23 March 2021

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Jan de Vries realised he had an enormous task on his hands very soon after taking over as the new managing director of DSV|Verzorgd Leven (Cared Living) in September 2020. At that point, not only did DSV own and manage all its accommodation, it was also responsible for providing care and welfare services in two Dutch towns, Katwijk and Lisse, located between Amsterdam and The Hague. Some four months later, just before Christmas, DSV sold 61 care apartments in Katwijk to Bouwinvest’s Healthcare Fund. Under the sale agreement, DSV will continue to offer care to residents in the Parledam buildings where the apartments are located while Bouwinvest will manage the buildings. DSV will provide the care services from an adjacent property, Parlevliet, which it still owns.

DSV was founded on a strong Christian tradition of social engagement and is committed to providing the elderly with a good quality of life. It aims to help senior citizens to live responsibly, comfortably and as independently as possible in their own home for as long as this is manageable. When this is no longer feasible, DSV offers accommodation in four residential care complexes where the privacy of an independent apartment is combined with personal care services.

The Parledam apartments’ rental levels are mid-range, between €750 and approximately €1,000 per month. The transaction marks the start of a close partnership with Bouwinvest and De Vries explains here how the alliance came about.

What prompted DSV to sell part of its care real estate portfolio?

“I had just started in my new role when the Dutch government announced it was raising the transfer tax on [real estate]. That hike implied a seven-digit extra cost on the sale of this type of residential property. So we accelerated the whole process, which had come about as part of a strategic review, in order to complete the deal before 1 January 2021. The rationale behind the sale was twofold. First, we had implemented a strategic reorientation of our real estate portfolio and had decided to focus more on our core business - care - and less on property management. Second, we wanted to build a new residential care centre, but we didn’t have enough financial resources for the project. The profit we have made on the sale of the Parledam complex can now be channelled into a new intensive care complex where we will offer protected accommodation. Our plans there had been put on ice, but we’ve now picked it up again with renewed enthusiasm.”

Was it a difficult decision to divest the apartments? Were there any disadvantages to selling?

“It had become clear to us that property management is a profession. We’re good at providing loving care; that’s our specialty. You can't be good at everything which is why we decided to bring in an expert. On the one hand it meant letting go for us. It’s possible that we’ve forfeited part of the indirect return in terms of capital growth to Bouwinvest, but so be it. On the other hand, we now have the opportunity to expand our offer with a new development. We’re getting new silverware in return, so to speak. And this will allow us to focus solely on high-quality care: and that’s exactly what we’re here for. In a nutshell that’s why we took this decision.”

Why did you select Bouwinvest’s Healtcare Fund as the buyer?

“DSV has always had strong links with the local community. So, we don’t want to do business with just any old real estate organisation. The talks we had with Bouwinvest quickly made us realise they have a long-term vision and no intention of selling quickly, as well as being fully committed to sustainability. Their vision on healthcare also appealed to us. We realised this is an investor with a clear strategy. Of course, the fact that Bouwinvest's bid was competitive also helped. An additional important consideration was that nothing should change for our residents. We continue to provide the care and remain at the client-facing end of the services residents receive. It was precisely this last point - in combination with Bouwinvest's good reputation - that worked so well for us. The local municipality also had to give its approval, because it is the backstop for our financing requirements and has the mortgage rights to our property. The municipality voted unanimously in favour of the deal: which demonstrates there is full confidence that the care services and housing for the residents are in good hands.”

How is your collaboration with Bouwinvest working out?

“It was excellent from the start. All sides including the municipality worked hard in the final months of last year to get everything on track. We had to run a bit faster now and then, so it’s good when a party like Bouwinvest can move quickly. We’re now working together at all levels of the organisation to flesh out the details. We’ve paid a lot of attention to retaining the care character of the residential complex among other things. For example, the meeting centre with De Reedery restaurant at the ground level of the building will be retained. We also discussed the issue of allocating apartments in quite some detail. These units were completed just a few years ago and are 100% suitable for assisted living. It would be strange if they were suddenly converted for another group. Fortunately, Bouwinvest has no plans to do that. We agreed we will remain responsible for allocating the units, also based on our local knowledge of the market but of course, we will respect Bouwinvest’s own criteria when making those choices.”

Do you have any tips for Bouwinvest and other investors in healthcare property?

“I understand that investors also look at the direct return of a property and that this has implications for their strategy on allocating individual units. It’s normal for a market party to build in a degree of risk aversion into their strategy. We are more flexible in our approach. Suppose a prospective tenant only draws an income from a state pension but has €400,000 in bank savings or a family member who can act as financial guarantor. In these cases, we would be inclined to allocate the unit to that person anyway, whereas an investor might be more reluctant. For us, the care requirement is the primary driver, and the income risk is secondary. We hardly have any vacancies and no rent arrears, so I dare to say: trust us on this one. We know the residents who rent our units and use our services. It doesn’t do an investor any harm to understand the target group and to trust their partner.”