CARE HOME FATCATS WHO WON’T HAVE TO SELL UP
They bet millions on the dementia crisis – and their lifestyles would make their residents weep ...
BRITAIn’S four largest privately run care home groups are owned by multi-millionaire private equity barons and financiers who hoped to cash in on the enormous fees they could charge vulnerable dementia patients.
The stream of profits the tycoons had hoped to make from providing this service to frail and elderly patients — in some cases via companies in tax havens — may not have materialised. Yet their vast fortunes still stand in stark contrast to the hardship suffered by residents and their families who struggle to pay exorbitant fees.
The four leading firms — Four Seasons, HC-One, Barchester Healthcare and Care UK — are laden with huge debts amounting to hundreds of millions of pounds and all face an uncertain future.
As a consequence, there is also uncertainty over the fate of the residents and the tens of thousands of care staff who work in the sector, doing difficult jobs for often very modest reward. Four Seasons, the biggest operator in Britain, was bought several years ago by private equity boss Guy Hands’s vehicle Terra Firma and is now controlled by a U.S. hedge fund.
It fell into administration earlier this year and is desperately hunting for a buyer to take on its struggling business. Despite this, Hands, 59, enjoys a plutocratic lifestyle in tune with his extreme wealth.
He and his businesswoman wife Julia, 59, who runs the Hand Picked high- end hotels, bask in a fortune estimated at around £265 million.
Hands moved to Guernsey a decade ago where he bought an enormous house, secluded behind trees to preserve his privacy, with panoramic ocean views.
The couple also have a timbered property near Sevenoaks in Kent. And they bought the 1,760- acre Villa Saletta wine estate in Tuscany in 2000, where they restored the vineyards.
Their rarefied existence could not be more different from that of many of the company’s care home residents, who have had to sell their cherished family properties to pay the fees.
Despite charging the residents fees running into tens of thousands of pounds per annum, Four Seasons went into administration in the spring after making losses of £146 million before tax in its latest financial year.
This has put the future of around 17,000 elderly people and 20,000 staff across more than 300 homes under a cloud.
The administrators are trying to sell the chain, which is still nominally owned by Terra Firma, though for more than a year it has been controlled by the largest shareholder, H/2 Capital, a U.S. hedge fund.
H/2 is run by American Spencer Haber, 50, who made his fortune at Lehman Brothers, the collapsed Wall Street bank, before starting his own business in 2004. Haber’s great passion outside making money is helping animals that have been badly treated.
His animal welfare foundation helped to evacuate dogs and cats trapped by Hurricane Irma in the British Virgin Islands in 2017 and he has also worked on a film about a Costa Rican toucan which was attacked by thugs.
Four Seasons has £625 million of debt
and Terra Firma has made losses of £450 million on the deal.
Hands is likely to take his ill-fated foray into care homes in his stride, having conducted billions of pounds worth of transactions in his long and lucrative career.
He has previously been involved in catastrophic deals including his purchase of EMI in 2007, where his personal losses were estimated at £156 million. However, his successful deals have outweighed the duds.
Hands is not alone in getting his fingers burned. Over the past two decades the care- home sector, previously state- run, has been a happy hunting ground for financiers looking for a quick buck — with disastrous consequences.
THE first harbinger of doom came in 2011 with the spectacular collapse of Southern Cross, then the largest operator in the UK, under a multi-millionpound pile of debt.
Southern Cross had spent a period in the ownership of U.S. private equity giant Blackstone which made enormous profits of £600 million in a mere two years from the care home chain and a sister company.
Private equity and other financiers pounced on the sector in the belief they would reap a steady stream of high fees from an ageing population in increasing need of care.
In reality, they were hit by rising costs as rent bills, wages, food, heating
and medical costs all spiralled — and this came on top of the huge interest charges on their mammoth debts.
It also coincided with a squeeze on the fees local authorities are prepared to pay for elderly people deemed unable to fund their own care.
experts believe that the debtheavy business models are unsustainable. this could have a huge cost to society because if care home firms do run into financial difficulty, then facilities may be shut down or have to be taken over by local authorities.
