ATP Ejendomme is getting ready to build the first part of a new venture into senior housing. It involves 72 assisted living facilities on the coast in north-eastern Denmark and a total project budget of DKK 150 million (EUR 20.2 million), of which construction makes up about 75 percent, equal to DKK 110 million.

Project to be run by ATP subsidiary Seniorbolig Danmark, which will also hold the homes on its own books once the residential care company OK Fund becomes its tenant and takes over day-to-day operation of the facilities.

"This is the first time we make an investment that fits our framework for the Seniorbolig Danmark strategy. This is a part of our general property strategy. We have found out that senior homes and assisted living facilities are best placed in their own owner structure, because, among other reasons, it is a special asset class in which we also work with an external consultant on finding and developing the projects," says Michael Nielsen, Chief Executive of ATP Ejendomme, tells EjendomsWatch.

He would like for the pilot project's set-up to bring about more senior homes as quickly as possible for the simple reason that ATP Ejendomme focuses on the advantages of large-scale operations.

"We do not yet have new projects on the way with a name and an address, but if the framework of this investment could be copied to other projects across the country, then we would be willing to consider it. For us, a volume of DKK 150 million in this segment is not big enough," says Nielsen.

Holding onto a core mentality

Particularly the nursing care and senior citizen sector is a field outside of ATP Ejendomme's core expertise. For this reason, previous to the launch, ATP contacted manager and consultant Northern Horizon in order to develop the strategy in the field and identify the right projects.

Northern Horizon works with the same field in Sweden and Finland. According to Michael Nielsen, it is a highly developed area for pension funds and other institutional investors in Sweden and Norway.

"Now we need to find an entrepreneur who can carry out the project at the right price and quality. It is a fixed part of our strategy to put construction projects out to tender, but in this case we have the condition that the price must be at a level that allows OK Fonden to enter a price competitive rental agreement for the buildings," says Nielsen.

A few years ago, ATP decided to start investing in Danish residential properties. The strategy is broadly based, and covers both normal rental housing as well as youth and senior housing. The required rate of returns is close to ATP's usual approach to property investments.

"The level of returns fits nicely with the rest of our portfolio. That is to say, a core level with low risk in the form of long-term rental contracts and good tenants in completed buildings," says Nielsen.

Preparing for future housing needs

According to the agreement in question, it will be no more expensive for tenants and the local Gribskov municipality than similar municipal care options. Local authorities only pay for residents who independently choose to move to the new assisted living facilities.

"This is our first case, from which we have learned a lot, and we hope to build more facilities like this one. All forecasts for demographic trends say that there is a need for senior housing and care facilities in Denmark, and local authorities have to provide that service for their citizens. So if we can contribute with attractive buildings that are simultaneously a good investment for ATP's members, then we are satisfied," says Nielsen.

The operator, OK Fonden, is a Danish non-profit organization that currently runs a hospice, four psychiatric residences and treatment facilities, and 15 nursing homes across Denmark. Furthermore, the fund has built and manages 1,300 residences, 480 of which are senior homes, distributed in 29 co-housing schemes.

"The combination of senior housing and assisted living facilities means that, over time, we can give many people the opportunity to stay in their own private homes throughout their lives – even if the need for help and nursing care arises. In the assisted living facilities, we place great emphasis on homeliness and comfort, while at the same time making sure that the facilities are safe for people with dementia," says Paul Erik Weidemann, CEO of OK Fonden, in a press release.

English Edit: Marie Honoré