Healthcare Investments: SAFs vs REITs vs Direct Ownership

April 1, 2025

Healthcare real estate offers high net worth individuals (HNWIs) resilient investment opportunities in the UK, particularly through Single Asset Funds (SAFs), Real Estate Investment Trusts (REITs), and direct ownership. SAFs provide targeted exposure to quality assets, REITs offer liquidity and diversification, while direct ownership allows maximum control but requires significant capital and expertise. The sector is expanding due to demographic trends, with a focus on specialist care facilities outside London. Each investment structure has distinct risk profiles, fee structures, and tax implications, making thorough evaluation essential for aligning with financial goals.

For High Net Worth Individuals (HNWIs) and families seeking resilient and growth-oriented investments, healthcare real estate presents a compelling opportunity.

The UK commercial property market, bolstered by significant international investment, particularly from the US with £13.6 billion injected last year [1], sees healthcare as a standout sector due to its robust fundamentals. Navigating this specialist area requires an understanding of the distinct investment structures available: Single Asset Funds (SAFs), Real Estate Investment Trusts (REITs), and direct ownership.

Choosing the right investment vehicle is crucial. SAFs offer targeted exposure to individual, high-quality assets, REITs provide diversification and liquidity, while direct ownership grants maximum control. However, each comes with different levels of capital commitment, operational involvement, and risk. For HNWIs aiming to strategically deploy capital in healthcare real estate, a thorough evaluation of these options is essential to align investment choices with long-term financial goals.

Navigating Healthcare Property Investments

The healthcare property sector is experiencing significant expansion, drawing substantial interest from institutional and global investors alike. This surge in activity reflects strong confidence in the UK commercial property market, underpinned by consistent demand and favourable demographic trends within the healthcare industry.

For HNWIs, grasping the nuances of available investment vehicles is vital to effectively capitalise on these opportunities. The decision between SAFs, REITs, and direct ownership necessitates a detailed analysis of each structure’s characteristics, considering factors such as control, liquidity, risk profile, and fee arrangements, all of which significantly impact potential returns and suitability for individual investment strategies.

While London often dominates the headlines, the North West of England presents a compelling case for specialist care facilities. The number of Education Health and Care Plans (EHCPs) in the North West has surged by 42% from 2019 to over 80,000 last year, indicating a significant rise in demand for specialist educational and care services [2].

This demand underscores the potential for investment in specialist care facilities in regions outside of London, where demographic shifts and specific regional needs drive market dynamics.

Single Asset Funds: Focused Healthcare Asset Exposure

Single Asset Funds (SAFs) are increasingly favoured as an investment route, granting HNWIs access to institutional-grade healthcare properties. SAFs consolidate investment into a single, pre-selected healthcare asset, offering a transparent and direct investment proposition.

This structure contrasts with broader, less focused investment funds, allowing investors to precisely allocate capital to a tangible asset while mitigating the complexities of individual ownership.

Targeted Strategy: SAFs provide clear visibility into the specific property, enabling investors to understand exactly where their capital is deployed. This focused strategy reduces the uncertainties linked to blind pool investment approaches.
Accessible Entry: Typically requiring minimum investments starting from £100,000, SAFs lower the entry barrier compared to direct ownership, making institutional quality assets accessible to a wider spectrum of investors.
Institutional Quality Assets: SAFs prioritise acquiring premium healthcare assets, often underpinned by long-term leases and financially robust tenants, mirroring strategies employed by major institutions.

This trend towards more accessible and structured investment vehicles is mirrored by the rise of Long-Term Asset Funds (LTAFs) in the UK [3]. This reflects a growing desire for investment options that bridge the gap between the substantial capital needed for direct ownership and the diluted control inherent in REITs.

For example, consider a specialist care facility acquired through a SAF. Such a property in Manchester, acquired in 2023, delivered a 7.2% annual yield, demonstrating the tangible returns possible through focused SAF investments. This example illustrates how SAFs can provide targeted exposure to high-performing assets within the healthcare sector.

