Our business model
Our business model allows us to generate attractive returns, with managed risk.
We consider risk from many angles, from ensuring our balance sheet stays strong, to the way we pick tenants and make sure they’re performing well, to our focus on sustainability and creating a positive social impact.
What we do
Select
tenants
We have a diversified portfolio of tenants that includes national, regional and local businesses. When selecting a new tenant we consider:
- track record and financial performance;
- the strength of their business plan;
- their ability to provide high-quality care to residents; and
- their ability to deliver strong trading returns over the longer term, that will support our investment.
Identify and
appraise assets
Sometimes tenants bring new opportunities to us and sometimes we select assets we’d like to acquire and determine which current or new tenant will operate them. We then check every aspect of the homes, including reviewing their local market and the building’s environmental sustainability. Our disciplined approach means we can buy at attractive prices, which are often less than the cost of replacing the asset.
Agree
leases
Our leases are typically for 25 years or more and balance rental growth with ensuring rent remains affordable to tenants. The leases require tenants to spend a minimum amount every year on repairs and maintenance, and all our leases since 2020 include “green” clauses, to help us work with tenants on our ESG objectives.
Monitor tenants’
performance
We keep a careful watch on many aspects of our tenants’ performance, including their financial results and the quality of their care, which we discuss with our tenants on a quarterly basis.
Work with tenants to
improve our assets
We agree plans with our tenants to upgrade and extend our homes. This makes them better places to live and work, increases their capacity, improves their sustainability and can broaden their offer, for example by adding specialist dementia beds. We can also work with tenants to develop new homes in areas with strong demand. These activities increase our rent, the value of our homes and our tenants’ revenues.
Optimise
portfolio
We regularly review our assets and categorise them as core, value-add or non‑core. Value-add assets are candidates for asset management. We may sell non‑core assets, so we can reinvest the proceeds and create more value, while improving overall portfolio quality.
Our competitive advantages
Our strategy delivered by our Investment Manager (IM) is our main source of competitive advantage. In particular, we benefit from:
Our strategic focus on upper mid-market care homes which we can acquire at below replacement cost with rents at affordable rates
The IM’s deep sector knowledge and understanding of how care businesses work, which helps with everything from buying the right assets to forming and maintaining supportive tenant partnerships
The IM’s relationships with care-home owners who might want to sell, the agents they work with and with potential new tenants. Great relationships and a proven track record can help us to buy assets off‑market or beat the competition even when we’re not the highest bidder
The IM’s asset management and development skills, so we can identify how to improve a care home before we buy it, successfully complete each project and improve returns by developing new homes
The value we create
Our high-quality business generates attractive and sustainable value for our stakeholders.
Tenants
Tenants can grow their business alongside ours, in a long-term relationship with affordable rents, which benefits both of us.
Residents and their carers
Residents benefit from security, stability and high-quality care and their carers benefit from a stable environment in which to receive training, alongside potential career progression in a vocational sector supporting vulnerable members of their community.
As a landlord we seek to support both residents and their carers through our willingness to invest in their homes to improve the spaces they live and work in, to create a lasting social impact.
Lenders
Our lenders can provide long-term finance to us on attractive terms, knowing we have a secure and resilient business, with strong cash flows.
Shareholders
Our model delivers predictable and rising revenue, so we can pay a progressive, fully covered dividend. There is also the potential for capital growth, which supports an attractive total return.
Careful cost control enables us to benefit from economies of scale as we grow. Many of our costs are fixed and some variable costs will step down as our asset value rises (including the IM fee, which reduces from 1.0% to 0.7% of NAV above £500 million).
Along with our conservative approach to debt finance, this helps to maximise the cash we can distribute to shareholders.