On Friday, Swedish private equity and real assets firm EQT announced that its real estate subsidiary, EQT Real Estate, is launching a joint venture with Italian construction company Arco Lavori. The venture will develop a portfolio of purpose-built, affordable grade-A senior care homes in Northern Italy that will seek to provide the highest level of healthcare and quality living in the country.
The venture will launch with five initial sites with an aggregate capacity of 1,010 beds, valued in excess of EUR 300 million (about $354 million). The first two senior care homes are will be delivered by late 2022 and early 2023. The JV’s first five projects are located in the Lombardy and Emilia Romagna regions, which are particularly in need of senior care facilities due to a supply-demand imbalance and low provision rate of care home beds for senior citizens driven by Italy’s growing elderly population.
Per EQT, over the next decade, the share of Italy’s population aged 75 years and older is expected to increase from 11.5 percent to 14.0 percent. Completed facilities will be let to, and managed by, well-known, high quality operators who will aim to bring a high standard of sustainability and safety to the Italian healthcare home market.
While not its first foray into southern European senior housing, the joint venture marks EQT Real Estate’s first investment in Italy, combining its thematic focus on “beds and sheds” in primary European markets while developing assets based on EQT’s strong sustainability credentials. Where possible, care homes will utilize photovoltaic panels on the roof and benefit from measures aimed at incentivizing the promotion of recycling of waste and rainwater management. The JV’s care homes will also seek to achieve green certifications such as LEED and WELL, as well as following specific ESG principles. In addition, the JV will promote sustainable living practices within the care homes themselves. The operators will implement policies and standard activities related to the procedures against Covid-19 and other possible health risks.
“EQT Real Estate is thrilled to be entering the Italian healthcare market and investing in a sector which is lacking grade-A facilities and is expected to benefit from robust demographic trends in the country,” said Alessio Lucentini, EQT Real Estate’s Managing Director, Investment Advisor and Head of Italy. “In addition to the initial five sites, we are currently evaluating a growing pipeline of projects, mainly in Northern Italy, to build a large scale, resilient and downside-protected portfolio. EQT Real Estate looks forward to partnering with the Arco team to realize our shared vision over the coming years.”
“This joint venture with Arco marks an exciting entrance into Italy for EQT Real Estate as it represents the first transaction in this market since the business line was established in 2015,” Rob Rackind, Partner, Investment Advisor and Head of EQT Real Estate, said, This is another prime example of using EQT’s ‘local-with-locals’ approach to source attractive opportunities in order to invest with thematic trends and we are proud to back a strategy that should deliver significant social impact by providing defensive, socially responsible assets to the regions of Italy most in need.
Founded in 1999, Arco Lavori bills itself as “a cooperative construction company focused on general construction, facility management, energy and healthcare sectors. The company is headquartered in Ravenna, in the Emilia Romagna region, patterning with more than 400 partner companies and an order portfolio of approximately EUR 550 million as of March 2021. The company has a well-established track record in the Italian healthcare industry, Arco’s principal focus is aimed at improving the economic and social conditions of partner companies while delivering innovative products. Arco has created an unrivalled property platform and an integrated solution to its partners by sourcing sites, bringing together construction resources, and managing all stages throughout the planning and development process. Arco Lavori reported revenues of EUR 200 million in 2020.
Emiliano Battistini, CEO of Arco Lavori, said, “There is a growing undersupply of affordable grade-A care home facilities in Italy and this trend is expected to continue during the coming years. The combination of EQT Real Estate’s pan-European expertise and our local reputation and know-how is expected to create a much-needed product for an important and growing part of Italy’s population.”
FCLT
EQT’s focus on Italian senior living marks its second major announcement oriented to “long-term sustainable credentials” this week. On Wednesday, the company announced its membership in FCLTGlobal (i.e. “Focusing Capital on the Long Term”), a non-profit organization whose mission is to “rebalance capital markets” to support a long-term, sustainable economy, and stimulating long-term behavior across the investment value chain.
Members include more than 60 leading asset owners, asset managers and corporations from around the world, including Blackstone, BlackRock, Neuberger Berman, Nuveen, and many others. EQT touts FCLTGlobal asa rapidly growing initiative, calling the shift of financial markets toward a longer-term perspective “one of the most important systematic changes needed to provide companies with space to make the right investment decisions.” In a statement announcing its membership, EQT said that FCTLGlobal “aligns perfectly” with its stated mission of “future-proofing companies” and making a positive impact in all that it does.
“It is also well in line with EQT’s thematic approach of investing with the future in mind, as well as the evaluation of a long-hold strategy as a natural extension of the current platform,” the company added.
FCLTGlobal conducts research and develops tools to drive long-term value, with the guiding principle that working toward short-term financial targets comes at the expense of long-term value creation. Despite the fact that data shows that long-term-oriented investors deliver superior performance and long-term-oriented companies outperform in terms of revenue, earnings, and job creation, the focus in global investing remains largely skewed towards short-term performance.
“The private markets industry has a huge opportunity to change this mindset, to think longer-term and to strive to simultaneously enhance financial returns and improve societies,” said Christian Sinding, CEO and Managing Partner at EQT AB. “And our industry has the power to make a real difference with a governance model and active ownership approach that get things done. We are deeply impressed by FCTLGlobal’s mission and research-based approach and are humbled by the opportunity to team up with the organization and all the other members in order to take an even more active role in the movement of tackling short-termism and promoting sustainable growth.”
