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Even Senior Living Not Immune From Volatile Markets, Warns Impact Healthcare

Impact Healthcare REIT warned that the economic environment is hitting every sector.

Even the booming healthcare real estate sector is “not immune” from high levels of volatility in financial markets, Impact Healthcare REIT outgoing Chairman Rupert Barclay warned as the company announced its full-year results for 2022.

Despite the resilience of the senior and elderly living sector, Impact Healthcare REIT saw profits halve and net asset value per share down 2% year-on-year for the calendar year 2022.

Following a number of acquisitions, total NAV at 31 December 2022 was £446M, up 13.1%, reflecting change in market values of its property portfolio, partially offset by inflation-linked rent reviews and stable operator performance.

The total size of its portfolio was £569M at 31 December 2022, up 14.3% on £497M a year earlier, largely reflecting acquisitions in the year, offset by downward valuation movements.

The change in fair value of investment properties was down £14.5M compared with a £4.2M gain in 2021, with a profit before tax of £17M, down from £32M in 2021.

“While healthcare is not immune, the essential nature of our tenants' services — which translated into zero voids and 100% rent collection for 2022 as well as further rental growth — are expected to continue to help our asset values to hold up much better than most other real estate subsectors,” Barclay said.

Annual inflation-linked upward-only rent reviews in 100% of its leases underpinned delivery of its dividend target, Barclay said.

“What we can be certain about is that care homes are critical social infrastructure, which provides an essential service for vulnerable elderly people. Demand for that service is driven by demography and acuity, and is not directly related to developments in the wider economy or financial markets,” he added.

“This gives care home operators a higher level of in-built resilience than tenants in many other real estate sectors, demonstrated in part by their ability to pass through inflation in the fees they charge for care."

Post year-end Impact Healthcare REIT said that it has invested in a portfolio of six homes with 438 beds for £56M and sold one noncore asset for £1.25M.

Barclay will step down from the board and resign as a director of the company on 31 March 2023, when Simon Laffin, currently nonexecutive director and chairman designate of the company, will become chairman.