AR: I think we would have to gear the team up a bit. In our business, we have to ask, what is a controllable pace of growth? We would not want to find ourselves in a position where we have to open five or six homes in a year. At the end of the day we are a care business so everything has to be done in a controlled fashion. The resident is the number one priority for us.
CHP: You must know the schedule for the properties you will be opening in 2017-18, but do you also know where you will be opening in the years after that?
AR: We know the sites we are tentatively teasing along in the background. Next year, around the summer time, we will open a home in Sunninghill just near Wentworth (Berkshire). We will open a new home in Camberley (Surrey). We are about to go on site in Ottershaw near Chertsey, (Surrey). We will go on site this summer in Reigate (Surrey). We have just received planning consent in Bushey in Hertfordshire. That will be a start later this year. I would say at any time there’s another half a dozen sites that are at an advanced stage in our pipeline.
The market for land is interesting because there is such huge demand and prices have gone up dramatically in the last 2-3 years. Securing land under the right type of contract is challenging, but we are getting good visibility over a range of sites in areas that interest us.
CHP: Would you describe the six homes around the M25 as assisted living, care homes, nursing homes? Here in Coombe you appear to be a hybrid.
AR: The apartments that we offer would register to the outside world as assisted living but eight of our nine homes are registered for the provision of residential care, nursing care and dementia care. When we are looking to build homes with 90 units, our aim would be for 24 of those to be in a secure, high quality, dementia wing.
CHP: What is your thinking behind providing the secure dementia rooms rather than creating a home filled with less dependent residents?
AR: We were keen to do dementia; we were keen to do nursing care. What we are finding is that there is a demand for dementia care in every area we go into. The demographics of dementia are interesting. What I have noticed from the six homes that we have opened in the South-East over the past few years is that the dementia units have filled up most quickly. What also happens is that, as the community matures, some residents in assisted living apartments transition to our dementia units.
We want to be a company where, irrespective of the level of care you need, you can come and live in a beautiful environment created by Signature.
CHP: I’m sure you don’t want to speak about residents as numbers on a spreadsheet, but you must track data such as yield per square foot or yield per resident. How does that work at Signature? And isn’t it tougher to make money from residents with complex conditions like dementia than it is from healthy assisted living residents?
AR: In respect of dementia , you probably yield less on a square foot basis – it is slightly more labour intensive – but we tend to look at our homes as an overall business.
We are dealing with very savvy institutional and individual real estate investors and we tend to look at an overall yield on total cost of 10% when a home is mature. That is after management fees, because we have 25 year management contracts on our homes. That sort of return is compelling for these senior living real estate investors.
CHP: That is certainly a healthy yield given that they will also be enjoying capital gain on the real estate and the value of the business. What is the secret?