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Target Healthcare (THRL)

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Thursday 25 April, 2019

Target Healthcare

Net Asset Value, Corporate Update & Dividend

RNS Number : 0147X
Target Healthcare REIT Limited
25 April 2019

25 April 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 March 2019, provides an update on its corporate activity during the quarter, and declares its third interim dividend.




·      EPRA NAV per share of 107.3 pence (31 December 2018: 106.9 pence), resulting in a NAV total return for the quarter of 2.0%.

·      0.5% increase in like-for-like value of the operational portfolio; total portfolio value of £477.1 million, 61 assets comprising a mix of operational homes and forward fund developments.

·      Twelve rent reviews completed at an average uplift of 2.6% per annum; contractual rent roll now stands at £29.7 million per annum from 56 operational properties.

·      Two new homes opened for residents during the quarter, located in Leicestershire and Oxfordshire, following practical completion of development projects, delivering continued portfolio diversification with the number of tenants increasing by 2 to 23.

·      On track to add a further three new tenants during 2019, and £3.7 million of annual contractual rent, from the Group's five forward funded pre-let developments plus a commitment to acquire a further home upon completion.

·      £40 million of flexible debt secured through doubling the size of the Group's revolving credit facility with HSBC, taking the Group's total debt facilities available from its three lenders to £170 million.

·      Third 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 5.64% based on the closing share price on 24 April 2019.

·      Post-quarter end acquisition of a care home in Formby, an affluent area north of Liverpool, for £6.9 million, providing 40 bedrooms with full en suite wet-room facilities.



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


"It has been another period of robust financial performance, underpinned by both the valuation uplift of the operating portfolio and the growth in contracted rent. It is particularly pleasing to see our portfolio grow with the delivery of our forward funded developments, providing purpose built accommodation for residents whilst also helping us to deliver on our stated commitment to diversify the portfolio by tenant, geography and end-user payment profile.  


"As the Formby acquisition demonstrates, we remain focused on investing the remaining equity and debt capital we have available in high quality investment opportunities that will further diversify the portfolio whilst increasing earnings and improving dividend cover. In addition, we continue to act as an engaged landlord to our portfolio of homes to assist tenants and help create further value for shareholders, as well as providing fit-for-purpose real estate which continues to meet the needs of residents and their care providers."



Net Asset Value


The Group's unaudited EPRA NAV per share as at 31 March 2019 was 107.3 pence. The total return for the quarter based on EPRA NAV was 2.0%.


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 March 2019 the Group's portfolio was valued at £477.1 million and comprised 61 assets, a combination of 56 operational care homes and five pre-let sites being developed through forward funding commitments with established development partners.


The portfolio value has increased by 2.8% over the quarter. Of this, 2.3% is derived from further investment into developments, with a positive like-for-like movement in the operational portfolio value of 0.5% which reflects primarily the impact of the annual inflation-linked rental reviews as well as a small amount of market yield shift.


Portfolio contractual rent has increased by 6.0% over the quarter, of which 5.5% is derived from the successful completion of two development sites which are now operational homes, both leased to operators who, whilst new tenants of the Group, have established track records managing high quality homes. Where rent reviews were completed during the quarter, the average increase was 2.6%, resulting in a 0.5% like-for-like increase to the contractual rent roll.


The portfolio's weighted average unexpired lease term remained in line with previous periods at 28.85 years.


The portfolio had an EPRA topped-up net initial yield of 6.29% based on an annualised contractual rent upon expiry of lease incentives of £29.7 million. The EPRA net initial yield was 5.70% based on passing rent of £26.9 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 March 2019, the Group's total borrowings were £84.0 million, giving a loan-to-value (LTV) of 13.2% 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 17.6%.


During the quarter, and as announced in the Half Year results, the Group increased its revolving credit facility with HSBC to £80 million from £40 million. Commercial terms including pricing, covenants and security package are unchanged from the existing facility.


