The report "Business Outlook 2020; Focus on Business
" reflect on the themes, activity and challenges of the previous year and forecasts what 2020 might bring across the sector in which Christie & Co operates, including Care.
It is noted the going concern transactional market has remained active, with excellent volume in the market and a wide range of stock. In 2019, Christie & Co observed an increase in interest across both larger and smaller care homes, fuelled by strong buyer demand, particularly from entrepreneurial regional operators.
The report highlights Christie & Co have been at the forefront of the development market, facilitating the sale of over 1,400 beds. A number of related investment deals involved forward funds with a range of operator covenants, with a gross development value of £300m. Several of these transactions have created new yield benchmarks for strong regional and SPV type covenants. Investment activity in the secondary market has also been steady with funds like Impact REIT announcing a number of deals involving regional operators.
The report also identifies a strong appetite from investors and operators throughout 2019, with high quality single or small groups of assets let to leading covenants, resulting in prime yields compressing to record low levels. This reflects demand from an ever-increasing number of institutional investors and specialist funds, attracted by the need driven fundamentals of the sector, coupled with challenges in more traditional parts of the property industry such as high street retail.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
- More portfolio M&A activity is likely once uncertainty associated with Brexit is resolved
- New build development and investment activity will remain very active
- A portfolio transaction involving a sale of an OpCo is likely to occur
Average prices remained economically positive throughout 2019 across almost every sector in which Christie & Co specialises, with Care seeing a 5.5% increase.
Richard Lunn, Managing Director – Care at Christie & Co comments, “Whilst the sector still has operational pressures in terms of local authority fee rates and nurse recruitment, overall sentiment from a transactional perspective is very positive as evidenced by the strong level of interest we received from buyers across a wide range of care assets in 2019.”
Michael Hodges, Managing Director – Care Consultancy at Christie & Co comments, “Moving into 2020 and with a majority government now in place, we anticipate a notable increase in major portfolio M&A and re-finance activity during the year ahead. Initial signs are already very positive, so we expect a busy year from both a transactional and advisory perspective.”