Alexandros Diamantis, Managing Director of Medcity spoke with Property Forum about the company’s investments in Romania that reached €30 million to date and the new cities that have potential for new healthcare real estate developments.
What is the profile of Medcity in the healthcare industry?
Medcity represents the unique real estate (RE) developer in the SEE region focused exclusively on the healthcare sector.
Created as a concept by two significant factors: a solid track record of successful projects in the healthcare field, coupled with the notable growth of the private medical sector and the lack of spaces within the real estate market catering specifically to medical use, Medcity has emerged as a pioneering force establishing itself as the foremost RE player, developing during the last 15 years the largest network of specially designed buildings dedicated to healthcare.
Additionally, Medcity covers a wide range of services in medical building development, such as design, project & construction management, specialized technical advisory, and facility management.
Being part of Sofmedica Group, a leading organization in Europe focused on healthcare innovation since 1994 in several sectors such as MedTech, medical operations, and education, granted the team a 360o perspective, which combined with its unique expertise and dedication, enabled Medcity to deal with any project related to healthcare infrastructure.
What is your strategy for your operations in Romania and how is the local business integrated into your regional footprint?
At present, having our portfolio in Romania nearly fully booked, secured by a 10-year WALT, our primary focus for the next 3-5 years entails an ambitious plan to further expand our building network.
Our overarching objective is to establish high-standard, innovative healthcare ecosystems by developing top-quality, energy-efficient, and sustainable medical facilities in proximity to major urban areas. We firmly believe that this state-of-the-art healthcare RE concepts will cater to the evolving needs of the community while fostering advancements in the healthcare field.
It is worth noting that our business in Romania has flourished through dedicated efforts over time. Building upon this success, we are now embarking on a journey to further extend our presence in Romania and beyond its borders into other countries within the SEE region, where our group has already established a strong presence.
We are excited about the opportunities ahead and remain committed to delivering exceptional healthcare RE concepts while nurturing long-term relationships within the communities we serve.
Why did you decide to expand in Iași and Timișoara? Which Romanian cities are on your investment radar going forward?
We have strategically chosen to expand our operations in Iași and Timișoara due to their status as dynamic economic centres and rapidly growing urban areas. Our decision serves a twofold purpose: to facilitate the development of high standards medical hubs that foster the growth of new businesses and improve the quality of life, while also bridging the gap between local communities and top healthcare providers offering innovative medical services.
These recent endeavours in Iași and Timișoara are integral components of our ambitious development plan. However, our investment radar extends beyond these two cities, encompassing other prominent Romanian urban centres such as Bucharest, Cluj, Brașov, Sibiu, Oradea, and Constanța. As we prioritize the specific needs and preferences of medical operators, we remain open to analyzing alternative development opportunities in other regions.
By strategically selecting these cities for expansion, we aim to contribute to their flourishing economies and elevate the standard of healthcare services accessible to the local communities. We remain steadfast in our commitment to progress and excellence as we continue to identify and seize opportunities to make a meaningful impact in the Romanian market.
What is your investment strategy and what is the structure of demand for your projects from healthcare players?
Our investment strategy primarily revolves around the acquisition and development of reliable and sustainable projects, with a strong commitment to long-term ownership and operation. In order to cater to the diverse needs of healthcare players, the structure of demand for our projects is contingent upon several pivotal factors, namely location, scale, and demand dynamics.
Based on a meticulous assessment of these criteria, we establish the most suitable project model, which can take on various forms. One such model is the single tenant approach, wherein we cater to a specific operator's requirements for a tailor-made project, encompassing a substantial GLA.
Conversely, we also encounter scenarios where we receive multiple requests from numerous operators. In this case, we adopt a multi-tenant model, through which we aim to facilitate a synergy platform for medical operators, enabling them to provide their services in a safe environment.
What is the leasable area of your existing portfolio and what is the average lease period for your buildings?
Including our latest developments, our existing portfolio boasts an expansive leasable area of 20,000 sqm, exemplifying our commitment to providing ample top-notch space dedicated to the healthcare industry. Furthermore, we have an average lease period of close to 10 years. This demonstrates the trust and confidence that our tenants place in our developments, by committing to long-term leases, securing in this way stability and continuity for their operations in safe and compliant facilities.
What is the biggest opportunity that the local market provides for the developers of healthcare ecosystems?
The most significant opportunity that the local market presents for developers of healthcare RE lies in the scarcity of suitable facilities that meet the specific needs and legal regulations of the medical industry. By addressing this critical demand, Medcity has the chance to not only meet the pressing needs of the medical field but also to create a social impact by contributing through its developments to the overall advancement and enhancement of the local healthcare ecosystem.
I would like to mention that by developing healthcare RE we have acknowledged from the beginning that we would obtain lower yields compared to commercial, office, logistics, or other types of developments, however being part of a group dedicated to healthcare innovation for 29 years now, we witness on a daily basis the crucial need for proper healthcare facilities. Therefore, we have invested in such RE developments, even with lower returns, because we strongly believe that someone must do so to fill the gap in the RE market. And we do observe that the ecosystem takes notice and appreciates and sometimes generates collateral benefits for other companies in our group.
How much have you invested in Romania to date and how are you funding your purchases?
To date, our cumulative investment in Romania has surpassed €30 million. This substantial financial commitment has been facilitated by the unwavering support of our shareholders. Moving forward, as we embark on new development projects, we aim to diversify our funding sources. In addition to the continued backing from our shareholders, we intend to explore avenues such as bank financing and JVs with an interest in investing in our innovative medical RE concepts.
What are the elements that you consider when looking to purchase an asset?
When evaluating the acquisition of an asset, be it a building or land, we prioritize several key elements that contribute to our investment decision-making process. Undoubtedly, location holds paramount significance in our assessment, as it forms the foundation upon which the success of our ventures is built. Additionally, we consider various other critical aspects that further shape our investment strategy.
First and foremost, depending on the scale of a new development, we carefully evaluate a potential asset, ensuring it aligns with our overarching objectives. Also, the physical condition and specifications of a potential building are meticulously assessed to determine its suitability for our intended purpose and future development possibilities. Additionally, accessibility and visibility are essential factors that we consider, as they contribute to the asset's desirability and potential market appeal.
By thoughtfully considering these elements, we can take documented investment decisions that align with our long-term vision and deliver substantial value.
How competitive is Romania’s commercial real estate market compared to other countries in CEE?
Romania stands out as a prominent player among the CEE countries, displaying a remarkable growth trajectory in terms of investment volumes. Notably, Romania offers a compelling proposition with highly competitive yields that surpass those found in many other countries within the CEE region. This, coupled with the country's dynamic economic expansion, further bolsters its allure as an attractive investment destination.
One key factor contributing to Romania's appeal is its impressive rate of economic growth, which presents lucrative opportunities for investors seeking to capitalize on the nation's potential. Additionally, the market benefits from a limited supply of reliable RE options to meet the growing demand, thereby enhancing its attractiveness to discerning investors.
