A Practitioner's Guide to Rent Cover, Payor Mix, EBITDARM and What an Operating Asset Is Actually Worth
Julian R. Sterling
These are the companion files of Senior Living and Healthcare Real Estate by Julian R. Sterling.The book on Amazon →
Someone will tell you this home is worth £16.8 million and someone else will tell
you it is worth £14.2 million, and they are looking at the same roof. One is pricing a trade and
the other is pricing a lease, and the two only agree at one particular rent cover:
1.52x. The lease in front of you is written at 1.80x.
These are the workbooks the book was written from, corrected where they were wrong, and each
now closes on a checks sheet that ends ALL OK. Around them: the same four with the inputs emptied,
thirteen working documents to print, forty questions that mark themselves, and three cases the book
names and never takes to a number. Every number is a live formula. Nothing is locked, protected or
watermarked.
Twelve workbooks, the printable documents and the read-me. Each group below can also be
downloaded on its own. Last revised 24 September 2026.
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These carry the book’s own figures, so that every number it prints can be traced to a live
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The Care Home Model
The resident engine every figure in the book is computed from. A care home has no leases, so occupancy cannot be read off a schedule — it is built from admissions decaying against a hazard of leaving, each cohort carrying its funding source until the resident's capital runs out. 70 beds, the fee card, care hours through to loaded staff cost, the full profit and loss, the rent a cover ratio produces and the value by two routes. On the home in the book, 55 per cent of admissions arrive self-funding and 36.4 per cent of the BEDS still are. Overwrite the inputs and every figure moves.
Revised: the twenty-five-year sheet rounded each decile’s conversion month and did not even start the lease at 1.80x; it now runs 1.80x to 1.96x as the book does. The embargo sheet, which overstated six months of closed admissions by 96 per cent, is now a cohort engine and gives £1,410,050. Two sheets added: the occupancy thresholds and the debt (break-even 74.5 per cent, the lease covenant at 81.5), and the fill curve with the development cost sheet — where the cash burned in the lease-up is £4,538 a bed, not the £41,103 Chapter 20 prints.
The arithmetic of the conversion, built to take your own capital distribution and your own length of stay. It returns the occupied-bed mix behind any admissions mix, the presentation premium — £38 a week here — and how much of a fee increase the mix gives straight back, which on this home is 8 per cent of it. Now also: the share of self-funders who live to convert (30 per cent) and the months they pay their own way (14.9).
Care hours per resident per day to full-time equivalents to heads to a loaded cost, with employer national insurance computed per CONTRACT rather than per equivalent — because that is how it is charged. The roster comes out 15.5 per cent bigger than the rota, and the two threshold regimes sit side by side so you can price a change before it is announced. Revised: the cost of modelling in full-time equivalents is now computed as Chapter 8 computes it, national insurance and pension together — £32,713 and £50,728, a move of 22 per cent of the reform; the first version said £37,212 and £49,727.
The bridge from asking price to bid, the five inversions — four of which close the gap on their own; no share of self-funded admissions does (at 100 per cent the home is worth £19.0 million), and the length of stay that closes it is 24.8 months, not the 96.0 the book prints — the ranked operating levers with a warning that they do not add, and the omissions table for the facing page, with a column saying where each unpriced item can actually be found.
A Practitioner's Guide to Rent Cover, Payor Mix, EBITDARM and What an Operating Asset Is Actually Worth — Julian R. Sterling. One home underwritten completely: the resident flow,
the payor conversion, the rota, the lease, the regulator and the bid. 1,287 controls run
over the model behind it.
The four workbooks with every input emptied. The checks sheets count what is still missing and test what holds for any inputs.
The whole book
Your beds, your residents, your fee card, your lease
The resident engine, the payor mix tracker, the rota calculator and the bid sheet, with the same formulas and every blue cell emptied. The calendar constants, the years, the months and the occupancy steps stay.
The book’s inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: £1,528,790 of EBITDARM, 1.96x at expiry, £1,410,050 for six months of closed admissions.
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 1 to 22
Thirteen working documents
The first meeting: the four series and the one division. Occupancy as a flow, with the survival curve to fill in. Who pays, and when each decile’s capital runs out. The calendar and the average fee. Care hours to a loaded staff cost, per head and per full-time equivalent. Agency and the cost base. Reading a trading pack. The bridge in pounds per resident. The lease, the identity and the terms that matter. Sale and leaseback and what a lender will lend. The twenty-five-year gap test. The regulator. And building one and bidding for one.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Eight on the resident and who pays, seven on hours, heads and the cost base, six on the lease and the identity, seven on time and risk, six on building, lending and buying, and six on the three cases below. Numbers are marked to a tolerance, multiple choice to the letter, and the score sheet counts your errors part by part: that is your revision list.
Nothing is hidden. The marking sheet holds every answer, every tolerance, and the reason for each answer.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the rest, and a checks sheet closes it. Type your own figures in and every finding recomputes.
Conclusion, Chapters 9 and 19 · Case one
What a good manager is worth
The book gives three numbers for a manager’s departure — five points of occupancy, agency back to 8 per cent, an embargo — and never adds them. Over a year they cost £174,009; with the embargo risk she carries (ADDED odds), £343,221. A retention package that cuts the chance of her leaving from 40 to 10 per cent (ADDED) is worth £102,966 a year, 1.6 times her salary.
