The Aedificia Group is a quite well-known group in Belgium. They specialise in the acquisition and management of care homes and are the market leader in Belgium with a portfolio of 1.5 bn €. The group is listed, so investors can buy the shares and enjoy a dividend from this diversified portfolio of 3-4% (minus 30% tax that is levied in Belgium).
Aedifica has announced it will pay 450 million pounds to finance the acquisition of 93 care homes across the UK, its biggest acquisition ever. The UK portfolio will form 23% of the total portfolio of the Group. Buying Aedifica shares means investing 23% of your money into UK care homes. Not a bad choice.
78.947£ per room – 7% rental yield
De group is paying £450m for the 5.700 rooms or 78.947£ per room. That is quite similar to the price of individual rooms for investors (who normally pat around 70.000-90.000£ per room). Expected rental return is around 7%, also very comparable with the 8% that is normally paid to individual investors that acquire single rooms.
CEO Stefaan Gielens: ‘In the past large groups have been for sale for a significant premium. This is not the case now: Lone star is selling its group with a 5% discount on market value. ‘It ticks all the boxes’.’
Quite remarkable is of course the timing in the middle of Brexit chaos. In less then 100 days, the UK will leave the EU and nobody knows whether there will be an agreement or chaos.
CEO Gielens understands the doubts, but he does not see huge risks for Aedificia. “Most doom scenario’s you hear, are focused on industrial activity. What we have acquired is a totally different segment of the economy and is a fully internal business. There is of course an exchange risk. But we are doing this acquisition with an historically cheap exchange rate. This is a good time to invest.”
Buy your own room
The Aedificia press release contains a lot of information on the care home industry and how Aedificia looks at this sector. That is quite interesting if you are intending to do the same. If you buy an individual room in UK (prices vary from 75.000£ to 150.000£), you can count on a fixed rental income of ~8% (up to 10%) and exit options between 5 and 10 years with a modest capital gains (1-2%/year). As dividends in Belgium are taxable and rental income isn’t, the net returns on your own room are significantly better than the return on an indirect investment.