Impact Healthcare REIT has acquired a portfolio of six care homes for £56m, which will partly be paid in cash and partly with an issue of new shares to the vendor Morris Care Limited.
The portfolio has 438 beds, of which 400 have en suite bathrooms, with five homes in Shropshire and one in Cheshire. The company said that 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.
Morris Care has 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, which will operate the homes. Welford is an existing tenant of Impact and the investment will take the group’s relationship with Welford to 18 care homes across England with 1,087 beds.
|
Home |
Number of beds |
|
Isle Court Nursing Home |
80 |
|
Radbrook Nursing Home |
63 |
|
Oldbury Grange Nursing Home |
69 |
|
Morris Care Centre |
96 |
|
Corbrook Park Nursing Home |
80 |
|
Stretton Hall |
50 |
80% of the £56m consideration is payable in cash (£44.8m), with the balance paid in shares. Impact 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 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 £50m interest rate cap at a cost of £1.5m, which caps SONIA at 3.0% for two years. The group has now hedged the interest rates on 80% (£150m) of its current drawn debt of £187m with a gross LTV after this transaction of 27.6%. The group has a further £54m 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 £3.9m, reflecting a gross initial yield of 7.0%.
IHR : Impact Healthcare REIT acquires £56m care home portfolio