TIDMTHRL
RNS Number : 9393R
Target Healthcare REIT PLC
01 November 2023
1 November 2023
Target Healthcare REIT plc and its subsidiaries
("Target Healthcare" or "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 September 2023, an
update on corporate activity and first interim dividend for the
year ending 30 June 2024.
Corporate activity highlights
Third consecutive quarter of EPRA NTA growth, stable earnings,
dividend fully covered and interest costs substantially hedged:
-- EPRA Net Tangible Assets ('NTA') per share increased 1.1% to
105.6 pence (30 June 2023: 104.5 pence), primarily reflecting a
like-for-like valuation uplift driven by inflation-linked rent
reviews
-- EPRA "topped-up" net initial yield remained stable at 6.22% (30 June 2023: 6.22%)
-- Adjusted EPRA EPS for the quarter of 1.54 pence per share,
fully covering the dividend of 1.428 pence per share to be paid in
respect of the quarter
-- NAV total return of 2.5% for the quarter (based on EPRA NTA
and including payment of dividend)
-- Net LTV of 25.0% (30 June 2023: 24.7%)
-- Weighted average debt term of 6.0 years (30 June 2023: 6.2
years) with the earliest maturity in November 2025. Interest costs
hedged on 95% of drawn debt to the relevant facility maturity
date
-- Total capital available of GBP42 million, net of the Group's
commitments on five development assets and other capital
projects
Continued improvement in underlying portfolio trading with
portfolio rent cover ahead of pre-pandemic level and rent
collection in excess of 99%; rental & capital growth driven by
inflation-linked annual rent reviews:
-- Diversified portfolio of 98 assets let to 32 tenants and
valued at GBP890.3 million (30 June 2023: GBP868.7 million)
reflecting an increase of 2.5%, of which the like-for-like
valuation increase was 0.8%
-- Like-for-like increase in contracted rent roll of 0.7%,
primarily driven by inflation-linked upwards-only annual rent
reviews
-- WAULT of 26.3 years which remains one of the longest in the
listed UK real estate sector (30 June 2023: 26.5 years)
-- High quality, modern and sustainable real estate portfolio:
o 97% of the portfolio is A or B EPC rated, (100% A to C
ratings) therefore compliant with the minimum energy efficiency
standards anticipated to apply from 2030
o Positive social impact from sector-leading real estate
standards: 98% wet-rooms; generous 47 sqm space per resident;
sustainable rent of GBP188 per sqm
-- Rent collection in excess of 99%, as overall tenant
profitability continues to benefit from improved trading
performance across our fit-for-purpose real estate, and in response
to the completion of portfolio management initiatives
Kenneth MacKenzie, CEO of Target Fund Managers, commented:
"Underlying trading across the portfolio continues to improve,
with home profitability as measured by rent cover ahead of
pre-pandemic levels. At the same time, resident occupancy at 86% is
trending towards the >90% level experienced pre-pandemic. This
is underpinning rental growth and overall earnings stability, which
enabled us to announce a 2% dividend increase alongside our annual
results. We are also seeing our investment thesis being validated
in the wider care home market, where transactions continue to be
focused on portfolios of modern, high-quality homes.
It is encouraging to see our tenants enjoy better trading
following the challenging pandemic. As a diversified group of
businesses who are fully independent of us, they serve their
residents with their caring ethos, operational and commercial
abilities, and share our views on what constitutes appropriate care
home real estate in 2023."
EPRA NTA
The Group's unaudited EPRA NTA per share as at 30 September 2023
was 105.6 pence and NAV total return for the quarter was 2.5%.
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.
Corporate Update
Portfolio performance
As at 30 September 2023, the Group's portfolio was valued at
GBP890.3 million and comprised 98 properties, consisting of 93
operational care homes and five pre-let sites, which are being
developed through capped forward funding commitments with
established development partners.
Portfolio value increased by 2.5% over the quarter,
comprising:
-- a 0.8% increase in the like-for-like operational portfolio,
reflecting an increase of 0.7% from inflation-linked rent reviews
and rent-free unwinds alongside 0.1% net initial yield
compression
-- a 1.7% increase from capital expenditure, primarily
associated with the five development properties
Contractual rental income increased by 1.0% over the quarter,
comprising a 0.7% like-for-like increase from 18 inflation-linked
upwards-only rent reviews, with an average uplift of 3.7%. The
remaining 0.3% increase was from the rentalisation of capital
expenditure following asset management initiatives at two of the
Company's existing properties as detailed below.
The portfolio's WAULT was 26.3 years (30 June 2023: 26.5
years).
The EPRA "topped-up" net initial yield was 6.22% based on an
annualised contractual rent of GBP57.1 million and the EPRA net
initial yield was 6.05% with two assets in rent-free periods.
