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20 - 21 March 2024

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News & Press Releases


22 Sep 2021

Care homes and retirement villages: the road to recovery

Ben Barbanel, Head of Debt Finance at OakNorth Bank

The aftershock of the pandemic will likely be felt by care home operators and retirement villages for years to come, but every crisis presents new opportunities, and for those that are well-capitalised and keen to grow, it is an opportune time.

Over the next several months, we will see lots of the government support and loose monetary policies, such as: furlough (used by almost a quarter of operators), emergency funding (used by 15% of operators), VAT holidays or referrals, etc. coming to an end. This will lead to a cliff edge, dividing operators into two streams: those which are going to surge ahead and do well in the recovery, and those which unfortunately are not going to make it through.

According to a recent report from Christie & Co, 39% of care home operators said their occupancy levels were below 80%, which is not sustainable in the long-term. This will create an opportunity for many operators to acquire new sites and expand their portfolio to appeal to a wider demographic, so I believe we’ll see an increase in M&A activity over the next 6-12 months. In June for example, we completed a £50M loan to Brigid Investments for the acquisition of approximately 250 UK wide, newly built and fully occupied rental retirement properties, operated by McCarthy Stone.


A place where you go to live

Care homes and retirement villages have historically been misunderstood, being seen by many as morbid places to wait out the rest of your life until you die. However, the pandemic is fortunately changing these perceptions and changing what residents are looking for. One of the key themes that has emerged is how elderly people think about their quality of life, their surroundings, and the increased importance of having a sound support bubble. Many have spent much of the past year in near isolation, not being able to see friends and family, and if their home doesn’t have any outdoor space, spending a significant time indoors.

There is therefore now an increased focus on senior living providing a hospitality and service environment that goes beyond food and beverage, and fundamentals such as a nice kitchen, to offering a range of lifestyle facilities such as restaurants, lounge areas, hair salons, and cinemas. Residents aren’t simply looking for a new home, but rather a community where they can age and have their increasing care needs addressed over time. For example, in January, we completed a £42m transaction to vertically integrated retirement living investor, developer and operator to develop 84 retirement homes in a purpose-built village in South-East England, that will include extensive health and recreational amenities, including a spa and treatment rooms, pool, gym, lounge bar, library and restaurant.

A survey from The Associated Retirement Community Operators (ARCO) last year found that 65 percent of operators believe the most common drivers of the increase in demand for retirement communities is the desire for additional company and social interactions and a realisation that their home is no longer fit for purpose.

Another trend that has emerged from the pandemic is the increased focus on sustainability and heightened environmental awareness. According to a survey from BCG of more than 3,000 people across eight countries, 70% of people are more aware now of how human activity impacts climate and the environment, than they were pre-COVID-19.

Operators are therefore having to think about how they can cater to this and to younger generations who will be more environmentally conscious and keen to place their elderly relatives in more sustainable homes. For example, in June, we provided 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.

Given the projections for people living with life-changing conditions over the next two decades, it’s perhaps unsurprising that demand to develop specialist care homes has remained strong and comparatively unaffected by the pandemic. Examples of this can be seen through our recent transactions with Springfield Healthcare, Frogmore, and Macc Care to development new dementia care homes in Yorkshire, Westminster and Birmingham.

The pandemic has highlighted the resilience and importance of the senior living sector and the essential work that it does in our communities, so we are incredibly proud to have lent over half a billion pounds to the sector since our launch in September 2015.


If you’re an operator looking for debt finance between £500k to £50m to pursue your growth ambitions, get in touch and I’ll see if we can help –

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