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Impact Healthcare builds funding firepower

The care home landlord is on track to produce a 9 per cent annual total return
September 3, 2019

Impact Healthcare Reit (IHR) spent the first half of the year building up funding firepower to expand its portfolio of care homes for the elderly. This included signing a £25m revolving credit facility with Clydesdale bank, which lifted available debt to £75m, as well as a £100m share placing in May, 85 per cent of which has been committed to date.

IC TIP: Buy at 112p

In the period, the care home landlord spent £39m acquiring nine properties, which boosted the number of beds by 14 per cent. That not only diversified the portfolio geographically but also added two more tenants in Countrywide (CWD) and the NHS. A further 91 beds were added in July and August via the purchase of a home in Devon and another in Oxfordshire.

Annual rent increases - which have a floor of 2 per cent and ceiling of 4 per cent - also lifted the valuation of the portfolio by around £5m, while the contracted rent roll rose by almost half. As a reminder, Impact's average weighted unexpired lease term sits at just under 20 years and carries no break clauses, which is more secure than most landlords. Income also remains decent, covering rent almost twice over.

IMPACT HEALTHCARE REIT (IHR)   
ORD PRICE:112pMARKET VALUE:£321m
TOUCH:111-112p12-MONTH HIGH:115pLOW: 100p
DIVIDEND YIELD:5.4%TRADING PROP:nil
PREMIUM TO NAV:7%  
INVESTMENT PROP:£266mNET CASH:£29m
Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
20181028.54.413.00
201910510.95.053.09
% change+3+29+15+3
Ex-div: -   
Payment: -   
*Dividends paid quarterly, second-quarter dividend of 1.5425p was paid on 30 Aug