REG - Target H'care REIT - Disposal of homes, debt refinancing & pipeline

Target Healthcare ReitAnnouncement

25/09/2025 07:00

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RNS Number : 7133A  Target Healthcare REIT PLC  25 September 2025

25 September 2025

Target Healthcare REIT plc and its subsidiaries

("Target Healthcare" or the "Company" or,

together with its subsidiaries, the "Group")

 

£85.9 million disposal of nine care homes transacted at a 11.6% premium to
carrying value, refinancing of debt facilities, attractive acquisition
pipeline and Investment Manager CFO update

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern,
purpose-built care homes, is pleased to announce the disposal of nine UK care
homes above carrying value to an institutional purchaser (the "Disposal"), the
completion of its debt refinancing, details on its attractive acquisition
pipeline and the appointment of a CFO by the Investment Manager.

Disposal of nine care homes for £85.9 million

This landmark transaction of £85.9 million represents our largest disposal
since IPO and was transacted at a 11.6% premium to the Group's carrying value
as at 30 June 2025. The sale price represents an implied net initial yield of
5.24%.

This highly accretive disposal of nine care homes, which represent 537 beds
and c.8.3% of the Group's overall portfolio value as at 30 June 2025, reduces
the Group's exposure to its current largest tenant, HC‑One/Ideal Carehomes,
from c.16.0% to c.8.8% based on rental income. On completion, the transaction
will create a more balanced tenant diversification across the portfolio. The
Disposal will not materially change portfolio metrics including rent cover,
weighted average unexpired lease term or average age.

Completion of the Disposal, which is unconditional and which is expected to
take place on 22 October 2025, will result in an annualised ungeared IRR in
excess of 11% and demonstrates the Company's active approach to portfolio
management and ability to drive shareholder returns.

Completion of debt refinancing

The Company has refinanced its banking facilities at improved terms with The
Royal Bank of Scotland plc and HSBC UK Bank plc (the "Refinancing") replacing
the Group's existing £170 million facilities with these banks which were due
to expire in November 2025. The detail of the new facilities, and those they
replace, are as follows:

                 Pre refinancing                      Post refinancing
                 Quantum  Maturity  Interest rate     Quantum  Maturity    Interest rate
 RBS Term loan   £30m     Nov 2025  2.5%              £20m     Sept 2028*  5.3%

                                    Fixed with swap                        Fixed with five-year swap
 RBS RCF         £40m     Nov 2025  SONIA + 2.3%      £30m     Sept 2028*  SONIA + 1.5%

                                    Variable                               Variable
 HSBC Term loan  -        -         -                 £30m     Sept 2028*  5.3%

                                                                           Fixed with five-year swap
 HSBC RCF        £100m    Nov 2025  SONIA + 2.2%      £50m     Sept 2028*  SONIA + 1.5%

                                    Capped at 5.2%                         Variable
                 £170m                                £130m

* All with the option to extend for a further two years, subject to lender
consent.

The £30 million RBS RCF and £50 million HSBC RCF will be capped
appropriately in advance of any acquisitions being committed.

As part of the Refinancing, the Company has also agreed accordion facilities
of a further £70 million with these banks providing the ability to increase
the banking facilities to an aggregate of £200 million, subject to lender
consent, to pursue further attractive investment opportunities.

Following the Refinancing, the Group's weighted average cost of its drawn
debt, inclusive of amortisation of loan arrangement fees, increases to 4.3%
from 3.9%. This includes the Group's £150m of long-term, fixed rate
facilities with Phoenix Group which remain unchanged.

Attractive acquisition pipeline

The Group has a strong pipeline of near-term assets at a net initial yield of
c.6%. This comprises a combination of accretive investment opportunities
including high quality, strongly performing existing UK care homes all with en
suite wet-rooms and new purpose-built forward funded assets. The acquisition
of the first of the existing care homes in the pipeline is expected to take
place in November. Executing on the rest of this pipeline of assets is
expected to utilise fully the proceeds from the Disposal as well as making
efficient use of the new debt facilities.

Kenneth MacKenzie, CEO, at Target Fund Managers, commented:

"We are delighted to announce this landmark disposal of nine homes, at a
substantial premium to carrying value. The sale further underlines the
desirability and demand for the modern, purpose-built care home portfolio we
have carefully curated over the years. The decision to divest these assets
was primarily driven by our desire to actively manage the portfolio -
including reducing our largest tenant exposure to under 10% - and to take
advantage of a favourable market opportunity. As well as crystallising an
attractive return for shareholders, it is also a strong validation of our
portfolio valuation.

"Refinancing the Group's banking facilities at a reduced margin, extending the
long-term relationship we have with our lenders, is also a significant
milestone. We have improved the terms, reflecting the strength of our business
and the compelling fundamentals underpinning purpose-built care homes.

"The disposal proceeds combined with the new debt facilities provide us with
significant financial flexibility to invest in new assets and improve the
quality and scale of the portfolio, whilst benefiting from the yield
differential we expect to achieve. We look forward to setting this out in more
detail at our full year results in October."

Investment Manager update

Further to the Company's announcement on 8 May 2025, the Company is pleased to
announce that its Investment Manager, Target Fund Managers Limited, has
appointed Alastair Murray as Chief Financial Officer ("CFO"), replacing Gordon
Bland whose resignation became effective on 6 June 2025.

This appointment follows an extensive market search completed by external
recruitment consultants, with the Chair of the Audit Committee included
throughout the process.

Alastair is a chartered accountant, having trained and practised at Bank of
Scotland/Lloyds Banking Group, with extensive experience in finance and
accounting matters, including having served as Director of Finance: Listed
Funds for the Investment Manager since 2023. Alastair's appointment as CFO is
subject to regulatory approval.

 

LEI: 213800RXPY9WULUSBC04

ENDS

Enquiries:

 Target Fund Managers Limited    Tel: 01786 845 912
 Kenneth MacKenzie

 Alastair Murray
 James MacKenzie

 Stifel Nicolaus Europe Limited  Tel: 020 7710 7600
 Mark Young
 Rajpal Padam
 Catriona Neville

 Panmure Liberum Limited         Tel: 020 3100 2000
 Jamie Richards
 David Watkins
 Shalin Bhamra

 FTI Consulting                  Tel: 020 3727 1000
 Dido Laurimore                  TargetHealthcare@fticonsulting.com
 Richard Gotla

 

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 June 2025 comprised 93 assets let to 34 tenants
with a total value of £930 million.

The Group 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.

Important information

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.

 

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