Cushman & Wakefield’s new analysis of the aged care property investments in Germany shows that the market remains a high-potential asset class going forward.
In the report, authors Simon Jeschioro, Head of Investment Advisory and Jan-Bastian Knod, Associate Investment Advisory, examine the regulatory framework, socio-demographic factors, and the latest developments in the market for care homes and assisted living properties. Their conclusion is that nursing home and assisted living property remains a high-potential asset class going forward.
As the demographic shift gathers pace and the number of people with care needs rises rapidly, there is an increased focus on living concepts for advanced age. “Currently, one in four German citizens is aged 60 or above, and in 2017, there were already 3.42 million people in need of care,” states Knod. “By 2050, this number is expected to have risen to 5.36 million,” he continues, explaining that, in view of this increase, the 14,500 residential care homes offering 950,000 places will not be sufficient.
In 2018, 52% of those in need of care were being looked after by their relatives, with 24% in residential are and a further 24% receiving care in their own home.
“Assisted living combined with home care or visits to day-care centres for the elderly is an attractive solution not just for people in need of care, but also for those operating facilities and for investors in the sector,” says Jeschioro, explaining that the reason for this is that assisted living and sheltered accommodation are not governed by the same strict regulatory requirements as residential care homes.
Between 2013 and 2017, there was a rise of 35% in the number of people receiving care in their own home; according to Cushman & Wakefield experts, the political will to expand ambulatory care provision means that demand for home-visit care services is set to grow in tandem with part-residential and age-adapted living concepts.
A fragmented aged care property investments market offers good prospects
In terms of care home providers, the German market is strongly fragmented – with a growing tendency towards consolidation.
“Measured in the number of places in residential care homes,” explains Knod in his analysis, “private operators have a 40% market share. There has been a wave of take-overs by financial investors and private operators from abroad, leading to consolidation.”
The authors conclude that “regional, medium-sized operators represent attractive targets for investment. There is still room in the German market for the creation of a profitable platform or chain of commercially-run homes.”
The care home and assisted living property investment market
Between 2013 and 2019, investment in care homes and assisted living complexes across Germany totalled 11 billion Euros, with 1.7 billion spent in 2019; top yields ran at 4.3%.
“In order to secure urgently-needed investment in new forms of assisted living and sheltered accommodation, regulatory barriers such as strict standards for the quota of single-occupancy rooms will need to be reduced. Long-term oriented investors need planning security, not a restrictive planned economy,” warns Jeschioro.
Expert interview on aged care property investments
The authors of the report also interviewed Dr. Matthias Faensen, partner and advisory board member at advita Pflegedienst GmbH, one of Germany’s leading providers of ambulatory care services and an operator of assisted living properties. Faensen offers first-hand insights into the reality of care service provision and his own views on the outlook for the sector.
The report on aged care property investments in Germany by Cushman ad Wakefield comes after Singapore Press Holdings Limited (“SPH”) on Feb 24 announced that it has, through two special purpose vehicles, Straits Himawari TMK One TMK and Straits Himawari TMK Two TMK, entered into sale and purchase agreements to acquire five aged care assets in Japan for an aggregate consideration of JPY5.26 billion (approximately S$65.8 million).
SPH said that the acquisition of the portfolio of five high quality senior independent living properties is in line with the Group’s strategy of investing in aged care and healthcare assets, and expanding its business footprint in markets with fast-ageing populations.
Three of the properties are in Hokkaido, one is in Nara in the Osaka Metropolitan Region and the fifth, in Tokyo. The properties are well-designed and located, with a total capacity of 365 beds. Seniors are offered quality independent living services including community-based activities, transport and laundry, meals and care services. SPH said that further details of the senior independent living properties will be disclosed on completion of the acquisition.
Mr. Ng Yat Chung, Chief Executive Officer of SPH, said: “We continue to seek opportunities to expand our Aged Care business overseas. This acquisition is in line with our strategy of growing our recurring income base through the acquisition of cash yielding assets in defensive sectors.”
The acquisition of the senior independent living properties is made as part of SPH’s partnership with Japanese real estate asset manager Bridge C Capital in October 2019 to establish a fund focused on investing in aged care and healthcare assets such as senior housing, nursing homes and medical office buildings in Japan. Asset management fees will be generated as part of the fund, eventually adding to the recurring income stream from the assets. The senior independent living properties in Japan will continue to be managed by the current operators on long leases averaging 23.4 years.
Mr. Anthony Tan, Deputy Chief Executive Officer of SPH said: “The move builds on the acquisition of Orange Valley, one of the largest private nursing home operators. We believe that the aged care industry is set for continued growth in countries with fast-ageing populations like Singapore and Japan. We will continue to leverage on the track record and network of Bridge C to explore future growth opportunities in Japan.”
The aged care sector in Japan has attractive demographics with the proportion of the elderly population (65 years and above) expected to rise to 30% by 20252. Senior care offerings, including home, facility and the elderly care market are estimated to be worth JPY15 trillion (approximately S$188 billion) in 2025.
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