Mega PPP hospital in Turkey: Award winning infrastructure investment

Have you heard of the Health PPP of the year?


Ever heard of the Başakşehir Çam & Sakura City Hospital? Based in the vicinity of Istanbul, this $1.6 bn project is the third largest health Public Private Partnership (PPP) countrywide.


The name “Çam & Sakura” refers to the consortium formed by Turkish investment and infrastructure facility management firm Rönesans and their Japanese partner Sojitz corporation: it literally means “Pine” in Turkish and “Cherry Blossom” in Japanese.

cherry blossom Unsplash 

The Project company is in charge of the design, building, financing, construction, operation and management of the hospital (it is a classic full DBFOM model of PPP).


This massive investment led to the hospital becoming partially operational this year. This is also an example of integrated urban and infrastructure development policy, with complementary capital investment in public transportation.


This PPP won Engineering News Record (ENR)’s Global Best Projects competition in the healthcare category. Earlier on it was already awarded the title of “PPP of the year”:


Launched by Rönesans Healthcare Investment in partnership with the Japan-based Sojitz Corporation, the Başakşehir Çam & Sakura City Hospital was recognized as the “PPP Deal of the Year” at the highly prestigious Thomson Reuters’ Project Finance International Awards for its financial closure of JPY 163 billion.


All you need to know about this mammoth project


Interested in knowing more about this complex investment project? Let’s look at some of the particularities of this infrastructure starting with a staggering size of 1 million m2 indoor construction area.


Upon opening of this “city of 8 hospitals” President Erdogan, accompanied by Japanese Prime Minister Abe pointed out that:


when in full capacity, the hospital would offer healthcare services in 107 areas of specialty to 35 thousand outpatients a day (…)n addition to a parking lot with  a capacity of 8134 cars, the hospital is also equipped with 3 helipads and will be at the service of both the Turkish people and foreign guests as it is very close to Istanbul Airport. So, now, Istanbul has become an international healthcare hub."


This is not only a national flagship project: it is a regional landmark and an economic growth catalyst, through international patient referral in particular, i.e. the capacity of the hospital to attract patients from way beyond its catchment area, across the region and other countries. This could in turn generate third-party revenues and boost the return on investment of the assets and its services, helping secure value for money.


This enables to host a total of 2,682 beds comprising of a 2,354-bed Main Hospital, a 200-bed Physical Therapy and Rehabilitation Hospital and a 128-bed Psychiatric Hospital.


In fact, the campus includes six buildings around shared core buildings. The healthcare offering here breaks down as follows (figures provided by Rönesans):


- General Hospital with a bed capacity of 469

- Cardiovascular Diseases Hospital with a bed capacity of 327

- Neurology and Orthopedics Hospital with a bed capacity of 311

- Children’s Hospital with a bed capacity of 521

- Gynecology Hospital with a bed capacity of 359

- Oncology Hospital with a bed capacity of 367

- Psychiatry Hospital with a bed capacity of 128

- Physical Therapy and Rehabilitation Hospital with a bed capacity of 200

opening ppp hospital turkey 

Another idiosyncrasy? This hospital addresses seismic risks with the latest industry standards:


the Başakşehir Çam & Sakura City Hospital is recognized as the “World’s Largest Seismically Isolated Building” with 2,040 seismic isolators which are installed in its main hospital building. Equipped with world-class cutting-edge isolators, the Başakşehir Çam & Sakura City Hospital is able to seamlessly carry out all its operations, even during and after the most severe earthquake scenarios.


Private finance you said?


This particular PPP project also resonates in those troubled times as an illustration of the co-operation between Turkey and EU institutions, with the European Bank for Reconstruction and Development recently granting a long-term loan of $40 million to support the private investors venture.


Compared to the total amount of the project and the prominent participation of mainstream banking institutions such as the Bank of Japan, this may sound like a relatively modest contribution, yet an instrumental one, for two reasons:


1. This loan will allow private partners Rönesans to fund their equity at better conditions than if they went for alternative banking solutions.


It is important to remember that the financing structure of PPP typically mixes bank loans (93% of total financing of the arrangement) and 7% equity (except in corporate financing when the whole financing is fronted by the leader of the project company). In this case, it is Rönesans’ equity that the EBRD is helping fund.


2. This support to equity funding comes with a catch: EBRD insisted on an ethical provision linked to women empowerment and gender equality. In other words, more equity may result from this loan:


the company supports the improvement of employment opportunities for women in technical positions and is conducting a gender audit of the hospital facilities to improve women’s access to healthcare services.


By all accounts, this important project is a landmark in the arena of complex contractual arrangements: the volume of structured finance required to pull this infrastructure off the ground, the challenge of opening through a pandemic.


But it also in many ways, it is quite the symbol, embodied by the European support to a Turkish-Japanese partnership: this hospital is quite pragmatically where East meets West!


Will it succeed? Is its size and the colossal cost detrimental to the value for money it aims at achieving? There are so many questions that could shed a light on the choice of this PPP option….for instance:


- What did the Public Sector Comparator show that made the authorities choose a complex contractual arrangement?

- Are there any provisions regarding refinancing, third-party revenue and sharing rules? 

What about other environmental norms (waste management, energy performance in particular?)


If you are interested in this topic, you are strongly encouraged to follow Decide’s Capital Investment in Health Working Group and in particular its Greenhouse of innovative projects as this is one of the areas it plans on analyzing! This is a project that the Decide Capital in Health working will follow to share lessons about replicability, pitfalls and gains.


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