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The healthcare sector is enjoying robust growth in Europe, underpinned by economic, demographic and structural factors. Investors are therefore increasingly focusing on healthcare assets to harness these long-term fundamentals and diversify their portfolios. A recent survey found that 35% of investors in Europe intend to allocate capital to this asset class in 2024, compared with 19% the previous year[1].
Key features driving investor interest in the sector
A market underpinned by structural factors
According to the latest projections, almost 30% of Europe's population will be over 65 by 2050 (vs. 22% today) and the number of people aged over 80 is set to almost double[2]. This demographic change means there is growing demand for health services and infrastructure adapted to the needs of the elderly. Real estate investors are therefore identifying healthcare properties such as hospitals, specialist clinics and retirement homes as strategic assets with high potential for value creation.
A countercyclical market
Healthcare assets are underpinned by long-term fundamentals and are fairly resistant to economic shocks, making them an attractive diversification option for investors. Relatively long leases compared with other asset classes also guarantee a measure of yield stability.
Choosing the right operators is key to performance
Costs in this sector are inherently high: payroll, maintaining medical equipment, complying with safety standards, regular major renovations, etc. Due to inflation and especially recruitment difficulties, some healthcare players are struggling more than they used to economically. Choosing the right operators is therefore vital to ensuring the profitability and viability of investing in healthcare property.
“The current economic environment in Europe creates a bright outlook for the healthcare sector, with greater viability for operators and more stable returns. Healthcare should deliver high returns and be one of the best-performing sectors in Europe. This is an opportunity for BNP Paribas REIM to pursue its healthcare fund and diversification strategies” indicates Laurent Ternisien, Deputy Global Head of BNP Paribas REIM.
HPF Europe: the investment solution offered by BNP Paribas REIM to institutional clients
Healthcare Property Fund Europe (HPF Europe) was launched in March 2020. It is a pan-European platform focusing on healthcare facilities in the main eurozone countries, which may be for short, medium or long stays. Its portfolio comprises 55 secure assets in France, Belgium, Germany and Italy, of which 60% are retirement homes and 40% clinics, with a value of over € 700m as of 30 June 2024, making it one of the foremost investment platforms for institutional investors in Europe. It is operated by some 20 market-leading operators selected by BNP Paribas REIM. The fund manager is thereby making its 15 years of experience in this asset class available to the forty or so investors in HPF Europe, refining its selection of operators in an increasingly complex market.
The HPF Europe fund has continued to grow since the beginning of 2023 with the acquisition of 10 facilities operated under long-term leases as well as securing the development of new facilities, pre-let on long-term leases, in Italy. The fund has also focused on renewing the leases in its portfolio, successfully finalising the first lease renewal for one of its French clinics for a further twelve years. As of 30 June 2024, HPF Europe's portfolio had an average remaining lease term of 12 years.
BNP Paribas REIM is continually striving for improvement and has defined 3 strategic principles for HPF Europe over the coming months:
1. Investment policy: in terms of acquisitions, HPF Europe plans to increase the allocation of its portfolio by sector to clinics and hospitals, and geographically to France, Italy and the Iberian Peninsula. This drive is already underway, notably with the delivery of new healthcare facilities currently under construction in Italy and other investment opportunities currently being considered.
2. Achieving high performance and creating value by pursuing a dynamic asset management strategy: the BNP Paribas REIM teams will focus on performance, namely by renewing leases with expiry dates from 2025 onwards. HPF Europe also wants to increase the number of extension or refurbishment schemes, to create value in partnership with operators.
3. Achieving ESG targets: The fund will also implement its ESG strategy, in keeping with its SRI certification obtained in 2023 and its classification under Article 8 of the SFDR (Sustainable Finance Disclosure Regulation).
“These strategic priorities will enable HPF Europe to continue growing in the years to come. We are determined to offer our clients distinctive investment strategies. The healthcare sector, where we've developed strong convictions over the past 15 years, is a perfect fit for us. We are also delighted to report that HPF Europe had attracted new inflows as of 30 September 2024, which will drive the growth of its platform” remarks Paul Darribère, Head of Fund Management – Institutional Funds and Mandates for BNP Paribas REIM.