European Senior Housing Towards its golden age Eri Mitsostergiou 7 October 2019
Agenda 1 2 Senior housing investment Where to invest? 3 4 Elderly people and their Conclusions home
1 Senior housing investment A niche, attracting growing investors’ interest
More than € 700m transacted since the beginning of the year, a record high Q4 Q3 Q2 Q1 800 700 600 Million Euros 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Savills based on RCA 106
Increasingly fuelled by different types of investment Single-property Portfolio M&A Forward Sales 800 700 600 Million Euros 500 400 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Savills based on RCA 107
Cross border investments, still limited and mainly coming from Europe Senior housing Other residential alternatives 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Savills based on RCA 108
Senior housing: still a niche Multifamilly Student housing Nursing care Senior Housing Over the past five 100% years, senior housing accounted for only 1% of 90% the total residential investment volume. 80% Growing investors’ 70% interest for aged- restricted asset types. 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Savills based on RCA 109
Why investing in senior housing? Portfolio diversification Relatively non-cyclical Undersupplied market Diversified revenue model Easy potential conversion Long term strategy Secured income stream Strong fundamentals Lower fertility rate Longer life expectancy Ageing population Increasing number of divorces Overall lack of housing New living arrangements 110
… and competitive returns France Netherlands Norway Spain Sweden The prime senior 6.00% housing yield currently ranges between 3.5% and 5%. 5.25% 5.00% 5.10% Senior housing offers a 5.00% yield discount of 100bps over multifamily and of 4.25% 4.00% 4.15% 4.15% 66bps over offices. 4.00% 3.75% We expect further yield 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% compression as the 3.25% 3.00% 3.00% 3.00% 3.00% sector is maturing. 2.75% 2.55% 2.00% 1.00% 0.00% Student housing Senior housing Office Multifamily Savills 111
2 Where to invest? European senior housing opportunity index
Senior housing opportunity index Demographics Wealth Housing Pensions 50% 15% 30% 5% Population (70-79) Saving ratio Dwelling stock per inhabitant Pension Beneficiaries Share of population (70-79) Household debt Home ownership ratio Old age pensions per inhabitant Forecasted growth of pop. (70-79) until 2028 Housing cost burden (65+) House price to rent ratio Anticipated old-age pension Old age dependency ratio Net income (65+) Housing regulation Past 10-year increase of old-age pension Past 5-year total investment volume 23 countries 17 metrics 113
Germany and France stand out, followed by the UK Score out of 100 Each country backed by different prevailing ≥ 60 Germany 69.2 drivers. France 66.5 55 - 59 United Kingdom 59.9 50 - 54 Italy 59.5 45 - 49 Germany is at the top Poland 56.6 ≤40 Spain 55.7 of the demographics No Data Austria 52.2 potential. Luxembourg 51.3 Netherlands 51.0 France: Wealthy and Sweden 49.1 fast growing elderly Denmark 48.2 population. Belgium 48.2 Norway 47.7 UK: Strong Ireland 47.4 demographics and Czech Republic 46.7 matured housing Hungary 46.6 market. Finland 46.0 Portugal 45.5 Greece 45.3 Slovakia 43.4 Latvia 43.1 Estonia 42.5 Lithuania 39.7 Savills 114
Beyond the top three countries… 90 Housing score LU 80 70 Wealth & Pension scores AT NO 60 FR DE SE NL SI DK IT 50 EE BE ES CZ PL IE 40 FI UK LV SK PT 30 GR LT HU 20 40 45 50 55 60 65 70 75 80 85 90 Demographics score Savills 115
3 Elderly people and their home Understanding their needs and expectations
Overall, elderly people feel satisfied with their life Do you currently feel satisfied with your life? Do you currently feel useful? 83% 70% 80% 76% Usefulness Happiness 2% 3% 15% 15% 24% 25% Yes, very Yes, very Yes Yes Not really Not really Not at all Not at all 57% 59% 86% 86% 90% 84% 90% 84% 82% 81% 81% 85% 85% 79% 78% 75% 80% 75% 74% 80% 74% 73% 73% 75% 75% 67% 70% 65% 70% 63% 65% 65% 60% 60% 15-24 25-34 34-44 45-54 55-64 65-69 70-74 75-79 80+ 15-24 25-34 34-44 45-54 55-64 65-69 70-74 75-79 80+ Age Age Ipsos surveys 2016 and 2018 117
They want to enjoy life, whilst anticipating their future needs To what extent do the following statements correspond to what you think? What would you say regarding you current financial situation? Fully agree Agree Disagree Fully disagree 47% You can save significant amount of money Can save money I have confidence in the future 8% 46% 36% 10% You can save little amount of money Your income just allows you to meet your budget 45% I take life as it comes by avoiding thinking about 15% 52% 27% 6% You live partly on your savings tomorrow In 2016 and 2014 You live in the open thanks to one or more credits I feel physically and psychologically fulfilled 14% 53% 26% 7% 50% 47% I still love to have fun 17% 51% 24% 8% 45% 42% I try to anticipate for my old age 15% 60% 19% 6% 65-69 70-74 75-79 80+ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% years old years old years old years old Ipsos surveys 2016 and 2018 118
They would rather stay in their current home than moving anywhere more suitable, but senior housing would be their second option How often do you think that you should move to a new home because your If you were to become dependent and in need for a medical follow-up to live, how accommodation is no longer suitable for your current life? would you think of the following solutions? It would be desirable and realistic It would not be desirable although realistic It would be unthinkable 5% Living in an apartment that you would share with 19% Often 10% 37% 53% others Sometimes Living with a relative who would take care of you 14% 37% 49% 53% Rarely Never 23% Benefit from the help of a "companion" robot 14% 43% 43% Living in a retirement home 9% 54% 37% 1 in 4 seniors, feel they should move because their current accommodation is no longer suitable for them Living in a new accommodation alone or with my partner in a more suitable residence offering different 31% 43% 26% services Have you already begun to anticipate the adjustments you would need to make in your home if you were to experience a situation of dependency? Stay in your current home by adapting it 69% 21% 10% 37% 63% YES NO 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ipsos surveys 2016 and 2018 119
4 Conclusions
Strong potential to grow further in Europe European countries are inevitably ageing but at different pace and to a different degree Senior housing is an increasingly strategic investment opportunity Germany, France, the UK, offer the best potential Other countries should be considered depending on strategies Elderly living habits are slowly changing Operators have an important role to play In the future, affordability will be a major challenge
Eri Mitsostergiou - European Research Director Thank you 122
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