Healthcare in the UK and Europe is rapidly transforming, presenting healthcare real estate investing opportunities that have never really existed before, especially in the UK, because of the unprecedented demand and budgetary pressures on the National Health Service (NHS).
In the UK, public healthcare is almost at a breaking point. Since the pandemic, demand for healthcare has soared whilst supply has been severely constrained. The NHS has a backlog of seven million individuals, including 2.4 million who are facing surgical wait times longer than 18 weeks. Another 331,000 individuals face wait times of more than a year. (Source: BBC) These long waiting lists are beginning to undermine the idea of healthcare being free at the point of need, given those needs are not being met within an acceptable timeframe. The growth of a mixed healthcare economy, where both NHS treatment and self-payers electing private treatment coexist, is starting to normalise the idea of private healthcare in the UK.
It’s no surprise that individuals are turning to the private market; they have been doing it for years, they are just doing it in greater numbers now. Indeed, the NHS is also increasingly referring patients to private providers, having signed contracts worth up to £10 billion, designed to help reduce the NHS backlog of surgery waiting lists. The UK private healthcare market is forecast to grow by 15 percent to $13.8 billion by the end of 2023, according to LaingBuisson. In addition, while government-financed healthcare grew by two percent in 2022, non-government healthcare spending grew by 9.5 percent over the same period. (Source: Office of National Statistics)
The requirement for new and expanded facilities and capital for the private sector to meet this growing demand opens the opportunity for private investment into healthcare real estate at attractive risk adjusted returns. Healthcare real estate has proven to be resilient in challenging macro-economic conditions, with its non-discretionary nature and stable cash flows, often via long term index-linked leases to strong operator covenants, cushioning the impact of economic and inflationary headwinds. We believe that will continue, particularly in the context of the longer term impact on demand of an aging population.
Importantly, we see opportunity in a number of key healthcare asset classes – hospitals, post-surgical rehabilitation centres and longer-term care / senior living facilities and labs / life sciences– areas where supply is currently limited. These are all areas where Greene Park Capital Europe has the experience and networks to deliver attractive investment opportunities.
Our business model is to align ourselves with our capital partners, usually through joint venture structures. We can act as the General Partner or co-GP, provide the benefit of our expertise in selecting and managing assets in the healthcare sector and invest alongside the capital to realise our returns on a long-term performance basis. Given the complexity of this alternative asset class and the value enhancement opportunities from active asset management, using this structure we can work more as a partner with our investors, allowing us as GPC Europe to be closer to the real estate and provide better oversight and value management of the investment with and for our capital partners.
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