The presence of a robust social infrastructure system can drive economic prosperity and encourage development and growth within nations. Despite this, in 2016 social infrastructure deals constituted just 7% of completed infrastructure transactions, worth an estimated $37bn. While the number (225) of deals completed for social assets peaked in 2012, representing 14% of the market, the average size of a social infrastructure transaction increased slightly from $176mn in 2012 to $183mn in 2016.
In 2016, 38% of social infrastructure deals were completed within the UK, down 12 percentage points from the previous year. The UK is one of the largest social infrastructure markets globally and has historically used PPP/PFI schemes to improve social infrastructure. Developing markets, however, have tended to use PPP/PFI schemes to develop economic infrastructure – Asian Development Bank has openly encouraged the use of PPP/PFI schemes to reach low-emission goals within the energy sector.
The greatest proportion (37%) of social infrastructure assets acquired in 2016 were at the brownfield stage of development, followed by those in the secondary stage (35%) and greenfield stage (28%). Notably, in Asia & Rest of World, 45% of completed deals were at the secondary stage, compared to just 18% in North America. However, the average deal size ($1.4bn) of North American secondary stage assets was approximately twice as large as that of such assets in Asia & Rest of World ($762mn).
Social Asset Types
In both 2015 and 2016, healthcare and educational facilities were the most acquired social infrastructure assets. However, the largest social infrastructure deal of 2016 involved the acquisition of defence asset Dassault Reliance Aerospace, valued at €7.9bn.
- Healthcare-related assets constituted 34% of completed social infrastructure deals in 2016, 70% of which were in areas outside North America and Europe. The largest healthcare deal of 2016 was $2.3bn acquisition of the Chinese Hospital Portfolio Project, and was the second largest deal of the year. For comparison, the largest healthcare deal in Europe was acquisition of an 80% stake in Italy-based Societa' Italiana Per Condotte d'Acqua PPP Portfolio, which includes three Italian hospitals, for €700mn.
- Educational facilities were the most prominent social asset in transactions globally in 2016, representing 38% of social deal flow. Fifty-eight percent of education transactions were completed in Europe, far above the proportion in North America (21%). The third largest deal of 2016 was the acquisition of University House Communities by a consortium consisting of GIC, CPPIB and The Scion Group for $1.4bn.
- Defence represented just 5% of all social infrastructure transactions in 2016, but represented a far larger proportion of deal value, as per the aforementioned largest deal of 2016.