PATRIZIA invests in booming care home sector amid aging population

The world’s population is growing older, which is creating long-term investment opportunities in care homes. PATRIZIA AG has added a third healthcare fund to its portfolio.

Care homes provide diversity and sound investment to a portfolio

What’s your chance of reaching a ripe old age? Extremely high, according to 2019 data from the United Nations’ World Population Prospects. In 2018, for the first time in history, there were more people aged 65+ worldwide than children under five. And the number of those aged 80+ is expected to triple from 143 million in 2019 to 426 million in 2040.

Increasing life expectancy is undoubtedly good news. However, this also brings an extended period of age where we will be likely dependent on the care of others and potentially have to move into a residential care home. An aging population means upheaval for many sectors, including real estate, which is experiencing a growing need to adapt infrastructure and provide accommodation and care homes for the elderly.

Care properties can provide diversity and sound income to an investment portfolio, with long leases of between 15 and 20 years and potential for above-average returns of 5%.“The segment of senior-appropriate living and long-term care properties offers immense growth potential,” says Jan-Hendrik Jessen, head of fund management operated properties at PATRIZIA AG.

Threefold investment

That’s why in January PATRIZIA added a third healthcare fund to its portfolio, focusing on care and assisted living properties in Germany and selected other European countries. The fund, ‘PATRIZIA Social Care Fund III’, has an initial target volume of EUR 300 million and a long-term target of EUR 700 million. This adds to its 56 assets under management in the healthcare sector in Germany, worth more than EUR 900 million.

“This new fund builds on our existing track record and expertise in the German healthcare sector, a market which continues to experience strong investor demand, with 2018 transaction volumes around 150% of those in 2017,” continues Jessen.  

The strategy is to invest 50% of the new fund’s assets in care homes and 50% in assisted living. At least 70% of investments will be made in Germany. “The portfolio of new, modern care homes which we are aiming to acquire will offer clients sustainable, long-term income while meeting the growing demand for bed spaces due to a rising population of over 65s, who require the best environment for living and care.”

When it comes to appropriate investments, PATRIZIA checks that a care facility’s size makes good business sense, that the operator boasts lengthy experience in the care industry and provides high-quality care services. PATRIZIA also pursues a policy of investing in state of the art and new build properties. Geographically it concentrates on areas where there is particular demand for care homes, such as its property in Brandenburg an der Havel, near Berlin, which provides 128 beds and additional specialised services for dementia patients.

The strategy of the new fund is to invest 50%  in care homes and 50% in assisted living. At least 70% of investments will be made in Germany.

Someone to watch over you

As the world struggles to come to terms with an aging population, Germany, like many other advanced nations, is facing a care crisis due to a lack of care workers for senior citizens and, in general a dwindling number of prime-aged workers, who are best suited for the physical demands of elderly care.

The shortage of staff is prompting a move away from old-style retirement homes to more residential care facilities, which provide room, board, and personal care assistance. Some are pursuing digital solutions to ease the care crisis. Portable diagnostic devices can track pre-existing conditions, monitor heart and blood sugar levels and even diagnose new diseases.

Bring on the robots

Technology loving Japan, host to the world’s most aged population, has turned to robots for help. Robots can relieve human carers of more menial and physically demanding tasks, such as lifting a patient from a bed into a wheelchair. Take “Robear”, a bear-shaped robot, which lifts or carries elderly or frail patients from their bed into wheelchairs or the bath. Panasonic makes a robotic bed that transforms into a wheelchair while Sony’s robot puppy “Aibo” helps fight loneliness and dementia.

"Care properties can provide diversity and sound income to an investment portfolio, with long leases of between 15 and 20 years and potential for above-average returns of 5%."

Other countries are following Japan’s example. In Germany, robot assistants are set to support the elderly at home or in care facilities thanks to scientists at the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt), who have been developing robotic’ solutions to support nursing care staff as part of the ‘SMiLE’ project. The project’s vision is to “help people with limited mobility to achieve more fulfilling and independent lives” by researching and testing the necessary technologies. Examples are SMiLE’s wheel-based humanoid assistance robot ‘Rollin’ Justin’ and the EDAN wheelchair assistant.

“When attending care exhibitions and conferences, we are seeing many smart new technologies that will eventually be introduced to support aged caring and reducing pressure on the care givers”, Jessen says. “PATRIZIA buys state of the art buildings, which will become even more future proof by the introduction of such technologies.”

Of course, robots can never wholly replicate the human touch. Ideally though, by carrying out menial tasks, robots free up time for carers to engage in valuable human interaction. After all, machines can’t provide an engaging bedside manner or employ social and emotional human intelligence in conversations. At least not yet. Regardless which future developments occur in the healthcare sector in future, PATRIZIA is well prepared.


This article was written by Lois Hoyal. 

Image credit: Cecilie_Arcurs