“Cofinimmo is achieving a significant and unique transformation. In a short space of time, the teams put in a huge effort to evolve from a business mainly focused on the office space to a European leading healthcare real estate player,” explains Jean-Pierre Hanin, Chief Executive Officer of Cofinimmo.
Indeed, the company has been on quite a journey since its founding in 1983. After establishing itself as a leader in office real estate next to other small diversifications, the company decided to pursue a new path which ultimately led to it becoming a juggernaut in the European healthcare space.
Jean-Pierre Hanin outlines Cofinimmo’s journey, saying that “back in 2005 we were largely office focused, but then we decided to invest in a small nursing homes portfolio, being at that time the first Belgian REIT investing in that asset class”. From this point on, Cofinimmo continued to make further investments across Europe’s expanding healthcare sector, which propelled it to its position as Belgium’s premier listed REIT. Today the company owns a property portfolio worth over EUR 5.7 billion – out of which EUR 3.8 billion is in healthcare – representing a total area of nearly 2.5 million m². That makes it the largest listed Belgian company in terms of volume of direct investments in the real estate segment.
The genesis of Cofinimmo’s decision to pursue opportunities in the healthcare real estate segment was based on solid long term fundamentals and an early realisation there were fewer high-value opportunities in the office sector, where the brand had traditionally been strong. “The principle governing our diversification strategy was to find the next generation of growth after the office sector, which we realised was already quite mature back then,” he explains.
This approach has caught on, which has not escaped the Chief Executive’s attention. Jean-Pierre Hanin mentions that “since then, a lot of others have followed. Cofinimmo was a pioneer in identifying this segment as being a sustainable one to invest in”. Its extensive activity across Europe will have undoubtedly caught the eye of others, with the organisation now operating in Belgium, France, the Netherlands, Germany, Spain, Finland, Ireland, Italy and the United Kingdom.
However, it is important to stress that Jean-Pierre and his team have not neglected to upgrade and valorise their other portfolios in their pursuit of healthcare growth. He outlines this, saying: “Our strategy is to consolidate our leadership around healthcare in Europe while having a prime office portfolio focused on the Brussels Central Business District. This is then supplemented by being opportunistic in our distribution network properties. These three elements embody our current core strategy – ‘caring, living and working’ – together in real estate.”
All of this has given the company a hugely interesting insight into the outlook for a sector that has been brought sharply into focus by the past two years’ pandemic.
Healthcare, Jean-Pierre explains, is a very specific and unique sector, different to all other sectors for myriad reasons that those who do not fully understand it might miss. To start with, there is the fact that it involves so much collaboration between the public and private sector at different levels, which can be a sensitive topic given the vital importance of the health sector. This is then complicated by the fact that you can have several different public agencies with overlapping responsibilities at local, regional and intra-national levels. In addition, the sector has to evolve to sudden new challenges, such as continuing to provide high-quality services while still being affordable for society. As a long term real estate investor, Cofinimmo must understand and anticipate these trends.
The Belgian Chief Executive explains how this looks in practice for those operating in the sector: “You don’t decide to build a facility as you do in the office or the retail sector. Your analysis must take the broader healthcare ecosystem into account. This includes understanding the dynamic of demography and availability of long term care in the area and the way a facility will fit in a broader network with other actors like clinics and hospitals.”
On top of this, in a market like Europe, developers and investors must also navigate very different approaches between different geographies; the healthcare systems differ wildly among countries in terms of e.g. the way capacity is planned, care is financed, facilities shall be designed. As a result of this, the teams at Cofinimmo perform rigorous analysis before entering any new market, which consists of a “deep dive into the healthcare sector in that country’s legislation, its financing, how it is structured and the operators”.
While Jean-Pierre is open about the challenges of operating in the healthcare sector, he is also candid about the opportunities that it presents. Those who can navigate its complexities can be well rewarded for their efforts. “There will be many opportunities to help the evolution of the sector. We want to work very closely with the operators to help them to tackle this challenge. We have the firepower and can go along with these operators,” he explains.
Much of this new opportunity will be driven by a renewed focus on improving the sector for its beneficiaries: the residents or patients. This must happen jointly by policymakers and health authorities across Europe. “The pandemic and some recent lights have demonstrated that the sector cannot be neglected, nor can it be considered in silos,” he says. A crisis is always an opportunity to rethink the global approach to reach a transparent system balanced for all stakeholders, from the individual residents/patients, the operators – whether public, private or non-profit – to the real estate landlords and investors. Healthcare clearly needs more global and structured attention. However, there has been a longstanding need for further investment in many countries’ health systems that predates the pandemic, and this will be compounded by Europe’s ageing population.
According to the projection from the European Commission (Eurostat, September 2021), as from 2026 on the European population will start declining, whilst the share of elderly people will keep on growing. By 2050, the elderly population aged 65 years old and above will account for 30% of the total population from currently 20%. The very old population (≥ above 80 years old) will account for 11% of the total population, from currently 6%. This will heighten demand for not only facilities like nursing homes but a range of elements of the healthcare real estate mix, both in cure and care segments.
A strong track record in sustainability
Hanin’s long career in the industry has given him a strong understanding of the external forces currently shaping the real estate sector and how these might play out. On inflation – arguably one of the biggest financial talking points of 2022, he believes a lot of its impact will depend on how rapid and high it is. He also “welcomes a moderate level of rise in interest rates, since negative interest rates are not sustainable and could not support sustainable growth”.
Jean-Pierre is also a firm believer that sustainability is reshaping the sector for the good, saying that “climate change and the Green Deal will be much more important in the grand scheme of things than the takeaway from the COVID crisis”.
When it comes to sustainability, the Chief Executive is eager to point out Cofinimmo’s strong track record. “Every acquisition and portfolio is scrutinised from this perspective,” he explains, describing how the team’s rigorous analysis has been channelled into ensuring that the group is making a positive difference. Jean-Pierre continues that “we are undertaking to reduce the energy use of the portfolio by 30% by 2030 against 2017, which is in line with COP21 objectives”. Beyond this substantial commitment, Cofinimmo has also been at the forefront of several other ESG initiatives, including the launch of sustainable bonds, which recently convinced Euronext Brussels to grant Cofinimmo its Sustainable Growth Award 2021.
Climate change, inflation, challenges facing the healthcare sector and the ongoing recovery from the pandemic present Europe’s real estate industry with a rapidly changing landscape. In these circumstances, players need to adapt rapidly to secure returns and keep ahead of the competition. Under the helm of Jean-Pierre Hanin, Cofinimmo has shown it can adapt quickly and thrive – you wouldn’t bet against them doing the same again.