Impact Healthcare REIT (IHR) has exchanged contracts to acquire a care home near Lowestoft and entered into a pre-let forward funding arrangement for a new care home in Norwich, for a combined £20.8m.
Both properties are let to a Carlton Hall Limited, a new tenant in the group’s portfolio and comprise 166 beds.
On completion of the deals, IHR’s portfolio will total 111 care homes and 6,141 beds, let to 13 tenants with a contracted annual rent roll of £33.4m.
Carlton Hall care home in Lowestoft, Suffolk
The property will be acquired in a sale and leaseback transaction from current owner and operator Carlton Hall. Carlton Hall will continue to operate the home after completion.
The home, which has been rated as Good across all measures by the Care Quality Commission, has capacity for 86 residents and is part of a care village community developed by Carlton Hall that includes around 49 retirement bungalows and coffee shop set in 10 acres of well-maintained grounds.
The net purchase price before transaction costs is £10.3m and the initial annual rent is £650,000, reflecting a yield of 6.3%. The initial rent cover on the home is in excess of two times.
On completion, the home will be let on a new lease with a fixed 30-year term with no break clauses and 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.
Forward funding a new care home in Norwich
The group has also agreed to forward fund the construction of a new 80-bed care home in Norwich, to be built by a Carlton Hall company. The development has planning in place and is targeting completion in around 20 months.
Carlton Hall will be developing the new home as part of a care village, with phase 1 also comprising 19 bungalows. This will replicate Carlton Hall’s development in Lowestoft and is expected to be the blueprint for further potential developments in the region by Carlton Hall. Carlton Hall has committed to build the home for a price of £10.5m, including the value of the land.
IHR has pre-leased the home to Carlton Hall with a fixed 35-year term with no break clauses on an initial rent of £750,000 per annum reflecting a yield of 7.1%. A rent free period of nine months will take effect at practical completion.
IHR has agreed a deferred payment structure with Carlton Hall under which the company will pay up to £4.0m based on the trading performance for the new home at maturity in exchange for an annual rent increase of up to £246,000, so long as rent cover remains in excess of two times.
Financing
The transactions will be financed from the group’s existing cash resources and available debt facilities, of which £28.0m is currently undrawn.
IHR : Impact Healthcare REIT acquires two care homes