31,000 Elderly Homeless?
Monday 14th March 2011
31,000 ELDERLY RESIDENTS IN
SOUTHERN CROSS CARE HOMES FACE
BEING MADE HOMELESS AS GMB CALLS FOR QIA TO CLEAR UP THE FINANCIAL
MESS CAUSED BY SKY HIGH
RENTS
These 750 UK Care homes are
not factories that are failing from lack of demand but are an
essential part of every community which now face ruin due to the
combination of privatisation and private equity
31,000 elderly residents in 750 UK
care homes, run by Southern Cross, across Britain face the
prospect of being made homeless as the company struggles to pay sky
high rents on the freeholds of the buildings used as the care
homes. This morning (Monday 14th March 2011) Southern
Cross issued a profits warning and the share price has now lost 97%
of the price it was floated for in 2006.
Earlier this month GMB staged another
demonstration against the Qatari Investment Authority (QIA), which
owns Harrods the total lack of action by the QIA on the sky high
rents charged for care homes for the elderly owned by the QIA in
Britain and the continuing tax avoidance on the income from these
rents as the funds are channeled to off-shore tax havens.
Overcharging on rent amounts to £60
per week per care home bed. The public funds involved was intended
to be used to pay for the care of the elderly in Southern Cross
care homes. Instead these funds are being used to pay the interest
on £1,100m bonds raised by the QIA when they bought the care home
builidngs from a private equity company in 2006. Taxes on this
income are avoided as the funds are funnelled via companies in the
Isle of Man and the Caymen Islands. See notes to editors for
details.
At the demonstration outside Harrods
GMB protesters were dressed in Bedouin attire and had oil drums and
placards with slogans calling for QIA to stop ignoring the
issue.
GMB has 10,000 members working for
Southern Cross care homes for the Uk's elderly. These members are
paid the National Minimum Wage (NMW) and the majority have had
their pay frozen. A list of all 750 Southern Cross care homes is
available at http://www.gmb.org.uk/ at the foot of
this release in the Newsroom.
Paul Kenny GMB General Secretary said,
"It is time for the QIA to clear up the financial mess that
it and the private equity industry created at Southern Cross and
which now threatens to make 31,000 vulnerable elderly UK residents
homeless.
These 750 UK Care homes are
not factories that are failing from lack of demand but are an
essential part of every community which now face ruin due to the
combination of privatisation and private equity.
The boast of the private
sector is that it can run services better than the public sector
can. This is yet another case of where the private sector has
already made huge profits from the public funds and now expects the
tax payer to pay to clear up the mess now that it is all going
wrong. For over a year GMB has been calling on the QIA to step in,
pay down the borrowing on the homes and reduce the rents. The QIA
has ignored GMB's demand.
The QIA raised £1,110 million
in bonds to buy 300 care homes from the private equity company
Blackstones in 2006. Rents are being overcharged to the tune of £60
per week per care home bed. Most of this is public money. It is
needed to care for the elderly in the homes. It is being used
instead to pay interest on these enormous and expensive bonds which
was never the intended purpose. To add insult to injury these funds
are being funnelled to off-shore tax havens and no tax is being
paid in the UK on this income.
The elderly residents in the
care homes are being made to pay for the syphoning off of these
funds intended for their care. Staff turnover in the care homes is
very high because of the low pay to the workers the majority of
which have had their pay frozen. This lack of continuity of
care staff has an adverse effect on the care the elderly
receive. They now face the prospect of losing
their homes."
Ends
Contact: Justin
Bowden, GMB National Officer on 07710 631351 or Paul Clarke 07713
077193 or GMB Press Office: Steve Pryle on 07921 289880 or Rose
Conory on 07974 258123.
Notes to Editors:
1 GMB
estimate that rents for the 752 Southern Cross care homes are
£100m higher than they should be. QIA acquired the freehold in up
to half of the homes in 2006 and are still the legal owner of them.
In January 2010 GMB wrote to councilors on a number of councils to
bring to their attention GMB's concern about high rents charged by
the owners of buildings, including QIA. used as Southern Cross
Care Homes and the lack of transparency regarding who owns the care
homes and the financial returns to the ultimate owners of the
properties.
There are 752 Southern Cross Care
Homes in the UK with a total of 38,603 care beds for the elderly
(September 2010).The published accounts for that period showed that
in 2010,Southern Cross paid £248.3m in rent to the owners of the
properties. GMB research indicates that up to half of the
properties were acquired by a company called NHP, of
which the ultimate parent company is Delta Commercial Property.
