- Royal Free Charity bought current operational site at Chase Farm Hospital for £50m
- This helped Royal Free London FT end 2016-17 with a £15m surplus, after it was previously forecasting a £39m deficit
- Charity intends to develop housing for key workers on the site
- Trust says the deal was cleared by NHS Improvement and Charity Commission
A large acute trust that reported a dramatic deterioration in its finances at the start of the year has now met its financial plan after selling land to its charity arm for £50m.
At the end of January, the Royal Free London Foundation Trust was forecasting a year-end deficit of £39m for 2016-17, which would have been £55m worse than its planned surplus.
However, board papers for April said the trust ended the year with a £15m surplus and included some details about a transaction in which land at Chase Farm Hospital in Enfield was sold to the Royal Free Charity.
The trust confirmed to HSJ the sale resulted in a major boost to the trust’s reported revenue position and enabled its financial control total to be met.
The deal related to the current operational site at Chase Farm Hospital site, labelled “parcel B”, which was sold to the charity for £50m. The trust has been planning to sell this site as part of the development of a new hospital on adjacent land, which is due to open in 2018.
HSJ understands several land disposals were completed by NHS trusts in the final quarter of 2016-17, which will help improve the outturn position for the provider sector, but not the underlying financial position. Details of these should emerge in the coming months.
The value of the Chase Farm site on the trust’s balance sheet was around £3m, due to its age, so the deal generated a £47m profit and revenue benefit for the trust.
Chris Burghes, chief executive of the Royal Free Charity, told HSJ part of its strategy has been to buy land from the trust to provide housing for staff, and discussions over the transaction had started last year.
Asked whether the trust’s financial struggles in 2016-17 were a key driver for the deal, he said: “I can’t say the trust’s revenue position was the one factor that prompted the deal, but it was there in the background.
“Opportunities like this are in line with the charity’s five year strategy which aims to provide services for patients which support their clinical care.
“The charity has invested in property for a number of years and with Chase Farm one of the key things we’ve wanted to do is procure land for key worker housing and to retain ownership of that.”
The trust said the deal has been cleared by NHS Improvement and the Charity Commission, and specific guidance that governs this type of transaction was followed.
This involved the trust obtaining two formal valuations, and taking the average figure as the sale price. The charity also obtained a separate valuation, which was within £200,000 of the trust’s figure, and therefore enabled the sale to proceed under the guidance.
Caroline Clarke, deputy chief executive and director of finance at the trust, said: “If we hadn’t done this deal in the last financial year, we would have done it during 2017-18.
“It suits us to get things like this done as quickly as possible, in line with appropriate regulations, so we can focus on delivering the very best care to our patients and are not spending all of our time on one-off transactions.”
Ms Clarke and trust medical director Professor Steve Powis are also directors at the charity. Ms Clarke said they were excluded from discussions about the transaction due to potential conflicts of interest.
After meeting its 2016-17 control total, the trust is expected to receive its full allocation of £18m from the sustainability and transformation fund, which is designed to incentivise strong financial performance.
A smaller transaction has also been completed between the trust and the charity involving the Royal National Throat, Nose and Ear Hospital.
Most of this site was already owned by the charity, but part was owned by the trust and has now been sold for a £9.2m profit. However, University College London Hospitals FT run services on the site and is expected to benefit as part of the arrangement.
Board papers and information provided to HSJ
2 May 2017