What we are looking for:
- Purpose built or well converted settings
- More than 45 places
- At least average fees for the area
- Good occupancy levels
The valuation
- Will be based on a professional valuation of each setting
- Will reflect the value of the operation, as well as the “bricks and mortar” value
- Earnings in the setting before tax, excluding depreciation (EBITDAR), must be at least 1.8 times the proposed amount of rent
The yield
- Depending upon the strength of the covenant, around 7.75% on the amount we pay for the setting
The lease
- Initially twenty-five to thirty years
- Inside the Landlord & Tenant Act, so security of tenure thereafter
- Rent to increase in line with RPI, subject to a minimum annual increase of 2.75%, and a maximum annual increase of 7.5%
- Test of the rent against open market rent at years ten, twenty and thirty
- No initial requirement for Directors guarantees
- No initial requirement for rent deposits
- There are a series of requirements upon you as a tenant, necessary in order to satisfy our lenders & investors:
- You will have full responsibility for repairs and maintenance
- You will need to report all correspondence with Ofsted to us
- You will need to share monthly management accounts information with us
- If the financial performance of the setting breaches the EBITDAR : Rent ratio, then we will seek a rental deposit
Timing
- Because property transactions are much quicker than business sales, we can complete the purchase of your freeholds within four - six weeks of agreeing terms
The benefits
- This is an opportunity to:
- Pay off more expensive forms of funding
- Raise more funds than available by other means to fund further expansion
- Take money out of the business risk free while retaining control of the business
- Realise more money, by splitting sale of business into sale of freeholds and sale of leasehold business, than would be possible via sale of freehold business
- Rent will reduce as share of costs as fees increase with wage costs
- You will have security of tenure
- VAT will not be charged on the rent
