The Schroder UK Property Fund (SPF) is to fund the development of five new care homes in Suffolk for circa GBP28m with Care UK, a provider of health and social services in the UK.
Subject to planning permission, Schroders will acquire the freehold sites in Framlingham, Haverhill, Mildenhall, Lowestoft and Ipswich. It is proposed that the sites will be redeveloped as 60 or 80 bed residential care homes with Care UK taking a 30 year indexed lease to operate them.
This funding agreement follows the 25 year contract Care UK entered into with Suffolk County Council in November 2012 to outsource the council's elderly care provision. The council’s requirement for beds within the homes will largely underpin the future income.
Ian Mason, fund director of Schroder UK Property Fund, says: "This agreement complements our existing strategy allocation to non-mainstream sectors. We have built deliberate positions in areas such as leisure, student accommodation and car showrooms where we can get sustainable, above average yields with growth built in. The key to investing in these sectors is to fully understand the tenant's business and to set rents at an affordable level.
“We are not afraid to challenge the status quo of benchmarks when we see risks at the prime end of the traditional sectors. We believe there is value in care homes because the driver of growth is principally the UK's changing demographic profile. They are far less vulnerable to the fluctuations of the economy, or the impact of the internet.”
Deloitte Real Estate advised Schroders, while Colliers International advised Care UK.