[Interview] UK senior facilities likely to offer strong return: Octopus Investments

He said that 33% of retired people in the UK want to sell their traditional family homes and move into retirement specific housing, but only seven percent do so, because of lack of supply.

“Filling this gap, there is an investment opportunity of up to $70 billion over the next 10 years. An investor looking at this opportunity might expect to see at least a net 15% IRR return from investing in the development of UK retirement communities.”

The typical development cost for senior housing and healthcare facilities is around $80 million, and the market is much less congested than other asset opportunities, he noted.

The UK retirement housing sector has expanded over the past decades with the increase of investment funds entering the market, while concerns remain about lackluster demand in their secondary market.

Still, it has room for large-scale growth, according to Knight Frank, an advisory firm, in its first-quarter research note.

The UK retired population is estimated to have $1.4 trillion tied up in housing wealth, considering that 67% of retired people in the country own all their home without a mortgage., according to Beirne.

With demographic trends spurring interest in senior and student housing, investors are seeking to diversify investment strategies and raising risk appetite for strong returns.

"I see a move towards a greater appetite for risk in exchange for strong return. ... as returns in some of the traditional sectors continue to come under margin pressure and the availability of investment opportunities is limited,” said Beirne.

Octopus Investments manages $10.9 billion of fund assets, ranging from energy, healthcare real estate, property and ventures investments to a multi-manager platform.

It focuses on entering outdated or neglected markets, or the markets going through rapid change or to be disrupted.

The UK asset manager expects to raise $4 billion to 5 billion in institutional funds over the next four to five years.

By Chang Jae Yoo

yoocool@hankyung.com