John Laing invests in specialised accommodation platform in the UK
John Laing Group plc ("John Laing" or the “Group"), the responsible investor and active manager of infrastructure projects internationally announces that it has entered into an agreement (the “Transaction”) to create a UK-based platform to invest in retirement accommodation.
Under this Transaction, Brigid Investments Limited (the “Platform”), in which John Laing and Macquarie Capital are each 50% shareholders, will invest in purpose-built, completed and let retirement living units developed in partnership with McCarthy Stone, the UK’s leading developer and manager of retirement communities.
The Platform has selected and secured a high quality and geographically diverse pipeline of units, with approximately 250 completed units to be acquired on financial completion of the Transaction. In addition, approximately 400 further completed and let units will be acquired over the next 12 months. Taken together, these represent an investment commitment for John Laing of approximately £50 million. Financial completion of the Transaction is expected to take place in the second quarter of 2021, subject to a number of conditions, including customary consents and execution of the agreed property documentation. The Platform also benefits from an additional agreement with McCarthy Stone which provides an option, subject to certain conditions, to acquire follow-on investments in a further approximately 500 units within three years following financial completion.
Ben Loomes, Chief Executive of John Laing Group plc, commented:
“We are delighted to be partnering with McCarthy Stone, the UK’s leading developer and manager of retirement communities, and creating a platform for growth with Macquarie Capital’s infrastructure investment team. Retirement-living is a market with high barriers to entry and strong fundamentals, underpinned by an ageing population and constrained supply.
This investment is in-line with our strategy of investing in platforms which are asset-backed, scalable and offer long-term, resilient cash flows. Importantly, this investment brings inflation-linked revenues and strong cash yield from the outset. There is potential for significant value creation both through scaling the platform, and as the sector matures and attracts further institutional capital into core infrastructure assets.
So far this year, we have announced realisations of three investments, each at a premium to book value, for total proceeds of £110 million1, and in the same period, we have committed to total new investments of approximately £107 million2 at attractive returns.”
In-line with strategy with strong contribution to portfolio yield
John Laing is investing in a scalable platform, backed by real assets. As well as offering growth potential, the Platform offers strong and long-term inflation-linked cash income to the Group, with a strong cash yield from financial completion.
In particular, John Laing’s investment in the Platform delivers the following:
- Growth potential: ability to scale the Platform through aggregating a diverse portfolio of units under an arrangement with the UK’s leading developer of retirement accommodation.
- Asset intensive: the Platform is acquiring real assets which provide a strong underpin to the investment.
- Long-term, resilient cash flow: high credit quality tenants and visibility of cash flows, underpinned by structural undersupply of rental units in the UK.
- Essential services with a positive social impact: the Platform aims to meet the growing needs of an ageing population looking for independence and a sense of community in their later years, as well as offering the increased flexibility that a rental model provides.
Experienced partners and management
John Laing has a proven and long-term track record of investing in specialised accommodation and in broader social infrastructure in the UK and internationally. The Group has successfully invested in, and delivered, projects including hospitals and wider healthcare facilities, housing, and student and military accommodation.
We are pleased to be partnering with Macquarie Capital, who also bring strong credentials and experience of investing in development infrastructure, including in the accommodation sector. McCarthy Stone, a market-leading partner with a strong brand, reputation and track record in the retirement sector, will provide operating and management services to the Platform.
Richard Williams has been appointed as Chief Executive Officer of Brigid Investments Limited. Richard brings over 20 years of real estate and property experience, including at Aldi, as Regional Managing Director with McCarthy Stone, and as Chief Executive of Rangeford Retirement Living & Care.
Strong sector fundamentals
Retirement-living in the UK is a market with high barriers to entry and strong fundamentals. The market is undersupplied, with a shortage of appropriate and affordable options. The gap between supply and demand is also set to widen as a result of a growing ageing population. There are currently approximately 12.2 million people in the UK who are aged 65 years or over, and which is expected to rise to approximately 17.4 million by 2043, representing an increase of over 40%.3 Research undertaken by McCarthy Stone shows that a third of those aged 65 years or over are interested in moving, equating to approximately 4 million people.
Retirement living penetration in the UK currently lags other markets such as the US and Australia. For example, the US has a well-established rental model, with rental accounting for the majority of senior housing stock. There is potential for significant value creation both through scaling the Platform, and as the asset class matures into core infrastructure, which is attractive to second market investors given the stable and long-term yield characteristics. For example, there is already an established secondary market for retirement living assets in Europe.
About John Laing
John Laing is a leading international investor across a range of infrastructure sectors. We seek to deliver attractive and sustainable returns over the medium-term. We are a responsible investor, committed to delivering critical and enduring infrastructure which responds to public needs and improves the lives of the communities we serve.
1 For the purpose of the special dividend, gross proceeds will be adjusted to exclude any interest earned.
2 As committed; actual cash investment amount subject to future foreign exchange movements.
3 Population data sourced from ONS.