Belgreen Capital
Margret Schulenburg and Joseph H. Schrull III, Belgreen Capital GmbH
Belgreen Capital is an owner-managed real estate investment manager for institutional investors, with headquarters in Hamburg and offices in Gütersloh and Krefeld. The company is focused on social and healthcare real estate investments, and has a special affinity with the area around Ostwestfalen-Lippe, Osnabrück and Münster.
It manages its funds as open or closed-end fund, individual mandates, and Separate Accounts. Its two main funds currently are the Belgreen Care Fund 1 and the Belgreen Triangle Fund 1.
REFIRE spoke to the company’s joint managing directors Margret Schulenburg and Joseph H. Schrull III about the attractions of investing in medical practices in Germany.
REFIRE: Belgreen Capital specializes in health care real estate, in particular medical centers, medical care centers (MVZs), rehabilitation centers and care facilities, but also assisted living with outpatient care services. While the asset class has been around a while, it seems it’s really only now being discovered by institutional investors?
Margret Schulenburg: Until now, investments in health care real estate were more or less reserved for insiders and absolute market experts, who were able to secure this market and the advantages of the asset class for themselves based on proprietary knowledge. In the meantime, the asset class is regrouping and is being worked on by other players in the market.
Despite the ongoing low interest rate phase, investments in classic office or residential property have so far achieved comparatively adequate returns, albeit with increasing risks. Most recently, the Corona crisis has shown once again that some segments are more affected by economic downturns than others. In such times we often see a return to safety-oriented investments, which at best generate returns regardless of the economic situation. A look at the growth market "health care" is obvious.
REFIRE: What are the particular attractions of medical care centers as an asset class?
Joseph H. Schrull III: This is a logical continuation of the so-called shared economy. Co-working and co-living are already common features of this omnipresent trend. So far, doctors have been a bit more reluctant when it comes to cross-practice shared economy. Here the synergy effects of a cooperation are more in the foreground: If additional specialties are brought in for treatment, this can take place in the same building. If various medical specialties together with other affiliated health care service providers such as pharmacies, medical supply stores, hearing care professionals, opticians, etc. appear as a health care center, this strengthens the market perception enormously. This means that the location has an advertising advantage over an individual doctor´s office, for example with a sign at the entrance to a residential building. Medical centers often also have distinctive branding, which firmly anchors the property and the central location in the awareness of the local population.
Schulenburg: In addition there are changing lifestyles within society. Work-life balance, childcare shared between parents, parental leave or caring for relatives, for example, can be better implemented in a community than in an individual health care practice. An increasing feminization of the medical profession also contributes to this. Approximately 70% of all medical specialists and 62% of all medical students (2018/2019) in Germany are already female. In order to reconcile work and family, the demand for part-time jobs has risen sharply. The position of a salaried doctor is also much more in demand today than it used to be, which can best be achieved outside of hospitals with shift work in the context of group practices, medical centers or medical care centers. All of these factors contribute to the fact that real estate also has to adapt to the changing demand of this user group.
REFIRE: How would you describe the success factors for an investment in health care real estate?
Schrull: A central location is essential, if possible with walk-in customers and easy access. Doctors also appreciate a modern, well-equipped building. Therefore the focus must lie on high-quality property with attractively designed waiting areas and sophisticated examination rooms. A holistic concept for day-to-day business operations and marketing of the property is another positive aspect. These requirements for a health care property are best met by new buildings, which investors often have to secure before the start of construction in order to successfully build up a portfolio.
REFIRE: You have committed yourself to the “hidden champions” among German real estate locations. Why do you see particular potential there?
Schulenburg: In contrast to other countries, Germany has decentralized structures, which leads to the formation of regional centers. In Germany, only around one third of the population lives in large cities with more than 100,000 inhabitants. More than half of all Germans live in medium and small towns, each with their own care structures. In rural areas, in particular, a shortage of doctors and a lack of succession in individual practices are increasing the need for health care services that local communities have to meet. Cooperation with the different municipalities in the development of suitable locations and access to projects for health centers are a prerequisite for a portfolio of health care assets.
REFIRE: Isn’t it difficult to get medical professionals to settle in smaller provincial locations and not in the larger cities? Isn’t there a well-publicised flight of young professionals from the regions into the big cities?
Schrull: The remuneration of doctors is regulated nationwide, if one refrains from privately insured patients. At the same time, the cost of living outside the top 7 German locations is lower. In an attractive living environment with good working conditions, it is quite attractive to settle down as a doctor in a medium or small town. Furthermore, admission as a health insurance physician is strictly regulated so that an oversupply of certain specialties is avoided in any case. This also protects the medical profession beyond the general prohibition of competition within a medical center.
REFIRE: Investors obviously want to know about the risks. What are they? What are the opportunities?
Schrull: Health care properties are often operator-run properties, so that in addition to the known property risks, the operator's creditworthiness and experience must also be assessed. Another factor is the assessment of whether enough personnel can be recruited locally to operate a health care facility. It is also real estate that is specially designed for the individual needs of doctors and their patients. In this respect, despite long-term leases, attention must always be paid to a high level of third-party use, especially with regard to the location, building structure, and design.
In contrast, there are long-term leases with terms of often 20 years and beyond. The rental agreement is particularly important for doctors with regard to their admission as a health insurance physician, so that there is very rarely a change of location. In addition, healthcare properties generate crisis-proof cash flows, since the need for health care services is, with very few exceptions, independent of the economy.
REFIRE: Is the trend towards social and health care sustainable, or is it just following fads?
Schulenburg: When it comes to our investments, we attach great importance to sustainability and always want to be one step ahead with regard to the EU climate targets. In the area of Social & Health Care, the topic of sustainability can be realized in many places within the meaning of the ESG criteria. In the case of new construction projects in particular, it can be influenced at an early stage and attention paid to climate-friendly buildings and property management through renewable energies. Public funds are sometimes available for this, which make the use of new technologies economical for investors. In addition, investments in social & health care properties can improve general care and thus make a socially relevant contribution.
REFIRE: Yield and impact – is it too good to be true?
Schulenburg: With the investment in social & health care real estate, returns for the institutional investor can still be achieved in the 4.5 to 5 percent range, if one also takes into account regional locations. Belgreen Capital specializes in these “hidden champions” among real estate locations. The quality of the location and the demographic development in the immediate vicinity are important factors: in old age, few people leave their familiar surroundings and remain loyal to their hometown. Personal health accompanies people through all phases of life regardless of the economic situation. In Germany, every fifth job is already in the health care sector and it is foreseeable that demand in this area will increase significantly in the coming decades due to demographic developments. The investment in health care also has a relevant social impact.
Belgreen Capital is a Real Estate Investment Manager and establishes and manages real estate special funds for institutional investors. The company has a clear focus on regional „Hidden Champions“ among German business locations and is specialized in social and health care properties.
