REG - Target H'care REIT - Net Asset Value, Corporate Update & Dividend

Target Healthcare ReitAnnouncement

05/02/2025 07:00

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RNS Number : 8987V  Target Healthcare REIT PLC  05 February 2025

5 February 2025

Target Healthcare REIT plc and its subsidiaries

 

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

together with its subsidiaries, "the Group")

 

Net Asset Value, update on corporate activity and dividend declaration

 

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern,
purpose-built care homes, announces its unaudited quarterly Net Asset Value
('NAV') as at 31 December 2024, an update on corporate activity and its second
interim dividend for the year ending 30 June 2025.

 

Corporate activity highlights

 

High quality modern care home real estate delivering consistently positive
total returns from growing rental income and EPRA NTA:

 

·    EPRA Net Tangible Assets ('NTA') per share increased 0.9% to 112.7
pence (30 September 2024: 111.7 pence), reflecting a like-for-like valuation
uplift driven by the portfolio's inflation-linked rent reviews

·     EPRA "topped-up" net initial yield stable at 6.20% (30 September
2024: 6.20%) based on an annualised contractual rent of £60.6 million

·     Adjusted EPRA EPS for the quarter of 1.59 pence per share, fully
covering the quarterly dividend of 1.471 pence per share

·      NAV total return of 2.2% for the quarter (based on EPRA NTA and
including dividend payment)

·      Net LTV of 22.7% (30 September 2024: 22.8%)

·     Weighted average debt term of 4.7 years (30 September 2024: 5.0
years). Interest costs hedged on 93% of drawn debt to the relevant facility
maturity date, with a weighted average cost of drawn debt of 3.95% (30
September: 3.96%) (inclusive of amortisation of arrangement costs)

·    Access to a further £72 million of committed, but undrawn, revolving
credit facilities which, if drawn, would carry an interest rate of SONIA plus
2.21%

·    Total capital available of £85 million as at 31 December 2024, net of
the Group's capital commitments including a development asset

 

Strong underlying portfolio trading underpinned by structural demographic
tailwinds and a nationwide undersupply of fit-for-purpose real estate.
Portfolio performance further supported by inflation-linked rent reviews,
diversified tenant base and a highly-engaged Manager. Portfolio's ability to
support long-term returns demonstrated by 1.9x last twelve months rent cover:

 

·   Diversified portfolio of 94 assets let to 34 tenants and valued at
£924.7 million (30 September 2024: £916.4 million) reflecting an increase of
0.9% with like-for-like valuation increase of 0.6%, primarily driven by
continued rental growth

·    Contracted rent increased 2.3%, driven by a 0.7% like-for-like
increase predominantly from inflation-linked upwards-only annual rent reviews
and 1.6% from a completed development and the rentalisation of other capital
expenditure

·      WAULT of 26.1 years (30 September 2024: 26.2 years)

·      High quality, modern and sustainable real estate portfolio:

o  100% of the portfolio is A or B EPC rated, and therefore the portfolio is
already compliant with the minimum energy efficiency standards anticipated to
apply from 2030

o  Positive social impact from sector-leading real estate standards: 99% en
suite wet-rooms; generous 48 sqm space per resident; sustainable rent of
£198 per sqm

·      Rent cover on mature homes remained stable, at 2.0x for the
September 2024 quarter (most recent quarter of tenant data)

 

Kenneth MacKenzie, CEO of Target Fund Managers, commented:

 

"We are seeing consistent rental growth and continued positive total
accounting return performance, supported by tenant profitability and the twin
tailwinds of demographic trends and increasing demand for modern,
purpose-built, real estate. The trading outlook across our portfolio remains
positive, with tenants privately-funded fee revenues a distinctive and helpful
lever in the rising-cost environment following the recent Budget. Rent covers
have remained robust, with the September quarter result of 2.0x consistent
with previous quarters."

 

"Our long-standing and dedicated management team remain ever focused on our
core investment strategy of delivering strong investment returns through
active and highly-engaged management of our best-in-class portfolio."

 

Portfolio update

 

During the quarter, the following asset management initiatives were
undertaken:

·     One of the Group's two development sites reached practical
completion and was leased on pre-agreed terms to an existing tenant of the
Group adding £0.9 million to the Group's contractual rent;

·      A performance payment of £1.0 million was made to a tenant where
contracted performance conditions set at the time of entering into the initial
lease had been met. This payment was rentalised at a yield greater than the
portfolio EPRA topped-up NIY; and

·      A home was re-tenanted resulting in a tenant who had taken the
strategic decision to exit the elderly care sector being replaced by a new
tenant to the Group with an experienced management team. The contracted rent
from the property remained unchanged, with the rent free period granted to the
incoming tenant being partially funded by the outgoing tenant, an increase in
the minimum annual rental uplift and an improvement in the property's
valuation yield.

