1. Modeling risk in the real estate portfolio of healthcare institutions Ir. I.H. Gotink Dr. J.J.A.M. Smeets Ir. L.A.M.C. van de Ven

2. Healthcare properties, risky or promising? Investing in healthcare properties is no longer without risks To a different vision on healthcare properties Healthcare sector provides plenty of opportunities to real estate sector

3. Content Introduction: Dutch Healthcare sector Risk and risk management Risk management cycle as base for design of instrument Case study Discussion Modeling risks in the real estate portfolio of healthcare institutions

4. Introduction: Dutch healthcare sector Focus on mental healthcare sector Diversity Split between intramural and extramural care Institution grounds versus buildings Modeling risks in the real estate portfolio of healthcare institutions Healthcare institutions Care Cure Mental healthcare Nursing and care Hospitals Disabled care General practitioners Homecare Rehabilitation

5. 4 Cure Transition 200520062007200820092010201120122013 ‘Supply driven’ Coverage cost of capital related to building permit Coverage costs of capital related to production Care ‘Market driven’ Budget and costing For the account of institutions ZVW WTZi Gewijzigde AWBZ WMO ZVW: Zorgverzekeringswet WTZi: Wet toelating zorginstellingen WMO: Wet Maatschappelijke ondersteuning AWBZ: Algemene Wet Bijzondere Ziektekosten normative housing component 2 e kapitaal- lastenbrief 1 e kapitaal- lastenbrief Modeling risks in the real estate portfolio of healthcare institutions

6. Changed legislation Central supply-driven tot regulated market-driven Integral performance funding (DBC and ZZP) Normative housing component Institutions become responsible for investment decisions Results: Incentives to increase effient use of real estate Changed position of real estate within organization Changed demand for the function of real estate Modeling risks in the real estate portfolio of healthcare institutions

7. Broader view on real estate Modeling risks in the real estate portfolio of healthcare institutions Covering risks and cost-effectiveness Real estate as an added value + Image Healing environment Efficiency Competition Effectiveness Flexibility Revenues Expenses Life cycle Healthcare properties Supporting healthcare

8. Modeling risks in the real estate portfolio of healthcare institutions Risk is the uncertainty that a negative effect will occur. Whereby the likelihood, the effect and the ability to influence determine the exent of risk.

9. Risk management Modeling risks in the real estate portfolio of healthcare institutions

10. 1. Internal environment Risk attitude: risk averse, risk neutral and risk taking 3 categories: Ability to take risks within the organization Political climate Economical climate Modeling risks in the real estate portfolio of healthcare institutions

11. 2. Objective setting Main goal is the supply of good health care Real estate is supporting Goal for real estate: being at least cost-effective on portfolio level Modeling risks in the real estate portfolio of healthcare institutions

12. 3. Risk-identification Political factors Economical factors Social and demographical factors Technological factors Market developments Modeling risks in the real estate portfolio of healthcare institutions

13. 4. Risk Assessment Modeling risks in the real estate portfolio of healthcare institutions Type of riskAbility to influenceClass Acceptable+Safe O - Normal uncertainties+Low O -Middle Undesirable+Middle O -High Large and Threatening+High O -Fatal SafeLowMiddleHighFatal 0% 100%

14. 5. Risk response 4 Response strategies: Tolerate Treat Transfer Terminate Modeling risks in the real estate portfolio of healthcare institutions

15. 6. Control activities Database with control measures is no solution, because managers must become aware of risks 7 criteria for control measures: Appropriate Affordable Actionable Achieveble Assessed Agreed Allocated Accepted Modeling risks in the real estate portfolio of healthcare institutions

16. 7. Information and communication The instrument: Provides insight in current state of real estate portfolio Applied by managers real estate, finance and healthcare Outcome submitted by management team for validation Modeling risks in the real estate portfolio of healthcare institutions

17. 8. Monitoring Risk management is an ongoing process Takes place in various orders Dynamic portfolio tool Modeling risks in the real estate portfolio of healthcare institutions

18. Risk management instrument and case study Instrument built up going through 8 steps of ERM-model Case study at Emergis, institution for mental health care Modeling risks in the real estate portfolio of healthcare institutions

25. Case study Test of design, descriptions and relation literature and applicability Test on selection of buildings Power to distinguish main risks and riskiest properties Rented properties show significantly lower scores Clear differences in scores that match the state as known by Emergis Modeling risks in the real estate portfolio of healthcare institutions

26. Conclusion Complementary in the process to get a grip on real estate portfolio Most important risks and properties with highest risk can be discovered Response strategies can be connected to risks Risk score is input for portfolio strategy and real estate strategy Benchmark: between buildings or institutions Modeling risks in the real estate portfolio of healthcare institutions

27. Discussion Instrument focuses on risk identification and risk assessment, subsequent step extend risk response and control steps Risk assessment by using quantitative methods Risk identification for rented properties Modeling risks in the real estate portfolio of healthcare institutions

28. Risk management is a necessary part of the transition from traditional housing management to strategic real estate management in the care sector. Modeling risks in the real estate portfolio of healthcare institutions Thanks for your attention