Impact Healthcare REIT, the UK care home investor, has reported strong annual results, posting a net asset value (NAV) total return of 8.4%.
NAV per share increased 2.6% (growth of 2.85p per share) in the year to 31 December 2021 to 112.43p and with dividends paid in the year of 6.41p per share resulted in a NAV total return of 8.4%.
Contracted annual rent increased 22.7% to £38.0m (2020: £30.9m), with 104 properties rent reviews adding £0.7m to the contracted rent, representing an annualised 2.5% increase on a like-for-like basis.
Earnings per share (EPS) for the year was 9.41p (2020: 9.02p) and EPRA EPS was 8.05p (2020: 7.25p). Adjusted EPS, which better reflects underlying cash earnings in the year, was 6.68p (2020: 5.98p). Dividends declared for the year were 126% covered by EPRA earnings per share (EPS) and 104% covered by Adjusted EPS.
The group has raised its dividend target for 2022 to 6.54p, representing a 2% uplift on 2021.
As at 31 December 2021, the portfolio was valued at £459.4m (202: £418.8m). This was mainly due to £26.9m of new acquisitions and a valuation uplift of £12.9m, largely driven by rent increases received during the year.
Financials
In the year Impact agreed a new £26m NatWest facility, with an accordion agreement to extend up to £50m, as well as securing the group’s first long–term institutional fixed interest debt of £75m facility with an average maturity 14 years.
The group now has £168m of available debt facilities, as well as a second £38m tranche of institutional debt, which is committed to be issued in June 2022, and the option to expand the NatWest facility by a further £24m.
Operational highlights
- Collected 100% of rent due, with no changes to any lease terms or payment schedules.
- The portfolio comprises 124 properties with 6,720 beds and is 100% let.
- Rent cover (which reflects tenants’ profitability and headroom against future cost pressures) rose to 1.95x (2020: 1.76x).
- Invested in 16 care homes for net consideration of £61.9m, adding 780 beds.
- Weighted average unexpired lease term (WAULT) of 19.2 years at 31 December 2021 (31 December 2020: 20.0 years).
- All leases are inflation-linked, with upwards–only rent reviews.
- Completed an EPC (Energy Performance Certificate) audit of the portfolio and assessed capital cost of improvements to achieve EPC band B of around £5m.
Post-year end highlights
- Raised £40m of gross proceeds from a placing of new ordinary shares.
- Completed the acquisition of two properties with 147 beds for £11.0m in February 2022.
- Invested £11.1m in two homes with 107 beds. The investment has initially been made by way of a loan to one of the group’s existing tenants, Welford, to acquire the assets with put and call options to acquire the assets once regulatory approvals are received.
Rupert Barclay, chairman, said:
“We have deliberately fostered our resilience by carefully selecting tenants, putting in place leases with robust rent cover and inflation linkages and maintaining a prudent balance sheet. Our tenants have provided high-quality care during the pandemic and in turn we have received 100% of the rent due. This has underpinned a fully covered dividend for 2021.
“As we emerge from the pandemic, the long-term investment case for care homes is unchanged. Occupancy is expected to continue to recover while the support from government grant funding falls away. Demographic trends and the rising incidence of specialist needs, such as dementia, will continue to drive demand for care, which will require many new beds, in suitable homes, to be added to the market. The Government’s reforms will provide additional funding for the sector and contribute to its resilience.
“We have a good level of protection against the current inflationary environment, through the upwards-only index-linked rent reviews in our leases.
“We have a strong pipeline of accretive acquisitions, which has the potential to add attractive new assets and further tenants to the portfolio. We are also exploring further asset management and development opportunities, with a view to enhancing shareholder returns. We therefore look forward to making further progress with our growth strategy during 2022 and for the long term.”
IHR : Impact Healthcare REIT posts 8.4% NAV total return