The difference between property bonds and leases – and the consequences for healthcare.

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There are some 487,000 places in long-stay residential care and nursing homes in the UK representing an industry worth some £15.2 billion per annum. Creating leases with guaranteed rental uplifts, a property bond in all but name, now attracts significant investment into healthcare. This is argued to be unsustainable, as evidenced by the collapse of Southern Cross Healthcare. It is therefore important to provide insight into institutional investment for sustainable healthcare provision. In our study it was found that the differentiation between rental growth and indexed rental uplifts reveal a misunderstanding of the nature of the investment vehicles currently being marketed. The implication of this is that much modern private healthcare provision is financially unsustainable, as has begun to be recognised in new government regulation and guidance – recognising the difference in finance vehicles can help reverse this trend.

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