Investors spy big bucks in day-care crunch
Published: 19 Nov 2012 10:38 GMT+01:00
Updated: 19 Nov 2012 10:38 GMT+01:00
As German authorities scramble to create thousands of day care places by a 2013 deadline, many investment firms are sensing opportunity and setting up "day care-facility funds" that promise solid returns over several years.
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Demand for places in day care facilities in Germany is rocketing, and local authorities must make room for another 220,000 children between the ages of one and three by August 2013, when it becomes law that all children of that age have access to a spot.
"Day care funds are the logical continuation in the chain of real estate products that tie into people's life cycle," said Wolfgang Kubatzki, an executive board member with the rating agency Feri EuroRating Services.
Much like dormitories and other care facilities, day care centres can offer investors long-term security - not least due to the length of rental contracts, which often run for two decades or more.
Despite some warning signs of a property bubble in Germany, many investors feel that real estate is still a good choice, in light of inflation fears and low interest rates. And the operators of day care facilities, which include local authorities, churches and private groups, are thought to be much better positioned to weather annual rent increases.
Aviarent Capital Management, a Luxembourg-based asset management company, was the first to hop on board - with a fund worth a total of more than €50 million. In October of last year, the firm bought a former school in the western German city of Essen and converted it into a kindergarten.
Unlike Aviarent's day care fund, which is targeted toward institutional investors like insurers and pension funds, the Habona Invest company in Frankfurt is looking to offer individuals the chance to get in on the trend - and analysts are convinced that other asset management companies will start offering similar funds in future.
Yet despite solid demand for day care, pouring money in the facilities is not necessarily a risk-free investment. Closed-end funds, like the one offered by Habona Invest - generally come with a lock-in period - and there is always the chance that a seller may be unable to get a suitable price for his property.