Chapters 10, 13 and 15 · Case two
The capital programme no cover ratio measures
A lifecycle reserve of £1,500 a bed (ADDED) takes the cover after maintenance, which no clause of the lease measures, from 1.80x to 1.68x; at £3,640 a bed the 1.50x covenant is gone with no fall in trade. On the tenant, it takes 24 per cent of his residual and lifts the sale-and-leaseback break-even multiple from 6.15x to 8.12x.
Chapter 17 · Case three
A rent that moves with fees
The chapter proposes linking the rent to revenue or to a capped share of EBITDARM. Run over the book’s twenty-five years, only one works. A revenue-linked rent pays the landlord more in every scenario and leaves cover at expiry at 1.56x in the central case: a rent increase in disguise. An EBITDARM-linked rent capped at the index keeps the operator trading in the adverse case and costs the landlord 0.44 points of yield with equal odds (ADDED).
Blue on pale blue is an input you may edit. A yellow fill is the carrying
assumption of the sheet — the one to argue about first. Black is a formula.
Nothing is locked, protected or watermarked. There are no macros and no external links.
Each workbook ends with a sheet called Checks: the figure as the book prints
it, the figure the workbook computes, the variance and a status. The sheet closes on
“ALL OK”. If a line ever reads “to check”, the workbook and the book have
drifted apart — and the workbook is right. Lines marked “revised” give the corrected
figure and, beside it, the one the first edition printed. In the cases, a figure the book does not give
is marked ADDED wherever it appears.
Three numbers to compute on your own home
The true average length of stay. Twelve months of admissions,
twelve months of average occupied beds, divide. Here it is 22.5 months. It will not match the
figure the home quotes, because homes compute it over residents who have left —
which excludes the long-stay residents who are still there.
The private-pay share of occupied bed-weeks. Not of admissions. On
this home the two differ by 18.6 points: 55 per cent of admissions arrive self-funding and 36.4 per cent of
the beds still are, because capital runs out and the council takes over at £273 a week
less.
Care hours per resident per day, from the payroll. Not from the
rota, and not from a percentage. Then divide the hours by 1,694 hours rather than by a contracted
year, because leave and absence have to be covered by somebody who is also paid.
One warning, because it decides the answer
Three ratios get quoted about every care home transaction: the multiple of EBITDARM
the trade is worth, the yield the investor requires on the rent, and the rent cover the
lender insists on. They are not three judgements. Cover × yield ×
multiple = 1, exactly, so any two of them fix the third. At 11.00x and 6.0 per cent the
implied cover is 1.52x — not the 1.80x in the term sheet. An investor who insists on 1.80x
at that yield is not applying a prudential standard; he is naming a price, and the price
is 9.26x of EBITDARM. Multiply the three numbers in any memorandum you are handed. If the
product is not one, somebody is holding a difference they have not been told about.
And one risk with no analogue anywhere else in property
A regulatory rating drops and admissions stop. Nothing else changes — no fee
falls, no wage rises, no resident leaves who was not going to leave anyway. The home
empties at the rate people die, bottoms at 69.6 per cent occupancy in month 6, and takes 4.0 years to
recover. The cost is £1.4 million, which is 0.92x of a year's EBITDARM, and it outweighs every
operating lever in the book put together. It is the reason this asset class is priced on
an operator and not on a building.
What changed, and when
24 Sep 2026
The four workbooks corrected and closed on ALL OK. The twenty-five-year sheet now starts at 1.80x and ends at 1.96x; the embargo is a cohort engine (£1,410,050, not £2.76 million); the FTE error is £32,713 and £50,728; two inversions of the bid sheet corrected. Added sheets for the occupancy thresholds, the debt, the fill curve and the development cost sheet. In the book, Chapter 20’s cash burned is £4,538 a bed, not £41,103, and Chapter 22’s length of stay is 24.8 months, not 96.0. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
How do you calculate EBITDARM for a care home?Revenue less staff and running costs, before rent and the management fee: a 64-bed home at 90 per cent and £1,150 a week earns £1,043,737 of EBITDARM.
How many staff does a care home need?Care hours per resident, plus cover, over contracted hours: a 60-bed home at 5.5 hours a day needs 65.4 FTE, 84.2 people and 2,142,214 a year of care staff.
How long does a new care home take to fill?Departures grow as it fills: an 80-bed home admitting 3.5 a month with a 26-month stay reaches 92 per cent in 42.2 months, not 21.0, and burns 16,240 a bed.
How do you value a care home?Normalise to fair maintainable trade, deduct a 5 per cent management charge, apply a multiple: 1,122,045 of FMOP at 9.0x values a 70-bed home at 10.1 million.
How much does it cost to build a care home per bed?All-in, including the months the home takes to fill: 260,631 per bed on an illustrative 80-bed scheme, against 216,358 before finance and a 264,000 value.
How much does a minimum wage rise cost a care home?Paid hours at the floor plus the ripple, times the rise, plus on-costs: £0.60 an hour costs a 60-bed home £103,368 and cuts rent cover from 1.67x to 1.48x.
How much does an admissions embargo cost a care home?Count the resident-months lost until the home refills: a six-month embargo on a 70-bed home costs 480,320 of contribution, 53 per cent of it after admissions reopen.
How much debt can a care home support?Size it on cash after the management charge and capex, then test leverage and LTV: 5,059,190 on a 70-bed home, which breaches a 1.25x covenant at 85.7% occupancy.
How do you calculate RevPOR in senior living?Resident revenue / average occupied units / months: $9.52m over 108 units is $7,345 a month, up 4.3% on 3.0% rent rises because care levels went up.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
Significant Risk TransferThe bank's ceiling and the investor's floor derived independently, and the narrow band of prices at which both can say yes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
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