This is a company owned by the Qatari Investment Authority and is
registered in the Isle of Man. The financial returns for this
company are consolidated within Libra No.2 Ltd, a company
incorporated and registered in the Cayman Islands.
Southern Cross rents paid to the homes
acquired by QIA in 2010 equated to £6,444 per bed. This was a
1.5% increase on the 2009 figure when the rent was £6,348 per bed
which was a 4.9% increase on the 2008 figure of £6,050. This in
turn was a 3.1% increase on the 2007 figure when the rent per bed
was £5,866. This in turn was a 7.9% increase on the 2006 figure
when the rent per bed was £5,435. Thus in the past 4 years rents
have gone up by 18.6% at a time when property values were
falling.
GMB have told the councilors that use
Southern Cross to care for their clients, paid for with public
money, that if the beds were used for different purposes the market
clearing rents paid to the landlords would at least £100m less. If
the accommodation was used for students, for example, GMB conclude
that the total amount the landlords would receive is £121.8m.If the
space were made available for private residential use, GMB consider
that this would give rise to £139.5m in annual rental income.
2 Southern
Cross- a financial history timeline
2004
Blackstone acquires Southern Cross from West Private Equity for
£162m. It then bought NHP for £564m (£1.1bn including debt). NHP
managed homes through its Highfield subsidiary, now owned by
Southern Cross and at the time Southern Cross was one of its
largest tenants.
2005 OFT
investigated the NHP takeover by Blackstone believing it to be
anti-competitive, particularly in Nottingham, Arbroath and Port
Talbot. After an investigation OFT did not refer the case to the
Competition Commission. (http://www.oft.gov.uk/shared_oft/mergers_ea02/2005/blackstone.pdf)
2006
Blackstone floated Southern Cross. NHP bought by Three Delta with
funds provided by the Qatari Investment Authority (QIA) for £1.3bn.
The £1.17bn debt NHP had was sold on to investors packaged as asset
backed bonds and subordinated debt. QIA, through Three Delta,
already owns The Senad Group, Four Seasons Health Care and Care
Principles. It is the performance of these health care investors
coupled with the failed Sainsbury bid which led to the split
between the QIA and Paul Taylors Three Delta investment group.
2007
Blackstone sold remaining stake in Southern Cross. The 'buy and
build' technique is understood to have netted a fourfold return for
Blackstone.
2008
Southern Cross failed to pay back a £46m loan facility, unable to
offload the properties attached to recent purchases. The banks
agreed to a renegotiation but the company were likely to pay higher
interest rates.
2009 NHP
in negotiations over the restructuring of more than £1bn of loans
that have been in default since November 2008. Its portfolio was
worth £243m less than the loans secured on it.
GMB informed that owners of NHP are in
negative equity and QIA have lost a lot on money on the transaction
but are still the legal owners of the homes.
Three Delta big wigs: three
non-executive Directors: Sir Peter Middleton, the former Chairman
of Barclays Bank and Permanent Secretary at HM Treasury, Sir
Christopher Howes, former Chief Executive of the Crown Estate, and
Nick Land, former Chairman of Ernst & Young LLP. David Mellor,
former Tory cabinet minister, was business development director of
Three Delta. The current Business Development Director is Malcolm
Le May. Delta Commercial Property is the name of the investment arm
of Three Delta that acquired Four Seasons Health Care and the NHP
portfolio. The results of NHP Ltd are consolidated within Libra no
2 Ltd, its immediate parent undertaking.
Qatari Investment Authority was
established in 2000 with $40 billion. The fund does not report how
much money it has invested or how much they have added to the fund.
As a result, there is much debate on how much the fund actually
has. There have been estimates of $50 billion and as high as $75
billion. Most likely it is around $60 billion. The QIA is
controlled by Sheikh Hamad bin Jassim bin Jabr al Thani, the Prime
Minister of Qatar. Due to the private nature of sovereign wealth
funds and investment firms, there is a cloak of secrecy surrounding
their activities and internal affairs, they are government owned
and are not officially answerable to any international body and
have no obligation to make any disclosures about the source of
their funding. Most of the companies involved with Three Delta are
Limited Liability Corporations and as a result, little and in some
cases, no information is publicly available.
Qatari Investment Authority holds a
7.1% share in Barclays. They have recently taken a share in Porsche
and currently own about 26% of Sainsbury.