Belgian REIT Cofinimmo sees opportunity in Spanish care homes.

Cofinimmo, a Belgian healthcare REIT, has initiated its plans to expand across Southern Europe with the launch of five construction projects in Spain.

The first five Spanish projects represent an investment volume of 45 million EUR and will start with a 5,000 m2 project in Vigo. Located in the northwest of the country, this new project will provide 140 beds at a cost of approximately 8 million EUR. Works on the scheme started in May 2019 with delivery expected in November 2020. The deal represents an initial gross yield of 6%.

Growing its activities beyond Belgium, France, The Netherlands and Germany, Cofinimmo is pleased to have recently entered the Spanish market. This expansion is in line with the Group’s strategy, namely to consolidate its leadership in healthcare real estate in Europe and increase the portfolio’s geographic diversification. We are launching a partnership with a leading operator in the Spanish healthcare segment and, over time, aim to build up a sizeable portfolio in the country,” said Jean-Pierre Hanin, CEO of Cofinimmo.

You recently expanded your healthcare portfolio to Spain. Can you explain what makes the Spanish market so attractive?

Jean-Pierre Hanin:  “With a population of approximately 47 million inhabitants, demographic trends in Spain are similar to those observed in other European countries. More than 19% of the Spanish population is aged 65 and above, with 6% being more than 80 years of age. Moreover, Spain offers interesting growth opportunities given that its population is expected to age at a significantly faster pace than in Belgium and France: the population aged 65 and above is increasing by more than 1.8% annually, compared to roughly 1.3% in Belgium and France. In terms of supply, Spain has fewer and often older nursing and care homes than other European countries. However, this gap is expected to narrow rapidly.

Sébastien Berden: “Approximately 380,000 beds are currently available in Spain. This represents an average of 4.4 beds per 100 people over 65 years old[1], compared to 7.1% in Belgium, 5.3% in France, 5.4% in Germany and 8.5% in The Netherlands. Market analyses show that the capacity for care-dependent older people must increase by at least 70,000 beds by 2030 and by 150,000 to 200,000 beds by 2050 in order to cope with the increasing demand.”

Isn’t this a market with higher risk compared to more mature markets?

Jean-Pierre Hanin: “We came to the conclusion that Spain is undersupplied with modern nursing homes, which implies that a large group of the population is in need of care. Taking these two factors into account, we believe the Spanish market to be a real opportunity for Cofinimmo.”

Sébastien Berden: “Given the lower maturity of this market, we are primarily attracted by the possibility to choose buildings of better quality and more qualitative developments. Though higher yields are also important, they are not our first driver. Moreover, the 15 largest private operators currently hold approximately 22% of the total number of beds, creating significant growth opportunities.”

Early September you announced your expansion to Spain with an initial pipeline of five construction projects in healthcare real estate. Why did you choose development rather than acquisition?

Yeliz Bicici: “This expansion is in line with our strategy and we intend to build up a considerable portfolio in Spain. We aim to consolidate our leadership in ‘European healthcare real estate’ and to increase the portfolio’s geographic diversification.

We have opted to invest in new development projects as they will set high standards in terms of quality, energy and comfort. We have a large real estate expertise and developed various types of buildings in different countries, healthcare real estate included. Our development teams know perfectly the needs of healthcare providers, enabling the latter to focus on their core business, which is providing healthcare services. On construction sites abroad, we work hand in hand with experienced international real estate development companies, which can be considered as the local extension of our in-house teams.  

The initial pipeline has already been pre-let for 20 years to a major Spanish operator, Clece Vitam. Since announcing our plans for the Spanish market, we have received significant interest from owners of existing assets considering the sale of their properties. This kind of acquisition, in addition to our pipeline of greenfields, could be another possibility of pursuing growth in the future.”

Sébastien Berden: “The building will be constructed according to state-of-the-art sustainability standards, with a portion of the electricity produced by photovoltaic panels and a heat pump, and with condensing boilers and ventilation units providing heat recovery in winter and free cooling in summer. The building will have a very high A-level energy performance.

In addition to the project in Vigo, Cofinimmo has already identified four other sites in the autonomous communities of Galicia, Valencia, Murcia and Andalusia. Delivery of the final nursing and care home in this series is currently planned for the summer of 2021.”

Many investors are currently interested in the Spanish market. This means a lot of competition for Cofinimmo. How does the Company differentiate itself from other investors? Are you confident about the future?

Jean-Pierre Hanin: “Spain offers interesting perspectives for Cofinimmo. The Spanish market is not yet as developed as the French or German markets, with owner-operator models still commonplace. However, we are starting to see an externalisation of the real estate component. Several portfolios have recently been bought by investment funds. Moreover, the good health of the Spanish economy is reflected in the high number of deals signed the last two years.

Sébastien Berden: The ageing population offers Cofinimmo considerable opportunities for expanding its portfolio and deploying its real estate expertise. We strive to respond to the need for more modern nursing and care homes in Spain and offer our experience and expertise in the development and renovation of care facilities. We have good knowledge of the Spanish market and are entering the country with confidence, aware of the many opportunities that lie ahead. We continue to investigate the market and maintain close contact with local and international market players.

We have also hired a local business development manager for Spain. Maria Garbayo Garcia.Maria is Spanish nationality, she joined the Cofinimmo team on October 1 and report directly to me. By hiring Maria, we have made it clear that we are willing to place a strong focus on Spain which will lead to more deals and more activity in the coming months.”


[1] Sources: Eurostat, Antares.

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