Time for greater cooperation between investors and healthcare organizations: ‘This is a true win-win deal’

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.

Transparent partnership

In addition to providing the healthcare institution with security, this type of arrangement can also pay off for investors. Sonneborgh conducted meticulous research, set out the needs and requirements of both partners in the contract, and funded the project through a transparent mutual investment fund (also known as a unit trust), so as to provide investors with the support they need. Kuijpers: ‘We closely analyzed Vilente’s financials beforehand. Do they have their affairs in order? Are there high vacancy rates? How is the organization structured, and what about staff turnover? Those are all key factors.’ Sonneborgh also shared ideas on the investments Vilente was planning, which had to be financially viable and pay off in the future. As Sonnebergh’s Kuijpers explains, this is in the interest of the heathcare organization. ‘But it’s also for the benefit of our investors. Needless to say, we can’t tell them if something is a good investment when this cannot be justified. That’s why we established a number of criteria for assessment, for example if Vilente invests enough in healthcare technology.’ Kuijpers can confirm that this is indeed the case.

Emerging healthcare

While healthcare real estate is less obvious as an investment than, say, houses, offices or retail property, Kuijpers does see a trend. ‘This type of real estate is attracting a growing number of investors. It’s a very stable sector, and the demand for services is not likely to decline over the next 30 years. As other sectors become more unpredictable, like we saw during the Covid pandemic, there will be a growing need for secure real estate investments.’ The fact that healthcare is a professional sector that employs many experienced directors also adds to the sense of security. Healthcare organizations, for their part, are also keen to team up with investors. 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 industry

CBRE sees a lot of potential in the healthcare real estate sector: specifically, potential for healthcare institutions to future-proof their locations and for investors to generate stable returns and invest in society. Kuijpers believes a sale-and-leaseback deal is the perfect way to put such a partnership in place. “If you do this properly, it is a very useful tool – a real win-win for all parties involved.’ 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.’ 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.