August 7, 2019 Property

Knight Frank advises on triple sale and leaseback deal to Prime Life

Knight Frank, a leading global commercial real estate advisor, has advised on the acquisition of three care home sale and leasebacks on behalf of LRIS Investment Management and AEW. The sale and leasebacks funded Prime Life’s, a leading provider of care homes in the UK, acquisition of the Springhill Care Group business.

Springhill Care Group operated three high-quality, purpose-built care homes; Springhill Care Centre in Accrington, Birch Green Nursing Home in Skelmersdale and Riversway Nursing Home in Bristol, providing a total of 259 registered beds. The business was acquired by Prime Life with the property assets sold to LRIS IM and AEW and simultaneously leased back to Prime Life on long leases with inflation linked reviews.

LRIS Investment Management acquired Riversway Nursing Home, Bristol, a 63-bed home, whilst AEW acquired Springhill Accrington, a 116-bed home, and Birch Green a 74-bed home. The total transaction value was £22m.

A recent healthcare trend has seen more and more investors acquiring assets and leasing them back to operators, as there are numerous organisations who are sitting on high quality real estate assets, but who also need to unlock capital to support their core business. There is clear demand from investors to secure long-term financing across a range of alternative asset classes. Knight Frank have recently completed sale on long term lease with inflation linked reviews and leasebacks for garden centres, hotels, children’s activity centres and care homes.

Huw Holman, Associate at Knight Frank, said: “Working with Prime Life, AEW and LRIS Investment Management led to a successful outcome for all, using the sale and leaseback investment strategy. Astute investors are capitalising on the opportunity to have diversified portfolios of high-yielding real estate assets, occupied by tenants on long-term leases. The strength of the Springhill Care Group assets’ locations and occupier demand, coupled with excellent property fundamentals in providing long-term secure income, appealed to both the purchasers of the assets, in addition to the care home operators, so this deal ticked all of the boxes.”

Simon Van Herrewege, Prime Life, said: “We are delighted to have acquired the Springhill Care group, adding three more care centres to the Prime Life portfolio. The three care homes located in Accrington, Skelmersdale and Bristol offer future proofed facilities, deliver good quality care, and fit well within our own aspiration for care delivery. Our team are enjoying getting to know the people, and looking to see where we can add additional value for the benefit of the service, the staff team and those we care for. We wish the best for Ken and his family in retirement, after over 36 years in the industry.”

Ian Mason, portfolio manager at AEW UK Real Return Fund, said: “We are delighted to have these two properties with Prime Life as tenants, a top provider of higher acuity and nursing care, with a strong balance sheet. They are well regarded by operators and investors in areas of complex care needs and specialities. The care home sector is driven by strong social and demographic needs and the UK is set for huge growth in its elderly population over the next few decades. As a result, it has strong market fundamentals and should remain resilient to any Brexit risks and uncertainties. AEW has taken the strategic decision to adopt a defensive strategy, targeting assets in less cyclical areas of the economy and increase the fund’s weighting to the care home sector.”

Philip Littlehales, Managing Director of LRIS Investment Management, said: “LRIS Investment Management is delighted to have completed on Riversway Nursing Home in Bristol, working closely with both Prime Life and AEW in delivering this off-market opportunity. This brings our assets under management to just under £50 million, as LRIS IM continues to seek assets in the Alternatives and broader Residential sub-Sectors, focusing on their strong operational businesses and excellent supply demand dynamics.”
Prime Life is a leading provider of care homes in the UK, operating more than 60 purpose-built care homes. Prime Life’s care homes provide a range of care service including care for the elderly, respite care, care and support for younger adults, dementia care and supported living.

The AEW UK Real Return strategy aims to align the real benefits of property with the liabilities of pension savers and long-term investors. It targets a real total return of 4 per cent pa and a 5 per cent gross portfolio yield and inflation-linked income growth. The fund aims to provide capital preservation, in real terms, by building a portfolio based on the strong property fundamentals of this real asset class. The fund accesses a wider UK investible universe of traditional and alternative sectors than typical core funds, aiming to generate greater diversification and lower volatility.

LRIS Investment Management was set up in September 2016 by Philip Littlehales (formerly Commercial Investment Director at Terrace Hill Group plc, and before that a fund manager at Aviva Investors). LRIS IM acts for several family offices and HNWI, enabling them to access investment and development opportunities and returns across both the commercial and residential sectors. LRIS IM is actively seeking further opportunities, particularly where these are asset backed, operational businesses.

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