Investor Appetite For UK Healthcare Assets Widens Beyond Secure Havens, With 2017 Set To Be A Strong Year

cushmanCushman & Wakefield’s Healthcare Advisory team values more than £1bn of assets less than nine months after being established

The UK healthcare sector will become an increasingly popular target for capital in 2017, as alternative assets become more mainstream for investors in search of attractive yield returns, according to Cushman & Wakefield.

Martin Robb, who leads Cushman & Wakefield’s Healthcare Advisory team, said recent capital inflows including lenders, hedge funds and US REITs, as well as a more competitive landscape among domestic institutions, has cemented healthcare as a recognised property investment class with the trend set to continue in 2017.

Martin joined Cushman & Wakefield earlier this year to establish the healthcare practice which since its inception, has advised on more than £1bn of assets comprising approximately 10,000 beds.

Looking ahead to next year, he said: “Sector operators, as well as funds, will be eyeing acquisitions across primary and long-term care in the next 12 months. There is a definite sense that sub-sectors in the market, such as long-term care, have turned an operational corner. While all well-advised buyers keep a close eye on specific metrics within the trading environment, such as staff shortages and pay rates in particular, there is a balancing item that a loss of provision in the market over a number of years is now starting to assist better quality operators with well-managed businesses.

“In addition, the established polarisation of the long-term care market is set to be maintained, with strong interest in the private pay market, while the mid-market or publicly-funded product is expected to see a focus upon asset refurbishment and improvement where financially viable. Overall, the industry remains needs-driven with suitably-priced businesses still generating realistic returns. Conversely, the continued unravelling of some over-leveraged positions, dating back in some cases over ten years, creates further opportunity.”

Tom Robinson added: “A specific trend we are seeing is the broadening of investor appetite. In previous years the enclave of the private pay long-term care market of the South East was the main target, but today, and no doubt into 2017, we are seeing appetite broadening to include provision across the UK where there is capital growth, either through turnaround of organic growth. Such opportunities require active asset management and careful control of operational matters, but the returns can be strong.

“This is evident in recent transactions we have worked on including the acquisition of the Quercus portfolio by Lonestar where we were the adviser to the funder. This portfolio of 75 long-term care assets which transacted at some £240m in October this year is just such a deal where opportunities to improve the performance of the individual assets will see capital growth and strong returns for the buyer in the medium term. We are currently working on a number of such transactions and have little doubt that the days are over of a niche group of investors dominating the healthcare world.”

The most recent senior hire was James Hanson who joined in November as a Partner and Head of Healthcare Transactions, having left JLL where he was a Lead Director and Head of Healthcare Investment.

James Hanson, said: “These are exciting times, both for the healthcare market and the Cushman & Wakefield Healthcare team. Next year will be a strong year for us with a host of exciting healthcare transactions in the making across the long term and primary care sub sectors, underpinned both through our position as a global real estate business and an ever-increasing appetite for a variety of healthcare assets.”

 

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