Landlords set to run Southern Cross care homes

One of the biggest landlords at care home operator Southern Cross is to take back control of homes it leases to the group and set up on its own.

NHP, which owns 250 of the homes currently run by Southern Cross, is expected to announce today that it will form a new care home operating company to run the homes in conjunction with Court Cavendish, a turnaround specialist run by industry veteran Dr Chai Patel.

The new operating company is expected to take over the homes once the wind-down of Southern Cross is complete, which could be at the end of October, it is understood.

NHP is already said to have secured the necessary funding and working capital and expects to achieve a seamless transition with no disruption for residents.

Southern Cross is the UK's largest care home operator with 31,000 residents, but ran into crippling financial problems this year due to a combination of a rising rent bill and declining fees from local authorities as occupancy rates declined.

The group had tried to negotiate a deal with its landlords to enable it to survive, but all 80 of the owners of its properties decided to walk away from the group, leaving it with no choice but to announce it would shut down.

Owners of 250 of Southern Cross's homes have already agreed to take them back and operate them themselves, but the fate of the remaining third of its 752 homes is still undecided with negotiations ongoing with their landlords.

The Government has insisted residents will not be affected by the restructuring.

At the weekend there were reports a group of investors was trying to put together a plan to refinance a smaller Southern Cross group, but this was reportedly dependent on NHP's participation.

Court Cavendish, which specialises in turning around struggling healthcare businesses, was originally formed by Chai Patel in 1988 but was acquired by Bupa in 1998.

The former NHS doctor, who gave up medical practice in the 1980s to move into the City, re-established the business in 2007. He is best known for running the Priory chain of rehabilitation clinics, which was sold in 2005.

As NHP owns the freeholds to the homes the new company will operate, it will not have to deal with the rising rent problems that crippled Southern Cross, but it will have to tackle the problem of fees being squeezed.

A recent report by industry analyst Laing and Buisson suggested the care home sector is facing a fifth year of below-inflation increases in the amounts they receive for patients from local authorities.