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Impact Healthcare acquires several care homes, forward-funds another
9th Mar 2020 10:16
(Sharecast News) - Impact Healthcare REIT has completed the acquisition of a property portfolio, exchanged contracts to acquire a second property portfolio and entered into a pre-let forward funding arrangement with an existing group tenant, it announced on Monday.
The London-listed firm said it had agreed to acquire nine homes in Scotland from the Holmes Care Group, had completed the purchase of three homes in Bradford from Victorguard Care, and had struck a deal to forward fund the construction of a care home in Hartlepool.
Once completed, the company said the transactions were expected to deliver a number of benefits to the group, including enabling it to deploy ?61.1m of capital, plus transaction costs and a deferred payment on one of the transactions of up to ?3m.
It said the acquisitions and the pre-let forward funding arrangement would add 13 care homes comprising 925 beds to its portfolio, which would then total 99 care homes and 5,253 beds.
The transactions would also increase its contracted annual rent roll to ?28.2m - a 21.9% increase 31 December - as well as add two new tenants, taking its total number to 11.
Finally, Impact said all of the acquisitions would be leased on its standard lease terms, with fixed terms of 25 years and annual upward-only rent reviews linked to the retail price index.
On the Holmes Care Group acquisition, Impact said it has exchanged contracts to acquire nine homes in Scotland in a sale-and-leaseback transaction.
A subsidiary of Holmes would continue to operate the homes after completion, making it the company's 10th tenant.
Holmes would continue to own and operate a further four homes in England.
"The nine Scottish homes have a combined total of 649 beds and enjoy high ratings from the Care Inspectorate - Scotland's healthcare regulator," Impact said in its statement.
"One home is in Aberdeen and the other eight are located around Glasgow and in Scotland's central belt."
The net purchase price before transaction costs was ?47.5m, and the initial rent ?3.5m , reflecting a yield of 7.4%.
The company said it had agreed a deferred payment structure with the vendors, under which it would pay up to ?3m based on the trading performance of the nine homes in the 12 months to 31 March 2021, in exchange for an annual rent increase of up to ?0.23m.
The initial rent cover on the portfolio was in excess of two times.
"On completion, the homes will be let on new leases that have fixed 25-year terms with no break clauses," Impact explained.
"The rents receivable under the leases will be subject to annual upward-only rent reviews linked to RPI, with a floor of 1% per annum and a cap of 5% per annum, and Holmes has committed to a minimum annual expenditure on the maintenance of the homes."
Completion would take place as soon as the required regulatory approvals from the Care Inspectorate was received.
In Bradford, Impact said it had completed the acquisition of three homes from Victorguard Care, which would be operated by Silverline Care - its 11th tenant.
The three homes were all purpose-built "to a high standard" by Victorguard, and offered 182 bedrooms, all of them are en-suite.
"Under previous management, the three homes being acquired went through a period of underperformance and Silverline has developed a clear plan to turn these around," Impact Healthcare explained.
"Silverline operates other homes in Yorkshire, including one in Bradford."
The group said it had agreed to pay a net purchase price of ?7.5m to the vendors, or ?41,000 per bed, which reflected the homes' recent trading performance rather than their potential.
To support Silverline's turnaround plan, it committed ?0.3m of capital expenditure on the homes, and agreed a rent-free period of six months.
The initial rent was ?0.63m per annum, reflecting a yield of 8.1%.
"The homes are let on new leases that have fixed 25-year terms with no break clauses.
"The rents receivable under the leases will be subject to annual upward-only rent reviews linked to RPI, with a floor of 2% per annum and a cap of 4% per annum.
"The new leases are under a new framework agreement with Victorguard which is consistent with the terms of the framework agreements with our existing tenants."
Finally, in Hartlepool, the group said it had agreed to forward fund the construction of a new 94-bed care home, to be built by a subsidiary of Prestige Group - an existing tenant.
The development had planning in place, and was targeting completion in 12 months.
"Prestige has a strong track record of building care homes to a high standard in the north-east, three of which the group already owns.
"Prestige has committed to build the home for a fixed price of ?6.1m, including the value of the land."
The company said it had pre-leased the home to Prestige, with it falling under its existing framework agreement with Prestige.
Initial rent was expected to be ?0.48m per annum, reflecting a yield of circa 7.8%.
"These transactions will be financed from the group's existing cash resources and available debt facilities, of which ?49.9m is currently undrawn," Impact said.