But some wealthy owners have taken large sums in dividends for themselves even as the entire sector struggles with huge debts.
Chai Patel, a former NHS doctor turned multi-millionaire entrepreneur, founded the hC- One care home business, which has around 11,000 residents in more than 240 care homes, out of the ashes of Southern Cross in 2011.
the firm paid out an astonishing £48 million in dividends in 2017 and 2018 to its shareholders.
Beneficiaries include a company controlled by Dr Patel, the former owner of the Priory chain of celebrity rehab clinics.
It is not the first brush with controversy for Patel, 64. he was dragged into the ‘cash for peerages’ scandal in 2006 when he wrote to the house of lords appointments commission to protest about reports that his nomination as a labour peer had been blocked.
Separately, he was cleared in 2005 of professional misconduct by the General Medical Council over allegations of mistreatment in a care home run by a company where he was chief executive.
ASelF-MADe man, who arrived in the uK from uganda as a teenager and who grew up in a council flat over his father’s South london newsagent’s shop, he has built a personal fortune thought to be around £50 million.
the dividend bonanza was ladled out regardless of the fact the hCOne care home business made an £8.7 million loss in 2017 and only a small profit of £52,000 last year.
hC-One has nearly £300 million of debt and the ultimate parent company of the business is incorporated in the tax haven of the Cayman Islands. Other companies in the complicated corporate structure are registered in Jersey.
the use of tax havens is common among companies, but is
controversial in the care home sector, which relies on taxpayer-funded fees.
HC- One said the system for funding elderly social care in England is ‘broken’ and added that it supports the Daily Mail’s campaign to secure reform.
It said that the firm is expected to deliver high-quality care for just £4 per resident per hour and that 80 per cent of costs are salaries and pensions for its staff.
The spokesman added: ‘ Our owners have spent more than £100 million of their own money over the past three years to refurbish our homes, upgrade equipment and develop an awardwinning colleague training programme.
‘Further significant investments are planned this year and the long-term financial commitment of our owners has been crucial to the sustainability of our services.’
Another leading firm, Care UK, which has 116 homes under its control, made a loss of £54 million according to its most recent accounts. It is owned by private equity firm Bridgepoint, which bought the chain in 2010 in a £414 million deal.
Bridgepoint put Care UK up for sale last year, but is no longer seeking a buyer.
Critics say that too many of the UK’s care homes are being operated under a business model based on short-term profits and large levels of debt. They argue that this is unsuitable for a business meant to cater for elderly people and ordinary families with limited resources. A trio of Irish billionaires, John Magnier, Dermot Desmond and J.P. McManus, are behind Barchester Healthcare, which has around 200 facilities with 12,000 beds in the UK.
THE company has around £321 million of debt in the form of £162 million of finance leases and a bank facility of £159 million. It made modest profits of just under £ 7 million in 2017 according to its latest accounts.
The billionaires have hoisted a ‘ For Sale’ banner over the business but Australian bank Macquarie, which had been interested, recently pulled out.
Magnier, 71, whose fortune is estimated at £2.25 billion, is best known for his horse-breeding empire. McManus, 68, is another horse racing tycoon, reputed to be worth around £2 billion.
Desmond, 68, thought to be worth just under £2 billion, owns a large shareholding in Celtic FC.
Last year he secured planning permission to build a mansion on one of Ireland’s most exclusive roads, featuring an underground swimming pool, a gym, cellar, games room and sunken courtyard, plus a garden designed by a landscape architect who won three gold medals at the Chelsea Flower Show.
He was given the green light to demolish the previous grand property on the site to make way for his sprawling new residence. Baroness Ros Altmann, a Conservative peer and campaigner for the elderly, said: ‘It feels like a financial game is being played that stacks the cards in favour of the owners of those companies.
‘It leaves those that need care at risk because there are no protections if the finances go wrong.
‘I can’t imagine how appalling it must be for families losing their modest family home, when the company bosses are living such lavish lifestyles.’