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Veterinarians take out big loans to set up lavish pet clinics


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To start 2020, Morgan McDaniel fulfilled a lifelong dream: She bought her own veterinary practice, a financial leap that took out a $4.5 million loan.

Then the pandemic hit, and so did America’s pet adoption boom. Cat and dog parents continue to beg McDaniel’s Montgomery Animal Hospital in Pineville, Louisiana for more services. Can it provide long-term care for a dog’s torn ACL? Did you offer overnight accommodation on board?

McDaniel decided he could, taking out a $750,000 loan to expand his practice with more than two dozen dog kennels, an exam room for special procedures and an artificial turf field. She bought an underwater treadmill for rehab and set up a drink machine as a treat for her 35 employees.

“I dream big, I’ll say it. In some cases, it seems extreme,” McDaniel said.

Similar stories can be found across the country as the animal health sector experiences staggering growth. Now, vets are tearing down walls or digging down to make room for new clients who want boarding, daycare and grooming.

Their balance sheets are also becoming increasingly complex. In the first nine months of 2022, small business loans for veterinary offices jumped 23 percent at PNC Bank, a spokesman said. At Huntington National Bank, veterinary loan applications have quadrupled over the past four years.

That’s fueled by a wave of pet adoptions, experts say. More than 23 million U.S. households—almost 1 in 5—got a pet during coronavirus pandemic, according to the American Society for the Prevention of Cruelty to Animals. The share of households with at least one dog jumped from 38 percent in 2016 to 45 percent in 2020, before leveling off last year. Cat ownership increased from 25 percent in 2016 to 29 percent in 2022.

For Brian Greenfield and his partners at Animal Clinic Northview, the boom in the pet pandemic has prompted them to accelerate their expansion schedule. The clinic outside of Cleveland added 12,000 square feet of state-of-the-art space, including 10 exam rooms, two operating suites, a remodeled intensive care unit, a rehabilitation pool and an underwater treadmill. The project cost $4 million, 75 percent of which came in the form of a loan from PNC.

Becca Byrd in San Antonio purchased a lot to start a second veterinary practice in 2018 and will open it in 2021, along with a “pet sanctuary and spa.” The guesthouse apartments have flat-screen TVs that show burning fireplaces or play cartoons.

McDaniel’s luxury dog ​​boarding service allows owners to communicate with their pets through daily video calls. The clinic’s staff of veterinary technicians and assistants tuck the pups into bed each night and give them evening treats.

Tommy Monaco in northern New Jersey started his own specialty surgery practice. His wife, Francesca, left her job as a management consultant at the electronic technology firm Blackboard to manage the business’s finances. Jonathan Trail, in southern New Jersey, added 2,500 square feet of space to his mom-and-pop general veterinary practice with a $700,000 loan from TD Bank.

“The door has remained open for vets throughout the pandemic,” said Brandy Keck, head of veterinary lending at Live Oak Bank. “It became incredibly obvious very quickly that the veterinary industry was going to be one of the winners.”

The vet from the “pet’s point of view”

Pet expenses, including health care, are largely considered discretionary. Researchers often track consumer spending on pet food, toys, training and even surgeries to gauge consumer confidence.

But in the years leading up to the pandemic, insurers began to feel that the classification was increasingly unreliable. People no longer view their pets as property, said Ed Nunes, senior manager at TD Bank who oversees veterinary lending. They see them as family.

There is also new research showing that pets have been a panacea for many of the stressors associated with isolation, loneliness and poor health habits during the pandemic.

Researchers at the University of Montreal found dog ownership had a significant positive impact on health during the pandemic. Owning at least one dog encouraged immunocompromised people to exercise more and sleep better, researchers found, while dog owners did not spend more time sedentary and lost sleep.

A similar dynamic also helped isolate the veterinary industry during the Great Recession; revenues from the vet sector have mostly just flatlined, not decreased, Nunes said.

The pandemic accelerated two other dynamics: People not only adopted more pets, they also stayed at home together. When people are more considerate of their animal companions, they spend more money on them, vets say.

Who spends the most time (and money) on pets?

That meant more visits — emergency rooms sometimes reported hours-long waits to see patients, and some vets’ offices said they had stopped accepting new clients for preventive care exams — and more costs for nonmedical services.

In other words, Byrd said in San Antonio, we spoiled our pets. And since pets don’t pay for their own care, veterinarians make it their business to attract human clients. So boarding houses are starting to look like resort hotels, and day care centers are starting to look like kindergartens instead of kennels.

