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EHPAD Valuation

Valuing nursing home (EHPAD) properties: monovalent and regulated assets

Nursing homes (EHPADs) are considered as monovalent assets. They provide accommodation services (much like hotels), but also provide medical assistance to residents. These elements of dependency and medicalisation make EHPADs regulated establishments, both in terms of business operations and real estate.

In the context of an ageing population, needs are growing faster than supply. The estimation of an EHPAD depends directly on its location and the scarcity of supply in its sector as well as its operating conditions. The difficulty of obtaining the necessary approvals to open an EHPAD accentuates the shortage situation on the market, which makes nursing homes a secure product that investors appreciate.

  • 36 %

    Share of dependent persons among those over 80 in France

  • 97 %

    Average occupancy rate of PDAs in France

  • 173,000

    Minimum number of additional beds to be created between 2015 and 2025

Nursing home valuation: an asset whose value depends on operations

Interview with Sabine Rosinach, real estate valuer specialised in EHPADs (nursing home) at BNP Paribas Real Estate- Valuation. Discover our expertise in valuing this monovalent asset.

Our expert’s point of view

Sabine Rosinach

Expert valuer specialised in nursing homes

What are the special characteristics of nursing home properties?

According to INSEE, French seniors are 1 million more than ten years ago. The ageing of the French population is creating a growing need for medical facilities for the accommodation of elderly people. The nursing home sector as a whole remains under-supplied with long waiting lists for some establishments. However, the situation differs from region to region and must be analysed on a case-by-case basis. 

 

How does this asset behave in the market?

The attractiveness of the nursing home asset is that it is linked to the nature of the market, which is driven by an ageing population, public support and strong barriers to entry linked to regulations that limit competition. In France, the supply of public and associative establishments dominates the market. But regional disparities do exist, especially in attractive areas, where private operators are more present. 

Since 2010, the implementation of the “call for projects” procedure, the creation of new nursing home locations is no longer in the hands of operators but rather local authorities. If the aim was to correlate new openings with actual needs, construction has been markedly slowed down in recent years, due to a context of budgetary savings. The number of nursing homes remains small, while demand for acquisition remains high. These trends are contributing to the increase in values for the best assets (newer and more secure institutions).  

 

What are investors' expectations for nursing homes (EPHADs)? 

Nursing homes continue to appeal to investors who see this type of asset as a high yield diversification property product. The demand for acquisition is all the more important because it concerns investments on a lot-by-lot basis as well as the acquisition of entire buildings. Since the nursing homes are alternative, monovalent and technical real estate assets subject to strict regulations, an informed acquisition is necessary. Our dedicated team of experts have specific knowledge (technical, regulatory, market or financial analysis) to help clients face the high complexity of nursing home valuation and provide our customers with reliable answers.

 

What are the main criteria used to value a nursing home?

Nursing homes are considered monovalent assets. They are built with a view to specific exploitation and their conversion for another activity is often only possible with heavy construction work. The value of the premises is therefore closely linked to its operating conditions, the characteristics of the establishment and its location.

Location

Relevance of location, local market value levels

Operations and occupancy

Lease, tenant quality, rent level, occupancy rate, Weighted Average Gir, turnover, GOP

Hotel data

Number of beds, rooms, surface area

Technical specifications

Date of construction, compliance with standards, equipment level

Our experts rely on valuation methods based on the ability of an operation to bear a rent compatible with the profitability of the activity being carried out. GMP (Weighted Average Gir) is also an important indicator. It measures the average level of dependency of elderly people housed in nursing homes and valuers use it to determine the amount of public funding granted to the institution in question.

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