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Southern Cross Care Homes In Trouble

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Southern Cross care homes has 31,000 residents spread over 750 homes and made a £310m loss in H1.

They have come up with a cunning wheeze to save the company: pay 30% less rent!

This typifies the problem with the UK. High property costs are acting like a noose around the neck of every person and business in the land. So I say congrats to SC for figuring out who the villain of the piece is and shafting them appropriately.

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Southern Cross care homes has 31,000 residents spread over 750 homes and made a £310m loss in H1.

They have come up with a cunning wheeze to save the company: pay 30% less rent!

This typifies the problem with the UK. High property costs are acting like a noose around the neck of every person and business in the land. So I say congrats to SC for figuring out who the villain of the piece is and shafting them appropriately.

This would be the same SC who sold the properties they owned off at inflated top of the market prices (and withdrew the cash as profits) and then rented them back and prices that rely on local council paying ever increasing amount to cover the costs...

Very similar to the problems that certain pub cos are having.

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This would be the same SC who sold the properties they owned off at inflated top of the market prices (and withdrew the cash as profits) and then rented them back and prices that rely on local council paying ever increasing amount to cover the costs...

That'll be them. I have no sympathy for them.

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This would be the same SC who sold the properties they owned off at inflated top of the market prices (and withdrew the cash as profits) and then rented them back and prices that rely on local council paying ever increasing amount to cover the costs...

Very similar to the problems that certain pub cos are having.

Why is there a long term flaw in this short term easy profit business model?

Still I'm sure someone has walked off with a nice pay packet.

Edited by interestrateripoff

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Highest paid director's salary: £643,000. :)

Yes, and all of this money made at the taxpayers expense no doubt.

What is really worrying, is the fact that more and more people are going to be needing long term care as the population ages, assuming no solutions from medical technology. And I dont see that there is going to be a similar increase in labour willing to take on the task of doing that care.

Result, the price of care will rise and rise, until it becomes untenable. And then what? We are talking so untenable that the government will collapse just like Greece if it tries to pay the market rate, and if it doesnt pay, people dont get care.

No matter how difficult it is to come to terms with, I think we will see this situation come about, where the costs of care can no longer be afforded. People who cannot care for themselves and have no financial resources, will just have to fend for themselves.

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This would be the same SC who sold the properties they owned off at inflated top of the market prices (and withdrew the cash as profits) and then rented them back and prices that rely on local council paying ever increasing amount to cover the costs...

Very similar to the problems that certain pub cos are having.

Great reminder! - Well done koala! :)

The real picture?

A US Private equity firm clears Southern Cross out - then they demand UK Govt move in to support it so they can make another killing.

By Peter Bill on November 29, 2010 9:09 AM | No Comments | No TrackBacks You have to admire the brazen gall of Blackstone. The tale of how the US private equity house made a killing on care home operator, Southern Cross, in 2006 is related in the post below. Now the guys who sold hundreds of homes and saddled a firm with a £240m a year rent bill, one which is killing the operating side of Southern Cross, want to buy back in, says the FT today. An opportunity to make a second killing perhaps?

As the post below concludes, the only way Southern Cross will be able to afford a better service for its 30-odd thousand elderly clients is to halve the rent bill.Bankers at Morgan Stanley have been hired by the management (at great cost, no doubt) to renegotiate downwards the upward-only rent agreements. A failure to do so, so far, was no doubt the cause of the collapse of talks on Friday with private equity house, TowerBrook Capital.

So, who are the lucky landlords in receipt of a guaranteed £240m a year? I spent many an unhappy hour trying to find out for an Evening Standard article in October 2008. No luck. Some light has been shed in a Telegraph profile today of Southern Cross CEO, Jamie Buchan. He says three quarters of the 754 homes are owned by 10 landlords, suggesting most of them are debt funds sold the guaranteed income streams: by Blackstone perhaps?

"It's like herding cats" to get them to negotiate, says Buchan. That's because these cats prefer the dark. The best card Southern Cross has to play is that nobody dare bankrupt an operating company that tends to 10% of UK care home residents. The second best card is to shine a light on the landlords. The trouble is that in having Morgan Stanley negotiate, they have chosen another cat that prefers to operate in the dark.

