INVESTMENT IN A PORTFOLIO OF SIX CARE HOMES IN SHROPSHIRE AND CHESHIRE FOR £56 MILLION
The Board of Directors of Impact Healthcare REIT plc (ticker: IHR), the real estate investment trust which gives investors exposure to a diversified portfolio of UK healthcare real estate assets, in particular care homes, is pleased to announce that the Group has invested in a portfolio of six care homes which were owned and operated by Morris Care Limited. The purchase price is £56 million, which will partly be paid in cash and partly with an issue of new shares in the Company (“Shares“), as further detailed below.
Morris Care enjoys a strong local reputation for delivering high acuity care and has established good working relationships with the local NHS Clinical Commissioning Groups. The vendors have granted a licence for the homes to continue to trade under the Morris Care brand for three years and the operational management team of Morris Care will transfer to Welford Healthcare (“Welford“), which will operate the homes. Welford is an existing Group tenant and the investment will take the Group’s relationship with Welford to 18 care homes across England with 1,087 beds.
The portfolio has 438 high quality beds, of which 400 have en suite bathrooms, with five homes in Shropshire and one in Cheshire. The homes each have an established track record of delivering strong operational performance. Four of the homes have EPC ratings of B, and two are rated C, with outline strategies in place for achieving an EPC rating of B.
80% of the £56 million consideration is payable in cash (£44.8 million), with the balance paid in Shares. The Company has issued to the vendors 9,603,841 Shares priced at 116.62 pence per share, which is the Company’s last reported NAV as at 30 September 2022. The Shares have been issued conditional on Admission which is expected to occur on or around 13 January 2023. The vendors have agreed to customary lock-up provisions for a period of six months. 100% of the debt drawn down to fund the cash element has been hedged through a new £50 million interest rate cap at a cost of £1.5 million, which caps SONIA at 3.0% for two years. The Group has now hedged the interest rates on 80% (£150 million) of its current drawn debt of £187 million with a gross LTV after this transaction of 27.6%¹. The Group has a further £54 million of undrawn debt facilities.
The funding of the investment has been made initially by way of a loan by the Group to Welford. The structure creates several benefits for all stakeholders, including enabling Welford to take immediate operational control of the six homes, thereby avoiding a potentially lengthy transition period while regulatory approvals are sought to register the operation of the homes in new legal entities.
Once CQC regulatory approvals are received, Impact then has the option to acquire the entire issued share capital of the company which owns the properties from Welford, which also has the option to sell the entire issued share capital of the company to Impact in order to repay the loan. Impact will receive interest payments equal to 8.4% per annum for the duration of the loan. When either option is exercised, new 35-year leases on Impact’s standard terms, which have been pre-agreed with Welford, will come into effect. Initial rent under the new leases is set at £3.9 million, reflecting a gross initial yield of 7.0%.
The loan structure used to make this investment contains additional protections for Impact’s shareholders, including security over the above property assets and a number of operational covenants from Welford.
Immediately following Admission, the Company will have 414,368,169 Ordinary Shares in issue and therefore the total voting rights in the Company will be 414,368,169. This figure may be used by Shareholders as the denominator for the calculations by which they may determine whether or not they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP via Maitland/AMO
Andrew Cowley
Mahesh Patel
David Yaldron
Jefferies International Limited
Tom Yeadon, tyeadon@jefferies.com
Neil Winward, nwinward@jefferies.com
Tel: +4420 7029 8000
Winterflood Securities Limited
Neil Langford, neil.langford@winterflood.com
Joe Winkley, joe.winkley@winterflood.com
Tel: +4420 3100 0000
H/Advisors Maitland (Communications Adviser)
James Benjamin, impacthealth-maitland@maitland.co.uk
Alistair de Kare-Silver
Tel: +44 7747 113 930
The Company’s LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT is available at www.impactreit.uk.