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

Target Healthcare ReitAnnouncement

Wed 07:00

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RNS Number : 1162U  Target Healthcare REIT PLC  06 August 2025

6 August 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 30 June 2025, an update on corporate activity and its fourth
interim dividend for the year ended 30 June 2025.

 

Corporate activity highlights

 

Consistent total returns driven by growing rental income and asset management
initiatives.

 

·     EPRA Net Tangible Assets ('NTA') per share increased 1.6% to 114.8
pence (31 March 2025: 113.0 pence), reflecting a like-for-like valuation
uplift primarily driven by the portfolio's inflation-linked rent reviews and
supplemented by capital returns from property sales and other asset management
initiatives

·   EPRA "topped-up" net initial yield of 6.22% (31 March 2025: 6.23%)
based on an annualised contractual rent of £61.2 million

·     Adjusted EPRA EPS for the quarter of 1.48 pence per share, fully
covering the quarterly dividend of 1.471 pence per share

·      Total accounting return of 2.9% for the quarter (based on EPRA
NTA and including dividend payment)

·      Net LTV of 21.8% (31 March 2025: 22.9%)

·      Weighted average debt term of 4.2 years (31 March 2025: 4.5
years). Interest costs hedged on 95% of drawn debt to the relevant facility
maturity date, with a weighted average cost of drawn debt of 3.84% (31 March
2025: 3.94%) (inclusive of amortisation of arrangement costs)

·    Access to a further £78 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 £94 million as at 30 June 2025, net
of the Group's capital commitments including the Group's remaining development

·      Rent collection of 97% to date for the fourth quarter, with
collection levels expected to increase going forward following successful
re-tenantings

 

Strong underlying portfolio performance underpinned by structural demographics
and an acute national undersupply of fit-for-purpose real estate.

 

·      Diversified portfolio of 93 assets let to 34 tenants valued at
£929.9 million (31 March 2025: £930.0 million) reflecting a like-for-like
valuation increase of 0.9% offset by a reduction of 0.9% in absolute value
following a property disposal. The like-for-like increase was primarily driven
by continued rental growth partially offset with a marginal widening in the
net initial yield

·     Property disposal of £9.6m at a 8% premium to holding value
which, in addition to the surrender premium received in relation to the
re-tenanting of another property with the same incumbent tenant, contributed
0.3% to the total accounting return for the quarter

·    Contracted rent decreased by 0.1%, driven by a 1.1% like-for-like
increase from inflation-linked upwards-only annual rent reviews offset by a
1.2% decrease arising from the property disposal

·      WAULT of 25.9 years (31 March 2025: 25.8 years)

·    High quality, modern and sustainable real estate portfolio, full
details of which are set out in the recently published Group's Sustainability
Report:

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 £203
per sqm

·      Average rent cover on mature homes remained high, at 1.8x for the
March 2025 quarter (most recent quarter of tenant data)

 

Kenneth MacKenzie, CEO of Target Fund Managers, commented:

 

"The Group's portfolio continues to generate consistent underlying rental
growth and a positive total accounting return driven by our exclusively
modern, purpose-built real estate, supportive tailwinds and active management.

 

"Our recent asset management initiatives are now coming to positive
conclusions. With one tenant we have successfully negotiated a sale and two
re-tenantings across their three homes. This supports their exit from the
sector with minimal disruption to the homes' residents whilst delivering
attractive financial returns for the Group. In early July we successfully
re-tenanted, at a higher rent with no tenant incentives, an asset where rent
was not being paid. The EPRA earnings and lower rent collection reported over
the last two quarters are now expected to improve. Therefore, whilst we remain
cognisant of the short-term impact on net rental income and dividend cover,
the overall positive outcomes achieved demonstrate that an active and highly
engaged landlord model, when supported by high-quality real estate in
attractive geographical locations, is core to delivering strong investment
total returns over the long term from care home properties."