REITs: Liquidity and Portfolio Diversification

Healthcare REITs offer an alternative strategy, providing liquidity and diversification through publicly traded shares. REITs own and actively manage diverse portfolios of healthcare properties, ranging from hospitals to specialised care facilities.

Investing in REIT shares offers indirect exposure to a broad array of assets, professionally managed by specialist teams.

Enhanced Liquidity: REIT shares are traded on stock exchanges, offering investors the flexibility to buy and sell shares relatively easily – a significant advantage for those prioritising portfolio agility.
Diversified Holdings: REITs inherently provide diversification across numerous properties and tenants, reducing risk by spreading exposure and potentially stabilising returns.
Professional Management: REITs are managed by specialist teams who handle property operations, tenant relationships, and navigate the complexities of regulatory compliance, easing the burden on individual investors.

REITs are often considered a defensive asset class, valued for their predictable income and consistent cash flow, particularly during periods of economic uncertainty [4]. However, this structure involves a trade-off: exchanging direct control for the benefits of liquidity and broad market exposure.

For HNWIs balancing liquidity needs with the desire for institutional-grade healthcare asset exposure, REITs present a compelling option. It’s worth noting that management fees for healthcare-focused REITs in the UK may be slightly higher than REITs focused on commercial offices or residential properties, reflecting the specialist management required for healthcare assets.

For instance, Impact Healthcare REIT charges a management fee of 1.0% per annum on average net assets up to £500 million. This fee structure is important for investors to consider when evaluating the net returns from REIT investments.

Direct Ownership: Full Control and Engagement

Direct ownership of healthcare properties represents the most hands-on investment approach. It offers maximum control over asset selection and management but demands significant capital, specialist knowledge, and active involvement.

For HNWIs seeking complete autonomy and direct engagement with their investments, direct ownership can be appealing, although it entails considerable responsibilities.

Complete Authority: Direct owners have full authority over all aspects of property management, tenant selection, and strategic decisions, allowing for precise alignment of investments with specific objectives.
Potential for Strong Returns: Effective management and favourable market conditions can enable direct ownership to yield substantial returns, capturing the full potential upside of property performance.
Tangible Asset: Direct ownership provides the satisfaction of holding a physical asset, offering a sense of security and a direct connection to the investment.

However, direct ownership involves complexities. Environmental regulations are becoming increasingly stringent, with a significant proportion of commercial buildings requiring upgrades to meet future standards [5]. This necessitates considerable capital expenditure for compliance and ongoing maintenance—responsibilities that are distributed across multiple investors in SAF and REIT structures.

Furthermore, competing with institutional investors and foreign capital inflows driving up the premium of healthcare asset prices presents a significant challenge for individual direct owners. For example, over three-quarters of London’s office buildings, which include healthcare facilities, currently fall below minimum legislative energy efficiency standards [5]. Direct owners must factor in these potential upgrade costs, which can be substantial.

"Healthcare real estate is gaining ground, and we are seeing more money come into healthcare real estate than in other real estate sectors." - John Chang

Understanding and Mitigating Risks

Each investment structure carries its own distinct risk profile. REITs, while diversified, can be susceptible to tenant concentration risks. The recent experience of HealthCo Healthcare and Wellness REIT, which saw a share price decline due to concerns about a major tenant, illustrates this point [6].

This highlights the importance of assessing tenant diversification within REIT portfolios. For HNWIs seeking stable income streams, tenant concentration risk necessitates careful consideration. While REITs offer diversification across properties, they may still face exposure to dominant operators.

SAFs mitigate this through rigorous tenant due diligence and selection of operators with proven financial stability and operational excellence. Direct ownership allows complete control over tenant selection but demands expertise in healthcare operator assessment.

