PROPERTY TIME FOR CHANGE?
As rising operational costs push more care home operators to consider selling, the process demands sensitivity, a good strategy, and the right partnerships. Here, The Harkalm Group explores the ways care home operators can protect their value and manage reputational risk.
Two in five care homes are set to fail due to employer National Insurance Contribution (NIC) costs, according to a recent survey by business sales advisor Christie & Co. Rising costs, including heating and the increase in the minimum wage, are also having a huge impact. As a result, selling up has become a serious consideration for some operators.
However, unlike selling a house, marketing a care home has significant implications for clients, their families, and staff. Communications must be managed sensitively and in a timely manner. Putting a care home on the open market involves uncertainties, particularly around the timeline of any sale, so a discreet sale may be preferable. This approach allows a deal to be finalised confidentially, aſter which clients, families, and staff can be informed of definite decisions in a professional way and given adequate time to make alternative care or employment arrangements if necessary.
Going on the open market may also damage the reputation of the business. Even if profitability is not a concern, rumours may circulate, creating difficulties if the care home does not ultimately sell and attempts to continue operating. Uncertainty about the future can lead to challenges in recruiting and retaining staff, while residents and their families may begin looking elsewhere for suitable services, causing the business to decline further. Suddenly, it is not a 'going concern' but a declining business, which is far harder to sell.
A DISCREET ALTERNATIVE
An alternative way to maximise the value of a care home property is to work directly with an investor or developer who already has a potential client list. This can offer a faster, cleaner, and less complicated sale.
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At The Harkalm Group, for example, we work with household name brands looking to secure buildings quickly and repurpose them for alternative uses. We partner with providers in sectors such as education, nursery care, residential, and retail to ensure buildings continue to serve as community assets.
In many care home transactions, we agree on a forward commitment or transaction date that gives the vendor time to support the transition of residents into alternative accommodation. Because we do not rely on bank funding to purchase properties, we are able to move as quickly or as gradually as the situation requires.
OVERCOMING PLANNING PERMISSION HURDLES
A further challenge of selling on the open market is the issue of planning permission, as a change of use is oſten needed to repurpose care home buildings. Without the necessary permissions, potential buyers may be deterred, and valuable time can be wasted as they investigate their options.
An experienced off-market developer and investor like Harkalm will have the expertise to discharge historic planning restrictions and accurately assess what is achievable based on years of experience.
CAPITAL INVESTMENT: ALTERNATIVES TO SELLING
It is also important to consider why a care home operator is looking to sell. If the building is outdated and capital expenditure (CapEx) is not available to modernise it, a sale and leaseback agreement may be a suitable alternative.
Under this model, once the property is acquired, the operator enters into a long-term lease under the Landlord and Tenant Act,
www.tomorrowscare.co.uk
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