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Target Healthcare (THRL)

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Thursday 31 January, 2019

Target Healthcare

Net Asset Value, Corporate Update & Dividend

RNS Number : 6036O
Target Healthcare REIT Limited
31 January 2019

31 January 2019

Target Healthcare REIT Limited and its subsidiaries

("Target Healthcare" or "the Group")

Net Asset Value, update on corporate activity & dividend declaration



Target Healthcare (LSE: THRL), the UK listed specialist investor in purpose-built care homes, announces its unaudited quarterly Net Asset Value (NAV) as at 31 December 2018, provides an update on its corporate activity during the quarter, and declares its second interim dividend.




·      EPRA NAV per share of 106.9 pence (30 September 2018: 106.1 pence), resulting in a NAV total return for the quarter of 2.3%

·      1.6% increase in like-for-like value of the operational portfolio; total portfolio value of £463.9 million, comprising 61 assets

·      Nine rent reviews completed at an average uplift of 3.3%; contractual rent roll of £28.0 million from 54 operational properties

·      £50.8 million of acquisitions (inclusive of costs and funding commitments) completed during the period, including one operational home and two sites on which pre-let homes will be constructed through forward funded development agreements. Acquisition yields are representative of assets of similar standard and location within the Group's existing portfolio

·      The Group's seven pre-let development projects plus a commitment to acquire a further home upon construction completion are scheduled to add £5.3 million to annual contractual rent as well as five new tenants to the portfolio during 2019, further diversifying the occupier base.

·      Second interim dividend declared for the year ending 30 June 2019 of 1.64475 pence per share, an increase of 2.0% on the 2018 quarterly dividends. On an annualised basis, this reflects a payment of 6.579 pence per share and a dividend yield of 5.9% based on the closing share price on 30 January 2019.



Kenneth MacKenzie, CEO of Target Fund Managers Limited, commented:


"The successful capital raise in November 2018 has enabled us to maintain our momentum, and allows us to acquire assets which further diversify the portfolio by tenant, geography and resident payment profile. This diversification supports the sustainable, long term income delivery which is a key returns objective. We are carefully working through diligence on a pipeline of additional assets which meet our strict criteria in terms of asset quality, local market competitiveness and tenant ability. Completion of these deals will see the full deployment of our available capital within an efficient timeframe.


The construction of our new home in Wetherby was completed during the period and, having welcomed its first residents, is now fully operational and generating rental income on a long duration lease. The building showcases the substantial progress that has been made recently in care home design and the high standard of facilities now available to residents including full en-suite wetrooms. We believe this is crucial to the future of the sector as the UK's population ages with a simultaneous increase in expectations for quality of accommodation in which to reside and receive care."



Net Asset Value


The Group's unaudited EPRA NAV per share as at 31 December 2018 was 106.9 pence. The total return for the quarter based on EPRA NAV was 2.3%.


A balance sheet summary and an analysis of the movement in the EPRA NAV over the quarter is presented at the end of this announcement in the Appendix.




Corporate Update


Portfolio performance


As at 31 December 2018 the Group's portfolio was valued at £463.9 million and comprised 54 operational care homes as well as seven pre-let sites being developed through forward funding commitments with established development partners.


The portfolio value has increased by 14.9% over the quarter. Of this, 13.3% comprises new acquisitions and further investment into developments, with a positive like-for-like movement in the operational portfolio value of 1.6% which reflects both the impact of annual inflation-linked rental reviews and market yield shift.


Portfolio contractual rent has increased by 6.1% over the quarter, of which 3.1% is derived from acquisitions with 2.3% reflecting  the successful construction on one of the Group's development sites which is now an operational home leased to an existing tenant of the Group. Where rent reviews were completed during the quarter, the average increase was 3.3%, resulting in a 0.7% like-for-like increase to the contractual rent roll.


The portfolio's weighted average unexpired lease term was 28.46 years.


The portfolio had an EPRA topped-up net initial yield of 6.32% based on an annualised contractual rent upon expiry of lease incentives of £28.0 million. The EPRA net initial yield was 5.64% based on passing rent of £25.0 million. A schedule showing the respective NIY profiles from the unwind of portfolio assets in rent-free periods is shown in the Appendix.



Debt facilities & swap arrangements


As at 31 December 2018, the Group's total borrowings were £71.0 million, giving a loan-to-value (LTV) of 9.2% using net debt (total gross debt less cash, as a proportion of gross property value). Gross LTV (total gross debt as a proportion of gross property value) was 15.3%. The Group has historically disclosed gross LTV based on its intention to invest the vast majority of cash balances, however in response to shareholder and analyst requests will also disclose LTV on a net debt basis going forward.


The Group, through facilities with RBS, HSBC and FCB, has available fixed term debt of £70 million with an additional £60 million of more flexible debt available from revolving facilities. The Group has currently drawn £66.0 million of fixed term debt on which the interest rate has been fixed through interest rate swaps. £5.0 million has been drawn from the revolving facilities on which the interest rate is variable linked to 3-month LIBOR.


The Group's weighted average cost on its drawn debt, inclusive of amortisation of arrangement costs, is 3.09% with a weighted average term to expiry of 2.8 years.


Following deployment of available equity capital, it is the Group's intention to fund its subsequent investment pipeline through a level of additional debt capital which would allow achievement of its stated gearing targets.



Investment activity in the quarter


As previously announced in November 2018, the Group invested £50.8 million in three new acquisitions during the period, including two forward-funding agreements and a purpose-built operating home:


·      Two well-advanced developments in Cumnor Hill, Oxford and Badgers Mount, near Sevenoaks in Kent. The remainder of the development works will be funded under capped development contracts to create two high quality residential care homes with full en suite wet-room facilities with a combined total of 130 beds. Upon completion (expected mid-2019) both will be let to Hamberley Group, a new tenant to the Group, on 35-year occupational leases including annual, upwards-only RPI-linked increases, subject to a cap and collar.

