What can The PINE Fund Offer?
The PINE Fund offers an alternative source of funding providing Sale and Leaseback finance to the Day Nursery sector.
What is Sale and Leaseback finance?
Under a Sale and Leaseback agreement with The PINE Fund, we would acquire your freehold property interests at an agreed valuation, and then immediately rent them back to you on a long lease (15-years plus). The initial annual rent will typically be around 7.75% of the purchase price of the building.
The purchase would be made on the basis of a professional valuation taking account not only of the traditional land and bricks and mortar value, but also the facilities approved use in both planning and regulatory terms and the established operating location.
The lease would be inside the terms of the Landlord and Tenants Act (i.e. not contracted out) providing you with protected rights of renewal but no obligation.
What are the Advantages of Sale and Leaseback
to my business?
Sale and Leaseback finance offers your business a higher level of funding than senior debt finance – which is typically restricted to 60% loan to value.
Banks are increasingly uncomfortable to lend for more than three to five years. As such, what happens when it is time to refinance at the end of that time is inherently uncertain. A sale and leaseback with PINE is the equivalent of a twenty-five year loan with no capital repayments, known as payments of interest (in PINE's case, in the form of rent on the property) and the option to renew the lease at the end of the initial term.
Sale and Leaseback finance offers a cheaper form of funding than private equity finance.
Sale and Leaseback finance offers the opportunity to raise additional funds for expansion, reduction of expensive debt or even equity withdrawal without surrendering control of the underlying business.
Operators &/or Investors seeking to exit the business may discover that entering into a Sale and Leaseback finance arrangement first, may increase the number of potential buyers for the underlying business as the capital requirement will have significantly reduced. The aggregate proceeds from the Sale and Leaseback and sale of the underlying business may also prove to be greater than in a straight sale of the business including the freehold properties.
Purchasers of existing Day Nursery businesses may also find Sale and Leaseback finance a useful tool to finance the purchase.
Busy Bees
Dealing with PINE has been a good experience for Busy Bees, the things that impress us are:
- Once the deal was agreed PINE delivered without any further negotiation.
- Problems inevitably arise during the closure of a sale and leaseback, PINE were flexible and pragmatic in finding solutions with Busy Bees to these problems.
- PINE are innovative in looking for off balance sheet solutions to suit our strategy – they try hard to come up with fresh ideas that will help us deliver strategy. We are able to have an open conversation with them about an acceptable yield for them versus a sensible cost for us.
The emergence of sale and leaseback funds in the day nursery sector is good news, PINE are to be congratulated that they are leading this innovation.
Simon Irons
Finance Director
Busy Bees Group Ltd