Abstract
This study is designed to explore the viability for South African private healthcare operators
to monetise and use their vast real estate portfolios as an alternative source of capital to fund their
operations, growth and expansion plans. The knowledge obtained from the study will be of
great value in establishing whether monetisation is a viable alternative or additional source of
capital to the country’s healthcare sector.
Qualitative research was undertaken, wherein data was collected by way of semi-structured
interviews within the South African private healthcare sector at large. The research is important
as it appears that healthcare operators are yet to exploit and monetise their vast real estate
assets, which hold considerable equity value on their balance sheets that may well be better
used in funding their growth and operations.
Based on the literature review available as well as the findings of the reviews, it appears that there
is definite scope available for the monetisation of healthcare real estate in South Africa. However,
it is clear that it will be entirely dependent on each healthcare operators’ unique capital
requirements. Currently, the three largest healthcare operators are well capitalised with
sufficient access to various capitalisation sources and they are not looking to divest from their real
estate holdings in the short to medium term. The immediate monetisation opportunities could
thus be found with the independent healthcare operators as well as new entrants into the sector
who lack the liquidity, access to capital, and track record to fund the development of new healthcare
facilities.
Therefore, the monetisation of South African private healthcare real estate may be a viable
alternative and additional source of capital for healthcare operators to fund their growth
initiatives and aspirations. Recommendations for future research include, amongst others, a further
study into the lease pricing model to resolve the mismatch between annual lease escalation rates
and annual medical aid tariffs. This aspect is proving to be a challenge and an impediment
to the successful monetisation of South Africa’s private healthcare real estate.
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KEYWORDS
Health market inquiry; healthcare; healthcare real estate; liquidity; monetisation;
National Health Insurance; private healthcare operators; qualitative research; real estate;
Real Estate Investment Trust; sale and leaseback; source of capital