First it was car-parks, then apartments. Now it is looking as if custom-built nursing homes and retirement villages will be the next big investment area for developers. With a large, and growing, demand for places - in the Dublin area especially - along with the fact that there are 100 per cent tax allowances for the construction of nursing homes, private investors and companies are actively looking to cash in on the "grey economy" and develop both individual homes and groups of homes. Encouragement too has come from AIB's £50 million fund to part-finance capital investment and restructure/renovate nursing homes and from the decision by Cormac Crawford's Ailesbury Corporate Finance to arrange finance for investments in nursing homes.
The Sandown Group (a subsidiary of the Australian healthcare company Moran Group) and Mowlam Residential Care Ltd recently announced a joint venture to spend £40 million on a minimum of 24 purpose-built nursing homes in this country. At least 12 sites have so far been acquired.
An indication of the likely return on nursing home investment can be gauged from the cost of care in the Dublin area, where the average weekly bill for an individual in a home is between £400 and £450. The demographics, and what the Department of Health calls "the challenge to the health services of a rapid increase in the population of older people", show there may be high returns on investments in this area.
What the latest projections of the National Council on Ageing and Older People indicate is that the country's older population will have grown by almost 108,000 people, including an extra 40,000 over 80 years old, in the period 1996-2011 and will then represent 14.1 per cent of the total population. The Department sees the care of older people as one of the "key issues" for the coming decade. With some 11,000 long-stay beds and approximately 12,000 private nursing home beds in the country - about 4,500 of which are in the Eastern Health Board area - the Department says that the provision of "high quality" residential care for older people has been designated "a priority".
The 100 per cent tax allowances work out at 15 per cent for each of the first six years and 10 per cent for the seventh year and have led, according to Dave Fee of Christies Property Services, to a "marked increase in investment this year". He believes the "nursing home industry is going to change radically" over the next four to five years but says too that, though there has been "a lot of recent interest, with investors and companies talking about plans for groups of homes", he has not yet "seen any of these putting brick upon brick, or actually building." He sees most interest coming from Irish investors and is sceptical about the imminent arrival of the multi-nationals. "Big companies need to establish their brand name in this country and ideally would like a flagship institute in Dublin and a group of homes dotted around the country, not too far from Dublin. But would-be investors are competing for locations against builders who want the land for housing schemes. Planning permission too is not easy to get. It's strict and the company must comply."
Mr Fee does say, however, that "individual, private developers are building lovely nursing homes. The typical thing is for a husband and wife team, with money from land or a house sale, to build a one-off home. Invariably, the wife will have a nursing background and they will have together consulted with the Department of Health before building." He says that "quite a few such homes are going up around the country" and that they are being "purpose-built since conversions don't usually work". Such custom-built homes are usually single-storey and allow for 330 sq ft per resident.
Smaller homes no longer work. Mr Fee points to a 20-bed nursing home on Christies's books "which we couldn't sell because it wasn't viable as a nursing home. To make it a viable proposition, you need 30 or more beds. It has to do with the economies of scale and the fact that it's now as cheap to run a 30-bed as 15-bed home.
FROM a financial point of view, smaller establishments don't work out by the time staff are paid. The result is that many of those who own older, smaller nursing homes are selling up".
Christies is currently looking for an operator for a newly constructed nursing home in the midwest which will cater for more than 50 residents. The home will have all the latest mod cons including a low-surface touch heating system and four special bathrooms, two of them with therapeutic baths. There is also outline planning permission for 30 units of sheltered accommodation in the grounds which will be developed as required. Advice abounds for those thinking about entering the new investment area. The Department of Health advises anyone thinking of building a nursing home to consult first with the local health board. A spokesperson advised that the catchment area needs to be assessed, as well as the "physical needs within the home".
Nursing homes are monitored carefully by the health boards, according to the spokesperson. The AIB Business Guide to Nursing Homes, produced in association with accountants BDO Simpson Xavier and auditors and accountants Carroll & Associates - who specialise in the nursing home sector - stresses that "the location and setting of the property is important to the success of any nursing home". Under "typical characteristics", it lists: seek advice on purpose-build and consult with the local health authority; accommodation should consist mainly of single rooms with en suite facilities; a good management team; proximity to an urban area; and a more than 30-bed capacity.
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