Consolidation and geographical diversification are coming to Europe’s healthcare sector, delegates heard at Real Asset Media’s Senior Housing & Healthcare Briefing, which took place online recently.
The recent epidemic has accelerated an existing trend, increasing difficulties for smaller and weaker players, with credit ratings being damaged and the risk of bankruptcy from dips in occupancy and increases in costs.
‘There will be consolidation in the sector, because size matters in healthcare,’ said Kees Zachariasse, Managing Director Netherlands, Cofinimmo.
‘In the longer term, increased regulatory scrutiny will increase the speed of consolidation in the sector,’ said Frédéric Dib, President, Mozaic Asset Management. ‘More independent operators are likely to exit the business, because it is so difficult to deal with a crisis on your own’.
The larger operators will expand and diversify, he said: ‘There will be a small dip in profitability for the established groups but no significant negative impact. For the small independent operators, however, it will be a different story’.
There are opportunities in many countries in Europe.
‘Nursing home consolidation is a big opportunity in Italy, Spain, the Netherlands and Ireland where the market is still fragmented,’ said Dib. ‘In Germany the process of consolidation has already started but it is still ongoing, while in France it’s been done’.
There will be more consolidation and portfolio deals but also more sale & leaseback ahead because ‘owning the real estate isn’t that important anymore,’ said Ron van Bloois, Partner, HEVO. ‘I see a real shake-out of the sector ahead’.
Larger groups also find it easier to get financing.
‘The sector will be able to finance itself, also thanks to Government and Central Banks’ interventions,’ said Geert Wellens, Partner, Triginta Real Estate Fund. ‘There will be a societal bonus for healthcare, as Governments feel they owe a debt to the sector. But private capital will be needed to build the infrastructure’.
Governments have learnt the value of healthcare, but their strained finances mean that they will increasingly turn to the private sector to provide the infrastructure.
‘Governments have been putting huge amounts of money into the economy, with a massive strain on public finances,’ said Keith Harris, Executive Director Operational Real Estate, CBRE. ‘There will be a push by every country to get more private sector capital into healthcare, and real estate is one obvious way of attracting capital’.
Financing opportunities for development are easier to come by, reflecting confidence in the sector’s long-term prospects.
‘Debt from banks and mainstream lenders is virtually non-existent now for investment plans,’ said Harris. ‘However, the development market is open, because people know the crisis won’t last forever so the feeling is that the market will be efficient and functional again in 1 or 2 years’ time, when the new developments would be coming onstream’.
Contact the editor here.