CareTech raises £30m in ground rent agreement

Social care provider CareTech said it had raised £30m in cash to support its growth strategy through a ground rent deal.

Under the terms of the agreement, the freehold to 41 CareTech properties will be transferred to Alpha Real Capital's managed funds in exchange for the cash and security of tenure with a 150 year term.

The starting rent will be £1.07m a year, which will rise with the Retail Price Index on a five yearly compound basis at between 0%-5% annually.

CareTech said the deal "releases a significant amount of cash for reinvestment in growth opportunities whilst maintaining a virtual freehold interest in the properties, which are located mainly in the South East and represent less than a quarter of the company's freehold portfolio".

As part of the transaction, the valuation of CareTech's entire property portfolio has been updated, which post transaction, now stands at £282m.

The company said its loan to value ratio, before application of the proceeds for growth, of less than 50% and a net debt to earnings before interest, tax, depreciation and amortisation ratio of less than 4x.

"The transaction also highlights the extent to which the valuation of our freehold portfolio is in excess of our book cost," CareTech said.

"There is no requirement to pay off any existing bank debt as a result of the transaction, supporting the updated freehold valuation and our low loan to value ratio. This utilisation of existing assets gives us additional resources to continue to grow our business and fits into our overall long term growth strategy."

Chief executive Farouq Sheikh said the company had already identified a number of "potential earnings-enhancing acquisition opportunities, which we believe will meet the evolving requirements of care commissioners along with our own growth criteria".