People and Property are the Foundations for the Future
Specialist residential healthcare provider secures funding and support for care home ownership
- Company turnover: £60 million
- Sector: Healthcare
- Exemplar is a leading provider of residential and nursing care for people with complex care needs. It offers both rehabilitation and maintenance pathways in a dedicated environment.
- A landlord offered an opportunity to buy the freehold of (ultimately) 12 care homes. The incumbent bank would not provide finance.
- Santander worked closely with Exemplar's FD and CEO to understand the commercial drivers of the deal, proactively going through due diligence with them on each property to ensure a smooth and fair outcome.
- The deal totalled £41 million, including Treasury services, deposit accounts, Bacs and bank accounts for 20 homes in the portfolio. The amount was structured into a single commercial mortgage for simplicity's sake.
- The deal boosted the balance sheet of Exemplar and allowed the company to reap the benefits of improvements to its properties.
- With improved cashflow and a stronger balance sheet the company has opened five new homes and added up to 70 beds a year in the past. The financial support also helped the business achieve a management buy-out (MBO).
Exemplar Health Care is a business built on the passion of its managers and employees. They are committed to providing the best possible service to individuals requiring very complex care in highly specialist care homes. With support from Santander the business expanded rapidly and has recently completed a management buy-out (MBO).
Gap in the sector
Established in 1999, Exemplar began life as a training company, coordinating courses for care home workers and helping operators to remain compliant with regulations. It went on to open a number of its own properties, but it wasn’t until 2002 that the company identified a gap in care home provision that would become its major focus.
“There was a light-bulb moment,” says Managing Director Euan Craig. “Our founder Julie Quarrington saw someone with severe disabilities being cared for in a non-specialist home. He literally had nothing to do, there were no stimuli and nothing to occupy him or address his specific needs.”
Exemplar opened the first of its specialist homes in 2003. As Euan stresses, Exemplar has the facilities and expertise to deliver outcomes that would not be possible in conventional care homes. “We have a maintenance pathway but also a rehabilitation pathway,” he says. Where possible, Exemplar provides residents with the care they need to lead independent lives.
In 2008, Exemplar was given the opportunity to buy the freeholds of a number of its care home properties. The incumbent bank was the natural first port of call but was unwilling to provide the finance necessary to buy the seven properties on offer. “Responsibility had been moved from the bank’s commercial to corporate division and the relationship had grown more distant,” says Euan.
Exemplar was introduced to Santander through Savills Private Finance and, as Divisional Head Dasos Kirtsides recalls, the first step was to thoroughly understand the business. “We spent a lot of time with the CEO, the FD and their senior management team, understanding and talking about what Exemplar had already achieved and the case for buying the freeholds.”
Dasos and the Santander team saw compelling reasons for the transaction. Exemplar’s success was increasing the value of the property assets, but while these remained in third-party hands that rising value was only benefiting the landlord. Equally important, ownership would also improve cashflow, as the repayments on the debt would be less than the rental commitments.
From Euan’s perspective, Santander’s proactive approach to fully understanding the drivers of the business and the logic behind them was a breath of fresh air and fully in line with Exemplar’s own ethos. “We don’t see ourselves as a ‘corporate’ business,” he says. “Ours is very much a people business and we prefer to work with like-minded people. We liked Santander’s approach.”
Euan says a number of complex issues were handled smoothly by the Santander team. Each property required Santander and Exemplar to carry out the necessary due diligence. One home, for example, was situated close to old mine workings and he recalls Dasos carrying out in-depth research that would allow the deal to go ahead. “I was very impressed with the attention to detail,” he says. Despite the complexity of the deal, it all went smoothly. “It was the easiest banking deal I’ve ever done,” adds Euan.
Santander initially agreed to refinance Exemplar’s existing debts and fund the purchase of seven homes for £25 million. However, the relationship developed quickly and a few months later the bank provided funding for a further five properties. This took the total debt to £41 million, which was structured into a single commercial mortgage for simplicity – a sum that has been reduced to £33.5 million in the intervening years. In addition, Santander provides a range of banking services, including Treasury, deposits, Bacs and 20 separate accounts for the company’s portfolio of care homes.
Since the deal was completed, Exemplar has opened another five homes – bringing the total to 30 – and is currently planning the next phase of their expansion.
While the deal itself is specific to 12 properties, Euan believes it has been instrumental in helping the business achieve its ambitions. “We now have a much stronger balance sheet and we have control over our homes,” he says.
This healthy balance sheet meant the company has been able to move forward with its programme of opening new homes. It has also undertaken the improvement and expansion of existing homes, confident that this further investment will be reflected on the balance sheet.
“The finance and the support we had from Dasos was also important in helping us take the business to the market,” says Euan. Following an MBO, Exemplar is now owned by the management team and, with further expansion plans in the pipeline, discussions about a third loan have begun.
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Relationship Director Comments
We spent a lot of time with the CEO, the FD and their senior management team, understanding and talking about what Exemplar had already achieved and the case for buying the freeholds.