Against the backdrop of real estate lenders seeking greater exposure to alternative property sectors, one of 2018’s largest financings so far happened in the German private healthcare market.

In September, French bank Société Générale closed a €655 million financing of a portfolio of 71 clinics from which Berlin-based operator Median provides post-acute care to paying patients. The deal supported the €800 million purchase by French investor Primonial REIM of a half-stake in the portfolio from US listed Medical Properties Trust.

The investment deal, which was agreed in June and closed in September, reflected a net initial yield of 6 percent, valuing the Median platform at more than €1.6 billion.

The institutionalisation of the private healthcare industry across Europe, combined with lenders’ increasing focus on the income-producing merits of operating assets, means debt liquidity to the sector has increased. French banks, including SocGén, have built a track record in providing debt to healthcare property as consolidation across the sector in recent years has created financing opportunities.

“The German healthcare market is still an area of development due to its fragmentation and structural needs for the near future. It’s an opportunity for us because we see more institutional investors looking to invest, and we have followed them,” Jerome Gatipon-Bachette, co-head of real estate structured finance at SocGén told Real Estate Capital.

SocGén won the deal due to its ability to underwrite the entire transaction upfront and bring on board syndication partners to share the risk, explains Marco Rampin, head of debt advisory and structured finance for Continental Europe at CBRE Capital Advisors, which advised on the deal.

The syndicated facility was sold down to more than 15 organisations, from within the SocGén group, as well as companies from Paris-based insurance group AXA. The seven-year facility was structured in two tranches, with three-quarters of the facility written on a floating-rate basis, hedged with a swap, and a fixed-rate tranche to accommodate the needs of various pre-identified syndicate parties, Rampin explains.

The facility carries a swapped fixed rate of 2.3 percent, MPT said.

“French lenders demonstrated more familiarity with the healthcare market,” says Rampin. “The German Pfandbrief banks often have issues with underwriting single tenants with operating risk and multiple assets.”

Germany’s healthcare property sector witnessed an almost fivefold increase in transaction volume in H1 2018, year-on-year, with more than €1.6 billion invested, according to Savills, which included the Median portfolio deal in its figures.

Source: ULI, PwC, Emerging Trends Europe report 2018

Healthcare is increasingly dominated by global investors attracted by the market’s strong fundamentals, according to Keith Harris, executive director for healthcare transactions at CBRE: “Demand is underpinned by an aging population with increasingly complex care needs, a consolidating private-sector operator landscape and a compelling opportunity for sustainable income.”

As demographic trends drive investment, Europe’s private healthcare market is likely to attract capital.

“The increasing investment in healthcare property, which is relatively independent of economic conditions, and the acquisition of operator-managed properties with long leases could also be manifestations of defensive investment strategies,” Matthias Pink, director and head of research for Germany at Savills said in the firm’s German commercial investment market report for H1 2018.

Primonial has invested in scale in German healthcare property before. In September 2016, it paid €995 million for a portfolio of 68 facilities from Swiss private equity firm Even Capital. In France, Primonial headed a consortium which, in July 2016, bought the healthcare assets of French REIT Gecina. French bank BNP Paribas financed the acquisition with a €450 million loan.