Retirement and care homes – just follow the money

Yesterday it was announced McCarthy & Stone (the UK’s best known builder of retirement accommodation) is in talks with two private equity consortia.

The approaches value the company at more than £900m, reflecting a strong six-month run for the house building sector that has seen McCarthy's market value rise by nearly 50 per cent.

The builder's unrivalled position in the retirement homes business and the strength of its brand has attracted the interest of Permira and Barclays Capital, which have teamed up to make a joint bid.

Private equity groups have been expanding rapidly into the retirement and healthcare sectors. It doesn’t take a genius to guess the reason. One, the ageing population. Two, this type of business has a regular and predictable cash flow.

The FT comment on this said: “Retirement homes are more vulnerable to fluctuations in the market because they are reliant on elderly people being able to sell their homes in order to 'trade down' to the one- and two-bedroom units that McCarthy builds”.

This is such a 1990s view of the retirement housing market. In 2010 there will be a buoyant market for people with not just one but two retirement homes. Sure there will still be a lot of the today's type retirement accomodation but there will a lot at the luxury end of the market.

There is so much going on this market. Look at my post on Monday June 5th about the UK’s largest care homes operator Southern Cross Healthcare who is looking to a stock market floatation that is expected to value the firm at around £500 million. Dick Stroud