Knight Frank Healthcare team has sold a ground breaking ground rent portfolio to Alpha Real Capital for €38.7m (£30m) at a net initial yield of 3.4%, on behalf of CareTech Holdings, one of the UK’s leading providers of specialist social care services, supporting adults and children with a wide range of complex needs. Alpha Real Capital specialise in asset backed securities and are a market leader within healthcare fixed income.
The portfolio consists of 41 care facilities, on a term of 150 year FRI ground lease, predominantly located across London and the South East. It offers not only security via way of operation businesses on long leases to CareTech, but the underlying asset values also offer comfort due to excellent locations.
Farouq Sheikh, CareTech Holdings, commented; “We operate in a growing and fragmented market in which the regulatory environment is driving consolidation and creating significant, earnings-enhancing opportunities. We are delighted to enter this non-dilutive ground rent agreement with Alpha to raise £30 million in cash, to invest in the development of our business at a very attractive yield. The transaction also underpins the valuation of our freehold portfolio which is in excess of our book cost. Innovative and astute utilization of existing assets gives us additional resources to continue to grow our business and fits into our overall long term growth strategy.
“Ground rent transactions are new to the care sector but have been used extensively in the hotel and leisure industry and we have worked closely with the Healthcare Team at Knight Frank to achieve this excellent outcome for our shareholders.”
Patrick Grant, Alpha Real Capital, who acquired the portfolio, added; ”We are delighted to launch our new ground rent fund with a seed portfolio of high quality specialist healthcare real estate with CareTech as our partner. We have utilised our experience of working with owners of specialist operational real estate and their funders to use new long term capital provided by pension funds as a way of reducing gearing and re-capitalising assets to provide more efficient long term capital structures for the asset owners which is a key part of our strategy moving forward.”
Julian Evans, head of healthcare, Knight Frank, stated; “Care Tech PLC is a stellar operator who has taken first mover advantage in the specialist care sector, by executing a ground rent deal to recycle sale proceeds for further growth and development of their business. This is a ground breaking transaction and a terrific result for both CareTech and Alpha Real Capital.”
