Ageing baby boomers provide unique investment opportunity in us property

The ageing of the baby boomers, the generation born between 1946 and 1964, is creating one of the biggest demographic shifts in US history and will have a significant impact on retirement and consumption patterns in that country over the next few decades.

Data from the US Population Reference Bureau (PRB) show that there are over 70 million Americans who fall into the baby boomer generation, making them the largest consumer segment in that country at around 40% of the total. The PRB estimates that the number of Americans aged 65 and older is expected to more than double from the current 46 million people to some 98 million by 2060, meaning this cohort will account for almost a quarter of the nation’s entire population, compared to the current 15%. So significant is the ageing of this generation that demographers have termed it the `Greying of America.’

While this will introduce fiscal challenges in the US as strains Social Security and Medicare expenditure, the ability of the American economy to innovate and provide solutions to such challenges is without parallel. As the baby boomer generation ages, private investors will step in and provide solutions that cater to their needs.

This is precisely the sort of socio-economic trend that we at Stonewood Alchemy Real Estate (SARE) like to incorporate into our investment strategy. By tailoring our investment themes in a manner that tracks socio-economic trends, we are able to swim with the stream rather than against it. In doing so we believe we can significantly reduce the potential for error while at the same time maximising the probability of meeting our return targets.

As the ageing of the baby boomer generation unfolds, our research indicates that there will be increased demand for specialist nursing care, particularly for sufferers of dementia and Alzheimer’s. The PRB estimates that the ageing of the baby boomers will spark a 75% increase in the number of Americans older than 65 who require nursing home care by 2030, or a total of 2.3 million people.

This increasing need for specialist elder care will also be fuelled by a sharp rise in the number of Americans with Alzheimer’s disease, which the US Alzheimer’s Association expects will roughly triple to between 13.5 million and 16 million people by 2050, at which point there will be nearly 1 million new cases every year. The Alzheimer’s Association also predicts that one in eight baby boomers will get the disease after they turn 65, fuelled in part by the mere fact that this generation will live longer due to improved healthcare. By the time most baby boomers reach 85 nearly one in two of them will have Alzheimer’s.

In order to track this unfolding socio-economic trend SARE has invested in the Savanna House Assisted Living & Memory Care facility in Gilbert, Arizona. The $34 million project has been open for a year and its success has convinced us that there are further opportunities in this space. We are currently underwriting four additional properties located in Florida, California, Texas and Arizona.

As a Guernsey-registered joint venture between Alchemy Properties and Stonewood Capital, SARE is in the fortunate position to have seasoned partners with an established track record in this field who are continuously evaluating potential investments. All investments are purchased through SARE’s two wholly-owned US LLC companies, the SARE Senior Living and SARE Skilled Nursing platforms.

Given that we represent high net worth family offices we look to partner with investors seeking to invest in non-REIT offshore properties with a hard currency bias, namely the US, the UK and Europe. For a minimum investment of $500,000 investors can gain exposure to our expansion into the US assisted living and memory care space, which we anticipate will provide dollar-based IRRs of between 15% and 20% over a three to five year horizon.

By Eldon Beinart, CEO of Stonewood Capital and Director of SARE