And for that reason, my mum’s out

I recently looked at contributing to a bridging loan to a company to complete a residential care home for the elderly. I’ll keep the numbers round for confidentiality reasons.

The key financials seem fine, with the facility sited in a demographic sweet spot and forecast to command above-market fees of £600/resident/week due to positioning as a high end option.

But the low operational costs – 90% of which are wages and food – startled me.

Food and drink is budgeted at under £4/person/day. I swapped a few messages with a relative who manages food operations for a budget restaurant chain. Choice quotes:

“Three meals a day? They don’t eat that much I suppose”

“Drinks too? Haha. You’d struggle with that big time”

Back-calculating on staffing costs gives 3 hours of work by a minimum wage employee per resident per 24 hrs. Well, I guess they won’t be spending much time cooking food.

With the loan paying at 10% and secured with a first charge against the property itself at 50% LTV, I’m not sure I’m out. But I definitely wouldn’t want my mum to be in.

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One Response to And for that reason, my mum’s out

  1. Eva Smagacz says:

    you have a fridge with quality food on display for any relatives nosing about and industrial fridge with pasta, sauce, peas and tapioca pudding further back. You offer to cook special, favourite, foods for few more wealthy (or choosy) residents and this pays cook’s wages.

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