High street woes help care sector attract institutional investors

Michael Hodges, managing director – care consultancy at Christie & Co

The older people care sector continues to be favourable to institutional investors as the population lives longer with an increasing range of health conditions.

Appetite for the sector is also being helped due to challenges in other assets classes, such as high street retail, according to an alternative investments report by business property adviser Christie & Co.

The document provided an overview of current yield trends on prime and secondary investments across various subsectors.

It said the average yield on prime investments across UK alternatives ranged from 3.5% to 7.5%, with the care sector demonstrating yields of 3.5% to 5% for super-prime and prime, and 5% to 7.5% for secondary investments.

UK Alternatives Investment Index: H1 2019 highlighted the strongest yields were attributed to high demand, particularly from institutional investors, for a limited supply of super-prime assets in the market.

It said: ‘Due to a combination of investor demand and increasing appetite from a wider range of operators to take leases, we are also seeing considerable activity in the prime and secondary markets.

‘Most notably Christie & Co has negotiated several transactions involving new-build assets which are let to regional or special purpose vehicle-type covenants, with yields compressing and new benchmarks being set at between 5.0%-5.5%.’

A key incentive for investors to take on leases is the inclusion of step-in rights agreements and full visibility of trading information to mitigate risk.

Christie & Co predicts elderly care will continue to be attractive to investors.

Michael Hodges, managing director – care consultancy at Christie & Co, said: ‘The elderly care market presents an excellent opportunity for investors and, over the course of the last 18 months, we have seen a notable increase in activity and interest from a wide variety of funds, attracted by the strong demand drivers which underpin the sector.’