A huge operation

The unguaranteed and care-free construction of Meander Medical Center

A huge operation

“If you are lucky, you will get one chance in a lifetime to finance and construct a hospital,” says René van Dijk, the financial director of Meander Medical Center. “But if you’re unlucky, that chance will come during a credit crisis, just when new legislation is in the pipeline.” Whether the financial and legislative climate is right or not, Zanders is successfully supporting the top clinical hospital in Amersfoort by arranging financing in these challenging times; and the new development is now well under way.

“Meander Medical Center is an extremely modern hospital in a shell of very old bricks,” says René van Dijk as he explains how the design of the new development got under way several years ago. The medical center finally opted for a new site in a beautiful location on the outskirts of Amersfoort with the intention of furnishing and equipping the new building in accordance with state-of-the-art ideas about healthcare. On the approximately 96,000 square meters, there will be space for 600 single rooms, a center for emergency care with a GP out-of-hours surgery and pharmacy, a psychiatric center, a Meander academy, restaurants and coffee corners. In the new hospital, the patient is to be unambiguously central. The cost: EUR 300 million.

Previously deals were quicker

A few years ago, financing such a project would have posed no problem due to government support and the Healthcare Sector Guarantee Fund. “A deal could be arranged quickly; that was the world we lived in then,” says Meander’s treasurer Lars Bakker. As a consequence of tighter legislation that increasingly stipulates care institutions should be able to fend for themselves, banks have become far more critical where requests for financing are concerned. “In the initial phase of our project, the outlines of the legislative changes became visible. It quickly became clear that we would have to think hard about our philosophy on both loans and interest rates,” says Van Dijk. “We also realized that we would have to consider the strategic role of our real estate more carefully. We would have to answer questions about how this hospital should offer the care we believe will be needed in the future; how we should deal with unoccupied real estate and whether it would be possible to rent out such real estate,” he adds.

“I needed what the Dutch refer to as 'het Zwitserlevengevoel'”

On the basis of all these considerations, the hospital developed a vision and subsequently drew up a detailed bid book. This bid book formed the basis for the RFP. Bakker says: “In December 2008, we offered the whole package to our principal bankers and the Healthcare Sector Guarantee Fund. The banks were almost immediately enthusiastic. We had the impression it would be possible to arrange the financing within a few months.” But Van Dijk explains how the project soon ran into difficulties: “The full vehemence of the credit crisis soon became apparent. Our philosophy on borrowing and interest rates was no longer appropriate and we had to start all over again. It was at that moment that we decided to call on the help of Zanders. We felt the need of external support. Given the up-and-coming changes, it was vital to acquire more knowledge of the financial markets – knowledge you could rely on without question.”

“Zanders kept us in the saddle.”

Excellent idea

Zanders consultant Rob van Heesch took on the job. He has a great deal of experience of financing in the health care sector. In addition, he worked for a bank for years and knows better than anyone what banks find important and what their strategies are. “Rob played an important role in the process,” continues Van Dijk. “Originally, he assisted us in compiling our financing strategy, later he also supported us during meetings with the banks.”

Eventually, only one consortium (Rabo, BNG and ING) was prepared to offer unguaranteed finance for the new hospital development. As a result of the credit crisis, a second consortium dropped out before it was even off the ground and it proved simply impossible to find other parties prepared to finance the project in the Dutch market. Surveys of foreign markets did not produce any useful alternatives. The Dutch healthcare system is so complicated and requires so much knowledge that no single foreign financial banker was prepared to get their fingers burned. Van Dijk adds: “The consortium wanted to know absolutely everything. We were a sort of test case for them; they needed to work out how banks should deal with large financing applications in today’s changed times.”

After the consortium had made its offer known, the role of Zanders changed. “I wanted what the Dutch refer to as ‘het Zwitserlevengevoel’, or ‘the Swiss life feeling’,” laughs Van Dijk. “That’s to say, I wanted the comfortable feeling that we had received an offer in keeping with market rates and that everything was well arranged. We are, after all, a health care company and I didn’t want to run the risk that we would have to reorganize everything each year because interest rates had risen again.” Together with the treasurer Lars Bakker, Zanders’ Van Heesch designed an interest rate strategy in the form of a tailor-made interest-rate swap, which means the hospital does not have to be afraid of interest rate fluctuations, but can rely on a clear, fixed rate of interest.

Threefold role

Van Heesch also acted as an adviser to the supervisory board and the works council. Both bodies also had to agree with the financing proposals. It is not often that an adviser to the executive board also advises the supervisory board and the works council but it worked very well according to Van Dijk who says: “Rob gave a short, enjoyable lecture to the works council explaining this difficult subject matter, enabling it to assess the proposal on its merits and subsequently take a considered decision.” Bakker adds: “You don’t want to send people home with questions and the feeling they have to use Google to find answers. You want them to be involved in the process. Rob had an excellent feeling in that respect.”

The construction of the new location is now in full swing. Van Dijk and Bakker reflect with satisfaction on the intensive support from Zanders. “Zanders kept us in the saddle. Rob knows better than anyone where there is room for negotiation in matters such as terms, interest rates and surcharges, which meant he was able to save us a great deal of money. One basis point makes a huge difference when it comes to amounts like this.”