REG - Target H'care REIT - Completion of Portfolio Acquisition

Target Healthcare ReitAnnouncement

20/12/2021 07:00

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RNS Number : 1175W  Target Healthcare REIT PLC  20 December 2021

20 December 2021

Target Healthcare REIT plc and its subsidiaries

("Target Healthcare" or "the Group")

 

Completion of 18-care home portfolio acquisition; total investment in quarter
of £173 million; new £63 million long-term, fixed-rate loan facility

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern,
purpose-built care homes, announces that it has completed the acquisition of a
major portfolio of 18 operational modern care homes. Combined with the
previously noted acquisition of a pre-let development site in Weymouth,  the
Group's total investment during the quarter has been £173 million including
costs. The acquisition yields are representative of assets of a similar
standard and location within the Group's portfolio, and the properties benefit
from long-term occupational leases with RPI-linked caps and collars.

These acquisitions, which formed part of the pipeline of acquisitions
announced as part of the Company's recent £125 million equity fund raise,
take the Group's portfolio to 98 assets and to 32 tenants once the development
site becomes operational in June 2022.

Portfolio of 18 operational care homes

Target Healthcare has completed the acquisition of a major portfolio of 18
operational care homes, representing in excess of 1,200 beds. The Investment
Manager has unparalleled knowledge of the individual assets within the
portfolio, having sourced 17 out of the 18 care homes on behalf of the vendor,
as well as having provided asset management services over the past 11 years.

The portfolio generates annual contracted rent of £9.2 million and has
collected 100 per cent. of rent throughout the pandemic. This is a
high-quality real estate portfolio, with an average age of approximately
eleven years. All of the properties are purpose-built care homes with modern
facilities including 100 per cent. en suite provision, the vast majority of
which (96 per cent.) benefit from full wet-rooms. The portfolio is spread
across eight tenants, three of which are new to the Group, including national
operator, Barchester Healthcare, as well as two regional operators.

The properties each benefit from long-term occupational leases with RPI-linked
caps and collars, with a weighted average unexpired lease term of
approximately 22 years. The commercial terms of each of the occupational
leases are consistent with equivalent leases in place across the Group.

Development site in Weymouth

The development is being undertaken by one of the UK's leading care home
developers, LNT Group, and upon reaching practical completion the care home
will be leased to experienced, regional operator, Chanctonbury Healthcare, on
a 35-year, full repairing and insuring lease. Chanctonbury Healthcare will
represent a new tenant to the Group.

Work on site has already commenced and practical completion is expected to be
reached in June 2022.  The development is being undertaken on a fixed price
contract with the developer and, in line with previous forward funding
agreements, the Group will earn interest on capital deployed through the
construction phase.

Long-term institutional debt facility

The Company has completed a £63 million committed term loan facility (the
"Facility") with Phoenix Group ("Phoenix"), an existing lending partner,
utilising the full £100 million of new facilities which had been allocated
and in diligence. The Facility carries an aggregate fixed rate of interest of
3.138% per annum on a 15-year term, maturing in January 2037.

Following the drawdown of the Facility, which is being used to finance the
acquisitions and temporarily repay a portion of the Group's revolving credit
facilities, the Group will have a net LTV of 21%; a weighted average term to
maturity of its debt facilities of 7.5 years; and a weighted average cost of
drawn debt, inclusive of amortisation of arrangement costs, of 3.08%.

The Group has undrawn flexible debt facilities of £97 million which will be
used to fund portfolio commitments and the acquisition pipeline, to which the
Group's investible capital is allocated.

The Group's total borrowing capacity now stands at £320 million comprising
the Facility, the existing £87 million Phoenix facilities repayable in
2032 and existing facilities with The Royal Bank of Scotland plc (£70
million committed term loan and revolving credit facility repayable in 2025)
and HSBC plc (£100 million revolving credit facility repayable towards the
end of 2024).

John Flannelly, Head of Investment at Target Fund Managers, commented:

"We are pleased to have deployed the proceeds of the recent equity issuance so
quickly, whilst agreement of the new 15-year term facility, the longest
duration yet, will support us in our objective to provide stable returns to
shareholders with long-term fixed interest costs matched against the
inflation-linked long income that is generated from our portfolio.

"The acquisition of the 18-care home portfolio increases the size of the
Group's existing portfolio by approximately 20 per cent and demonstrates the
Group's ability to undertake transactions of scale. The quality of the real
estate, combined with the diversified nature of the tenant base and the
attractive pricing, underpins our investment thesis for this acquisition.

"On completion next year, the Weymouth asset will be a best-in-class care home
in a location which demonstrates favourable demographics, whilst we are also
pleased to be further diversifying our tenant base by partnering with a new,
experienced operator in Chanctonbury Healthcare.

"These two transactions are strongly aligned with the Group's strict
investment criteria as we continue our highly disciplined approach to the
deployment of capital. We have a number of other transactions at advanced
stages of due diligence and expect to be in a position to make further
announcements in due course."

 All enquiries:

Kenneth MacKenzie / John Flannelly / Gordon Bland  01786 845 912

 Target Fund Managers

 Mark Young / Mark Bloomfield                       020 7710 7600

 Stifel Nicolaus Europe Limited

 Dido Laurimore / Claire Turvey / Richard Gotla     020 3727 1000

 FTI Consulting                                     targethealthcare@fticonsulting.com

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the Market
Abuse Regulations (EU) No. 596/2014 which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as amended. Upon the publication of this
announcement via Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

Notes to editors:

UK listed Target Healthcare REIT plc (THRL) is an externally managed Real
Estate Investment Trust which provides shareholders with an attractive level
of income, together with the potential for capital and income growth, from
investing in a diversified portfolio of modern, purpose-built care homes.

The Group's portfolio at 30 September 2021 comprised 79 assets let to 28
different tenants with a total value of £702.7 million.

The Group only invests in modern, purpose-built care homes that are let to
high quality tenants who demonstrate strong operational capabilities and a
strong care ethos. The Group builds collaborative, supportive relationships
with each of its tenants as it believes working in this way helps raise
standards of care and helps its tenants build sustainable businesses. In turn,
that helps the Group deliver stable returns to its investors.

 

 

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