“Anthropomorphism is everything,” Bird said. “I think that’s true even of myself.”

Vets are quick to point out the medical case for some of these amenities. The body of knowledge and scientific advances in animal medicine are rapid, said Greenfield in Ohio, and veterinary clinics must continually invest to retool their facilities.

More and more practices are turning to a new approach not only to medical treatment but also to other pet services known as “Fear Free”. This includes basic protocols for vaccine administration (using food to build trust and for positive reinforcement) and nail trimming (again food, but sometimes a mild sedative for anxious pets), although each step involves consultation between doctors and pet owners.

There are also standards for pet boarding and day care. Individual dog enclosures, for example, may have some privacy, such as a curtain or blankets, where the dog can burrow, according to Fear Free’s protocols. Cats are well served by placing calming pheromone diffusers around the facility or playing certain music. It turns out that dogs and cats like very different tunes.

“Now we’re looking at what do our facilities look like from a pet perspective?” said Carmen Rustenbeck, CEO of the International Pet Boarding and Services Association. “What does it look like? What does it sound like? What does it smell like? How does it feel on their paws?”

The Fear Free approach has become popular enough that TD Bank’s Nunez is studying it to better evaluate the business plans of loan applicants.

“Part of being a specialty lender is being a trusted advisor to the physician,” he said. “I know an awful lot about running a practice.”

And medically, pet parents are increasingly willing to invest more money in treatments to extend their animals’ lives, Greenfield said.

That’s a great thing for pets — “More longevity, healthier, happier, pain-free quality of life,” Greenfield said — but it adds economic pressure to the veterinary industry, which is already facing a shortage of doctors and technicians. This is the beginning of an arms race among practitioners to have the nicest facility, or the most advanced equipment, or the best amenities. And this extends beyond medical care into day care centers and boarding houses.

It’s not cheap for vets to make all these investments. Their business is capital intensive – new equipment is expensive and labor costs are also high. Some practice owners are taking out loans to have working capital to pay staff, bank officials say.

In many cases, large student loans add to the burden. Four years of vet school cost an average of more than $200,000, according to the personal finance site Bankrate, forcing many students to take on debt. And when they graduate, they can expect an average salary of $100,370 per year, according to 2021 federal data.

However, the Bureau of Labor Statistics predicts strong demand for medical practitioners, with veterinary jobs rising 19 percent over the next decade, compared with 3 percent for human doctors and 5 percent for the rest of the U.S. workforce.

However, these costs are generally worth it given how resilient the industry is. “We know that even when times get tough, [a pet owner] he’s going to take care of his dog,” said David Birch, director of specialty banking at Huntington. “And if something bad happens, he might choose not to travel to Disney World so he can take care of his dog.”

Defaults on vet loans are so uncommon that Huntington doesn’t measure them, Birch said. And so many vets are interested in becoming practice owners that doctors are often willing to acquire struggling practices and assume their financial obligations. The constant refrain in the industry is that the fastest way to get ahead of student debt is to buy practice.

The owners say that veterinary clinics simply need to keep up with consumer expectations.

As Byrd’s practice expanded, she built a separate pet acupuncture room — good for treating arthritis and even nausea and gastrointestinal inflammation, she said — and euthanasia counseling, as well as an entire pet-housing wing.

Larger corporate animal hospitals can feel like an assembly line for surgeries, said Tommy Monaco, who started his own practice in northern New Jersey in November. He thought a smaller surgical practice would be a successful alternative and created it to maximize the comfort of animal patients and pet parents.

At his clinic, Greenfield and his partner owners wanted the capacity to treat more animals and didn’t want to send clients to other facilities for rehab care or prescriptions. They more than doubled the size of the hospital pharmacy and added a brightly lit exercise room for animals recovering from surgery or with chronic joint and muscle problems.

Across a small barrier is a rehab pool where vets can jump into the 97-degree water and splash around with recovering pups — or dogs who just need some low-impact exercise. Up the back staircase, the hospital has two suites for doctors who need to nap between shifts and a large conference area for training.

When Greenfield recruits new vets — the practice is almost constantly hiring, he said — he shows them around the clinic and watches their eyes light up as they pass an observation room, an oversized intensive care unit and a drive-thru window, just in case the hospital must return to socially distanced care again.

“Honestly,” he said, “at the time we built it, we thought it was a little too big.”


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