Investment funds look at nursing homes | Economy

Investment funds look at nursing homes | Economy

Higher Life expectancy. Low birth rate Aging societies and family structures that change. The future of Europe is not very promising from a demographic point of view, but for some investors, willing to make virtue a necessity, it does expect a real real estate feast. In fact, it could be said that the party has already started: between 2015 and 2017, the sector of the residences of third age surpassed the 2,000 million euros in volume of investments, according to a market study that completes the real estate consultancy CBRE. And what comes, experts believe, is even greater.

Spain has about 376,000 beds in geriatric residences. About the total of people over 65 years of age, it supposes a coverage rate lower than 5%, the one recommended by the World Health Organization. To reach that percentage, and taking into account that the population of the elderly will increase, an additional 200,000 beds will be needed in 2030 and 400,000 in 2050, always according to CBRE calculations. "It is an increasingly stable sector and will continue over time," says José Alberto Echavarría, president of the Business Federation of the Unit (FED). This employer's association mainly includes small and medium-sized companies, most of them in a market where the seven main operators control less than a fifth of the beds.

The sector has been redrawn in less than five years. In 2014, the sum of the seven leading companies did not reach even 10% of the beds. But in recent years there have been acquisitions, mergers and expansions. The majority of operations have been supported by investment funds. "There is a trend towards greater professionalization of this service with larger and more procedural companies that traditionally enter into family business businesses," says Pablo Callejo, director of Alternative Investments at CBRE Spain.

French capital domain

You do not have to search hard to find an example. DomusVi, which leads the offer with more than 22,000 beds in 119 residences, only exists as such in Spain for a year. It is a group of French origin whose control took in 2014 PAI Partners, a venture capital fund of the same nationality. The new owner opted for internationalization and set his sights on Spain. In three years, it bought two of the largest national operators, Geriatros and SARquavitae, and merged them. In 2017, PAI Partners sold all its participation to the British fund ICG and to SRS, the investment platform of the founder of DomusVi.

The presence of large investors among the main geriatric groups that operate in Spain is a constant. Orpea, the second in number of beds and also of French origin, has among its shareholders with CPPIB, the Canadian pension fund. And Vitalia, third on the podium, is involved in more than 80% by the Spanish venture capital firm Portobello Capital. The entry of these investors is because "there is an interest in both parties," says Ivan Azinovic, partner of the Department of Real Estate Law of Ernst & Young. "It is a more specialized product than residential housing or commercial," continues the lawyer with more than 30 years of experience in the real estate sector, "the typical niches have already been exploited and that is why there are socimis that are going to more specialized market niches ".

The students, another investment niche

Residences for students they are another one of the reefs that the funds have started to explode in Spain. In 2017, they attracted investments worth more than 600 million euros, according to estimates recently published by CBRE. The real estate consultancy notes that the investment returns for this type of assets in Spain are above those offered in Germany or the United Kingdom. In the best areas, it can reach 5.5%.

And where are these residences? In addition to Madrid and Barcelona, ​​the experts point out other cities, usually on the coast, where the key lies in keeping the occupation in the summer months. Malaga, Valencia, Seville or Granada have new projects to expand their offer of accommodation for students. Because Spain, with six beds per 100 students, is behind the United Kingdom (24), France (15) or Germany (10).

"The good thing is that they go hand in hand with operators that were already there," says Echevarría. The president of the FED describes a very different situation when, during the real estate bubble at the beginning of the century, builders disembarked in the business: "In the crisis, many residences closed as unviable, but because the managers were not professionals". That is why he is not worried about the forecasts of a greater concentration in the sector. "There are 70% of small and medium-sized entrepreneurs who will continue because they know the sector and have highly amortized investments and expenses," he says.

And what is coming? For Callejo, the CBRE expert, there is no doubt that "there are new foreign operators that want to enter the market". Achieving a more concrete forecast is difficult: discretion is a must in this type of operation. But all the experts consulted agree, in broad strokes, with that statement And also the reality of the day to day. Javier Blasco is an Aragonese businessman who offers real estate portals to buy businesses, including nursing homes. I manage to manage three in the past, but in the portfolio of your company there is now none. Nor has it managed to close any operation in a market that it considers "complicated". But his diagnosis is blunt: "The small residences are disappearing".


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