Belgian listed company investing in healthcare real estate

Strategy

 

1. Diversification

 

Aedifica is positioned as a leading Belgian listed company investing in healthcare real estate in Europe, in particular in senior housing.

It aims to create a balanced portfolio that generates recurring revenues and offers potential for capital gains.

Aedifica’s strategy is focused on the demographic trend of population ageing in Europe and the specific needs this trend implies in terms of care and housing. As evidence to support these trends, Belgium’s Federal Planning Bureau anticipates that population ageing for the baby-boom generation will continue until it reaches its peak, in Belgium, by 2060. A similar trend is observed in Germany and The Netherlands.

These trends underlie long-term needs in terms of specialised real estate infrastructure. With regard to senior housing in particular, two additional factors should be taken into consideration: (i) consolidation of care operators on a European level and (ii) scarcity of public funding to finance such specialised real estate infrastructure. The combined long-term effects of population ageing, consolidation of operators and a lack of public funds, shape Aedifica’s strategy. The Group mainly concentrates its activity in the senior housing segment, but is also active in apartment buildings and hotels and other building types. The Company’s stated policy is to continue to grow in the senior housing segment, while analysing other segments of healthcare real estate in Europe.

Aedifica’s strategy – to specialise in healthcare real estate – constitutes its most unique feature and greatest strength. The Company strives to be innovative and constructive in order to provide its shareholders with a safe real estate investment over the long run, one that generates recurring revenues for them. Aedifica’s strategy is mainly a buy and hold type, which is by definition oriented over the long-term. Of course, this does not exclude disposals.

 

Healthcare real estate

Professionalisation and consolidation in the healthcare real estate market is evident at a European level. Aedifica participates actively in Belgium as well as in Germany, the Netherlands and the United Kingdom by acquiring buildings, engaging in sale and rent back arrangements for existing buildings, by investing in construction of new buildings, or by undertaking upgrades, renovations and/or extensions of existing sites. The Company puts its buildings at the disposal of professional and specialised operators under long-term contracts that generate high net rental yields. Considerable growth potential remains in this sector. Aedifica responds to the needs of its operators, and to the growing demand arising due to shifting demographics, by holding both rest homes and assisted-living buildings:

  • A rest home is a specialised building in which the elderly reside and benefit from continuous assistance in daily-life (catering, cleaning, and nursing or other care). These facilities are called “maison de repos” or “woonzorgcentrum” in Belgium, “Pflegeheim” in Germany or “zorgresidentie” / “verpleeghuis” in The Netherlands.
  • An assisted-living complex consists of one or several buildings that contain living spaces designed for the needs of the elderly and which allow residents to maintain autonomous living while benefiting from access to additional services on demand. These buildings are called “residence-services” or “assistentiewoningen” in Belgium, “betreutes Wohnen” in Germany and “seniorenappartementen” in The Netherlands.

The senior housing market generates stable and recurring revenues, which provide for the distribution of dividends to Aedifica shareholders. According to a study published by Cushman & Wakefield in January 2016, Aedifica held the 1st position in terms of private real estate investors in rest homes in Belgium for the period 2005-2015, representing 36 % of the total amount invested by RRECs, insurers, banks and other types of investors

Since 2013, the Company has also been active in Germany, in the Netherlands since early 2016 and in the United Kingdom since 2019. This expansion into the German, Dutch and Brittish market is consistent with the Company’s strategy in the senior housing segment. It allows for better diversification of tenants and extends the Company’s operations in a market which tends to structure itself at a European level. The Company positions its ambitions with respect to senior housing in a European context (see chapter on “Risk Factors” of the 2017/2018 Annual Financial Report). Information on the German and Dutch senior housing markets is given in the “Property Report” chapter of this Annual Financial Report.

Since 14 June 2019, the group’s portfolio consists exclusively of healthcare properties.

 

2. Growth strategy

 

The Company intends to continue on this growth trajectory in order to derive benefits linked to its scale, including:

  • strong liquidity, which is an important criterion for investors;
  • strong diversification of risks;
  • capacity to effectively respond to market opportunities;
  • strong portfolio management, which features collaboration with high-level partners;
  • predictable revenues;
  • good coverage of fixed costs; and
  • an increasing EPRA Earnings per share, and, subsequently, optimal returns for shareholders.

 

3. Possible strategic developments

 

Within the world of European healthcare real estate, senior housing is currently the most developed and therefore most relevant segment for Aedifica. Population ageing will probably have a very significant impact on care “consumption” and this trend could encourage the development of new segments, which are more oriented towards “cure” (care hotels, rehabilitation centres, hospitals, medical facilities, etc.) than “care”. Aedifica is therefore studying the possibility of investing in new sectors of the healthcare real estate market and is continually evaluating the needs and opportunities generated by shifting demographics.

Aedifica is also studying the possibility of investing in geographic markets within Europe outside of Belgium, Germany, the Netherlands and the United Kingdom, with a focus on healthcare real estate.