REG - Impact Healthcare - First Quarter Update to 31 March 2024

Impact Healthcare REITAnnouncement

22/05/2024 07:00

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RNS Number : 3710P  Impact Healthcare REIT PLC  22 May 2024

The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area, Canada, Australia, Japan or the
Republic of South Africa.

 

This Announcement contains inside information for the purposes of Article 7 of
the UK version of EU Regulation 596/2014 (as incorporated into UK law by
virtue of the European Union (Withdrawal) Act 2018), and as subsequently
amended. Upon the publication of this Announcement, this inside information is
now considered to be in the public domain.

22 May 2024

Impact Healthcare REIT plc

("Impact" or the "Company" or, together with its subsidiaries, the "Group")

First Quarter Update to 31 March 2024

NAV growth from rent reviews with stable rental yields and rent cover

Rent reviews in the quarter, all inflation-linked, raised rents by 4% for
those properties. Tenant performance continued to improve driven by continued
stable bed occupancy and rising fees. This enabled tenant rental cover to
improve to 2.0x (annual adjusted), the highest since IPO in 2017. The dividend
was paid in the quarter in line with our annual target, leaving the NAV per
share up by 1.7%

 

HIGHLIGHTS

·      1.7% increase in NAV per share to 117.31 pence and 1.7% increase
in EPRA NTA per share to 116.92 pence

·      6.94% EPRA "topped up" Net Initial Yield, marginally up from
6.92% in December 2023

·      1.5% like-for-like increase in Property portfolio valuation to
£660.8 million

·      Contracted annual passing rent((5)) at 31 March 2024 of £50.1
million, reflecting the 4% increase from 66 rent reviews in the period and
progression of pipeline capex projects

·      88.3% bed occupancy was stable for the quarter (31 December 2023:
88.2%), and up over half a percentage point on March 2023

·     2.0x annual adjusted rent cover((1)) to 31 March 2024, the Group's
highest annual rent cover since the Company's inception in 2017

·      Dividend of 1.7375 pence per share, paid in line with our target
dividend of 6.95 pence for the year to 31 December 2024((2))

·      3.14% unaudited accounting total return for the quarter

NET ASSET VALUE / EPRA NTA

·      Unaudited net asset value ("NAV") as at 31 March 2024 was £486.1
million, 117.31 pence per share. This represents an increase of £8.0 million
(1.93 pence per share), against the 31 December 2023 NAV of £478.1 million,
115.38 pence per share.

o  The Investment portfolio has been independently valued by the Group's
external valuer Cushman & Wakefield. The Group's EPRA "topped up" Net
Initial Yield at 31 March 2024 is 6.94% (31 December 2023: 6.92%).

 Pence per share                                          EPRA NTA  NAV
 Unaudited value per share as at 31 December 2023         114.96    115.38

 Revaluation gains/(losses) on investment properties      1.46      1.46
 Revaluation gain/(losses) on interest rate caps          -         (0.03)
 Net remaining contribution to reserves                   2.19      2.19
 Quarterly dividend for the period to 31 December 2023    (1.69)    (1.69)

 Unaudited value per share as at 31 March 2024            116.92    117.31
 Percentage change in quarter                             1.7%      1.7%

·      The NAV attributable to the ordinary shares of the Company is
calculated under IFRS, incorporating the independent portfolio valuation.

Summary balance sheet (unaudited)

                             Mar-24   Dec-23   Sep-23   Jun-23
                             £'m      £'m      £'m      £'m
 Property portfolio*         660.8    651.3    646.2    638.2
 Cash                        10.3     9.4      7.4      22.1
 Net assets/(liabilities)    2.8      2.2      1.9      1.4
 Bank loans                  (187.8)  (184.8)  (178.8)  (190.8)
 Net assets                  486.1    478.1    476.8    470.9
 NAV per share (pence)       117.31   115.38   115.08   113.64
 EPRA NTA per share (pence)  116.92   114.96   114.38   113.08
 EPRA Net LTV                27.6%    27.9%    27.7%    27.6%

*       Properties within the portfolio are directly owned by way of
freehold interest or long leasehold and are stated at the market value
provided by the external valuer and excludes the IFRS effects of guaranteed
rent reviews and initial lease rental payments.

PROPERTY VALUATION

·      The Group's Property portfolio was independently valued at
£660.8 million (31 December 2023: £651.3 million). This represents a 1.5% or
£9.5 million increase in value.

o  This like-for-like movement in value was driven by the increased rent from
the 66 rent reviews completed in the quarter at an average uplift of 4% per
annum in line with the rental increase cap on 64 of these leases, contributing
an extra £0.7 million to contracted rent.

o  The EPRA 'topped up' net initial yield showed marginal increase to 6.94%
as at 31 March 2024 (31 December 2023: 6.92%) demonstrating the continued
stability of the portfolio's yield.

o  The Group invested £1.5 million in the quarter on asset management,
primarily the refurbishments on a handful of the seed portfolio assets and an
ongoing project at Yew Tree, operated by our tenant Prestige, which is due to
complete in the second quarter of 2024.

