Denis Knockton, Head of Healthcare at Metro Bank, offers his analysis of the social care investment climate.
CHP: How did you become involved in healthcare finance?
DK: My entry into the healthcare sector came completely by accident when I attended a Fast Track 100 Awards Dinner and was seated next to the then finance director of Barchester Healthcare. We got on like a house on fire and, after meeting up shortly afterwards, I was invited to join a Club Deal to support Barchester’s acquisition of Westminster Healthcare. The sector interested me from day one and since this initial introduction I’ve never looked back.
In 2013, I was fortunate enough to join the Metro Bank, which already had a highly successful primary healthcare offering. I led the expansion of the team into the health and social care sector, focusing on residential care homes, nursing homes, independent hospitals, home care agencies, community-based services and mental health services.
CHP: How do you assess the current care home investment climate?
DK: What with Brexit and the impact it may have on sourcing qualified nursing staff and care workers, you could be forgiven for thinking it is a tricky time for the sector. However, if you compare it to other industries, the UK’s ageing demographic, shortage of supply and care home closures exceeding new stock coming to market, all go some way to protect the elderly care sector from many of the macroeconomic challenges the UK currently faces.
With demographic projections showing a steady rise in life expectancy, especially in those aged over 80, long-term demand trends reveal increasing average occupancy levels of more than 88%, according to Knight Frank. This is especially apparent for those operators providing high-quality, modern ‘hotel-style’ and ‘home-from-home’ facilities. In the majority of cases, we have seen an increase in average weekly fees, which now outstrip the low levels of inflation. Future fee increases will be influenced by the outcome of the Government’s health policy, residents’ affluence and the residential property market (as many people sell their homes to fund their care). We have also seen a number of operators move towards private-paying residents, who are prepared to pay higher fees in return for high levels of care, quality of facilities and engagement through a range of activities and events within and outside of the home.
CHP: What size of care home providers do you invest in and why?
DK: At Metro Bank, we’re in a really strong position and able to support businesses, whatever their size, from sole traders to large commercials. One area where we are seeing high demand is development funding, with many operators beginning to consider their long-term growth strategies. I’m fortunate enough to speak to providers day in day out and it’s clear form these conversations that there’s an increasing trend among them where they’re beginning to think about the next phase of their journey, whether it’s refurbishing and extending existing homes or acquiring and constructing new purpose-built homes.
CHP: What types of care homes (residential/dementia/nursing) are you investing in and what parts of the market are you avoiding and why?
DK: Given the Health and Social Care Team’s expertise, we can support care home operators’ requirements in assisted living, residential, dementia, nursing, respite, learning disability, mental health and specialist schools. Our own entrepreneurial background means that we understand the way businesses in these sectors work and the challenges they face. Whether they are seeking advice on a funding solution, support for acquisitions of existing facilities or the development of a new purpose-built property, we’re in a great position to help.
CHP: What parts of the country are you focusing your investments in?
DK: Our reach covers all of England and Wales and we are able to provide funding for a range of uses, including property acquisition, asset purchase and working capital. What’s more, we’ve made our products and services simple and straightforward because we know our customers want to stay focused on running their business and not lose time because of complexities, that’s why our lending process delivers funding quickly and with minimum hassle, with rates and fees tailored to each loan.