REG - Impact Healthcare - Transfer of Operations & Related Party Transaction

Impact Healthcare REITAnnouncement

02/06/2023 16:30

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RNS Number : 5511B  Impact Healthcare REIT PLC  02 June 2023

The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any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 (other than the Republic of Ireland
or the Netherlands and then only to professional investors in such
jurisdictions), Canada, Australia, Japan or the Republic of South Africa.

 

2 June 2023

Impact Healthcare REIT plc

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

Transfer of the operations of seven care homes to an existing tenant operator
of the Group and smaller related party transaction

The Board of Directors of Impact Healthcare REIT plc (ticker: IHR) (the
"Board"), the real estate investment trust which gives investors exposure to a
diversified portfolio of UK healthcare real estate assets, in particular care
homes, announces that it has successfully negotiated a transaction to transfer
the operations of all homes let to Silverline Group ("Silverline") to an
affiliate of an existing tenant of Impact Healthcare REIT plc.

In negotiating this handover of seven homes from Silverline, the Board placed
high priority on the best interests of the residents who live in these homes
and the staff who work in them by ensuring continuity of care and operational
improvements.

The Company has seven homes let to Silverline, which account for 3.4% (£1.6
million) of the Company's total annual contracted rent. As reported by the
Company on 31 January and 25 April 2023, Silverline has not paid its
contractual rent for the two quarters to 31 March 2023 and 30 June 2023,
although the Company has received £0.4 million from Silverline's rent
deposits.

The Company has continued to receive 100% of rent payments due from each of
its other tenants.

The Company has had extensive discussions with a number of alternative care
providers to take over Silverline's responsibilities. The Board has now
decided that it is in the best interests of all the Company's stakeholders
that it enables the solvent sale of Silverline's tenant companies to Melrose
Holdings Limited ("MHL"), which will take over responsibility for operating
the seven homes immediately. MHL is a new company and wholly-owned by
connected parties of Mahesh Patel((1)), and will benefit from a service
agreement with Minster Care Group Limited ("Minster"), under which Minster
will support the turnaround of the Silverline Homes. Minster has a long and
effective track record of taking on and improving under-performing care homes.
 

To assist in the funding of Silverline's overdue liabilities to third parties
other than the Group and to fund remedial capital expenditure to bring the
operational and financial performance of the homes up to the required
standards, the Group has agreed to provide a £1.6 million loan facility for
up to three years to MHL. This facility will have an interest rate of 8.0% per
annum on drawn funds and will be repaid in priority to rent from surplus funds
in MHL.

In the initial phase of the operational turnaround of these care homes, the
existing leases will be temporarily amended to replace the fixed rent with a
variable rent, payable once the loan has been repaid. The lease variations
will also entitle MHL to pay Minster a fixed management fee of £1,000 per
registered bed in the homes (approximately £400,000 per annum plus VAT) to
cover the direct costs it will incur in overseeing the turnaround, payable
only from any surplus cash generated by the seven homes. Any surplus cash
after the management fee, will first be used to repay the loan facility and
accrued interest to Impact and, once the loan is repaid, will be paid as rent
to Impact.

The rental default from Silverline and the new arrangements agreed with MHL
will temporarily reduce the level of rent received by the Group. Whilst this
reduction will be partly mitigated by rental deposits, the Board anticipates
the total reduction versus the Company's original budget for 2023 to amount to
around £1 million((2)).

The transaction with MHL is a smaller related party transaction for the
purposes of Listing Rule 11.1.10R and this announcement is therefore made in
accordance with Listing Rule 11.1.10R(2)(c). As per the requirements of
Listing Rule 11.1.10 the Company has obtained written confirmation from an
FCA-approved sponsor firm that it believes the transaction is fair and
reasonable as far as the shareholders of the Company are concerned.

FOR FURTHER INFORMATION, PLEASE CONTACT:

 Impact Health Partners LLP                                                             Via H/Advisors Maitland
 Andrew Cowley
 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)                                           +44 7747 113 930
 James Benjamin                                impacthealth-maitland@h-advisors.global
 Rachel Cohen

 

 

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 has a progressive dividend policy with a target to grow its annual
aggregate dividend in line with the inflation-linked rental uplifts received
by the Group under the terms of the rent review provisions contained in the
Group's leases in the prior financial year.

 

On this basis, the target total dividend for the year ending 31 December 2023
is 6.77 pence per share((2)), a 3.53% increase over the 6.54 pence in
dividends paid or declared per ordinary share for the year ended 31 December
2022.

 

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.

 

Neither the content of the Company's website, nor the content on any website
accessible from hyperlinks on its website for any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any such
content be relied upon in reaching a decision as to whether or not to acquire,
continue to hold, or dispose of, securities in the Company.

 

(1)     Mahesh Patel is the controlling shareholder of Minster Care Group
Limited. He is also a principal in Impact Health Partners LLP and a
significant shareholder in the Company. He has a 35 year track record of
owning and managing care homes.

 

(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.

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