Aviva is selling the Retirement Housing Partnership portfolio for £90m in one of the largest deals of its kind so far in the emerging supported living market.
The 1,343-bed portfolio is expected to attract interest from private equity firms, institutions, housing associations and others looking to enter the market.
The flats are mostly one bedroom and spread across 250 locations around England, Scotland and Wales across a variety of building types, from whole blocks to houses and standalone units. Much of the stock was bought from existing retirement operators including McCarthy & Stone.
The portfolio, which has been in operation for more than 19 years, relies on private tenants rather than local authority referrals. Girlings, a retirement specialist owned by housing association Places for People, has the operating contract for the portfolio, which offers a relatively distinct rental-supported living model that focuses on “light touch” sheltered housing. It is aimed at elderly people who need a form of supported living.
RHP has a gross income of around £10.3m and a mean net rental income of £5.8m. Its reversionary rental value is £11.1m and voids stand at 7.5%. The average length of stay is more than six years, and 82% of its units are let on assured tenancies with RPI-linked rent reviews. Many of the tenancies are funded from housing benefits.
Aviva managed RHP on behalf of two of its funds.
The UK’s care, retirement and supported living sectors have generated substantial investor interest. Demographic trends and an acute shortage of stock are seen as key factors for generating returns. According to the ONS, there will be 12.8m over-65s by 2020, an increase of 10% on 2015, and 14.3m over-65s by 2025, an increase of 22%.
Operators such as McCarthy & Stone and Audley Retirement are targeting the upper end of the market with a retirement housing for sale model.
Other players such as Civitas concentrate on affordable supported living; the firm raised £350m for the first social housing REIT on the London Stock Exchange at the end of last year. Meanwhile, Morgan Sindall and the Universities Superannuation Scheme announced a joint venture fund that will invest £200m in supported living.
JLL is advising on the RHP sale.
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