Nursery & Childcare Market News - 01 Feburary 2006
Busy Bees are Nexus fund’s first customers
Busy Bees are Nexus fund’s first customers
Major provider Busy Bees has completed a sale and leaseback deal on two of its settings through the £50m PINE fund.
The fund has bought two of Busy Bees medium-sized nurseries in Hertfordshire for a total consideration of £2.2m and rented them back to Busy Bees on 30-year leases. Both parties were unwilling to discuss what the investors yield would be.
Busy Bees finance director Simon Irons told NCMN that the company decided to take the sale and leaseback route as it has got to the point in its development where it has £30m invested in nursery properties. Busy Bees saw sale and leaseback as an opportunity to recycle capital invested in its mature settings and use it to expand its portfolio. The company wanted to raise capital mainly for its nurseries that operate alongside the NHS under a PFI arrangement, which typically offer 100-120 places, and was keen to find an alternative to increasing bank debt or its private equity funding from Gresham. Busy Bees plans to open a minimum of four new settings this year.
He also said that the company has performed well over the past year and earning grew by 25-30%. The directors view the business as robust enough to enter a sale and leaseback arrangement that carries operational risks rather than strictly financial ones. Mr Irons said that Busy Bees probably has £10m of assets that could be used in this way but whether the company enters into sale and leaseback arrangements for more of its sites would depend on the need to raise capital, which is currently not a priority.
Alan Proto, managing partner of Nexus Pine LLP, the UK manager of the fund, said he expects two more sale & leaseback transactions with other nursery providers to be completed by the end of this month; with a further four deals due to take place over the next three months.
The fund is seeking to agree sale & leaseback transactions with operators ranging from the largest nursery providers in the country to individual nurseries following a series of seminars across the UK late last year to explain the process.
Many large providers in the UK day nursery market are expected to follow a similar route in order to release capital for future expansion and to reduce loans owed to banks or private equity backers as their portfolios mature. For example, major provider Kidsunlimited completed a transaction on four units last year with Arlington Property Investors on behalf of National Trust for Scotland for a reported £4m.
