Real estate, a pillar of the nursing home strategy…

Delphine Jaafar, partner in charge of the firm’s Health practice, answers questions from L’OPINION :

Real estate, a pillar of the nursing home strategy

By Jade Grandin de l’Eprevier- 08 February 2022 at 6:00 am – L’OPINION

The heritage aspect has been a recurring theme for several years and is at the heart of the economic model of the sector’s players.

The facts –

According to a report by the Drees (statistical service of the Ministry of Health) published in December 2020, considering unchanged practices, 108,000 more elderly people are expected to be in nursing homes by 2030, and a further 211,000 between 2030 and 2050 (compared to 611,000 residents today), which means doubling the rate at which homes have been opened since 2012.

In nursing homes, real estate is both what is seen and what is not seen. This is what people look at first, the selling point for high-range establishments: good location, large individual rooms, nice garden, trendy decoration, ceramics in the bathroom… When you pay several thousand euros each month, in the absence of quality care, “it will be luxurious, especially in terms of the hostelry”, says Victor Castanet, author of Fossoyeurs in the regional press.

However, the importance of real estate in the economic model of nursing homes is not necessarily obvious. Often because of the price of land, the public and associative establishments are located in rural areas, whereas the private profit-making nursing homes are located in urban centres, where the higher income population lives. As these players arrived later, in the 1990s, their real estate stock is a little more recent, “but overall it is ageing, and the need for restructuring is enormous, because the standards have completely transformed what is expected of a nursing home”, with much more care, explains Delphine Jaafar, a lawyer associated with the Vatier firm and a specialist in the sector.

The need for rehabilitation and construction of establishments due to demographic ageing - according to the Ministry of Health’s statisticians, the rate of construction of nursing homes needs to double – has attracted investors, both institutional and private, which has made it possible to inject private money into the sector, in the absence of sufficient public resources (subsidies are still granted). “All the players in the market are on the lookout to buy up small, obsolete or landlocked assets, with a view to restructuring them, expanding them, or even regrouping them”, Olivier Benque, president of Siscare, told L’Opinion in 2019.

“Should I concentrate on my health activity or combine it with property management, considering that it is at the heart of my business?”

“Crux of the matter”. In its latest financial report, Orpea describes itself as “Europe’s leading healthcare property company”, thanks to its real estate assets of 2.32 million m2, valued at 7.4 billion euros (+ 463 million between January and June 2021). It describes its “asset management policy”, with lucrative sales of premises from which it becomes a tenant (it owns 47 of its buildings), in order to repay its loans. Some of the multi-millionaires owning nursing homes are specialists in real estate rather than health, Challenges reported in 2020. An analyst underlined the “formidable financial and real estate engineering” of Orpea’s founder Jean-Claude Marian to acquire “half of the buildings of its nursing homes, the crux of the matter”.

“For many years, the question of the real estate strategy to be adopted, whether to own or rent, has been a common theme in the medico-social sector, insists Delphine Jaafar. Should I concentrate on my health activity or combine it with property management, considering that it is at the heart of my business? In the private commercial sector, we rather favour a fifty-fifty strategy, and in the public sector, the tendency is to prefer renting, to raise funds.”,sant%C3%A9%2C%20indiquait%20Challenges%20en%202020.&text=Les%20%C3%A9pargnants%20attir%C3%A9s%20par%20les,refroidis%20par%20l’affaire%20Orpea.,sant%C3%A9%2C%20indiquait%20Challenges%20en%202020.&text=Les%20%C3%A9pargnants%20attir%C3%A9s%20par%20les,refroidis%20par%20l’affaire%20Orpea.