East Anglia: Rent lifeline for care homes group Southern Cross

STRUGGLING care homes operator Southern Cross will today start underpaying on its rent as it continues to seek a long-term solution to its financial woes.

Southern Cross, which runs around 750 care homes across the country, including nearly 30 in Suffolk and Essex, is to pay 30% less than the rental sums due on its properties over the next four months.

The group, which has an annual rental bill of around �230million, will repay the shortfall when its finances allow – meaning in effect that it is receiving a loan from its landlords while it seeks to stabilise its finances on a more permament footing.

Southern, which is responsible for the care of around 31,000 residents, also has until the end of the four-month period to secure a deal with its lending banks, an extension from a previous deadline at the end of this month.

Ongoing negotiations also include the possible disposal of some homes and a potential longer-term cut in rents on its remaining units. Some landlords, particularly those which are care home operators themselves such as Four Seasons, could choose to take back some of Southern’s homes, and there has also been speculation that some homes might close.

At the weekend, however, the Association of Directors of Adult Social Services moved to reassure residents and their relatives that it would help Southern Cross get back on its feet.

ADASS president Peter Hay said: “As councils buying care from Southern Cross, we are willing to work with all parties to support the recovery of the business.”

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Last month, as it announced a pre-tax loss of �311million for the six months to March 31, Southern acknowledged that it was in a “critical financial condition”.

While its rental bill has been rising it has suffered from a decline in income from local authorities, with fewer councils placing residents with the company.

Local authority admissions declined by 15% in the first half of its financial year, although this was partly offset by an increase in referrals from the NHS (which, together with local councils, accounts for 70% of the company’s patients) and a rise in private patients.

Overal occupany levels across its homes fell by three percentage points to just below 87% and revenues for the first half fell by 3% to �464m.

Southern Cross has four care homes in Suffolk, in Ipswich, Bury St Edmunds, Long Melford and Nayland, and 24 in Essex, at locations including Lexden and Great Horkesley near Colchester, Clacton, Maldon, Witham, Braintree and Stansted Mountfitchet.