The Board of Directors of Impact Healthcare REIT plc (ticker: IHR) (the “Board“), the real estate investment trust which gives investors exposure to a diversified portfolio of UK healthcare real estate assets, in particular care homes, announces that it has successfully negotiated a transaction to transfer the operations of all homes let to Silverline Group (“Silverline”) to an affiliate of an existing tenant of Impact Healthcare REIT plc.
In negotiating this handover of seven homes from Silverline, the Board placed high priority on the best interests of the residents who live in these homes and the staff who work in them by ensuring continuity of care and operational improvements.
The Company has seven homes let to Silverline, which account for 3.4% (£1.6 million) of the Company’s total annual contracted rent. As reported by the Company on 31 January and 25 April 2023, Silverline has not paid its contractual rent for the two quarters to 31 March 2023 and 30 June 2023, although the Company has received £0.4 million from Silverline’s rent deposits.
The Company has continued to receive 100% of rent payments due from each of its other tenants.
The Company has had extensive discussions with a number of alternative care providers to take over Silverline’s responsibilities. The Board has now decided that it is in the best interests of all the Company’s stakeholders that it enables the solvent sale of Silverline’s tenant companies to Melrose Holdings Limited (“MHL”), which will take over responsibility for operating the seven homes immediately. MHL is a new company and wholly-owned by connected parties of Mahesh Patel(1), and will benefit from a service agreement with Minster Care Group Limited (“Minster”), under which Minster will support the turnaround of the Silverline Homes. Minster has a long and effective track record of taking on and improving under-performing care homes.
To assist in the funding of Silverline’s overdue liabilities to third parties other than the Group and to fund remedial capital expenditure to bring the operational and financial performance of the homes up to the required standards, the Group has agreed to provide a £1.6 million loan facility for up to three years to MHL. This facility will have an interest rate of 8.0% per annum on drawn funds and will be repaid in priority to rent from surplus funds in MHL.
In the initial phase of the operational turnaround of these care homes, the existing leases will be temporarily amended to replace the fixed rent with a variable rent, payable once the loan has been repaid. The lease variations will also entitle MHL to pay Minster a fixed management fee of £1,000 per registered bed in the homes (approximately £400,000 per annum plus VAT) to cover the direct costs it will incur in overseeing the turnaround, payable only from any surplus cash generated by the seven homes. Any surplus cash after the management fee, will first be used to repay the loan facility and accrued interest to Impact and, once the loan is repaid, will be paid as rent to Impact.
The rental default from Silverline and the new arrangements agreed with MHL will temporarily reduce the level of rent received by the Group. Whilst this reduction will be partly mitigated by rental deposits, the Board anticipates the total reduction versus the Company’s original budget for 2023 to amount to around £1 million(2).
The transaction with MHL is a smaller related party transaction for the purposes of Listing Rule 11.1.10R and this announcement is therefore made in accordance with Listing Rule 11.1.10R(2)(c). As per the requirements of Listing Rule 11.1.10 the Company has obtained written conﬁrmation from an FCA-approved sponsor ﬁrm that it believes the transaction is fair and reasonable as far as the shareholders of the Company are concerned.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP via Maitland/AMO
Jefferies International Limited
Tom Yeadon, firstname.lastname@example.org
Neil Winward, email@example.com
Tel: +4420 7029 8000
Winterflood Securities Limited
Neil Langford, firstname.lastname@example.org
Joe Winkley, email@example.com
Tel: +4420 3100 0000
H/Advisors Maitland (Communications Adviser)
James Benjamin, firstname.lastname@example.org
Tel: +44 7747 113 930
The Company’s LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT is available at www.impactreit.uk.