Through its facilities with RBS, HSBC and FCB, the Group has available fixed term debt of £70 million with an additional £100 million of more flexible debt available from revolving facilities. The Group has currently drawn £66 million of fixed term debt on which the interest rate has been fixed through interest rate swaps. £18 million has been drawn from the revolving facilities on which the variable interest rate is linked to 3-month LIBOR.


The Group's weighted average cost on its drawn debt, inclusive of amortisation of arrangement costs, is 3.05% with a weighted average term to expiry of 2.4 years. The Group is currently assessing options available from lenders which would extend the term of its facilities.



Investment and asset management activity in the quarter


The Group completed twelve rent reviews during the quarter achieving an average uplift of 2.6% per annum.


Following detailed discussions between the parties, the Group completed a re-tenanting exercise at its Alexandra Court home, with the new tenant providing the Group with a longer lease as well as the benefit of a parent company guarantee on its rental obligations.


Construction was completed on development projects in Leicestershire and Oxfordshire, providing 140 bedrooms with full en suite wet-room facilities across two new homes, both of which have now opened to residents. The five assets currently under construction through pre-let forward funding agreements continue to progress in line with the Group's expectations with two of these expected to reach practical completion in the short term. 


Post quarter-end, and as previously announced, the Group completed the acquisition of a 40-bedroom property in Formby, Merseyside for approximately £6.9 million, including transaction costs. The home fully meets the Group's strict care home investment criteria and is let on a 35-year lease with an RPI-linked cap and collar to Athena Healthcare group, a proven operator and long standing tenant of the Group.




Pipeline and Investment Market


As ever, the Group has a number of near-term opportunities progressing through its diligence processes, which, if all these potential acquisitions were to complete as anticipated, would fully utilise the Group's available equity and debt capital during 2019's summer months.


The Group's Investment Manager continues to use its specialist knowledge and in-house research capabilities 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 second interim dividend for the year to 30 June 2019, in respect of the period from 1 October 2018 to 31 December 2018, of 1.64475 pence per share on 22 February 2019 to shareholders on the register on 8 February 2019.


The Company had 385,089,448 ordinary shares in issue at 31 March 2019 and has not issued or bought back any shares since that date.



Announcement of third interim dividend


The Company today declares its third interim dividend payment for the year ending 30 June 2019, in respect of the period from 1 January 2019 to 31 March 2019 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:                  2 May 2019

Record Date:                          3 May 2019

Pay Date:                             31 May 2019



All the dividend will be paid as a PID in respect of the Company's tax-exempt property rental business. The dividend reflects an annualised payment of 6.579 pence per share and a dividend yield of 5.64% based on the 24 April 2019 closing share price of 116.6 pence.


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,, or from the Company's registrar, Computershare Investor Services (Jersey) Limited. 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. 


Investor relations


Shareholders will find the latest Group information at its website:


LEI: 2138008VQQ5Y9QXMX749







Kenneth MacKenzie; Gordon Bland

Target Fund Managers Limited

01786 845 912


Mark Young; Neil Winward; Tom Yeadon

Stifel Nicolaus Europe Limited

020 7710 7600

[email protected]


Martin Cassels; Donald Cameron

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 £477.1 million (31 March 2019), which are let to 23 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 January 2019 to 31 March 2019:



Pence per share


EPRA NAV per share as at 31 December 2018




Revaluation gains / (losses) on investment properties




Net effect of acquisition costs and assets under construction^



Movement in revenue reserve



Second interim dividend payment for the year to 30 June 2019



EPRA NAV per share as at 31 March 2019



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 March 2019 the EPRA NAV stated above differed from that calculated under International Financial Reporting Standards of 107.2 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 of these assets is calculated by the valuer through the 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. During the quarter, two assets have reached practical completion which has contributed to a positive contribution to EPRA NAV from unwinding of the discount in these cases.







2.     Summary balance sheet (unaudited)













Investment properties*










Net current assets / (liabilities)*





Bank loans





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 June 2019 and the unaudited EPRA NAV per share as at 30 June 2019 will be announced in July 2019.


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


The Group has four 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 March 2019

30 June 2019

30 September 2019

31 December 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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