Nikko exits UK hospitals deal

Nikko Cordial has sold its 80 per cent interest in 20 UK hospitals back to Capio just 12 months after agreeing a 30-year sale and leaseback agreement with the Swedish healthcare group.

Nikko Principal Investments, the London-based structured finance division of Japanese financial services group Nikko Cordial, said it has sold its majority stake in UK Healthcare Partners, a partnership owning 20 UK private hospitals, back to Capio, the previous owner of the assets. Nikko acquired the hospitals from the Swedish healthcare group in June 2002.


Capio, which had first acquired the hospitals as part of its acquisition of the UK’s fourth largest private hospital operator, Community Hospitals Group, in 2001, has agreed to pay £262m for the 80 per cent interest. Capio already owns the remaining 20 per cent stake.


The original deal between NPI and Capio was structured as a £250m sale and leaseback, with Capio agreeing to an increased annual rent increase over 30 years, with an initial rent of £21m. The hospitals were held through a limited partnership structure, UK Healthcare Partners Limited Partnership Incorporated.


The deal was heralded as the first of its kind in the private hospital sector and, according to Nikko, the firm received ‘considerable interest’ from investors attracted by the opportunities in the private healthcare market. 


A year on, said Nikko in a statement, Capio was persuaded to reacquire the properties because of the attractive financing environment, particularly the more advantageous interest-rate situation, and the Swedish group’s ambitious development plans for the properties.


“Capio's desire to regain control of its strategic property assets against an attractive financing backdrop has enabled NPI to exit in a short period of time with very attractive returns,” said Brian Berry, chief executive of Nikko Principal Investments, in a statement. “We remain convinced of the attractions of the healthcare field generally and continue to seek new investment opportunities.


“The division pioneered a new structure, based on a limited partnership, which received interest from a lot of investors wishing to buy the business,” said a Nikko spokesperson. “Capio decided that it would buy the business itself, employing the same structure employed by Nikko.”


The properties will be placed in newly established property company Capio Healthcare Properties AB (CHP). CHP is financing the acquisition with a capital contribution of £7m from Capio AB and bank loans totaling £255m. Nikko declined to reveal the return on its investment, although a spokesperson described the deal as ‘attractive’.