Clariane, one of the leading European community for care companies with operations in seven countries, has revealed a disposal programme of real estate assets as it struggles to access financing at a time of heavy interest costs and looming debt maturities.
Experts have been predicting a wave of distress stemming chiefly from rapid interest rates hikes seen in Europe for the past 18 months. France’s Clariane appears to be an example.
At a board meeting on Monday, the company agreed to try to take decisive action in order to restore its strained balance sheet.
The €1.5 bn four-point plan is a short term balancing act. The company faces €837 mln of debt maturing between now and 30th June 2025. Most of this is normal bank finance arrangements. That said, nearly a quarter - €190 mln – is in the form of real estate debts due between December this year and February 2024.
Clariane is formerly known as Korian and not only owns assets but is the single biggest tenant of the REIT, Cofinimmo, accounting for 15% of rental income.
It has properties in Belgium, France, Germany, Italy, the Netherlands, Spain and the UK – all markets where health care property specialists and other funds already have exposure to the asset class and could be looking for more at the right price.
Coincidentally, Knight Frank released a report this week suggesting resilience of the wider care sector, with UK care home operators seeing a 3% rise in occupancy levels.
Julian Evans, head of healthcare at Knight Frank, said: 'Overall, the trends presented in this report have, once more, highlighted the case for healthcare. The sector has been a topic of concern regarding its ability to weather storms ahead, and this is something that it continues to do tremendously well - for example, steady improvements in average occupancy year on year and the minimal compression of EBITDARM margins.'
'While inflationary pressures are evident through rising utility costs, we are hopefully through the worst. With the economy beginning to compose itself, we seem safer from irregular flections and therefore hope to see operational costs stabilise somewhat in the coming year. We are, and always have been, optimistic about the sector's outlook.'
Already, behind the scenes, Crédit Agricole Assurances – Clariane's main shareholder with a 24.8% stake - has been in talks with the French operator to prop it up with property purchases and a recap.
Crédit Agricole Assurances has agreed to buy a €140 mln portfolio of 19 health and health and medico-social establishments in France, representing 1,470 beds, while continuing negotiations on a second real-estate partnership, worth €90 mln involving UK assets, for which Crédit Agricole Assurances has undertaken to secure execution if necessary. These two partnerships are scheduled to be completed by the end of 2023.
For the French real estate deal, Crédit Agricole Assurances will subscribe for €140 mln in euros to bonds issued by the group's real estate subsidiary holding these assets, redeemable in shares of the special purpose vehicle, with a maturity of 7 years and a fixed coupon of 10.5%.
The UK property deal relates to 11 UK assets with a gross asset value of €227 mln and is currently being negotiated with a mystery third-party partner.
More property deals are to come - €1 bn of operating and real estate assets are to be sold in 2024 on top of the €230 mln of French and UK assets already being negotiated.
But some analysts believe the company might struggle to sell.
Green Street Analytics thinks the health care real estate investment market remains ‘subdued’ and the prospects of successfully selling large portfolios in the private market amidst a myriad of supply appear ‘dim’.
Orpea is also targeting real estate disposals of around €2 bn in 2024. On the flip side, floating such a sizeable real estate portfolio in a listed vehicle could be a viable option as public/private pricing reaches an inflection point, said Green Street.
In parallel, Crédit Agricole Assurances has been involved with Clariane over a rights issue. The proposal is to issue preferential rights to raise €300 mln with a guarantee from Crédit Agricole Assurances for €200 mln subject to certain conditions.
Philippe Dumont, CEO of Crédit Agricole Assurances, said: ‘Crédit Agricole Assurances, a long-term shareholder in Clariane, has confirmed its confidence in Clariane's strategic plan adapted to its current financing conditions and actively supports the Group's action plan, enabling it to regain the required room for manoeuvre to reinforce its value creation path and regain the confidence of its investors and all its financial partners.’
Sophie Boissard, CEO of the Clariane Group said: ‘Despite a solid operational performance, our access to financing has been significantly restricted since the end of October, in a deteriorated market environment. This action plan gives us the visibility and the required financial strength to pursue our mission with confidence. This transaction has been carried out with the support of our main shareholder, Crédit Agricole Assurances, whom I would like to thank for their long-term commitment to the Group and its stakeholders.’
Revenue figures for Q3 published on 24 October confirmed the resilience of the group's operating business across its various geographies, marked in particular by solid growth in revenue of 9% over the first nine months, a continued rise in the occupancy rate of nursing homes to 88.9% and the delivery of 58 new or renovated establishments with a total of 1,200 beds.
It is still going ahead with previously stated ideas to create a corporate university, the setting up of solidarity funds to help employees facing emergency situations and Fil Clariane, a helpline and advice line for carers.
But the company has reigned in investments since the start of the year.