To care for pets, and their owners, vets go upscale

When Allegra Brochin and her boyfriend adopted Sprinkles, a feisty white Maltese, last year, they set about finding pet care.

"I immediately started looking," said Brochin, 23, who works as a communications coordinator for Michael Kors in New York.

She saw ads for Bond Vet pop up on her Instagram feed, and when she took in Sprinkles for her shots, she was won over by the look and feel of the clinic, "especially when it's for a pet you care about and feel responsible for," she said.

Brochin is not alone in her devotion to her pandemic pet. More than 12.6 million households adopted animals from March to December of last year, according to the American Pet Products Association, helping to propel an increase in visits and revenue to veterinary offices, as new owners took pets in for their first checkup.

The heightened demand for veterinary services has drawn investors and others to the market. Landlords — who might previously have spurned tenants associated with unpleasant odors and noise — are more amenable to leasing to the clinics after a year when the vets paid their rent while other businesses fell behind. And architecture firms that specialize in the design of vet space are busier than ever.

Tech-savvy startups like Bond Vet are promising a reinvention of the experience, with phone apps, round-the-clock telemedicine and boutique storefronts where refreshments (for pet owners) run to LaCroix and cold brew.

Startups make up fewer than 1% of the more than 28,000 vet practices across the country, but they are growing quickly.

In Los Angeles, a membership-based company, Modern Animal, has an office in a high-end shopping district in West Hollywood, with three more to come in the city by year's end and a dozen clinics in California by 2022, said the company's founder and chief executive, Steven Eidelman.

"I don't think as a landlord I would have been encouraged to have a vet clinic 15 years ago, but today I would," said Arash Danialifar of GD Realty, Modern Animal's West Hollywood landlord.

The startups appear positioned to appeal to millennials, who made up the majority of new pet owners during the pandemic. A recent survey found 76% of millennials own pets, and they are spending generously on their charges.

Rebecca Hilton, 34, who lives in Santa Monica, Calif., joined Modern Animal after adopting two kittens, Pinot and Lula, last year and has made use of the company's app to communicate with the office. She has talked to the doctor via video-chat and has used the app to ask questions and send photos.

"I may have called at 2 a.m. once when one of the cats was acting weird," she said. "It's helpful not to have to go in every time."

The health system for pets is advancing in other ways that mirror human health care. Meridian Veterinary Real Estate, a developer founded in Dallas in 2016, builds animal hospitals of 10,000 to 25,000 square feet with departments for surgery, oncology, internal medicine and other specialties — often equipped with as much as $10 million in equipment for things like X-rays, CT scans and MRIs.

Although there may be a flurry of activity now, veterinary real estate has been evolving for decades.

Traditionally, vets owned their own practice as well as the building that housed it — often an actual house. That started to change in the 1980s and '90s with the advent of corporations, known as consolidators, that began to buy up veterinary practices, attracted by the stability of the businesses. Around 25% of veterinary practices "have been sold to corporate," said Karen E. Felsted, a veterinary consultant. Some consolidators own hundreds of pet hospitals. But most consolidators have not been interested in the actual buildings. The vets thus became landlords, receiving rental income from the corporate groups and retaining the ability to sell their buildings to associates on retirement.

Now, however, the animal doctors have other options for their properties.

Some private equity firms and real estate investment trusts have divisions devoted to veterinary real estate. And increasingly, companies dedicated to it are springing up.

Terravet Real Estate Solutions, founded in 2016, now owns more than 100 buildings in 30 states, many of them housing practices owned by consolidators.

Hound Properties, founded two years ago, has been buying buildings with an investor-backed fund. And Vetley Capital, started this year, has a portfolio of 20 buildings in nine states, most of them on the small side, ranging from 2,500 to 4,000 square feet and costing around $1 million, said Zach Goldman, the company's founder and president.

The price of real estate has risen, but the returns are generally modest.

"It's the ultimate slow and steady income," said Tripp Stewart, co-founder and chief executive of Hound Properties, who is also a practicing vet.