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

Target Healthcare ReitAnnouncement

Thu 07:01

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RNS Number : 7648H  Target Healthcare REIT PLC  08 May 2025

8 May 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 March 2025, an update on corporate activity and its third
interim dividend for the year ending 30 June 2025.

 

Corporate activity highlights

 

Ninth consecutive quarter of EPRA NTA growth supported by rental income from
prime care home real estate, an investment class underpinned by structural
demographic tailwinds:

 

·   EPRA Net Tangible Assets ('NTA') per share increased 0.3% to 113.0
pence (31 December 2024: 112.7 pence), reflecting a like-for-like valuation
uplift driven by the portfolio's inflation-linked rent reviews

·     EPRA "topped-up" net initial yield of 6.23% (31 December 2024:
6.20%) based on an annualised contractual rent of £61.3 million

·      Adjusted EPRA EPS for the quarter of 1.472 pence per share, fully
covering the quarterly dividend of 1.471 pence per share

·      NAV total return of 1.6% for the quarter (based on EPRA NTA and
including dividend payment)

·      Net LTV of 22.9% (31 December 2024: 22.7%)

·      Weighted average debt term of 4.5 years (31 December 2024: 4.7
years). Interest costs hedged on 92% of drawn debt to the relevant facility
maturity date, with a weighted average cost of drawn debt of 3.94% (31
December 2024: 3.95%) (inclusive of amortisation of arrangement costs)

·    Access to a further £71 million of committed, but undrawn,
revolving credit facilities which, if drawn, would carry an interest rate of
SONIA plus 2.22%

·     Total capital available of £84 million as at 31 March 2025, net
of the Group's capital commitments including the Group's remaining development
asset

·      Rent collection of 97% for the quarter

 

Continued strong underlying portfolio performance with rental growth driven by
inflation-linked reviews and the acute nationwide undersupply of
fit-for-purpose real estate:

 

·    Diversified portfolio of 94 assets let to 34 tenants valued at
£930.0 million (31 December 2024: £924.7 million) reflecting an increase of
0.6% and like-for-like valuation increase of 0.3%, primarily driven by
continued rental growth partially offset by a widening in the net initial
yield

·     Contracted rent increased 1.1%, driven by a 0.8% like-for-like
increase predominantly from inflation-linked upwards-only annual rent reviews
and 0.3% from the rentalisation of other capital expenditure

·      WAULT of 25.8 years (31 December 2024: 26.1 years)

·      High quality, modern and sustainable real estate portfolio:

o  100% of the portfolio rated EPC A or B, 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: 100% en
suite wet-rooms; generous 48 sqm space per resident; sustainable rent of £200
per sqm

·      Average rent cover on mature homes remained high, at 1.9x for the
December 2024 quarter (most recent quarter of tenant data)

 

Kenneth MacKenzie, CEO of Target Fund Managers, commented:

 

"The Group's portfolio continues to outperform the MSCI UK Annual Healthcare
Property Index, with a 2024 calendar year total return at the property level
of 10.8% relative to the Index's 5.4%. Longer term performance has been
equally strong, with the Group's portfolio ranking second out of the 12 index
participants over the last 10 years, reflecting the attractive long-term
returns and low volatility available from disciplined investment by a highly
experienced team in this high-grade care home real estate asset class.

 

"Index linked underlying rental growth continues to drive EPRA NTA growth
despite the quarter's valuation reflecting a slight widening in the net
initial yield, and fully incorporating recent market transactional evidence.

 

"Our management team remains focused on the portfolio, particularly
opportunities to enhance revenues, progress potential tenancy changes and
tighten-up the overall portfolio quality where appropriate, whilst remaining
cognisant of the debt facilities due for renewal.

 

"Gordon Bland, the Manager's Finance Director, has decided to leave the
business next month after 12 years. I'd like to thank him for his excellent
work during that period, and we wish him well for the future. An Interim FD is
in place as we transition to a permanent replacement, with a full search
process being well advanced."

 

Portfolio update

 

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

·     Further progress at the Group's one remaining development site
which is forecast to reach practical completion in June 2025 at which point it
will be leased on pre-agreed terms to an existing tenant of the Group, adding
a further £0.6 million to the Group's contractual rent;

·      A capital payment of £1.5 million was made to a tenant in
exchange for an increase in the contracted rent where the performance of the
home was considered to justify an increase in the rental level. The payment
was rentalised at a yield consistent with the initial investment proposition
for the home;

·      A performance payment of £0.9 million was made to a tenant where
contracted performance conditions set at the time of entering into the initial
lease had been met. The payment was rentalised at a yield greater than the
portfolio EPRA "topped-up" Net Initial Yield; and

·      The remaining 37 en suite wet-rooms were completed at a home
undergoing refurbishment, increasing the contractual rent from the home and
improving the portfolio's overall wet room percentage to 99.8%.

 

We are nearing resolution in a process to re-tenant an asset where rent was
not being paid. We have had strong interest from multiple operators and we
expect the asset to be re-tenanted at a similar, or improved, rental level.
However, this has resulted in a short-term detrimental impact on rental income
and additional administration costs, and the drop in EPRA earnings and lower
rent collection in the quarter, which are expected to recover following
resolution of this matter.

 

Debt facilities

 

As at 31 March 2025, the Group had committed debt facilities of £320 million,
of which £249 million were drawn.  The majority of the Group's drawn debt is
long-term and fixed at low rates, with £150 million due to expire between
2032 and 2037. Of the Group's £170 million shorter dated facilities, £99
million were drawn.

 

In relation to these shorter dated debt facilities, which expire in November
2025, indicative refinancing 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 and the Group's expected
capital requirements.

 

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 third interim dividend

 

The Company today declares its third interim dividend for the year ending 30
June 2025, in respect of the period from 1 January 2025 to 31 March 2025, 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:  15 May 2025
 Record Date:       16 May 2025
 Payment Date:      30 May 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
 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
 Nikhil Varghese

 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 March 2025 comprised 94 assets let to 34 tenants
with a total value of £930.0 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 January 2025 to 31 March 2025:

 

                                                                   Pence per share
 EPRA NTA per share as at 31 December 2024                         112.7

 Revaluation gains / (losses) on investment properties             0.3
 Revaluation gains / (losses) on assets under construction^        -
 Movement in revenue reserve                                       1.5
 Second interim dividend payment for the year ending 30 June 2025  (1.5)
 EPRA NTA per share as at 31 March 2025                            113.0
 Percentage change in the quarter                                  0.3%

 

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.

 

At 31 March 2025, 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 113.2 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)

                                      Mar-25        Dec-24        Sept-24       Jun-24
                                      £m            £m            £m            £m
 Property portfolio*                  930.0         924.7         916.4         908.5
 Cash                                 36.3          37.9          38.9          38.9
 Net current assets / (liabilities)*  (16.2)        (15.7)        (14.6)        (17.9)
 Loans                                (249.0)       (248.0)       (248.0)       (243.0)
 Net assets                           701.1         698.9         692.7         686.5

 EPRA NTA per share (pence)           113.0         112.7         111.7         110.7

 

*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 March 2025 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 March  30 June  30 September 2025

                           2025      2025
 EPRA "topped-up" NIY      6.23%     6.23%    6.23%
 EPRA NIY                  6.10%     6.10%    6.23%
 Contractual rent (£m)     61.3      61.3     61.3
 Passing rent (£m)         60.0      60.0     61.3

 

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