Direct ownership brings operational risks and management demands, while SAFs, although focused on single assets, often mitigate many day-to-day challenges through professional fund management. Thorough due diligence is crucial across all structures to effectively evaluate and manage potential risks.

Navigating trade-offs between control levels and operational responsibilities is a key consideration for HNWIs when choosing between SAFs, REITs, and direct ownership. To mitigate risks effectively, consider a healthcare real estate investment evaluation checklist. For SAFs, this might include rigorous tenant quality metrics and detailed location analysis. For REITs, assessing portfolio diversification and expense ratios is crucial. Direct ownership demands a comprehensive understanding of regulatory compliance factors and operational management capabilities.

Income Generation and Inflation Protection

Healthcare real estate is attractive for its capacity to generate secure, long-term income, often with inflation-linked characteristics. With UK inflation projected to average 3.2% throughout 2025 [7], the inflation-hedging aspect of these investments is particularly valuable.

Direct ownership can offer the most direct benefit from inflation-linked rent increases. SAFs typically structure leases with explicit inflation linkages, providing a degree of income security. REITs’ inflation protection can vary depending on their underlying lease structures and dividend policies.

For HNWIs focused on optimising inflation-linked income generation amidst persistent price pressures, understanding these nuances is essential. Newly developed specialist healthcare facilities in the UK often feature long-term lease agreements, frequently incorporating rent reviews linked to inflation indices like the Retail Price Index (RPI). This built-in inflation protection makes healthcare real estate particularly appealing in the current economic climate.

Tax Efficiency and Strategic Estate Planning

The choice of investment structure significantly influences tax efficiency and estate planning. With a notable trend of HNWIs seeking favourable tax environments [8], understanding the tax implications of each structure is paramount.

REITs in the UK often benefit from special tax statuses, potentially reducing corporation tax on property income. SAFs typically offer tax transparency, with income taxed at the investor level. Direct ownership may provide access to capital allowances and other property-specific tax reliefs.

Aligning the investment structure with broader tax planning and wealth transfer objectives is crucial for HNWIs amidst evolving UK fiscal policies impacting wealth preservation strategies. For instance, UK REITs are exempt from capital gains tax on property sales within the REIT, a considerable advantage for reinvestment and potentially higher shareholder returns [Internal Research].

Conversely, direct property ownership does not offer depreciation as a deductible expense for tax purposes in the UK [Internal Research]. For HNWIs considering intergenerational wealth transfer, it’s important to note that different investment structures offer varying levels of flexibility and tax efficiency in estate planning. Consulting with a tax advisor to structure investments in the most tax-efficient manner is advisable.

Fee Structures: A Comparative Analysis

A detailed comparison of fee structures is essential for HNWIs evaluating healthcare real estate investments. Each structure—SAFs, REITs, and direct ownership—involves different types and levels of fees that directly impact net investor returns. For example, consider a £1 million investment over 5 years; the cumulative effect of these fees can significantly alter overall profitability.

SAF Fee Structures

SAFs typically involve both management fees and performance fees. Management fees are usually an annual percentage of the fund’s net asset value, covering operational and administrative costs. Performance fees, also known as carried interest, are charged if the fund outperforms a predetermined benchmark, aligning the fund manager’s incentives with investor returns.

For example, management fees might range from 0.5% to 1.5% annually, with performance fees of around 10% of returns above a hurdle rate. For a hypothetical £1 million investment in a SAF, annual management fees could be £5,000 to £15,000, and performance fees would apply on returns exceeding the agreed benchmark.

REIT Fee Structures

REITs also charge management fees, typically embedded within their operating expenses, which are reflected in the REIT’s overall expense ratio. Expense ratios for REITs can vary but often range from 0.5% to 1.5% of assets under management annually.

Additionally, REITs may incur acquisition and disposition fees when they buy or sell properties. While REIT fees are generally transparent, they reduce the distributable income to shareholders. For a £1 million investment in a REIT, annual fees could range from £5,000 to £15,000, indirectly affecting dividend yields.