PORTFOLIO UPDATE

·      At 31 March 2024, the Investment portfolio comprised 140
healthcare properties((3)), of which 138 are care homes managed by 14
tenants((4)) on fixed-term leases of 20 to 35 years (no break clauses),
subject to annual upward-only Retail Price Index-linked rent reviews (with a
floor and cap at 2% p.a. and 4% p.a., respectively on 117 leases, and 1% p.a.
and 5% p.a. respectively on 21 leases). In addition, the Group owns two
healthcare facilities leased to the NHS with an annual CPI uplift. In total,
the Group had 14 tenants((4)) across its Investment portfolio at the period
end, with We Care added as a new tenant earlier this month as set out below.

·      Annualised rent cover across our Investment portfolio remains
strong at 2.0x((1)) for the 12 months to 31 March 2024, the Group's highest
annual rent cover since the Company's inception in 2017.

·      Occupancy was stable at 88.3% at 31 March 2024, in line with
occupancy of 88.2% at 31 December 2023.

·      Contracted rent(5) grew to £50.1 million at 31 March 2024 (31
December 2023: £48.8 million) reflecting the increase from 66 rent reviews in
the period and progression of pipeline capex projects.

·      Weighted average unexpired lease term across the Property
portfolio of 20.4 years as at 31 March 2024 (31 December 2023: 20.7 years).

·      On 15 May 2024, the Group announced the transfer of the
operations of three care homes in Bradford on long-term leases to a new
tenant, We Care, an experienced operator with over 30 homes located throughout
the North of England, with significant experience with turnaround homes,
including in the Bradford submarket. It is anticipated that these Bradford
care homes will resume paying rent in the first quarter of 2025.The four
remaining homes, located in Scotland, that were transferred from Silverline
continue to be operated by Melrose Holdings Limited, and the Investment
Manager is making progress with its negotiations to transfer these four homes
to a new operator on long-term leases.

FINANCING

·      The Group's EPRA LTV was 27.6% as at 31 March 2024 (31 December
2023: 27.9%).

·      The Group has two £50 million interest rate caps, on at 4% and
the other at 3%, these expire in 2025. The Group has a further £75 million of
fixed-rate debt with a blended rate of 2.97% and expiry in 2035. The Group has
hedged the interest rates on 93% (£175 million) of drawn debt. The current
average cost of drawn debt, including hedging and fixed rate borrowings, is
4.61%.

Notes:

((1)      )Rent cover is our tenants' EBITDARM for the 12 months to 31
March 2024 divided by 12 months' rent for the same period.  It excludes
"turnaround" and "immature" homes.  Immature homes being defined as homes
that are newly opened or undergoing major capital improvement requiring
partial closure. The rent cover calculation excludes eight properties that are
defined as turnaround or immature.

((2))       This is a target only and not a profit forecast. There can
be no assurance that the target will be met and it should not be taken as an
indicator of the Company's expected or actual results.

((3)         ) Includes exchanged and under construction assets.

((4))       Belmont, Careport, Carlton Hall, Electus Healthcare, Holmes
Care, Maria Mallaband Countrywide Group, Minster, Croftwood and Melrose
(Minster and Croftwood are subsidiaries of Minster Care Group and Melrose is
an affiliate), NHS Cumbria, Optima, Prestige, Renaissance and Welford.

((5)         ) Contracted rent includes rent due or passing rent,
rent contracted from properties currently amended to rent  concessions
(Silverline portfolio), future committed rent from contracted capital projects
and forward funded developments, rent associated with deferred payments,
contractually exchanged property acquisitions.

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 Impact Health Partners LLP                                                             Via H/Advisors Maitland
 Andrew Cowley
 Mahesh Patel
 David Yaldron

 Jefferies International Limited                                                        +44 20 7029 8000
 Tom Yeadon                                    tyeadon@jefferies.com
 Ollie Nott                                    onott@jefferies.com

 Winterflood Securities Limited                                                         +44 20 3100 0000
 Neil Langford                                 neil.langford@winterflood.com
 Joe Winkley                                   joe.winkley@winterflood.com

 H/Advisors Maitland (Communications advisor)  impacthealth-maitland@h-advisors.global
 James Benjamin                                                                         +44 7747 113 930
 Rachel Cohen                                                                           +44 20 7379 5151
 Billy Moran                                                                            +44 20 7379 5151

 

The Company's LEI is 213800AX3FHPMJL4IJ53.

 

Further information on Impact Healthcare REIT is available at
www.impactreit.uk (http://www.impactreit.uk/) .

 

NOTES:

Impact Healthcare REIT plc acquires, renovates, extends and redevelops high
quality healthcare real estate assets in the UK and lets these assets on
long-term full repairing and insuring leases to high-quality established
healthcare operators which offer good quality care, under leases which provide
the Company with attractive levels of rent cover.

 

The Company aims to provide shareholders with an attractive sustainable
return, principally in the form of quarterly income distributions and with the
potential for capital and income growth, through exposure to a diversified and
resilient portfolio of UK healthcare real estate assets, in particular care
homes for the elderly.

 

The Company's dividend policy is to maintain a progressive dividend that is
covered by adjusted earnings.

 

On this basis, the target total dividend for the year ending 31 December 2024
is 6.95 pence per share((2)), a 0.18 pence increase over the 6.77 pence in
dividends paid or declared per ordinary share for the year ended 31 December
2023.

 

The Group's Ordinary Shares were admitted to trading on the main market of the
London Stock Exchange, premium segment, on 8 February 2019. The Company is a
constituent of the FTSE EPRA/NAREIT index.

 

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