Al Noor Hospitals has agreed to long-term leases worth about Dh1 billion with its landlord, Al Saqr Property Management, that will allow it to expand its three main hospitals in Abu Dhabi as it taps into one of the fastest-growing healthcare markets in the region.
New blocks being built at Al Ain Hospital and its Airport Road facility in Abu Dhabi will result in them doubling in size.
The deal at its Khalifa Street hospital site, which was built following the conversion of 79 flats within an existing building, will involve it taking over the rest of the building. It will convert a further 72 flats and use the ground and mezzanine floors to expand its emergency care and outpatients department.
A new 6,585 square metre building will be added to the Al Ain Hospital, which currently occupies 6,802 square metres. At Airport Road, Al Saqr will also build a Dh330 million extension from scratch. The leases have been signed (with some rent-free periods) over an average of 22 years, expiring at the end of 2036. The company will pay an average rent of Dh45.8 million per year.
The deal is considered to be a related party transaction as Al Saqr is ultimately owned by Sheikh Mohammed bin Butti Al Hamed, who is Al Noor Hospitals Group’s biggest single shareholder, with an equity stake of 28.25 per cent. Shareholder approval for the deal will be sought at a meeting on August 24.
Ronald Lavater, the chief executive at Al Noor Hospitals Group, said that subject to shareholder approval, the work at Khalifa Hospital and at Al Ain Hospital should both be completed by the middle of next year.
The new Airport Road site will add 100 beds to the 120 in the existing building.
“We’ve done the designs and we have conceptual approval, but until we start to dig a hole in the ground it’s difficult to give an exact date. But we estimate that it will take two to two-and-a-half years to build, so we expect it to be ready at some time in 2018,” Mr Lavater said.
He said that Abu Dhabi was one of the fastest-growing healthcare markets in the Arabian Gulf region owing to an increasing incidence of lifestyle-related diseases such as diabetes and obesity as well as a growing population.
He said the rents agreed to were in line with current market rates and that he “has full confidence that the shareholders will see the benefit” of the deal to expand the hospitals. “The exciting thing is the commitment of the management and the board to make this investment in the three hospitals,” he said.
Al Noor Hospitals currently has three acute hospitals and a network of 17 medical centres throughout the UAE. It says it is already the biggest private hospitals operator in Abu Dhabi, with 216 beds and 684 physicians as at June 30.
Mounir Marhaba, president and managing partner of Executive Consulting and Knowledge Brokering Services, said that although there has been lots of money pledged to projects, there has been a lot of upheaval in the Saudi Arabian market as a result of personnel changes at the Ministry of Health, which, along with the falling oil price, has led to hundreds of projects being placed on hold.
“Within the last two days, I haven spoken to two senior engineers within the construction sector who have said that people are starting to contemplate packing it up.” He said the project market remained active in Qatar and in the UAE.
He said the main challenge that hospital operators faced was in filling projects with capable staff once work completes. Cleveland Clinic, due to its facilities and the benefits it offers, has been “sucking up resources from across Saudi Arabia”.
“Human resources continues to be the number one challenge. The UAE has a heads-up in terms of the financial rewards as well as the quality of life it can offer. I’ve been here for eight years and Saudi Arabia has advanced a lot, but it’s still a hardship placement.”
A report produced by Ventures Middle East earlier this year for the Index interiors trade show said that the healthcare sector was the fastest-growing part of the GCC’s construction sector.
Healthcare building projects worth US$7.1bn are due for completion this year, up from $3.72bn in 2014. The market for healthcare interiors projects is also predicted to increase in value by 92 per cent to $569m.
Al Noor Hospitals is due to publish its financials for the second quarter of 2015 later this month. In May, the company reported that revenue for the first three months of 2015 stood at $124.9m, which was 12 per cent higher than in the same quarter a year earlier.
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