Ground Rent Transaction

CareTech Holdings PLC

("CareTech" or the "Company")

Ground Rent Transaction Raises £30 million

CareTech Holdings PLC (AIM: CTH), a pioneering provider of specialist social care services in the UK, announces that it has raised £30 million in cash to support its growth strategy through an innovative ground rent agreement with the funds managed by Alpha Real Capital LLP ("Alpha") at a net initial yield of 3.4%.

Under the terms of the agreement, the freehold to 41 CareTech properties are transferred to Alpha's managed funds in exchange for a cash sum of £30 million and security of tenure with a 150 year term. The commencing rent will be £1.07m per annum, which will rise with the Retail Price Index on a five yearly compound basis at between 0% and 5% per annum.

The transaction releases a significant amount of cash for reinvestment in growth opportunities whilst maintaining a virtual freehold interest in the properties, which are located mainly in the South East and represent less than a quarter of the Company's freehold portfolio.

As part of the transaction, the valuation of the entire property portfolio has been updated, which post transaction, now stands at £282m. This gives a loan to value ratio, before application of the proceeds for growth, of less than 50% and a Net Debt to EBITDA ratio of less than 4x.

The transaction also highlights the extent to which the valuation of our freehold portfolio is in excess of our book cost. There is no requirement to pay off any existing bank debt as a result of the transaction, supporting the updated freehold valuation and our low loan to value ratio. This utilisation of existing assets gives us additional resources to continue to grow our business and fits into our overall long term growth strategy.

Farouq Sheikh, CareTech's Executive Chairman, commented:

"We operate in a growing and fragmented market in which the regulatory environment is driving consolidation and creating significant opportunities for growth. Last year we raised £21 million in a share placing, and have already invested the proceeds in earnings enhancing acquisitions. Although we have already negotiated a further £30m on top of our existing bank debt facilitates, we are delighted to enter this non-dilutive ground rent agreement with Alpha to raise a further £30 million in cash to invest in the development of our business at a very attractive yield.

"Ground rent transactions are new to the care sector but have been used extensively in the hotel and leisure industry and we have worked closely with the Healthcare Team at Knight Frank to achieve this excellent outcome for our shareholders.

"We look forward to deploying the funds raised and have already identified a number of potential earnings-enhancing acquisition opportunities, which we believe will meet the evolving requirements of care commissioners along with our own growth criteria."

Julian Evans, Head of Healthcare, Knight Frank LLP, commented:

"Ground rents are a mature product within the residential and wider commercial property markets. CareTech has taken first mover advantage within the UK healthcare arena. We expect this model to become increasingly attractive to investors and operators alike."

Patrick Grant, of Alpha Real Capital, commented:

"We are delighted to launch our new ground rent fund with a seed portfolio of high quality specialist healthcare real estate with CareTech as our partner. We have utilised our experience of working with owners of specialist operational real estate and their funders to use new long term capital provided by pension funds as a way of reducing gearing and re-capitalising assets to provide more efficient long term capital structures for the asset owners which is a key part of our strategy moving forward."

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About CareTech

CareTech Holdings plc is a leading provider of specialist social care services, supporting adults and children with a wide range of complex needs in more than 250 specialist services around the UK.

Committed to the highest standards of care and care governance, CareTech provides its innovative care pathways through five divisions covering adult learning disabilities, mental health, young people residential services, foster care and learning services.

CareTech, which was founded in 1993, began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. Its freehold portfolio comprised more than 180 properties.

For further information please visit: www.caretech-uk.com.

About Alpha Real Capital

Alpha Real Capital is a co-investing funds management group focussed on investing in real estate, infrastructure and other asset-backed markets. Founded in 2005, Alpha is owned by its partners and has over £1billion of assets under management. Alpha has a focus on long income investing including freehold ground rents, social infrastructure and renewable energy infrastructure.