closed?
- Private equity makes new investments in healthcare sector. Who will be the next target?
- Investments in healthcare real estate pass € one billion mark. Will growth continue?
Uncertain future for hospital in mid-sized city
Langeland Hospital is located in the central part of the Netherlands between The Hague and Utrecht. It serves Zoetermeer, a city of 125.000 inhabitants. It is a general hospital with 220 beds and revenues of approximately €100 million. In 2018 it made a loss of €1 million.
The hospital has struggled financially for a number of years and was saved in 2015 by joining the Reinier Haga Groep consisting of two other hospitals (Haga in The Hague and Reinier de Graaf in Delft). This group has now decided to stop a process leading to a full legal merger and to move back to an independent status for each hospital.
Given its weak financial position the future for Langeland is uncertain, especially as Menzis (one of the largest healthcare insurance companies) announced that it would not step in to keep Langeland afloat. Given the debacle of a few years back when two hospitals belonging to the MC Group went bankrupt a potential closure will be a delicate issue. It is clear that the number of general hospitals in the Netherlands needs to be reduced and patients in Zoetermeer can be served by nearby hospitals, so Langeland is probably a good candidate for becoming something less than a general hospital (no emergency care, collection of clinics, etc.).
New investments by private equity in the Dutch healthcare sector
Bencis Capital is a Dutch investment company with 21 investments and an invested capital of €1.6 billion. Bencis was an early investor in the dentistry sector with the acquisition of Tandvitaal in 2011 and Smile Clinics in 2015. These investments were sold to EQT in 2017.
Bencis currently has one investment in the healthcare sector (Mersen & Ceban, a chain of 40 Dutch pharmacies). It is clearly seeking to expand its footprint bin the sector as it has recently announced that it is investing in EMC Groep and Zorgzuster Holding. EMC Groep is specialized in recruitment and placement services for healthcare organizations and also develops and provides employee training courses. Zorgzuster Holding is active as an intermediary for independent workers in the home care sector. With these new investments Bencis is well positioned to gain from the growing challenges that healthcare organizations have in finding and keeping employees.
Further growth in investments in healthcare real estate
CBRE have recently published another overview of the Dutch healthcare real estate market. Total investments have grown for the seventh year in a row and have reached €1.1 billion in 2019. This is a growth of 17% from 2018 and is the result of 137 transactions (107 in 2018). Sixty-four different investors were active, but the market is fairly concentrated with the four largest investors making 37% of all deals (in volume).
Most investments (almost 80%) are in elderly care locations with the remaining 20% split between medical office buildings and clinics. 2019 also saw investors venturing into real estate related to psychiatric and disabled care. Yields have come down and are now between 3.75% and 5.6% depending on the type of location.
As highlighted in the previous update there will be massive growth required in new elderly care locations in the next few years. Therefore, the growth in investments in healthcare real estate can be expected to continue.