Property deals have historically been scarce in the country because of tax rules that mean VAT at 21% cannot be recovered from rent in the acute sector, and a fragmented nursing home sector with few private equity owners.
Elderly care is beginning to consolidate, however, with Domus VI, Maisons de Famille and others buying there, and a few property deals involving foreign investors like MPT and Primonial emerging.
“The Spanish market is opening up,” said Stéphane Pichon, managing partner of the French consultancy Your Care Consult, which has just opened an office in Madrid. “There will be some large portfolios coming up in nursing homes and we’re seeing substantial interest in them already.”
Jorge Guarner, founder and CEO of the Healthcare Activos REIT, backed by Oaktree Capital and with €500m budget, has already been active spending €65m on seven properties, including nursing homes, a post-acute facility and a hospital run by BMF.
“Private equity wants operators to focus on the OpCo and sell the PropCo, the big private equity owned groups will be selling some big portfolios soon as the market is still fragmented and they want to fund their growth,” he told Healthcare Europa.
Maisons de Famille, for example, has already sold four of its properties to his new REIT, which he says he set up to fill a gap in the market. Yields of between 6-7% are typical, he added.
The CEO of the Belgian REIT Aedifica, Stefaan Gieelens, is another investor with his eye on the market. “We look at markets that have the right mix of aging, consolidation and local government policy. In Spain, clearly, things are happening there. It’s drawing our attention, but it’s not one of our domestic markets at the moment.”
Gieelens said that getting Aedifica’s name out in the country and developing a relationship with the operators was an important step. That could make smaller deals worthwhile in the short term, though in general it prefers to buy large portfolios. “If you just sit and wait for the next portfolio to come your way, you could be waiting a while.”