Bupa lines up £450m care home exit

Bupa is selling half of its UK care home estate for £450m in a move to realign its business to offer more specialist care.  The healthcare provider has instructed Bank of America Merrill Lynch to find a buyer for the portfolio of 150 care homes. The portfolio, labelled Project Oval, comes with the 15,000 staff employed at the homes, but the Bupa brand is not included in the sale. It is expected to attract interest from an established healthcare player looking to amass further scale in the sector. Cuts in local authority funding and the complexities of running a care home operating company pose challenges for prospective investors. The government has acknowledged that there is a growing funding requirement that has to be met in order to meet demands of the UK’s ageing population. Craig Woollam, head of healthcare at Savills, said: “This deal will be attractive to buyers. If you look at the sector, the number of homes that have been closing compared with the level  of demand – the demographic time bomb looming – this is a good opportunity for somebody to reposition the assets, add value and add scale. “It will be most attractive to mid-market operators that do not want to go into new builds as it would take forever to build a portfolio of this size.” Most of the assets in Project Oval are older and no longer in line with Bupa’s business objectives. Bupa operates around 300 care homes across the country and recently positioned itself as a specialist provider of dementia care and the care of frail and disabled people. It is likely that it will use the money raised from the sale to invest in more new-build facilities. Bupa’s diverse care home portfolio ranges from medium-sized homes serving private clients to very large homes which serve the state-funded market. Much of the portfolio comprises assets it acquired in the 1990s, when it bought businesses such as Greenalls Group, Goldsborough Healthcare and Care First, as well as the homes formerly owned by Community Hospitals Group. Pension funds Octopus Healthcare and Target Healthcare REIT have been looking closely at care home portfolios in recent years, investing £1bn in the sector in 2015. Private investors and charitable funds have also begun to target opportunities in the market. A growing market £15.9bn estimated value of the UK care home sector 1.5m number of old people living in care homes by 2018, up from 433,000 in 2014 5.8% increase in proportion of UK population aged over 65 by 2031 Source: LaingBuisson’s Care of Older People UK market report • To send feedback, email amber.rolt@estatesgazette.com or tweet @amberrolt or @estatesgazette