Market analysis
that was used by almost a quarter of operators at the peak of the crisis. With government stimulus like this
having come to end, we will see a cliff edge that divides operators into two streams: those which are going to surge ahead and do well in the recovery, and those that, unfortunately, are not going to make it through. The aftershock of the pandemic will likely be felt by care home and retirement village operators for years to come. Yet every crisis presents new opportunities, and for those that are well-capitalised and keen to grow, it is an opportune time. We are likely to see an increase of mergers and acquisitions over the next six to 12 months. In June 2021, for example, we completed a £50m loan to Brigid Investments, a special purpose vehicle formed by John Laing, and Macquarie Capital, for the acquisition of approximately 250 UK wide, newly-built and fully-occupied rental retirement properties, operated by McCarthy Stone. The facility also provided Brigid Investments with the opportunity to develop a scalable platform moving forward, in partnership with McCarthy Stone, resulting in a commitment to finance a further 400 rental retirement units over the next 12 months.
Social care moving up the political agenda The pandemic presented a harsh reminder of the importance of the social care sector, particularly elderly care. With families unable to visit loved ones in care homes and retirement villages, they relied on the commitment of key workers to ensure their relatives were taken care of not just physically, but also mentally. The recent flagship announcement from the government will see £12 billion per year invested in health and social care
Operators are having to think about how they can cater to younger generations who are more environmentally- conscious and keen to place their elderly relatives in more sustainable homes
over the next three years, which will come as a welcome respite for the sector.8
Social
care funding reform, which demonstrates the importance of the sector to policy makers, is set to directly help about 150,000 more people at any one time, according to government documents.9
Changing demand
Care homes and retirement villages have historically been misunderstood, being seen by many as morbid places to wait out the rest of your life until you die. However, the pandemic has fortunately changed these perceptions, as well as what residents are looking for.
One of the key themes that has emerged
is how elderly people think about their quality of life, their surroundings, and the
increased importance of having a sound support bubble. Many have spent much of the past two years in near-isolation, not being able to see friends and family, and if their home does not have any outdoor space, spending a significant time indoors. There is therefore now an increased focus on senior living providing a hospitality and service environment that goes beyond food and beverage, and fundamentals such as a nice kitchen, to offering a range of lifestyle facilities such as restaurants, lounge areas, hair salons, and cinemas. Residents are not simply looking for a new home, but rather a community where they can age and have their increasing care needs addressed over time. In January 2021, for example, we
completed a £42m transaction to a vertically-integrated retirement living investor, developer and operator to develop 84 retirement homes in a purpose-built village in south-east England. The new scheme will consist of extensive health and recreational amenities, including a spa and treatment rooms, pool, gym, lounge bar, library and restaurant. A survey by ARCO (Associated Retirement Community Operators) found that 65 per cent of operators believe the most common drivers of the increase in demand for retirement communities is the desire for additional company and social interactions and a realisation that their home is no longer fit for purpose.10 Another trend that has emerged
January 2022
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