2022 will be another year of growth for retirement living

By Deepesh Thakrar, Senior Director of Debt Finance at OakNorth Bank

The care sector is ripe for growth in 2022, but before operators can start thinking about securing capital to support this growth, they must first make sure they’ve got a strong plan in place to navigate the current staffing crisis. The crisis has resulted in nearly half of care homes closing their doors to new residents and two-thirds of home care providers turning down requests[1]. Now more than ever, operators need to have an experienced management team in place, a healthy cash flow forecast, and strong staff incentives to ensure they are attracting the best talent available.

A focus on lifestyle and wellbeing

One trend that will continue to drive growth this year is the demand for retirement villages and care homes which offer leisure and lifestyle amenities, as well as more green space and opportunities for residents to foster community and social cohesion. I read earlier this year that some care homes are even opening onsite pubs, as recent figures show that it helped boost the wellbeing of residents[2].

A recent example of this is Springfield Healthcare – OakNorth Bank provided the business with a £7.5 million structured facility to develop six apartments and seven retirement flats for independent living. This was alongside a 79 bed-roomed care home in the popular rural location in the heart of the Beverley community in East Yorkshire.

M&A activity makes sense for those keen to expand

Every crisis presents new opportunities, and for those that are well-capitalised and keen to grow, 2022 is the year for M&A activity. Last June, we provided a £50 million loan to Brigid Investments, a special purpose vehicle formed by John Laing, and Macquarie Capital. It was crucial for us to complete on this facility quickly so that Brigid Investments could sign for the new acquisition of approximately 250 newly built and fully occupied rental retirement properties across the UK, operated by McCarthy Stone. The facility also provided Brigid Investments with the opportunity to develop a scalable platform moving forward, in partnership with McCarthy Stone, resulting in a commitment to finance a further 400 rental retirement units over the next 12 months.

 Sustainable living is in the spotlight

Consumers are becoming keener and keener to support businesses with ethical and sustainable practices, so operators developing new care facilities should bear this in mind, and remember that sustainability doesn’t mean compromising on quality.

We’ve worked alongside Park Lane Healthcare for example to facilitate its new high-spec sustainable care village in East Yorkshire. The complex is made of a 72-bed care home, 24 close-care bungalows for married couples, partners or friends, an on-site licensed café and bar, cinema room, shops, and a wellness centre. Another example is a deal I worked on that saw us provide a combined senior loan facility to support the first acquisition of a new partnership between FORE Partnership and Amicala, that intends to develop up to £300m worth of ultra-sustainable net-zero extra care later living schemes.

Overall, our outlook for this sector remains positive. While other lenders shy away from the care sector due to concerns about its long-term viability[3], at OakNorth Bank we’re looking to support the growth of even more businesses in this space. So, if you’re an owner or operator looking for business finance to grow – whether organically or through acquisition – get in touch. We provide secured business loans, typically between £500K – £50M, and aim to complete transactions in days or weeks vs the months it takes traditional banks.

[1] Carehome.co.uk – Care homes say no to new residents and home care agencies decline care requests as staff shortages worsen

[2] Carehome.co.uk – More care homes urged to open onsite pubs after they were found to boost morale in lockdown

[3] The Guardian – UK care homes face funding crisis as banks refuse loans

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