Real Estate

Opportunities in global listed property: US aged care facilities

By James Maydew
BSc (Hons), MRICS Head of Global Listed Real Estate Sydney, Australia

The US is facing a demographic bubble of historic proportions as baby boomers age and move into retirement. The proportion of Americans aged over 65 is set to double between now and 20601, and an unprecedented investment in long-term care will need to take place in order to cater for their needs.

The situation is even more stark when it comes to dementia care. As citizens live longer, the number of people diagnosed with Alzheimer’s disease is predicted to balloon, from an estimated 5.7 million today to almost 14 million in 20502. The US already spends US$186 billion caring for those with Alzheimer’s, and that figure will need to quadruple by 20503.

There is currently a massive shortfall in dementia beds across the country, especially in the city centres. Manhattan, for example, has an estimated 70 dedicated memory-care beds servicing a population of almost 1.7 million people.

 

US aged care facilities
Source: Population Reference Bureau, 2016; National Center for Chronic Disease Prevention and Health Promotion, 2017; Health, United States, 2017 Chart: Created from data in Hebert LE, Weuve J, Scherr PA, Evans DA. Alzheimer disease in the United States (2010-2050) estimated using the 2010 Census. Neurology. 2013;80(19):1778-1783.

Senior housing has a number of attributes that make it an attractive defensive asset in an uncertain market. As they are no longer in employment, retirees may be less vulnerable to the income effects of a downturn, and once established are less likely to move, particularly if they have acute health needs. Government support programs for low-income residents, such as Medicaid, can further eliminate risk from the bottom-end of the market during a downturn.

Long-term care in the US has little in the way of supply constraints, and private providers are competing with a relatively low number of competitors who lack a profit motive4. As a result, investing in aged care in the US carries a low level of regulatory risk – the long-term solution is likely to be a straightforward matter of mostly private supply meeting rising demand.

This burgeoning need for long-term care places, and for high needs specialist care in particular, will largely be catered for in the US by the private sector, and Australian investors can capitalise on this growth opportunity through real estate investment trusts (REITs), such as the AMP Capital Global Property Securities Fund, which is an active ETF trading on the Australian Stock Exchange.

1 Population Reference Bureau, Fact sheet: Ageing in the United States, January 2016.
2 Centres for Disease Control and Protection, Alzheimer’s Disease, June 2018.
3 Alzheimer’s Impact Movement, Factsheet: Costs of Alzheimer’s to Medicare and Medicaid, March 2018.
4 Stevenson D.G, Bramson A.B & Grabowski D.C, Nursing Home Ownership Trends and Their Impact on Quality of Care: A Study Using Detailed Ownership Data from Texas, Journal of Aging & Social Policy 2013; 25(1): 30–47

 

This article has been prepared by AMP Capital Investors Ltd (ABN 59 001 777 591, AFSL 232497) (“AMP Capital”). BetaShares Capital Ltd (ACN 139 566 868, AFSL 341181 ("BetaShares") is the responsible entity and the issuer of units in the AMP CAPITAL GLOBAL PROPERTY SECURITIES FUND (UNHEDGED) (MANAGED FUND), (each a “Fund”). AMP Capital is the investment manager of the Funds and has been appointed by the responsible entity to provide investment management and associated services in respect of the Funds. Investors should consider the Product Disclosure Statement (PDS) for the relevant Fund before making any decision regarding the Fund. The PDS contains important information about investing in each Fund and it is important investors read the PDS before making a decision about whether to acquire, continue to hold or dispose of units in the Funds. Past performance is not a reliable indicator of future performance. Neither BetaShares, AMP Capital, nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this information. This information has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. Investors should, before making any investment decisions, consider the appropriateness of this information, and seek professional advice, having regard to their objectives, financial situation and needs.

 

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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