Many years ago, veterinary practices were usually owned by individual doctors, operating out of buildings they had purchased or developed. Over the last four decades, however, veterinary medicine, like many other areas of health care, saw a huge amount of consolidation.
Veterinary Centers of America, founded in 1986 by health care executives, was one of the first big consolidators of veterinary practices. By the time the firm was acquired by Mars Inc. in 2017, it owned nearly 800 animal hospitals in the United States and Canada. Today, VCA Inc., operating under the name VCA Animal Hospitals, is part of the Mars Petcare portfolio of brands.
Private equity investors have also become major players in the pet-care business. They began investing in veterinary practices in the late 1990s and early 2000s, backing entrepreneurial veterinarians who wanted to buy or start new practices.
However, like other corporate investors, they had little appetite for acquiring the properties where care is delivered, leaving thousands of clinic and hospital buildings in the hands of individual doctors. Enter Terravet.
“Fifty years ago, this opportunity wouldn’t really have existed,” says Eisenstadt, a lawyer by training and self-described pet lover. “You could have bought veterinary practice buildings, but the tenant would not have had the creditworthiness of a corporate entity.”
“What makes this opportunity interesting from a REIT perspective,” he adds, “is that you go from mom-and-pop credit to corporate credit as this evolution happens in multi-site health care broadly and veterinary medicine specifically.”
Growth in Pet Spending
What attracted Mars and other deep-pocketed investors to the pet care business? The U.S. pet population, particularly the number of dogs, has grown meaningfully over the last two decades, pushing up spending on veterinary services.
In 2023, an estimated 66% of all U.S. households owned a pet, which represented a slight decrease from the prior year, but a roughly 10% increase from 1988. Currently, some 65 million U.S. households own at least one dog, making them the most widely owned type of pet.
As most pet owners know, furry friends can come with a hefty price tag. Spending on veterinary services (about $37 billion in 2023) has grown at a compound annual rate of about 9% over the past five years, according to Eisenstadt. It’s projected to grow at a roughly 7% compound annual rate over the next five years.
