On Monday, EQT Infrastructure, a division of Swedish private equity firm EQT, announced that it has entered into exclusive negotiations to acquire a majority stake in Colisée Group, Europe’s 4th-largest operator of senior living facilities and home care services, primarily serving France, Belgium, Spain and Italy.
Once completed, the stake—currently held by Nordic private equity firm IK Investment Partners—would join EQT’s Infrastructure V fund portfolio, part of its thematic investment commitment to “social infrastructure” as defined under the United Nations Sustainable Development Goals, SDG 3 (“Good health and well-being”) and SDG 11 (“Sustainable cities and communities”).
Upon completion, and subject to labor, antitrust and potential foreign investment clearances, EQT Infrastructure V will be 5-10% invested, based upon its target fund size.
Established in 1976, Colisee, which is headquartered in Paris, France, currently operates 270 nursing homes and assisted living facilities and home care services in France, Belgium, Spain and Italy, with annual revenues in excess of EUR 1 billion (about $1.2 billion).
In a statement on Monday, Thomas Rajzbaum, Managing Director at EQT Partners, Investment Advisor to EQT Infrastructure and Head of EQT’s French Infrastructure Advisory Team, said: “Colisee provides essential services to society and truly makes a positive impact in the communities in which it operates. The Company’s core values and ESG approach are strongly in line with EQT’s and we look forward to continue building on Colisee’s renowned focus on high service quality and well-being for its residents.”
EQT’s latest acquisition points to durability in the investment market for European senior living centers. A report this summer from global real estate agency Savills pointed to a 25% increase in investment volume in European senior living facilities in the first half of 2020—a total of EUR 515 million (about $614 million)—compared to the same period last year, suggesting that covid-19—despite its gravely disproportionate effects on the health of older citizens—has had limited negative impact on European senior housing.
Savills analysts note that age-restricted housing, where all residents were more or less equally concerned about the risks of virus transmission, were likely safer during the first pandemic wave, compared to multifamily apartments, where different age groups mingled, or nursing homes with higher risk of viral spread from medical care workers or visits from outside relatives.
Additionally, Savills notes, cross-border investment accounted for 64% of the EUR 515 million total, much higher than the 34% average of the previous five years. Over the past five years, they note, more than two-thirds of total volume in senior housing investment has been concentrated in the maturer French and U.K. markets. Activity in these markets has been driven mainly by portfolio deals and M&A, as opposed to new developments in the “emerging” senior living markets to the east and south, where groundbreaking on many projects has been delayed due to covid-19 lockdowns.
While cross-border investment has traditionally come from within the European continent, new investment is increasingly coming from U.S. investors seeking to broaden their exposure from multifamily and student housing.
The mix of investors has also diversified, including public REITs and insurers in addition to traditional pension funds and investment companies, all drawn by senior housing sector yields averaging a discount of 96 basis points over prime multifamily properties, and 88 basis points over prime city office space.
“The minimal impact of the health crisis on investor appetite for senior housing remains supported by the strong fundamentals of the sector: aging population, new living arrangements, growing wealth, in combination with an overall lack of housing,” Savills analysts write. “Since COVID-19 has slowed down construction activity, we expect some projects to be delayed. This means that the senior housing supply and demand imbalance that has been characterizing the large European urban centers will further exacerbate.”
The acquisition of Colisee will be EQT’s first investment in France following the opening of its Paris office in June of this year, and EQT Infrastructure’s second investment following its purchase of French water services management company SAUR.