"The group is at an advanced stage on a number of other potential transactions and expects to make further announcements in due course."
At 0951 GMT, shares in Impact Healthcare were down 1.89% at 104p.
The London-listed firm said it had agreed to acquire nine homes in Scotland from the Holmes Care Group, had completed the purchase of three homes in Bradford from Victorguard Care, and had struck a deal to forward fund the construction of a care home in Hartlepool.
Once completed, the company said the transactions were expected to deliver a number of benefits to the group, including enabling it to deploy ?61.1m of capital, plus transaction costs and a deferred payment on one of the transactions of up to ?3m.
It said the acquisitions and the pre-let forward funding arrangement would add 13 care homes comprising 925 beds to its portfolio, which would then total 99 care homes and 5,253 beds.
The transactions would also increase its contracted annual rent roll to ?28.2m - a 21.9% increase 31 December - as well as add two new tenants, taking its total number to 11.
Finally, Impact said all of the acquisitions would be leased on its standard lease terms, with fixed terms of 25 years and annual upward-only rent reviews linked to the retail price index.
On the Holmes Care Group acquisition, Impact said it has exchanged contracts to acquire nine homes in Scotland in a sale-and-leaseback transaction.
A subsidiary of Holmes would continue to operate the homes after completion, making it the company's 10th tenant.
Holmes would continue to own and operate a further four homes in England.
"The nine Scottish homes have a combined total of 649 beds and enjoy high ratings from the Care Inspectorate - Scotland's healthcare regulator," Impact said in its statement.
"One home is in Aberdeen and the other eight are located around Glasgow and in Scotland's central belt."
The net purchase price before transaction costs was ?47.5m, and the initial rent ?3.5m , reflecting a yield of 7.4%.
The company said it had agreed a deferred payment structure with the vendors, under which it would pay up to ?3m based on the trading performance of the nine homes in the 12 months to 31 March 2021, in exchange for an annual rent increase of up to ?0.23m.
The initial rent cover on the portfolio was in excess of two times.
"On completion, the homes will be let on new leases that have fixed 25-year terms with no break clauses," Impact explained.
"The rents receivable under the leases will be subject to annual upward-only rent reviews linked to RPI, with a floor of 1% per annum and a cap of 5% per annum, and Holmes has committed to a minimum annual expenditure on the maintenance of the homes."
Completion would take place as soon as the required regulatory approvals from the Care Inspectorate was received.
In Bradford, Impact said it had completed the acquisition of three homes from Victorguard Care, which would be operated by Silverline Care - its 11th tenant.
The three homes were all purpose-built "to a high standard" by Victorguard, and offered 182 bedrooms, all of them are en-suite.
"Under previous management, the three homes being acquired went through a period of underperformance and Silverline has developed a clear plan to turn these around," Impact Healthcare explained.
"Silverline operates other homes in Yorkshire, including one in Bradford."
The group said it had agreed to pay a net purchase price of ?7.5m to the vendors, or ?41,000 per bed, which reflected the homes' recent trading performance rather than their potential.
To support Silverline's turnaround plan, it committed ?0.3m of capital expenditure on the homes, and agreed a rent-free period of six months.
The initial rent was ?0.63m per annum, reflecting a yield of 8.1%.
"The homes are let on new leases that have fixed 25-year terms with no break clauses.
"The rents receivable under the leases will be subject to annual upward-only rent reviews linked to RPI, with a floor of 2% per annum and a cap of 4% per annum.
"The new leases are under a new framework agreement with Victorguard which is consistent with the terms of the framework agreements with our existing tenants."
Finally, in Hartlepool, the group said it had agreed to forward fund the construction of a new 94-bed care home, to be built by a subsidiary of Prestige Group - an existing tenant.
The development had planning in place, and was targeting completion in 12 months.
"Prestige has a strong track record of building care homes to a high standard in the north-east, three of which the group already owns.
"Prestige has committed to build the home for a fixed price of ?6.1m, including the value of the land."
The company said it had pre-leased the home to Prestige, with it falling under its existing framework agreement with Prestige.
Initial rent was expected to be ?0.48m per annum, reflecting a yield of circa 7.8%.
"These transactions will be financed from the group's existing cash resources and available debt facilities, of which ?49.9m is currently undrawn," Impact said.
"The group is at an advanced stage on a number of other potential transactions and expects to make further announcements in due course."
At 0951 GMT, shares in Impact Healthcare were down 1.89% at 104p.