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News

Nursery sector remains attractive to buyers despite operational challenges

The nursery sector continued to attract buyers during 2013, resulting in very competitive transactional activity, according a leading nursery property adviser.

Christie + Co revealed in its Business Outlook 2014 that despite the increased operational challenges for nursery providers due to an increase in the number of complaint-driven inspections by Ofsted, the nursery market is still strong.

Last year, saw the portfolio transactions of Busy Bees and Bright Horizons and alongside corporate investors, it was “cash-rich and experienced buyers” that were at the forefront of the buying activity.

Courteney Donaldson, director and head of Childcare, says: “Their ability to provide large cash deposits, reducing loan to value ratios, provided the banks greater comfort to back transactions. Banks and investors attracted to the day nursery and educational sectors have gained confidence and comfort.”

Christie + Co’s Business Outlook 2014 claims that ‘many nursery providers were hindered by Ofsted’s continuing struggles with inspections in 2014 — compounded, it must be said by the increase in the number of complaint-led inspections to which their energies were devoted’.

For many nursery providers, issues with the inspection process, teamed with changes in Ofsted inspection outcomes and the implications of this, compromised their attempts to operate coherently and effectively, according to the property adviser.

Looking ahead to what 2014 may hold for the sector, Ms Donaldson added: “Activity across the major transactional market will take a back seat as deals, especially in the nursery arena, will become more regionally driven.

“Banks, investors and buyers will increasingly see value outside of the major conurbations and regional groups will use the opportunity to expand. There will undoubtedly be an increase in regional nursery groups, and owners of high quality single asset nurseries, being in receipt of direct approaches from prospective buyers.”

February 2014