Sale and Leaseback turned out to be the perfect solution for the Vilente care centre

Essential redevelopment

The Overdal site in the town of Oosterbeek (Gelderland province) is in urgent need of redevelopment into a contemporary care centre for elderly people with medical and other care needs, which will accommodate around 100 people altogether. However, like many other healthcare providers, Vilente is facing significant challenges: demand for care is growing due to demographic ageing, labour shortages, and certain quality requirements. To compound the situation, the buildings are becoming obsolete and no longer offer the efficiency needed to be able to provide the kind of care required. Builders will also need to adopt more sustainable standards and practices in the coming years to make the real estate viable for the future. The question is: how do you fund all these plans?

Finding a solution together

For Vilente, the solution turned out to be a sale-and-leaseback deal with social investor Sonneborgh – an Eindhoven-based developer and investor in healthcare real estate. Sonneborgh’s Arjan Kuipers: ‘We’d had some interactions with Vilente over the years, just talking about general issues such as the various challenges facing the healthcare sector. We ended up discussing opportunities for an acquisition, provided there would be clear terms in place.’ Duijvestijn: ‘We were determined to maintain control over our services and our building, and Sonneborgh had the resources to allow us to do just that.’  

Sale-and-leaseback

Sale-and-leaseback contracts are essentially very straightforward: Vilente sells one venue – the Beekdal care centre in Heelsum – to Sonneborgh, which then directly leases the building back to Vilente. Residents and staff don’t notice any of these changes, but the transaction has made funds available for investment for Vilente. This enables them to carry out ambitious plans, while at the same time continuing to use the current healthcare site. Once the contract expires after 15 years, Vilente then has the right of first refusal: the opportunity to buy the building back from Sonneborgh. Sonneborgh’s Arjan Kuijpers: ‘These types of sale-and-leaseback contracts are essentially mortgage deals’. The triple-net lease ensures that the user – in this case, Vilente – retains overall control. Duijvestijn: ‘We were outspoken about the fact that we wanted to maintain control. If we decide to paint the walls blue, we don’t need to first check whether that’s OK. We decide what happens in the building, and when the contract expires we get the first option to buy it back.’ The investment fund behind the sale-and-leaseback transaction, which was established by Sonneborgh especially for this purpose, is fully transparent, so that both parties can keep track of the finances. Vilente’s needs and requirements about maintaining control are set out in the contract. As Duijvestijn explains, they use a personalized approach. ‘Sonneborgh looked at our situation and then adapted the transaction accordingly. They look at the overall picture, just like any true partner would.’

Substantial need for investment

Healthcare providers throughout the Netherlands are running into the same challenges as Vilente. Demographic ageing has increased demand for in-home care, assisted living, and nursing home care. The growing numbers of ageing Dutch people coupled with increasing longevity is a trend that is set to continue over the next several years. The healthcare sector is also dealing with serious staff shortages across the board, compelling institutions to find smart solutions. For example, there are assisted-living communities, where several different types of care are grouped together in a single location. This makes it possible to use staff and facilities as efficiently and effectively as possible. The only thing is, this requires substantial investments. The sale-and-leaseback deal enables Sonneborgh to invest in a state-of-the-art, sustainable location that is equipped to provide future-proof care in an efficient way that nevertheless meets the needs of the residents. Duijvestijn explains that this is to be credited in part to Sonneborgh and their proactive attitude: ‘They’ve been a true partner to us, looking at our plans from an investor perspective. That’s how we always tried to find the best solution together.’

High-potential solution for the sector

CBRE believes there is a lot of potential in alliances between healthcare institutions and investors. For Vilente, the partnership with Sonneborgh couldn’t have come at a better time, and both parties are excited about their sale-and-leaseback solution. Kuijpers: ‘If you do this properly and truly collaborate during the process, it is a very useful tool. It’s a real win-win deal, and I think there’s a lot of interest in this approach across the sector.’   CBRE is currently assisting Vilente with the sale of the adjacent plot of land, which will be used for social purposes. Chantal Hout, Senior Consultant at CBRE: “For this project, too, we’re supporting the healthcare sector. Although the land itself is not in line with Vilente’s core portfolio, we aim for high yields and strong commitments. We also monitor Vilente’s needs for this site, which mainly involves using land and expanding it where necessary. The difference is that we don’t bear any of the investment risk ourselves.’ The healthcare sector will need substantial investments over the next few years, which is where the right kind of social investors come in. They analyze the situation, share their input, and provide customized services that greatly benefit healthcare organizations. They can expand, upgrade, adapt more sustainable practices or work more efficiently, depending on the needs of clients and staff. If you would like to learn more about working with investors or would like to learn about the options available, feel free to contact us.