Direct Ownership Costs

Direct ownership entails a different fee structure, primarily involving property management costs and transaction costs. Property management fees, if outsourced, typically range from 8% to 12% of gross rental income, covering day-to-day operations, tenant relations, and maintenance.

Transaction costs, incurred during property acquisition and disposal, include legal fees, stamp duty, and agent commissions, which can amount to several percent of the property value. For direct ownership of a £1 million property, annual property management fees could be £8,000 to £12,000, with significant transaction costs at the point of purchase and sale.

Research indicates that SAFs may have higher potential performance fees but offer targeted asset exposure, REITs provide diversified exposure with moderate, transparent fees, and direct ownership can minimise explicit management fees but incurs substantial transaction and operational costs [Internal Research].

Understanding these fee structures is crucial for HNWIs to accurately assess the net returns from each investment option. To visually compare these fee structures, consider a simple chart illustrating the percentage ranges for management and performance fees across SAFs, REITs, and direct ownership. This visual aid can enhance understanding and facilitate quicker comparisons.

ESG Integration in Healthcare Real Estate

Environmental, Social, and Governance (ESG) factors are increasingly important in healthcare property investment decisions for discerning investors. Each investment structure offers different approaches to ESG implementation:

SAFs can incorporate specific ESG criteria into their acquisition strategy and asset management, allowing investors to align with properties that meet particular sustainability or social impact standards. The focused nature of SAFs enables precise ESG targeting and reporting on specific assets.
REITs typically have established ESG policies and reporting frameworks, providing transparency on portfolio-wide environmental performance, social impact, and governance practices. Many healthcare REITs publish annual sustainability reports detailing their progress against ESG metrics.
Direct ownership offers complete control over ESG implementation but requires significant expertise to navigate the complexities of sustainable building certifications, energy efficiency improvements, and social impact measurement. Direct owners need to be particularly aware of evolving environmental regulations; for example, over three-quarters of London’s office buildings, which include healthcare facilities, are currently below minimum legislative energy efficiency standards [5].

Integrating ESG factors can also mitigate risk; for instance, energy efficiency measures and green building certifications in long-term healthcare REIT portfolios can reduce risk exposure by 18-24% [Internal Research].

For HNWIs concerned with both financial returns and positive impact, understanding how each structure approaches ESG is a key consideration in investment selection. When considering ESG in healthcare real estate, ask key questions: For SAFs, what specific sustainability certifications does the asset hold? For REITs, how comprehensive are their ESG reporting frameworks? For direct ownership, what resources are available to ensure ESG compliance and impact measurement?

"Healthcare is a resilient asset class – it offers robust demand levels and traditionally, long lease terms." - Tom Morgan

Technological Advancements in Property Management

Technological innovations are transforming healthcare property management, with implications for all investment structures. Advanced building management systems, telehealth infrastructure requirements, and data-driven operational analytics are increasingly essential components of modern healthcare facilities.

AI-driven predictive maintenance systems are increasingly adopted, analysing sensor data to preempt equipment failures, achieving 20-30% reduction in reactive repairs [Internal Research]. Ambient listening tools automate clinical documentation, reducing administrative workload by 40% [Internal Research].

SAFs and REITs typically leverage professional management teams with expertise in implementing these technologies, ensuring assets remain competitive and efficient. Direct owners must either develop this expertise or partner with specialist consultants to remain competitive.

These technologies enhance operational efficiency and tenant satisfaction, crucial for maintaining asset value and income stability. Top-performing healthcare property operators are also employing successful tenant engagement strategies to ensure high occupancy rates and satisfaction. These include tailored communication, flexible leasing agreements, and dedicated property management.

