One in three care homes in Flanders is run commercially today. A place costs around 2,245 euros a month on average, and as the population ages, demand grows every year. Yet the sector is under pressure, and much of that pressure sits in the buildings themselves.

In our podcast Bakstenen en Boterhammen (Bricks and Sandwiches), we spoke with Yves Remy, CEO of Armonea, part of the French group Colisée. Armonea operates 85 care homes in Belgium, with some 8,500 residents and 6,000 employees. The number of buildings Armonea owns itself? None.

These are the key takeaways from the conversation, for anyone working with care home real estate.

85 buildings, not one of them owned

Armonea leases all of its buildings long term from real estate investors. That is not unusual in the sector. In the years after the financial crisis, when money was all but free, many operators sold their real estate through sale-and-leaseback deals to free up cash and grow.

Remy understands that choice, but is blunt about the result: "In a period of low inflation, that wasn't a problem. Today it's a nightmare."

The scissor effect: costs rise faster than income

The problem lies in indexation. The leases follow the health index. The daily rates a care home may charge its residents are regulated and, according to Remy, may only rise once a year and by no more than five percent.

On top of that comes a time lag. Wages have to be indexed first, the daily rates only two months later. "That timing effect alone costs us around 400,000 euros with every indexation."

The result is a scissor effect: costs rise faster than revenue. At Armonea, the rent bill went up by 15 to 17 million euros a year over three years. "You can't absorb that."

What is a triple net lease?

Under an ordinary lease, the owner is responsible for major repairs. If the roof needs replacing, the owner pays.

A triple net lease works completely differently. The tenant bears every cost of the building: taxes, insurance, maintenance and all repairs. "Whether it's roofs, windows or boiler rooms. Everything."

For care homes, these contracts often run for 27 years. At first that is not a problem, because the building is new. But suppose the roof needs replacing after twenty years. Then the operator pays for a new roof on a building it will occupy for only seven more years. "I'm a healthy Belgian, I've got a brick in my stomach. I don't understand that model."

The 2034 capex wall

It gets tougher still. The contracts state that the building must meet the standards in force at the time. When new energy standards arrive, such as those for 2034, the operator has to make that investment in a building it does not own.

Remy calls it a capex wall: a wave of mandatory investments that will hit the sector in eight years' time. The sector looks at rent effort for this, the share of EBITDA that goes to rent. As long as that share stays reasonable, you generate enough cash to invest. If it rises because of the scissor effect, the cash runs out and you can no longer pay for those investments.

When cash gets tight, maintenance is the first casualty

"No real estate, no care," says Remy. A large part of resident satisfaction is tied to the condition of the building. But under financial pressure, maintenance is often the first thing to be postponed. "Why don't you invest in that building? Because that building isn't yours. Simple."

That creates a kick the can reflex: we'll invest when things improve, and the end of the lease is still a long way off. According to Remy, Armonea is now systematically catching up on what was not invested in the past. But deferred maintenance does not get cheaper, and it weighs directly on the quality of living.

That is exactly the tension we deal with at FixForm every day, including with Armonea itself: read how Armonea organises maintenance across its care homes with FixForm. Anyone responsible for maintaining a portfolio needs to know, building by building, what condition it is in, which investments are coming up and whether it complies with regulations. Only then can you plan maintenance instead of postponing it, and have the figures to make your case to your landlord, your shareholders or your bank.

Buildings that can't keep up with the next generation of older people

The next generation of residents expects more than the last. "You're not going to get my mother into a 20-square-metre box with her ugly bathroom," says Remy. Rooms will have to get bigger, but many buildings are not designed for that.

Strict rules, including on fire safety, make it hard to adapt buildings flexibly. The fire protocol in a care home assumes residents cannot be evacuated: close all doors and wait for the fire brigade. That single system applies to every building, even where it isn't needed, and imposes the same restrictions everywhere.

The layout deserves more attention too. Asked which part of the building we always forget in the design, Remy answered without hesitation: the day rooms and activity spaces, which are structurally too small. His picture of a care home in 2040: more greenery and trees, more outdoor activities and a much stronger focus on living and community.

A home, not a hospital

Remy's biggest criticism of Belgian elderly care is that it is too medicalised. "We are first and foremost a place to live." For many people, moving into a care home is a shock: a whole life that suddenly has to fit into one room, at a table with people you don't know. That is why Armonea wants to invest more in hospitality and in the psychosocial side of living.

That clashes with rules that mostly measure input rather than outcomes. Medication, changes of incontinence products, even a resident who wants to stay in their pyjamas until noon: everything has to be recorded. Armonea measures quality differently, with around 1,500 NPS surveys a month among residents and families. Every decision is tested against three pillars: resident satisfaction (NPS), employee satisfaction (iNPS) and operational performance.

900 nurses where 300 would do

According to Remy, Belgium is the only country with a mandatory round-the-clock nursing presence: 24 hours a day, weekends included, a nurse must be on site. The standard of one nurse per thirty residents also has a striking origin. According to Remy, it goes back to the American army tents of the Second World War, which held thirty beds and one nurse per tent.

An internal analysis at Armonea shows that around thirty percent of residents need technical nursing care every day. The rest mainly need support: help getting dressed, washing, a walk or a chat. Armonea employs 900 full-time nurses and believes it could manage with 300, if they were deployed for the tasks they were trained for. "And meanwhile hospitals are having to close rooms because of a shortage of nurses."

12,000 extra places needed, and nobody is building

By a conservative estimate, Flanders needs 12,000 extra places. Yet hardly anything is being built, because there is no budget to fund those places and the care that comes with them. Remy is clear: the infrastructure will have to be built by the private market.

That does call for a different kind of investor. His ideal is a care group that once again owns its own real estate, with an evergreen philosophy. "You can't do that with someone who expects to double their money and exit. That's not what the sector is built for. It's more of a long-term infrastructure investment."

What does this mean for anyone managing care home real estate?

The conversation with Yves Remy makes a few things clear:

  • Deferring maintenance is not a saving. With triple net leases and stricter standards, every postponed investment comes back later and costs more.
  • Insight into your portfolio is not a luxury. If you know the condition of every building and plan investments years ahead, you can see the capex wall coming instead of running into it.
  • Real estate and care are one story. The quality of the building helps determine the quality of living, and with it the satisfaction of residents and staff.

Do you manage a portfolio of care homes or other real estate, and want a firm grip on maintenance, assets, documents and compliance? FixForm helps property managers keep their buildings in perfect condition, with reactive and preventive maintenance in one platform. Get in touch and we'll look together at what that could mean for your portfolio.