This article was originally published on Cityscape Intelligence.
More investment - at a reduced cost - is expected in healthcare and infrastructure development in the future, thanks to increased privatisation in the industry.
According to Sandeep Sinha, Head of Healthcare MENA at JLL, healthcare infrastructure has a very strong amalgamation with real estate investment, foreseeing many opportunities for both infrastructure development and real estate companies.
“This combination has created a very strong opportunity for development and investment in the healthcare sector,” he said on Day Two of Cityscape Summit 2020. “If you try to analyse – from a healthcare point of view – the different business operating models in the healthcare industry, typically the self-development is the traditional way.”
The second model Sinha mentioned is increased international accreditation taking place, on top of self-development, while the third is called PropCo-OpCo-ManCo.
“This is where the [regional] healthcare development system is headed,” he said. “This structure has changed the healthcare landscape drastically. When you look at the revenues, they come from rental revenue to be paid by the hospital and other retail shops.”
This has led to several advantages for real estate developers, as well as healthcare providers, as they created mutual synergies.
“Real estate will have an opportunity to get a tenant who is long and sustainable and will continue to give a sustainable yield for 20 to 25 years,” Sinha added.
He also dubbed it a sustainable business model, due to the healthcare industry being considered recession-free. It has maintained pre, during, and is expected to maintain in a post-COVID-19 era as well.
He also mentioned healthcare real estate investment trusts (REITs), which is a relatively new concept in the region that has been successful in other parts of the world.
“It can be a clinical or medical centre, pharma manufacturing, or long-term rehabilitation,” he added. “They invest into the dedicated healthcare assets and will develop them. They’re typically listed and have a different equity model.”
Globally, there are more than 30 healthcare listed REITs and their market cap is “easily in the upwards of $200 billion”. Sinha described healthcare REITs as an opportunity for investment that is growing in the region.
Public-Private Partnerships
Lastly, he spoke of public-private partnerships (PPPs), which are evolving with many bids under progress across the GCC. Some examples he gave include Saudi Arabia with Al Ansar hospital PPP and the Ministry of Health PPP for Extended Care; the UAE with Pure Health PPP and the Ministry of Health and Prevention, and the Dubai Health Authority’s Cardiology care centre.
“Half a dozen PPP models are coming up in Saudi Arabia and Oman is also coming up with five to six PPPs,” Sinha said. “It has a higher investment from a real estate point of view.”
He concluded with key outlooks that will be an opportunity for healthcare providers, including more investment in healthcare development and infrastructure development in the region.
“Healthcare providers will now improve their cashflow,” he concluded. “Valuation of healthcare assets will be more realistic, the quality of healthcare will be better, and international players have started entering the region now. You will see lots of healthcare PPPs coming up in the market, which will reduce the cost of healthcare on the government and [shift] more towards privatisation.”