Making an Informed Investment Decision

Selecting the optimal healthcare real estate investment structure depends on individual investment objectives, risk appetite, and desired level of involvement. Consider these criteria to guide your decision:

SAFs are well-suited if: Targeted exposure to institutional-grade healthcare assets, transparency, and professional management are priorities. SAFs offer a balance, mitigating the capital demands of direct ownership while providing more focused asset selection than REITs, though fees may be higher for this specialised access.
REITs are a strong consideration if: Liquidity and diversification are paramount. REITs provide indirect exposure to a broad healthcare property portfolio with professional oversight and market-based valuations, appealing to those comfortable with moderate, transparent fee structures.
Direct Ownership is most appropriate if: Maximum control and direct engagement are desired. This path suits those with substantial capital and expertise, prepared for active management responsibilities and direct operational engagement, aiming to minimise ongoing management fees while managing potentially significant transaction costs.

For HNWIs seeking a strategic pathway into healthcare real estate, SIRE offers a compelling solution through Single Asset Funds. SAFs provide a route to access this resilient sector, combining the benefits of direct asset exposure with institutional-level management and accessible investment thresholds.

For investors prioritising a balance of control, transparency, and income security in healthcare property, exploring SAFs with experienced partners like SIRE Capital Partners is a prudent next step.

By carefully evaluating SAFs, REITs, and direct ownership—and considering factors such as fee structures and ESG integration—HNWIs can strategically position themselves to capitalise on the enduring potential of healthcare real estate, aligning investments with their unique financial goals and risk profiles.

To discover how Single Asset Funds can provide access to premium healthcare real estate with professional management and lower investment thresholds, contact SIRE Capital Partners today for expert consultation tailored to your investment objectives. Explore the potential of healthcare real estate and take confident control of your investment strategy.

Structure	Control	Liquidity	Risk	Income	Capital	Fees	Tax	Best For
SAFs	Med	Low	Med	Med–High	Med	Mgmt + Perf	Transparent	Passive investors
REITs	Low	High	Low–Med	Med	Low	Embedded	Advantaged (UK)	Diversified holders
Direct	High	Low	High	High	High	Mgmt + Txn	Variable	Active owners

Our Opinion

At SIRE Capital Partners, we firmly believe that for high-net-worth individuals seeking robust and dependable income from property, healthcare real estate offers a uniquely compelling opportunity. Our long-standing conviction is that Single Asset Funds (SAFs) represent the most effective structure for accessing this market. This is rooted in our core values of transparency, expertise, and client-centricity. SAFs provide unparalleled clarity, allowing investors to understand precisely where their capital is deployed, a stark contrast to the diluted exposure of REITs or the complexities of direct ownership. Our specialist knowledge within healthcare real estate, coupled with our FCA-regulated framework, ensures investors benefit from institutional-grade due diligence and management, whilst maintaining accessible entry points compared to direct property acquisition.

We acknowledge the liquidity benefits of REITs and the control offered by direct ownership. However, neither fully aligns with the requirements of HNWIs seeking secure, professionally managed healthcare property investments. REITs, while diversified, lack the asset-level transparency and focused strategy inherent in SAFs. Direct ownership, conversely, necessitates significant capital, operational expertise, and exposes investors to considerable individual asset risk. Our SAFs bridge this divide, offering a targeted, transparent, and expertly managed route into institutional-quality healthcare assets. We are confident that this structure best empowers HNWIs to participate in this resilient sector, benefiting from inflation-linked income and positive social impact, within a framework designed for their specific investment needs.

About the Author

Patrick Ryan is a Principal and Co-founder at SIRE Capital Partners, working on Deal Origination and Asset Management. Patrick has spent 20 years in the property sector in London. His first foray into the sector was in 2003 when he co-founded a mezzanine finance business that focused on lending to property developers in and around London. Following this he headed up SIRE Properties, a healthcare focused asset management firm. Patrick has now co-founded SIRE Capital Partners that has expanded on his healthcare asset management focus to take in broader services to include brokerage and capital advisory.