LENDER: BANQ HCABC - UK - Churchlake Care, LLC

BORROWER: Churchlake Holdings, Ltd (Europe)

LOCATION OF ASSETS; UK / England

TOTAL LOAN / CREDIT: $130,000,000 USD

TOTAL LOAN TO VALUE: Not to Exceed 75% 

HCABC OFFERING START DATE: Sept 1st, 2020

HCABC OFFERING END DATE: December 31st, 2020

ANTICIPATED FIRST CLOSING DATE: October 2020

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UNDERWRITER:

Private Placement Markets, LLC

1055 West 7th Street

Los Angeles, California 90017

Phone: (877) 259-8066

Email: Steve@PPMSecurities.com

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LOAN BROKER:

Private Placement Markets, LLC

1055 West 7th Street

Los Angeles, California 90017

Phone: (310) 779-7226

Email: Steve@PPMSecurities.com

__________________________________________________________

LOAN SERVICER:

Private Placement Markets, LLC

1055 West 7th Street

Los Angeles, California 90017

Phone: (310) 779-7226

Email: Steve@PPMSecurities.com

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HEALTHCARE ASSET BACKED

CERTIFICATES ("HSABC's"):

  • First Lien Position on all Subject Properties (current and new), not to exceed 75% of the "As-Is" Value.

  • 130,000 HCABC's

  • $1,000 USD Face Value per HCABC

  • Interest Rates: 3.50% to 5.75%

  • Interest Paid to HCABC Holders: Monthly

  • Maturity: 120 Months

  • HCABC Liquidity: Private Placement Debt Market

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BANQ HCABC - UK - CHURCHLAKE CARE, LLC (a Delaware Special Purpose Limited Liability Company, wholly owned and operated by Private Placement Markets, LLC (Delaware)) is looking to lend to Churchlake Holdings, Ltd. (an England Limited Company) up to $130,000,000 USD, secured by First Lien Position Loans secured to Real Estate at no greater than 75% of the "As-Is" Value of any Subject Property. 

Churchlake Holdings, Ltd. (the "Borrower") is an established private company that owns and operates healthcare properties throughout the UK.

The Borrower's Corporate Website is: https://churchlakecare.com/

​Current Portfolio of Properties Owned:

  • Axbridge Court Nursing Home (UK):

    • Value: $3,250,000 USD​

    • Current Liens: $2,112,500 USD

    • Equity: $1,137,500 USD

  • Belmont House Care Home (UK):​

    • Value: $3,250,000 USD​

    • Current Liens: $2,112,500 USD

    • Equity: $1,137,500 USD

  • Chichester Hall Care Home (UK):​

    • Value: $793,000 USD​

    • Current Liens: $578,890 USD

    • Equity: $214,110 USD

  • Elizabeth House (UK):​

    • Value: $1,137,500​

    • Current Liens: $830,370 USD

    • Equity: $307,130 USD

  • Ferns Nursing Home (UK):​

    • Value: $3,770,000​ USD

    • Current Liens: $2,450,500 USD

    • Equity: $1,319,500 USD

  • Hames Hall (UK):​

    • Value: $1,690,000 USD​

    • Current Liens: $1,223,700 USD

    • Equity: $456,300 USD

  • Hillview Nursing Home (UK):​

    • Value: $2,821,000 USD​

    • Current Liens: $1,833,650 USD

    • Equity: $987,350 USD

  • Holmewood Residential Home (UK):

    • Value: $2,164,500 USD​

    • Current Liens: $1,580,000 USD

    • Equity: $584,500 USD

  • Moorfields Residential Home (UK):​

    • Value: $1,560,000 USD​

    • Current Liens: $1,138,800 USD

    • Equity: $421,200 USD

TOTALS:

  • Value: $20,436,000 USD

  • Current Liens: $13,870,910 USD

  • Equity: $6,565,090

  • Current Loan-to-Value: 67.9%

The proceeds of this Offering will be used by the Borrower to purchase existing, or to develop / construct, additional Senior Care / Assisted Living Facilities throughout England. The Issuer will hold first lien mortgages / deed of trust on all current and future properties of the Borrower at Loan-to-Values not to exceed 75% of the “As-Is” value (existing properties) or “As-Improved” value (for renovations or constructions) as determined by a third-party real estate valuations expert (appraiser) with a strong work history in Senior Care / Assisted Living properties.

