Why Ventas Is Bullish on UK Senior Housing

Ventas Inc. (NYSE: VTR) sees more similarities than differences between the senior housing markets in the United States and the United Kingdom and is bullish on the prospects for growth across the pond.

That’s according to Carrie Hiebeler, a senior investment officer with the Chicago-based real estate investment trust (REIT), one of the largest senior housing owners in the United States. Under Hiebeler’s approximately five-year tenure at Ventas, the company entered the U.K. senior housing market for the first time and now is planning to expand its presence in Great Britain.

“I’m quite bullish on the prospects in the U.K.,” Hiebeler told Senior Housing News. “I am actually quite optimistic for the future.”

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Differences and similarities

Ventas currently owns 12 senior housing properties, or “care homes,” in the U.K. Almost all of these homes are primarily private-pay, though some are partially public-pay, Hiebeler explained.

Compared to Ventas’ 740 senior housing communities in the U.S., a dozen in the U.K. may seem inconsequential. That’s not the case, Hiebeler suggested.

“It’s a modest investment, but anytime you do international investing it’s very hard,” she said. “It takes an increased amount of diligence.”

The differences between owning senior housing in the U.S. and owning senior housing in the U.K. aren’t extreme, but they’re noteworthy.

For instance, in the United States, the senior housing sector is highly fragmented; there’s independent living, assisted living, memory care and more, and entire buildings can be dedicated to just one of these care types. That’s not how things work in the U.K.

“It’s just called the ‘care home’ in the U.K.,” Hiebeler said. “It’s one asset class.”

Additionally, there’s a dire need for senior housing properties throughout Great Britain.

“They are undersupplied and it is very hard to build,” Hiebeler explained.

Currently, there’s not a lot of available land on which to build new care homes, and older care homes are being decommissioned because they’re too small, not built for their current purpose or not living up to the U.K.’s regulatory standards.

All the while, population demographics are very similar in the U.S. and the U.K., Hiebeler said.

“You’re catering to the same sort of folks,” she explained, noting that we share a language and a large number of aging adults. Almost 20% of U.S. residents are expected to be 65 or older in 2030, according to the U.S. Census Bureau; the U.K. will likely have reached that marker by 2026, when 20.5% of the population is expected tone 65 or older, according to the Office for National Statistics.

Political uncertainty is at play in both countries, as well. In the U.K., senior housing owners are bracing for the potential implications of Brexit, which refers to Great Britain’s exit from the European Union. This could limit the number of workers and nurses that the U.K. can import from the European Union.

Similarly, in the U.S., owners and providers are waiting to hear the official fate of the Deferred Action for Childhood Arrivals (DACA) program. Both Brexit and the end of DACA would restrict the number of workers who are able and willing to work in the senior care industry—making it more likely a staffing crisis will occur.

Looking ahead

When Hiebeler joined Ventas five years ago, both of Ventas’ major competitors—Welltower (NYSE: HCN) and HCP, Inc. (NYSE: HCP)—were already active in the U.K. senior housing market.

Now, that picture has changed.

HCP plans to exit its remaining U.K. portfolio, the REIT noted in a investor presentation on Sept. 11. HCP did not respond to requests for further comment on its decision, but it does not come as a surprise. The company has been undergoing major changes in its portfolio mix and leadership, and in announcing its Q1 2017 earnings, CEO Tom Herzog said that the company would be assessing its U.K. holdings.

Ventas has a different plan.

“I think we have a very successful platform and footprint,” she said. “In the future, we’d like to continue to add on to our existing investments and grow prudently.”

Written by Mary Kate Nelson

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