2016 – The Year of the Elderly?

Nursing HomeAttracting nursing home investment and the EIIS 

As we get geared up for Budget 2016 we start to think about the future. In order to build the economy and create more jobs we need to attract all types of investors. Ireland is ready for investment but do we have the investment schemes in place to help? We have an increasing shortage of nursing home beds and this is a sector that badly needs investment from both home and abroad. So what’s available?

Enterprise Investment Incentive Scheme (EIIS) 

Last year we saw the expansion of the Enterprise Investment Incentive Scheme (EIIS) (this expansion is still subject to EU approval expected October 2015). This had previously replaced the Business Expansion Scheme. The EIIS was expanded to allow a company to raise up to €5m annually and the categories of sectors eligible for the scheme were expanded to include nursing homes. This is a great opportunity for those in private healthcare and nursing homes to attract new investors, hire more employees and make sure they develop top-class facilities. This scheme basically allows investors to deduct the cost of the investment they make under the scheme from their total income before calculating income tax (up to a maximum of €150,000). What’s not to like?

The Deal 

Investors are generally locked in for 4 years and the investment must be in an unquoted qualifying company. The companies being invested in must have an experienced management team, a recognised market, potential for growth, a clear strategy and the likelihood of return on investment after the 4 year period.  Sounds like a nursing home business would fit the bill! People will age and nursing home beds will be needed. This is an undeniable fact.  Nursing Homes Ireland has stated that the population projection for persons over 65 for the year 2021 is over 730,000. This is a 37% increase on the population in 2011. The opportunities are massive and the EIIS can help.

The Concerns 

However IBEC and others have raised concerns as to whether EIIS is pitched only at traditional investors. The scheme requires that the company being invested in must prove that they have increased employment levels or hit specified R&D spend requirements. This can put certain investors off and clouds their ability to see potential return on investment. A huge portion of nursing home costs relate to setting up the facilities and getting to HIQA and HSE standards. This means capital expenditure and the banks are hesitant. Therefore the nursing home sector needs to attract both traditional and non-traditional investors so it can grow to meet the inevitable demand. The EIIS should be simplified.

The Good News 

The good news is that several investment vehicles will be coming to market in Q4 2015 with investment opportunities in various sectors including healthcare and technology. If you are on the look out for a sound investment, don’t leave nursing homes off the list!

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