 

The aggregate lease / rental payments as determined by a third-party through a market analysis with respect to all new properties will be sufficient to permit the Borrower to make principal and interest payment on the Loan(s), plus cover all operating costs of each new facility with a “Debt Service Ratio” of no less than 1.25. All principal and interest payments will be passed through to the HCABC Holders.

 

The properties to be financed pursuant to this Offering will be completed before DECEMBER 31st, 2021. The Issuer / Lender will secure first lien mortgages / deed of trusts to each of the Subject Properties. See ITEM 8 of this Offering Memorandum for descriptions of the Properties that are expected to be financed with the proceeds of this Offering.

 

The Borrower’s strategy is to grow the company footprint through the acquisition of clusters and/or individual operating Senior Care Facilities, including any associated property(s). The scope of the strategy encompasses a combination of residential senior care facilities and nursing homes that have an efficient size with a mix of private pay and local authority funded. The Borrower’s hallmark is to create exceptional value by focusing on facilities that can benefit from consolidation savings through renegotiations, infusions of capital which will add value and uplift the quality of care provided.

 

The Borrower’s goal is to acquire a portfolio of Senior Care Homes of at least 1,000 beds, or 50 facilities, depending on the care mix. The Borrower would eventually look to exit from its investment(s) by trade sale, LBO or IPO.

 

Estimates in the UK show there are some 12,525 residential care homes and 5,153 nursing homes with approximately 405,000 total residents aged 65+.  Only 16% of UK residents aged 85+ live in a care home.  The number of people over 85 in the UK is expected to double within the next 23 years. 

Despite the demographic aspect which indicates a positive future for the care home industry, the number of beds available fell recently.  The profit margin of most care home businesses has been under pressure due to real-term reductions in fees from local authorities, the implementation of the National Living Wage, new workplace pensions, a shortage of trained staff (creating the need to hire high cost agency staff) and the continued requirement of the CQC to improve the quality of care provided. 

The industry in general is highly fragmented. Some 90 percent of Britain’s care homes are privately owned by ‘mom and pop’ or family owners which may be too small and inefficient to secure long-term financial viability.  The top ten largest providers hold just 24.6 percent of the market (number of beds), including four Seasons, the largest provider with only 6.1 percent of the market. 

The industry is in a difficult transition period as it is undergoing cost increase.  However, it is expected that fees from local authorities must eventually rise so as to derive stability of margins.  In the end, local authorities will be forced to accede to ‘reasonable’ annual baseline fee uplifts in order to avoid further judicial review challenges by care home operators.  Although economists may encourage local authorities to increase the provision of domiciliary care, there is a need to strike a balance with the core requirements of the individuals as well as the quality of life provided by care homes. 

The agitation is that unless the supply of new-build care homes increases from its current low level (approximately 7,500 per year), bed shortages will be seen in some regions, with the effect of forcing up fees.  Also, there is continued discussion on how the needs of the NHS for the provision of short-term respite care can be met at a lower cost (than a hospital stay) by integrating these needs with the provision of social care (some of which may be provided by Churchlake) These with other creative self-help ideas should boost income and margins for well-run care home businesses. 

Specialist care homes offer a different investment opportunity.  There are approximately 50,000 permanent residents in specialist care out of some 2 million persons with relevant disabilities.  Even if specialist homes have the same cost challenges as elderly care, the dynamics are different.  Homes are smaller, stays are longer, and margins can be higher, although some depends on occupancy rates and local authority funding.  There are incentives to transition persons for permanent care to supported and/or independent living arrangements which can also lead to a revenue generating commercial proposition. 

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