The Autumn 2013 Healthcare Research and Market Review met with great success. Over 165 clients attended the event at The Grand Connaught Rooms near Covent Garden representing a wide cross-section of operators, investors, funders and consultants. Walter Boettcher (Research) and Nicolaus White (Healthcare) set the stage by presenting updates on the UK economy and the latest Care Home key performance indicators:
• Walter said that despite economic improvements, the government remained committed to ‘Plan A’ and that local authorities were still squeezed and hence referral fee levels were still under pressure. He also noted that the Adult Social Care legislation was still moving through parliament, but even if Royal Assent was receive in mid-2014, an election in 2015 presented an impediment to long-term care funding with regulatory certainty unlikely until 2016.
• Nicolaus presented the latest KPIs and concurred that referral fees for care homes were actually falling in real terms. He noted though that occupancy levels seemed to be showing signs of bottoming out, but that in both cases, some individual operators and care homes were bucking the trend, suggesting that service excellence appears to be rewarded in many instances as some individual operators have been able to push up fees.
Dr Mark Jackson from Saga and Keith Crockett from US REIT then discussed both problems and opportunities in the UK healthcare sector.
• Dr Mark Jackson gave a brief history of the NHS explained the logic of its original design and how that logic no longer applies. In 1947, most people went into hospital with an acute condition and either lived or died. Long-term chronic conditions were not as common as most people did not live much beyond retirement. The mismatch of resources to needs that we see today will not be remedied by the NHS because it is resistant to change. Likewise politicians have seemed to only address the problems randomly over the years. Consequently, it looks as though the private pay part of care services will continue to grow even though this does not ensure a fairness in access to care services.
• Keith Crockett reviewed the structure and strategies of his company arguing that the UK is in a position similar to that of the United States some 15 years ago and that the lessons learned from developing the first generation of assisted living, close care, retirement villages and other similar formats would now be transplanted into the UK. They already have strong links with local development partners, but going forward competition for sites will increase as general residential house builders begin to build again. He argues that the cost of debt had risen again, but that yields in Europe and the UK were high enough to be attracting investment from the US.
Adam Lenton (Head of Healthcare) then rounded up the discussion summarising the discussions and the opportunities and took questions. Though questions were few given that the event ran over by about 15 minutes, one guest took the opportunity to announce that he had a Saudi investor looking to place $500 million into UK healthcare. Given the recent results of Collier’s Global Investor Sentiment Survey, it would appear that foreign investors are looking beyond core markets and core assets into more specialised areas of property investment.