So, expect to remain in the dark: especially if Blackstone, or another private equity fund, takes control. After all, whose interests would transparency serve? To repeat: the only sustainable solution is for the Opco to reunite with the Propco by using half the current rent bill to pay the interest on debt used to buy back the properties at half the price they were sold by Blackstone. The problem is that this screws the chance of anyone making another property killing.

http://www.estatesga...r-bill/2010/11/

Edited by erranta

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There's been a growing culture in the UK of adults of care home age parents wanting their cake (inheritance) and eating it (care homes at tax payers expense). Until this is truly addressed, the proverbial brown stuff is very much going to hit the fan. dry.gif

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This has the potential to be a major political disaster if Southern Cross does go bust. Stephen Dorrell was interviewed about it on Today this morning, and all he could do was to express the hope that if SC does go down, that any new buyer will try to continue running it as a going concern. He did not address (nor was he asked) the possibility that finding a buyer might be easier said than done, given that SC no longer owns any bricks-and-mortar assets, and nor did he address the consequences if an administrator cannot continue running SC as a going concern because they don't have enough money to do so. Forgive me if I'm missing something, but the endgame appears to be either tens of thousands of grannies turfed out onto the street or a humongous, open-ended taxpayer bailout.

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.....so basically, this is no different to a homeowner (with no job) selling their house and using the proceeds for fantastic once in a lifetime year long world cruise. Then coming back to the UK, renting a flat being paid for by Local Housing Allowance.

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Great reminder! - Well done koala! :)

The real picture?

A US Private equity firm clears Southern Cross out - then they demand UK Govt move in to support it so they can make another killing.

They can demand as much as the like. The response will be Foxtrot Oscar.

tim

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They can demand as much as they like. The response will be Foxtrot Oscar.

tim

?

The government said it was in regular contact with the company and local authorities while work was being done to secure Southern's future.

Labour urged ministers to put in place a plan to ensure continuity of care.

"Ministers must get a plan B in place if the company can't sort out its problems," he said.

So the US hyenas already did their dirty work killing all equity then relying on "Secure Govt payments" as framework of running a weird sort of business.

The elderly people in question are last in line for any sort of consideration or 'protection' by the UK authorities against these hyena attacks!

What seems to be expected is another tax-payer bailout by incompetent Politicians

The ones in charge in 2006 who let this sale go through should be stripped of any Govt Pensions and forced to pay back any payouts they received - or jailed for non-payment

Edited by erranta

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.....so basically, this is no different to a homeowner (with no job) selling their house and using the proceeds for fantastic once in a lifetime year long world cruise. Then coming back to the UK, renting a flat being paid for by Local Housing Allowance.

There's a difference. In the SC model (and Punch Taverns, Pizza Express before it, M&B etc) the fantastic once in a lifetime cruise is actually taken by the person's financial advisor (in the same way the private equity firm that bought the original company is the one that makes the money, not the management or shareholders for the most part).

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The ones in charge in 2006 who let this sale go through should be stripped of any Govt Pensions and forced to pay back any payouts they received - or jailed for non-payment

This is a legal change that might actually work. If a company goes bust all payments to directors over the last N years (maybe three or even five) should be clawbackable. That would concentrate minds.

PS: Foxtrot Oscar means F*** Off

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?

So the US hyenas already did their dirty work killing all equity then relying on "Secure Govt payments" as framework of running a weird sort of business.

The elderly people in question are last in line for any sort of consideration or 'protection' by the UK authorities against these hyena attacks!

What seems to be expected is another tax-payer bailout by incompetent Politicians

The ones in charge in 2006 who let this sale go through should be stripped of any Govt Pensions and forced to pay back any payouts they received - or jailed for non-payment

This is a very real problem. Poker is being played here. Give us the money or we will give you some very bad headlines. If the UK government stands firm, it is going to have to watch people that cant look after themselves being turfed out into the streets. If it caves in, everyone is going to be trying to do this.

At some point, you have to stand firm, or go bust.

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This is a very real problem. Poker is being played here. Give us the money or we will give you some very bad headlines. If the UK government stands firm, it is going to have to watch people that cant look after themselves being turfed out into the streets. If it caves in, everyone is going to be trying to do this.

