Chandler & Co quarterly care home market overview

Currently buyer demand for care homes continues to outstrip the availability of purpose built and quality converted and extended care homes.  Development of new builds has continued as evidenced by Buyacarehome partner, Care Build Group and its founder Ashley Cooper. 

The UK continues to avoid recession (at the time of writing this blog), with indications that interest rates may be at or near their peak with inflation moving into downward territory. 

In the year to date, evidenced from the many occupancy schedules that we have collated as part of a buyer’s financial application process, care home occupancy has been steadily recovering with continued polarisation towards the private care seeker or funding by the local authority with third party top ups.   

EBITDAR values are showing resilience in many cases that we have reviewed, with values holding up well in the South, South East and the Home Counties and holding their own in other areas across the UK. 

There has been a growing trend for the smaller care home to form part of a small group for an existing care home provider, pivot and change care service towards supported living or alternatively close and be offered for sale as a vacant site with various alternatives. 

The tightening lending criteria, including debt serviceability, demand for experienced stakeholders and history of service in the care sector or related industries, has meant that fewer new entrants to the care home sector have been able to cross the threshold of their first care home as owners, however, with specialist support we are seeing broker led viable options for new entrants, albeit more challenging. 

On the other hand, existing operators with a growth strategy have been able to seek out opportunities to add value to their existing care home portfolios and scale up. 

It is evident that specialist professionals in the health and social care sector have a strong role to play in a successful financing application, with real time management information, business structure and tax advisory a key part of the support within the lending process. 

With the onset of the CQC’s Single Assessment Framework only time will tell how this new assessment will work in practice and the ratings impact it will have on health and social care providers and financial applications. 

ESG and the impact on lending 

As highlighted in the CQC’s ‘state of health care and adult social care in England 2022/23’ “innovative practice and technological change are important tools to drive improvement and deliver better outcomes and experiences for people.”  The CQC’s aim is to “accelerate improvement in health and care", which underlies the Single Assessment Framework. 

With the CQC including environmental sustainability within their regulations and the adoption of sustainable practices by providers expected to increase for the whole care sector, it is likely that lenders will accelerate their due diligence around green and financial sustainability as part of their lending criteria, not only for new builds but for existing care home provision.  It is becoming clear that strong ESG policies are important for resident wellbeing and frontline staff, with independent care providers either starting their journey towards net zero or commencing the conversation.  Of particular note is the Go Green initiative started by Buyacarehome and Ownacarehome partner Autumna. 

In conclusion, the care sector has moved on from the pandemic era with renewed resilience, in a social care market that is showing increased demand from buyers of care homes in a sector driven by increasing demand from all areas of society.