No matter what happens, the Competition and Market Authority’s (CMA) ruling that US real estate investment trust (REIT) Welltower’s acquisition of over 600 UK care homes could be anti-competitive in some areas has reset market expectations. That’s according to discussions I’ve had, and missives shared online from legal, financial and other sector experts, who, at time of writing, were still digesting last week’s news.
By the time you read this, the CMA may have already decided whether to accept any ‘remedy’ offered by the US elderly property giant, or not and launched a more in-depth ‘phase two’ probe. Welltower had until today (Thurs 14th May) to propose changes to allay the regulator’s concerns, and the CMA is due to publish its decision on next steps by May 21st.
But, regardless of what happens next, the initial decision already means that it is no longer business as usual for large US owned REITs investing in the UK. The big issue at the heart of the regulator’s decision, I’m told, is its signal that it will now take an interest in owners or landlords of care facilities and not just the operators.
The reason Welltower has come under the regulator’s microscope is the type of ownership structure its acquisitions are being made under – known as a RIDEA ( REIT Investment Diversification and Empowerment Act), which allows healthcare REITs to partner with operators, sharing in both the operational income and expenses of care facilities, rather than receiving passive, fixed rent under traditional ‘triple net leases’.
It is this interest in, and potential ability to influence the operation of a care home or group of facilities that has caused them to come unstuck and trigger the CMA investigation.
So, what next? A diversification of ownership in the market is an inevitable outcome given Welltower has already been told its current deal would mean it would have a monopoly in some areas. Is this a good thing? Are there other investors out there with the means to take on the investment needed? And will this result in a dampening of US interest in taking over our care home real estate, or just keep specialist mergers and acquisitions lawyers in lucrative employment?
For those with a financial interest in the UK care home property market, these are all live questions right now. But more broadly, what does it mean for the care of our older, more vulnerable citizens? How will the supply of affordable, good quality care beds be impacted? Does it matter if a firm on the other side of the Atlantic is ultimately responsible for the quality of care our older relatives receive? What does it mean for the Care Quality Commission (CQC) and its jurisdiction over owners and operators?
These wider, vital questions should have already been raised by everyone involved in older people’s care - from policymakers to families, but if they weren’t, they are now. The CMA’s ruling is a wake-up call for all of us.
