The Henry Stewart 2006 Briefing

Latest Developments in the Nursing Homes, Care Homes and Extra-Care Markets

Chair
Hamilton Anstead
Chairman
English Community Care Association

Speakers
Tim Beresford
Partner
Davis Langdon Crosher & James

David Driscoll
UK Development Director
Sunrise Senior Living

Iain Lock
Director, Healthcare
Savills Commercial

Peter Hadley
Regional Director
Medical Property Fund

Steve Marriott
National Head of Healthcare
Pinders

Anthony Oldfield
Healthcare
King Sturge

Andrew Surgenor
Director, Healthcare
Savills Commercial

Jeremy Tasker
Director, Head of Healthcare
Colliers CRE

Keynote Address: Understanding the implications of the move towards separation of ownership of the business and ownership of the property in the Nursing Home market
• The concept is very popular but should it appeal to all operators?
• The obligations and benefits inherent in separating the property from the operation
• The lease structure
• Maximising value to the property company purchaser of the freehold while minimising pressure
on operating profits. You sell the freehold once, but the operator has to live with the lease structure created
• Taxation issues
• Maximising value of the Operating Company while ensuring ability to provide optimum care to service users continues

Investors in Nursing Home property: who they are; yields and preferred investments
• What deals are being done?
• How do yields compare with other property sectors
• Who is investing?
• Covenant strength the key for investor
• Any extra-care investment potential

Funders of Nursing Home property: who they are, loan amounts and terms
• Who is funding?
• What loan to value ratios are offered
• Current thinking on terms

Buyers of Nursing Home property in the current market: who they are, paying how much and their selected targets
• Who is purchasing; what they are paying
• Individual homes and group sales; different?

Opportunities in specialist units
• The wide range of care for younger adults
• For those with
- learning difficulties
- behavioural problems
- a need for secure and semi-secure units
- substance addictions
- acquired brain injuries
- eating disorders
• Historical patterns of growth in the market in the context of the Care Sector
• National Standards and Regulation - how they differ
• Who is investing in specialist care?
• Valuation issues - security vs. profits

Current thinking on lease terms and rental levels
• 35 year or 15 year lease terms? Why does it matter?
• Rental per square metre or a percentage of EBITDAR?
• What is the difference between 5 yearly reviews to RPI and fixed annual uplifts of 2.75%? Both terms that have appeared in recent leases
• Who is responsible for repairs? Replacing the furnishings and fittings?
• What constitutes fixtures and fittings? Who owns the fixtures and fittings?
• What happens at the end of the lease?
• Why do landlords often insist that a tenant company maintains a 'minimum net worth'?
• Should the tenant be able to assign to anyone?
• Should the tenant have an option to purchase for a calculated sum at some stage of the lease?
• What is market rental value?

Drafting and negotiating rent reviews
• Draft every rent review lease assuming that you will have to negotiate a future rent review on the drafted terms
• The easiest review is to market rental value - is there adequate evidence now? Will there be in the future?
• Is a review to RPI sensible for the operator?
• Is a review of a percentage of profits or turnover sensible to an operator?
• Which terms will increase the value of the leasehold interest and which will do the opposite?

Approaches to predicting and managing operator default
• Strong operator tenant, weak operator tenant; different approaches?
• Commercial leases and what that means compared to bespoke leases: their impact on investment value and leasehold operation value
• What can you do when a tenant defaults and how this should affect the type of safeguards the landlord employs?
• Understanding Company accounts
• The ideal tenant mix
• What happens at the end of the lease

Current issues in valuing nursing home and care property
• What drives value?
• The importance of quality and potential
• National Minimum Standards - will they be enforced?
• Vendor expectations vs. supportable value
• Will values rise or fall?

Utilising Capital Allowances to the full
• What Capital Allowances are available?
• What is their likely value?
• Cost or apportionment?
• Chattels or fixtures?
• Long life assets
• Pro-active disposals

Opportunities for purpose built clustered accommodation for the elderly
- Current thinking on critical mass to ensure adequate domiciliary care and attractive lifestyles
- Required facilities: bars, restaurants, gyms, meeting rooms, swimming pools, libraries
- Tenures to be offered and sales policies
- Managing the occupier community – managing entry and exit as requirements for supported living increase
• Government thinking on appropriate provision
• Market thinking on saleable/rentable product
• Services and care availability
- what is marketing ‘puff’?
- what is genuinely useful and utilised?
- regulatory constraints
• Range and cost
- demanded by marketing?
- or demanded/used by the consumer?
- economic viability
• Tenure offer
• Entry criteria – enforced or self fulfilling?
• Relocation practice – enforced or self fulfilling?

Keynote address: Market review - prospects in the care home sector
• What makes the sector so attractive?
• Cash flow or asset driven values
• Quality vs. quantity
• Review of recent trends
• Are values sustainable?
• A view on the future

Developments in the retirement village/extra-care market
• Who's doing what and where?
• Can private care home operators compete?
• Planning experiences including S106 obligations
• Legal experiences
• Opportunities: where and what

Opportunities in the expanding medical investment property market
• The Primary Care property market
• Primary Care premises today
• Primary Care premises options
• What does the future look like?
• How can this be achieved?