 

Portfolio update

 

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

·     The Group sold one home for a value of £9.6 million, net of
costs, which represented a premium of 8% compared to the external valuation as
at 31 March 2025;

·      The Group re-tenanted one home to an existing tenant of the
Group, receiving a surrender premium from the outgoing tenant in excess of
costs and incentives granted to the incoming tenant. The contracted rent
remained unchanged and the lease term was extended by a further 20 years; and

·    The Group exchanged contracts on the re-tenanting of a further home to
a tenant that will be new to the Group. A further surrender premium will be
receivable from the incumbent tenant on completion, expected in the next 3-6
months following the tenant's conclusion of certain capital works. Similarly
to the above, there will be no changes to the significant lease terms arising
from this re‑tenanting, other than the extension of the lease term by a
further 20 years.

 

Subsequent to the quarter end, the Group re-tenanted an additional asset where
the tenant had not been paying the rent, representing 1.4% of the rent roll.
Following strong interest from multiple operators, the property was ultimately
re-tenanted at an improved rental level and with no tenant incentives granted,
with an expectation of a valuation uplift of c.£0.3 million from this
additional rent in the following quarterly valuation. There is also the
potential for further positive valuation improvements over time from both
rental growth and yield adjustments linked to the expected recovery in the
operational performance of the home. Whilst this had a short-term detrimental
impact by both reducing the Group's net rental income and increasing its
costs, as noted last quarter, the EPRA earnings and lower rent collection
reported are now expected to recover following the resolution of this matter.

 

The Group has progressed discussions regarding the re-tenanting of three
further properties, leased to a single tenant representing 3.2% of the rent
roll, where the rent was not paid in full for the quarter. A provision has
prudently been recognised, and we anticipate rent collection to resume in the
current quarter.

 

Debt facilities

 

As at 30 June 2025, the Group had committed debt facilities of £320 million,
of which £242 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, £92
million were drawn.

 

In relation to these shorter dated debt facilities, which expire in November
2025, credit approved refinancing terms have been obtained from each of the
incumbent lenders. The Group is pleased with the appetite shown and is
continuing to carefully evaluate the proposals and the Group's expected
capital requirements, and anticipates completing the refinancing of these
facilities on appropriate terms prior to the publication of the Group's Annual
Results in September 2025.

 

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.

 

Sustainability Report

 

The Group published its Sustainability Report 2025 during the quarter. This is
available on the Company's website at www.targethealthcarereit.co.uk
(http://www.targethealthcarereit.co.uk)

 

 

Announcement of fourth interim dividend

 

The Company today declares its fourth interim dividend for the year ended 30
June 2025, in respect of the period from 1 April 2025 to 30 June 2025, of
1.471 pence per share as detailed in the schedule below:

 

Interim Property Income Distribution (PID):    nil

Interim ordinary
dividend:
1.471 pence per share

 

 Ex-Dividend Date:  14 August 2025
 Record Date:       15 August 2025
 Payment Date:      29 August 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 FTSE 250
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 £929.9 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 April 2025 to 30 June 2025:

 

                                                                 Pence per share
 EPRA NTA per share as at 31 March 2025                          113.0

 Revaluation gains / (losses) on investment properties           1.4
 Revaluation gains / (losses) on assets under construction^      -
 Gain on investment property realised                            0.2
 Gain from surrender premium received on re-tenanting            0.2
 Movement in revenue reserve                                     1.5
 Third interim dividend payment for the year ended 30 June 2025  (1.5)
 EPRA NTA per share as at 30 June 2025                           114.8
 Percentage change in the quarter                                1.6%

 

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 30 June 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 114.9 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)

                                      Jun-25        Mar-25        Dec-24        Sept-24
                                      £m            £m            £m            £m
 Property portfolio*                  929.9         930.0         924.7         916.4
 Cash                                 39.7          36.3          37.9          38.9
 Net current assets / (liabilities)*  (15.7)        (16.2)        (15.7)        (14.6)
 Loans                                (242.0)       (249.0)       (248.0)       (248.0)
 Net assets                           711.9         701.1         698.9         692.7

 EPRA NTA per share (pence)           114.8         113.0         112.7         111.7

 

*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 30 June 2025 was conducted by
CBRE Limited.

 

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

 

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

 

                           30 June  30 September 2025  31 December 2025

                           2025
 EPRA "topped-up" NIY      6.22%    6.22%              6.22%
 EPRA NIY                  6.04%    6.19%              6.22%
 Contractual rent (£m)     61.2     61.2               61.2
 Passing rent (£m)         59.4     60.9               61.2

 

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