01 December 2014

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Bouwinvest has acquired the first asset for its new Healthcare Real Estate Fund with a sale and long-term leaseback purchase of the Ingenhouszhof nursing home in the southeast Amsterdam district of Watergraafsmeer from healthcare provider Amsta.

The Ingenhouszhof nursing home is to be redeveloped to the highest moderns standards to provide 3,500 m2 of accommodation for 66 people suffering from dementia in 11 new residential care units.

Bouwinvest is targeting an investment volume of €300 million for the fund on behalf of its major institutional client the construction workers pension fund bpfBOUW, which is the fourth largest retirement scheme in the Netherlands, with total assets under management of about €40 billion, and roughly 20% of its portfolio allocated to real estate.

Dick van Hal, Bouwinvest CEO said: “This agreement with Amsta is an important step for Bouwinvest as it marks the first investment for our Healthcare Fund. Investing in healthcare real estate has multiple advantages. It is a solid investment with a low risk profile and at the same time we can fulfil the growing social need for high quality health care accommodation in the Netherlands.”

The Dutch Government is undertaking a profound restructuring of the domestic healthcare sector to tackle soaring economic costs stemming from a rapidly ageing population. Market research indicates that this could potentially open up a large new future investment opportunity for real estate investors, with healthcare projected to expand to become a property asset class in its own right, possibly about midway in size between the Dutch retail and office markets.

The recent legislative changes in the sector will inevitably sharply increase the demand for healthcare real estate due to the separation of ‘housing and care’ or “extramuralisation,” where the government no longer pays for the accommodation of elderly people who can still live independently, and the compensation for domestic assistance is drastically reduced. This means people who require “lighter care” that can be provided within their own homes, will now be responsible for their own housing costs generating a strong boost in demand for the ‘regular’ residential rental sector suitable for domestic care in the Netherlands. At the same time, the supply side of the equation will be curtailed as the majority of existing elderly residential care homes are to be closed as they no longer meet modern living standards nor receive sufficient government financial support.

In addition, the age-related ailments of an expanding “greying population,” combined with a strong increase in the number of people with dementia in particular, is creating greater demand in both the long-term care and “cure” (short-term treatment) healthcare categories. The private sector will increasingly need to fill the emerging gap in both the provision of more professional healthcare services and the accommodation needs of the elderly as government support declines and the financial burden of living though the twilight years defaults to the individual’s own resources.

Erwin Drenth, Manager Healthcare Real Estate at Bouwinvest said: “Institutional investors have the opportunity to step into a fast expanding gap in the market by including healthcare real estate in their investment portfolios as the characteristics of the asset class are well matched to the long-term liabilities of pension funds. The elderly nature of the tenants in healthcare accommodation provides a natural “ageing hedge” for the longevity risk inherent in pension portfolios and the indexation of rents matches the inflation exposure. At the same time pension funds can “close the circle” in meeting their social responsibilities to Dutch society and many of their own retirement plan members without sacrificing their fiduciary duty to maximise risk-adjusted investment returns.”