'Child’s Play' for Gerald Eve’s Nursery Sale & Leaseback

The sites, acquired by Three Little Birds in March 2021, are at varying stages of maturity, with two having opened as recently as August and September 2020.  The portfolio’s huge growth potential was a deciding factor for the nursery operator, who intend to grow to 30 sites whilst retaining their focus on providing premium, quality, childcare.

We undertook a discreet, targeted marketing campaign and identified a specialist investor, AEW UK Real Return Fund, who acquired the freeholds with new 25-year index-linked leases.  The deal enables Three Little Birds to focus on their core business, operating nurseries and educating children, whilst the capital generated will facilitate their ambitious expansion plans.

The price paid was £13.7 million and represents a Net Initial Yield of 5.25%, reflective of the strong investor appetite for well-located, high quality nurseries and the emergence of social impact funds focused on socially responsible real estate classes with sustainable long-term fundamentals.

Day care nurseries, despite being closed during the first lockdown, were rightly recognised as core social infrastructure by the government during the second and third lockdowns.

Edward Long, Director at AEW commented: “We are pleased to have acquired a portfolio of four preschool nurseries located across London let to Three Little Birds Nurseries. Like most sectors, operationally, children’s day nurseries have been impacted by the current global pandemic caused by COVID-19. Although deemed a key industry throughout the pandemic, with many having stayed open during the various national lockdowns offering childcare to key worker children. Despite the operational challenges facing the sector at present, demand for good quality settings is still strong. Looking forward there is confidence that post the pandemic, there should be continued demand from parents for formal childcare, albeit, perhaps on a more flexible basis to work with the changing demands of a more flexible ‘working from home’ nation. We look forward to working with Three Little Birds to provide excellent childcare locations for the local communities and long-term, inflation linked returns for our investors.”

Gerald Eve are pleased to have acted on behalf of the leading nursery operators in recent years.

Morgan Allen, Partner at Gerald Eve said: Nursery assets, offering good long-term income in strong catchments, have continued to hold investor interest. This disposal has freed up capital for the operator’s wider operational strategy. We are very pleased to support emerging operators such as Three Little Birds and are delighted at the strong investor appetite for good quality assets such as these and buoyancy of the nursery market despite the pandemic.

For more information about Three Little Birds, please visit www.threelittlebirdsnurseries.co.uk.