Social Sciences - OU Community Online

A popular financing model is less appropriate in today’s economy

SOUTHERN CROSS, a British operator of care homes for the elderly, is battling for its corporate life. This week it arranged a deal on rent reduction with its landlords in an attempt to reduce its operating costs.

As is quite common in other property-linked businesses such as retailing and cinemas, Southern Cross does not own the homes it operates. It has had a rather complex corporate history, having been owned by private-equity firms and expanded through mergers with other groups. Perhaps the crucial deal was a merger with another care-home operator, Highfield, whose homes were owned by a linked but separate company called NHP, now Southern Cross’s biggest landlord. The Highfield/NHP split is known in the jargon as the “opco/propco” model (for operating company and property company, respectively). ...