 

Debt facilities

 

In relation to the Group's shortest dated debt facilities, which expire in
November 2025, indicative refinance terms have been obtained from a number of
lenders, including each of the incumbent lenders, for a range of facility
types and durations. The Group is pleased with the appetite shown and is
continuing to carefully evaluate the proposals.

 

A balance sheet summary and an analysis of the movement in the EPRA NTA over
the quarter is shown in the Appendix of this announcement.

 

 

Announcement of second interim dividend

 

The Company today declares its second interim dividend for the year ending 30
June 2025, in respect of the period from 1 October 2024 to 31 December 2024,
of 1.471 pence per share as detailed in the schedule below:

 

Interim Property Income Distribution (PID):     1.471 pence per share

Interim ordinary
dividend:
nil

 

 Ex-Dividend Date:  13 February 2025
 Record Date:       14 February 2025
 Payment Date:      28 February 2025

 

 

Shareholders entitled to elect to receive distributions without deduction for
withholding tax may complete the declaration form which is available on
request from the Company through the contact details provided on its website
www.targethealthcarereit.co.uk (http://www.targethealthcarereit.co.uk) , or
from the Company's registrar. Shareholders who qualify for gross payments are,
principally, UK resident companies, certain UK public bodies, UK charities, UK
pension schemes and the managers of ISAs, PEPs and Child Trust Funds, in each
case subject to certain conditions. Individuals and non-UK residents do not
qualify for gross payments of distributions and should not complete the
declaration form.

 

LEI: 213800RXPY9WULUSBC04

 

ENDS

 

 

 

Enquiries:

 

 Target Fund Managers Limited    Tel: 01786 845 912
 Kenneth MacKenzie
 Gordon Bland

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

 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 31 December 2024 comprised 94 assets let to 34
tenants with a total value of £924.7 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.

APPENDIX

 

1.     Analysis of movement in EPRA NTA

 

The following table provides an analysis of the movement in the unaudited EPRA
NTA per share for the period from 1 October 2024 to 31 December 2024:

 

                                                                  Pence per share
 EPRA NTA per share as at 30 September 2024                       111.7

 Revaluation gains / (losses) on investment properties            0.8
 Revaluation gains / (losses) on assets under construction^       0.1
 Movement in revenue reserve                                      1.6
 First interim dividend payment for the year ending 30 June 2025  (1.5)
 EPRA NTA per share as at 31 December 2024                        112.7
 Percentage change in the quarter                                 0.9%

 

The EPRA Best Practices Recommendations Guidelines state that companies should
publish a set of three NAV metrics. The full set of EPRA NAV metrics are
published in the Group's Annual Report. The Company intends to continue to
announce the EPRA NTA.

 

At 31 December 2024, due to the valuation ascribed to the Group's interest
rate derivative contracts used to hedge its exposure to variable interest
rates, which are excluded from the calculation of the EPRA NTA, the unaudited
NAV calculated under International Financial Reporting Standards was 112.9
pence per share.

 

^Consistent with standard valuation practice for assets under construction,
the carrying value of these assets is calculated by the valuer through
application of a discount to accumulated costs to date. This discount varies
depending on factors such as the remaining development time. As the asset
progresses towards completion, the discount that has been applied is unwound.

 

 2.     Summary balance sheet (unaudited)

                                      Dec-24        Sept-24       Jun-24        Mar-24
                                      £m            £m            £m            £m
 Property portfolio*                  924.7         916.4         908.5         934.8
 Cash                                 37.9          38.9          38.9          17.9
 Net current assets / (liabilities)*  (15.7)        (14.6)        (17.9)        (17.3)
 Loans                                (248.0)       (248.0)       (243.0)       (259.0)
 Net assets                           698.9         692.7         686.5         676.4

 EPRA NTA per share (pence)           112.7         111.7         110.7         109.0

 

*Properties within the portfolio are stated at the market value provided by
the external valuer and the IFRS effects of fixed/guaranteed minimum rent
reviews are not reflected.

 

3.     External Valuer

The valuation of the property portfolio as at 31 December 2024 was conducted
by CBRE Limited.

 

4.     EPRA NIY profiles and unwind of rent-free period

 

The Group currently has one asset with a rent-free period. As this unwinds,
assuming no other changes including inter alia the portfolio valuation or
rental profile, the EPRA yield profiles for the portfolio will be as follows:

 

                         31 December  31 March  30 June  30 September 2025

                         2024         2025      2025
 EPRA "topped-up" NIY    6.20%        6.20%     6.20%    6.20%
 EPRA NIY                6.07%        6.07%     6.07%    6.20%
 Contractual rent (£m)   60.6         60.6      60.6     60.6
 Passing rent (£m)       59.3         59.3      59.3     60.6

 

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