Civitas is the largest investor working across healthcare and education in the UK and has expansion in Europe in its sights, Andrew Dawber of Civitas tells Nicole Dynes.

Andrew Dawber is a founding partner of Civitas Investment Management (Civitas), a UK-based pan-European impact investor. The firm seeks to create long-term, predictable, inflation-linked returns for investors, while generating positive environmental and social impact by investing in the healthcare, supported living and education sectors.

Today, Civitas has £3.5 billion under management across multiple strategies and is the largest investor in healthcare, living and specialist education in the UK. Since 2022, it has also had a presence in Continental Europe and plans to grow its investments there “significantly” over the next few years.

Impact asked Dawber about prospects for the sectors Civitas invests in throughout the UK and Europe and about his plans for the company.

What is your focus currently?

We are focused on healthcare, which is a subset of social infrastructure. Supported living is the core of what we do. It is operational real estate, and the real estate is the easy part of it: you can build it in six to nine months. It’s the ecosystem around it that is tricky. The goal is getting all the different elements to work in a transparent manner and making a return for our investors.

There are 2.5 million people who need supported housing in the UK, so finding opportunities is not the issue. We have a £100 million-plus pipeline which we could easily double, and we are currently discussing these opportunities with a number of third-party investors who are keen to increase their exposure to this sector and invest alongside us.

How has the UK business developed?

When we came into the market 12 years ago, we saw that there were lots of private landlords providing accommodation at varying levels of quality. The market needed to be institutionalised. Local authorities want to know that we are responsible long-term owners, that there will be no flipping through every few years. We have become the largest owner and provider in the UK and work with 250 local authorities and 230 care providers.

Leases are between 15 and 35 years, index-linked to inflation. There is a constant cashflow, which is attractive for investors, low double-digit returns, 5% yield – it is not private equity-style kind of returns, but they are steady and long-term.

How has the sector changed in the UK?

There has been a societal shift: care for long-term health issues, disabilities and mental health has been decentralised. The objective is to allow people to live within their own communities, not in big buildings in the middle of nowhere. Local knowledge is key. It is a mistake to be a large national housebuilder, because you typically end up with cookie-cutter apartments, big developments that are all the same and a bit of social housing, often out of town where land is cheaper.

This approach doesn’t work for us: we want to be in-town to increase people’s independence. People need to be close to shops and must be able to go out with their carers. They should not be trapped in a remote place. That’s the ghettoisation of care.

What kind of buildings do you tend to create and own?

We get a nomination agreement from the local authority and they’ll sign a rent guarantee. They tell us what they need and we build it or adapt it. We might keep the facade of a grand family home and replace everything behind and create maybe 12 apartments. It’s always very bespoke and you need that local knowledge. There has to be parking for carers, lifts for wheelchairs and so on.

We have a good track record and have won lots of awards because we build the very best quality assets and our designs are not only better, but more affordable. We work closely with local authorities to create special homes for people with disabilities, we identify care providers and we work with local developers who take on development risk. If needed, we join in the process and help to bring the funding in.

‘People need to be close to shops and must be able to go out with their carers. They should not be trapped in a remote place. That’s the ghettoisation of care.’

Andrew Dawber, Civitas Investment Management

The costs of supported living are half the costs of hospitalisation and, crucially, the outcomes of people in specialised accommodation improve.

If you take a person with severe autism out of a 200-people block and put them in a specially-designed building with gardens, in a personalised environment and with experienced specialist care providers, that person’s condition will improve and the cost of care will come down.

Targeted care means that people are not underserviced or overserviced. It all starts with the care – we have a team of clinicians in the real estate business. If the care is delivered well, then all the other elements fall into place. As I said, the real estate is the easy part.

Who are your residents?

The average age of people in our homes is 31, which may surprise some. Every single person has a bespoke healthcare package. There is no age limit, the portfolio ranges from children’s homes to adults with complex needs. We don’t do elderly care in the UK. There are tens of thousands of people in the UK who want provision for their adult children: demand is the highest it’s ever been and provision is low. Since covid, supply has shrunk and costs have gone up.

It is estimated that 30,000 units are needed in the UK, and that shortfall is predicted to rise to 50,000. Local authorities have an obligation to look after these people, but a lot of them are being looked after hundreds of miles away because there is nothing available nearby.

Only 8% of local authorities are satisfied with the provision they’ve got. So it’s a perfect storm: demand is up and provision is down. This is non-discretionary: it is a social sector – our residents cannot go anywhere and no one can be evicted.

How did you expand into the education sector?

Local authorities asked us to look at other things, like special schools, because there is a lot of demand and very little provision. So two and a half years ago we moved into the school market. Now we are the largest investor in special schools in the UK.

Local authorities don’t want to own the real estate, but they want someone responsible owning it and looking after it. We built a strategy to buy up buildings, upgrade and expand them. This freed up cash for them. We will continue to build special schools, it is a very specialised sector and we have a dedicated team.

Do you have plans to expand further into Europe?

What we see across Europe is the decentralisation of healthcare. Situations and systems vary from country to country, but the needs and conditions are the same, and we understand them. We built
a European team three and a half years ago, but prices were very high then. Our first deal was in Sweden in 2022, when we bought a care-based housing operator in Gothenburg for €50 million. We also own the operating business and it has been very successful.

We plan to expand in Sweden and we are also looking at other parts of the Nordics. But ultimately, our expansion in Europe will depend on what investors want.

What are your plans in Germany, where you made your biggest acquisition last year?

We think Germany is an amazing opportunity. Senior care is better funded than in the UK. We want to expand considerably in Europe, and we could invest €5 billion in Germany alone.

We are currently recruiting for our new office in Germany, a market we entered in October last year. Our first investment was the €300 million acquisition of a 3,000+ bed portfolio of 26 elderly care and assisted living homes, mainly in Berlin and Hamburg, from Vonovia SE, the largest listed residential landlord in Europe. The investment was made on behalf of the Civitas European Social Infrastructure Fund and takes our total European capital commitment to over €450 million.

Germany is a very fragmented market and there is a lot of consolidation to come, so we see many opportunities. We’re open to off-market deals and ready to buy portfolios. But we need German people on the ground, which is why we are recruiting.

How important are the societal benefits you offer to investors?

This is something that really resonates with investors and is also extremely important to us all at Civitas. Ultimately, investors need to make returns, but we are fortunate to be operating in a sector where we can help our investors meet their objectives while also making a meaningful difference to the communities in which we operate and, most importantly, to the quality of life and prospects of those individuals using our facilities.