At some point, you have to stand firm, or go bust.

Thinking like a Tory....

Clearly what we need is an open market in grannies. Anyone can bid for a granny - successful bidders will get paid £3,500 per WEEK to accommodate each granny (you can apply for more than one.) Minimum term is one week after which you may apply to renew your granny or send her back. Ofgran, the Office of Granny Regulation, will be established to monitor standards across all granny care providers (GCPs), and the GTA (Granny Transport Agency) will be responsible for moving grannies between locations, and the auction process will be managed by a consortium of investment banks headed by Goldman Sachs.

In the longer term the market will shake down into a collection of large GCPs which will be floated on the stock market.

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Southern Cross care homes has 31,000 residents spread over 750 homes and made a £310m loss in H1.

They have come up with a cunning wheeze to save the company: pay 30% less rent!

This typifies the problem with the UK. High property costs are acting like a noose around the neck of every person and business in the land. So I say congrats to SC for figuring out who the villain of the piece is and shafting them appropriately.

Yep. Please see my forum signature, below.

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Thinking like a Tory....

Clearly what we need is an open market in grannies. Anyone can bid for a granny - successful bidders will get paid £3,500 per WEEK to accommodate each granny (you can apply for more than one.) Minimum term is one week after which you may apply to renew your granny or send her back. Ofgran, the Office of Granny Regulation, will be established to monitor standards across all granny care providers (GCPs), and the GTA (Granny Transport Agency) will be responsible for moving grannies between locations, and the auction process will be managed by a consortium of investment banks headed by Goldman Sachs.

In the longer term the market will shake down into a collection of large GCPs which will be floated on the stock market.

Trouble is Nationalist, what do you do when you dont get enough bids for all the Grannies. You can have failed bond auctions you know, what do you do with surplus Grannies?

This is a serious question by the way. One solution is to raise the price, but how much tax do you think our robust economy can stand?

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This would be the same SC who sold the properties they owned off at inflated top of the market prices (and withdrew the cash as profits) and then rented them back and prices that rely on local council paying ever increasing amount to cover the costs...

Very similar to the problems that certain pub cos are having.

It looks as though they cashed in the profits for themselves and expected the state/residents to pay the extra difference....this does not sound like a caring hedge fund but a profit making entity in it for themselves that couldn't lose....but the payers and losers are left to pay the price. :(

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Trouble is Nationalist, what do you do when you dont get enough bids for all the Grannies. You can have failed bond auctions you know, what do you do with surplus Grannies?

This is a serious question by the way. One solution is to raise the price, but how much tax do you think our robust economy can stand?

At £3500 a week I can't see that happening.

However, you're right, to be a proper auction there should be no limit. Lowest bidder gets the granny even if that bid is £1 million/week.

But realistically, think of all the people who will bid. Kids away at Uni? Take a granny. Hotel can't sell all its rooms? Take a granny. Can't fill your BTL? Take a granny. Excess army housing? Take a granny. Grannies are very convenient; they are delivered to your door, and collected for return. You must look after your granny though. Grannies are inspected on collection and any damage and you'll be liable.

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At £3500 a week I can't see that happening.

However, you're right, to be a proper auction there should be no limit. Lowest bidder gets the granny even if that bid is £1 million/week.

But realistically, think of all the people who will bid. Kids away at Uni? Take a granny. Hotel can't sell all its rooms? Take a granny. Can't fill your BTL? Take a granny. Excess army housing? Take a granny. Grannies are very convenient; they are delivered to your door, and collected for return. You must look after your granny though. Grannies are inspected on collection and any damage and you'll be liable.

There are some reports on here of higher rates than that being charged. That can only be if the buyer of the service is corrupt, bad at negotiating, or the provider really isnt willing to provide the service for that price.

As for not being able to see it happen, well if people live longer and demand for this sort of care rises, prices will rise too, and it is surprising just how far they can rise when the service needed has to be provided. Being able to walk away from a deal is the most powerful weapon you hold as a buyer. That weapon is missing from the armoury of the public servant seeking to purchase care.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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