·      A modern, purpose-built care home in East Sussex which opened in September 2017 and was a care home design finalist in 2018. The home comprises 62 bedrooms with full en suite wet-room facilities and is let on a 35-year lease with RPI-linked cap and collar to a subsidiary of Caring Homes Group, the UK-wide care home operator which is an existing tenant of the Group. As is customary for new and nearly new care homes, a short rent-free period has been agreed which will assist the tenant's cashflows during the early trading period.




Pipeline and Investment Market


In November 2018 the Group successfully raised gross proceeds of £50 million through the issue of 45,871,559 Ordinary Shares by way of an over-subscribed non pre-emptive placing under its existing Placing Programme.


Thereafter, £14 million was deployed into the East Sussex property referenced above and the Group currently has a healthy pipeline of assets being assessed for investment, inclusive of near-term opportunities in advanced due diligence which are expected to progress to completion over the coming months. The successful completion of these transactions will result in the full deployment of the equity proceeds raised in November 2018.


Demand remains high amongst investor groups for exposure to the type of high-quality real estate assets in the Group's portfolio, underpinned by the supply/demand imbalance for appropriately modern care home facilities with en suite wet-rooms and the projected increase in the number of elderly people (the number of over 85s has been and is projected to be the fastest growing age group). The Group's Investment Manager, through its experienced and expert team, continues to use its highly specialist knowledge to identify and acquire suitable assets in this competitive market place, leveraging its strong reputation and relationships with vendors and operators.



Dividends in the period


The Company paid its first interim dividend for the year to 30 June 2019, in respect of the period from 1 July 2018 to 30 September 2018, of 1.64475 pence per share on 30 November 2018 to shareholders on the register on 26 October 2018.


The Company had 385,089,448 ordinary shares in issue at 31 December 2018 and has not issued or bought back any shares since that date.



Announcement of second interim dividend


The Company today declares its second interim dividend payment for the year ending 30 June 2019, in respect of the period from 1 October 2018 to 31 December 2018 of 1.64475 pence per share as detailed in the schedule below:


Interim Property Income Distribution (PID)                    1.64475 pence per share 


Ex-Dividend Date:                                7 February 2019

Record Date:                                        8 February 2019

Pay Date:                                           22 February 2019



The dividend reflects an annualised payment of 6.579 pence per share and a dividend yield of 5.9% based on the 30 January 2019 closing share price of 111.5 pence.



Investor relations


Shareholders will find the latest Group information at its website:


Listing Rule 15.2.5


Further to investor queries, the Company confirms that it follows Listing Rule 15.2.5 in regards to investments in other investment companies or investment trusts which are listed on the Official List of the UK Listing Authority (the "Official List")


As such, no more than 10% in aggregate of the value of the gross assets of the Company will be invested in other listed closed-ended investment funds, except for those which themselves have stated investment strategies to invest no more than 15% of their gross assets in other listed closed-ended investment funds.


Additionally, the Company will itself not invest more than 15% of its gross assets in other investment companies or investment trusts which are listed on the Official List.








Kenneth MacKenzie; Gordon Bland

Target Fund Managers Limited

01786 845 912


Mark Young; Neil Winward; Tom Yeadon

Stifel Nicolaus Europe Limited

020 7710 7600


Martin Cassels

Maitland Administration Services (Scotland) Limited

0131 550 3760


Dido Laurimore; Claire Turvey; Richard Gotla

FTI Consulting

020 3727 1000

[email protected]


Notes to editors:

UK listed Target Healthcare REIT Limited (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 current portfolio comprises 61 assets with a total value of circa £464 million (31 December 2018), which are let to 21 tenants.  

The Group only invests in modern, purpose-built 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 Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service this inside information is now considered to be in the public domain.




1.     Analysis of movement in EPRA NAV


The following table provides an analysis of the movement in the unaudited EPRA NAV per share for the period from 1 October 2018 to 31 December 2018:



Pence per share


EPRA NAV per share as at 30 September 2018




Revaluation gains / (losses) on investment properties




Net effect of acquisition costs and assets under construction^

Net effect of equity issuance




Movement in revenue reserve



First interim dividend payment for the year to 30 June 2019



EPRA NAV per share as at 31 December 2018



Percentage change in the 3-month period





The EPRA NAV provides a measure of the fair value of a company on a long-term basis. As at 31 December 2018 the EPRA NAV stated above differed from that calculated under International Financial Reporting Standards of 106.8 pence per share. This was due to the valuation of the Group's interest rate derivative contracts used to hedge its exposure to variable interest rates, which is excluded from the calculation of the EPRA NAV.


^Consistent with standard valuation practice for assets under construction, the carrying value is shown at a discount to accumulated costs to date. This discount reflects the remaining development time and is anticipated to unwind as the asset reaches practical completion.







2.     Summary balance sheet (unaudited)













Investment properties*










Net current assets / (liabilities)*





Bank loan





Net assets










EPRA NAV per share (pence)












*Investment properties are stated at market value and the IFRS effects of fixed/guaranteed minimum rent reviews are not reflected.



The next quarterly valuation of the property portfolio will be conducted by Colliers International Healthcare Property Consultants Limited during March 2019 and the unaudited EPRA NAV per share as at 31 March 2019 will be announced in April 2019.


3.     EPRA NIY profiles and unwind of rent-free periods


The Group has three assets currently with rent-free periods. 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:



31 December 2018

31 March 2019

30 June 2019

30 September 2019

EPRA topped-up NIY










Contractual rent (£m)





Passing rent (£m)







This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit

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