BlackRock, a multinational investment management corporation based in New York City, is making a big bet that the retirement sector in the UK is going to boom.
It is putting in UK£100 million (A$183.5 million) for a 75% stake in a joint venture with retirement village developer Audley Group, which will develop about 1,000 homes in the UK.
“It’s a coming of age for our sector,” said Nick Sanderson, Audley Group CEO. “We’ve been one of the lone operators in this space for 25 years, funded by private equity up until now. What is happening now is an appreciation of the need, demand and potential size of the market.”
Major investors are looking closely at the UK retirement housing market.
Royal London made its first investment in the sector with a joint venture with Audley last year.
Legal and General created Villages Group, its “later living business”, in 2017 and has been developing projects in Tunbridge Wells, Kent, and Caddington in Bedfordshire.
Axa Investment Management acquired its own developer, called Retirement Villages Group, in 2017. Last year, the Axa-backed group said it would build 30 new retirement sites in the next 10 years in towns and cities across England.
Goldman Sachs has raised hundreds of millions to invest in the sector, and is a major backer of Riverstone, a retirement developer with a UK£3 billion pipeline. In addition, FORE Partnership, a boutique property investor, is ploughing UK£300 million into the sector, partnering with retirement housing operator Amicala, to build up to 1,000 homes.
Through its real assets arm BlackRock, the world’s largest asset manager is banking on the UK’s growing elderly population to deliver them a sizeable profit. In the UK, retirement villages have traditionally been gated communities in the countryside. COVID-19 has shuttered offices and retail sites and developers are snapping them up to build apartment blocks for the over-65s who want to be near city centres.
“We have the benefit of being able to invest in any sector. Historically we’ve targeted offices, but we’ve been more active in ‘beds’ recently,” said Thomas Mueller, portfolio manager at BlackRock.
“We decided to focus on more defensive, income-focused strategies during the pandemic.”
BlackRock is looking at retirement homes, purpose-built student accommodation and the build-to-rent sector and logistics.
The investment in Audley Group will fund the development of homes, which the companies estimate will have a combined value of about £500m when complete. The first site in the joint venture with Audley Group is a 255-home development in Watford, 37km from London.
Mr Mueller said there are close to 100,000 people aged 65 or older within a 20-minute drive of the Watford site. Just over 200 retirement homes have been built locally in the past five years, he added.