Portfolio update
During the quarter, the following asset management initiatives
were undertaken:
-- A further 15 full en suite wet-rooms were completed as part
of the ongoing renovation works, progressing plans to move the
portfolio to 100% wet-rooms, currently 98% following these
works
-- As reported in the prior quarter, the Group has committed to
GBP2.35 million of capital expenditure to add 18 new bedrooms at an
existing property. During the quarter to 30 September 2023, 10 of
these were completed and the costs incurred to date of GBP1.7
million were rentalised during the quarter
-- A deed of variation was entered into to rentalise capital
expenditure of GBP0.5 million at a further home. This was combined
with the insertion of "green lease" provisions and a landlord
option to extend the lease to a term of 30 years at any time up
until the expiry of the current lease
Subsequent to the quarter-end, the Group's largest tenant, Ideal
CareHomes ("Ideal") was acquired by HC-One, the UK's largest care
home operator, which runs 275 homes. Ideal runs 36 homes, 18 of
which are owned by the Group, representing 16% of the Group's
contractual rent roll and 18% of the portfolio's capital value. The
18 homes are trading well and based on discussions with the Group's
valuers, no material valuation change is expected as a result of
the transaction. In consenting to the change in control, the
Group's rent deposit position has been strengthened, "green lease"
provisions have been added and landlord lease extension options
have been obtained.
Debt facilities and swap arrangements
As at 30 September 2023, the Group's total borrowings were
GBP243 million, representing a net LTV of 25.0% (total gross debt
less cash, as a proportion of gross property value). The Group's
weighted average cost on its drawn debt, inclusive of amortisation
of loan arrangement costs, was 3.91% (30 June 2023: 3.70%).
95% of drawn debt is fully hedged:
-- GBP150 million is fixed with a weighted average term of 10.4
years and a weighted average interest rate of 3.18% (excluding the
amortisation of arrangement fees)
-- GBP30 million of the Group's bank facilities is fixed at
2.48% for 2.1 years through an interest rate swap
-- GBP50 million of the Group's drawn revolving credit
facilities have interest rates capped at 5.17% via a 3% SONIA cap
for 2.1 years
-- The remaining GBP13 million of the Group's drawn revolving
credit facilities carries a variable interest rate of SONIA plus a
margin of 2.18%
The Group has access to a further GBP77 million of committed,
but undrawn, revolving credit facilities which, if drawn, would
carry an interest rate of SONIA plus 2.21%. The GBP13 million drawn
in the quarter is being used to fund construction of the Group's
development assets, and the other capex initiatives noted above,
with GBP39 million of such commitments remaining. The Group's
recent forecasting and decision-making is based on the prudent
assumption that these are funded using available facilities (with
the associated higher marginal interest costs), with the Group's
capital allocation currently being assessed to maximise the
efficiency of this funding requirement.
At 30 September 2023, the weighted average term to expiry on the
Group's total committed loan facilities was 6.0 years (30 June
2023: 6.2 years) with the earliest maturity in November 2025.
Dividends
The Group paid its fourth interim dividend for the year ended 30
June 2023, in respect of the period from 1 April 2023 to 30 June
2023, of 1.40 pence per share, on 25 August 2023 to shareholders on
the register on 11 August 2023. This distribution was comprised of
a property income distribution (PID) of 1.19 pence per share and an
interim ordinary dividend of 0.21 pence per share.
Announcement of first interim dividend
The Company today declares its first interim dividend for the
year ending 30 June 2024, in respect of the period from 1 July 2023
to 30 September 2023, of 1.428 pence per share as detailed in the
schedule below:
Interim Property Income Distribution (PID): 1.428 pence per share
Interim ordinary dividend: nil
Ex-Dividend Date: 9 November 2023
Record Date: 10 November 2023
Payment Date: 24 November 2023
The quarterly dividend reflects an annualised dividend of 5.712
pence per share and a dividend yield of 7.9% based on the 31
October 2023 closing share price of 72.1 pence.
The Company had 620,237,346 ordinary shares in issue at 30
September 2023 and has not issued or bought back any shares since
that date.
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 , 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 7710 7600
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 30 September 2023 comprised 98 assets
let to 32 tenants with a total value of GBP890.3 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 July 2023 to 30
September 2023:
Pence per
share
------------
EPRA NTA per share as at 30 June 2023 104.5
Revaluation gains / (losses) on investment
properties 1.0
Revaluation gains / (losses) on assets -
under construction^
Movement in revenue reserve 1.5
Fourth interim dividend payment for the
year ended 30 June 2023 (1.4)
-------------------------------------------- ------------
EPRA NTA per share as at 30 September
2023 105.6
-------------------------------------------- ------------
Percentage change in the quarter 1.1%
-------------------------------------------- ------------
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 on a quarterly
basis.
At 30 September 2023, 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 106.5 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)
Sept-23 Jun-23 Mar-23 Dec-22
GBPm GBPm GBPm GBPm
Property portfolio* 890.3 868.7 855.7 867.7
Cash 20.2 15.4 26.4 21.8
Net current assets / (liabilities)* (12.5) (6.2) (10.5) (10.4)
Loans (243.0) (230.0) (230.0) (240.0)
-------- -------- -------- --------
Net assets 655.0 647.9 641.6 639.1
-------- -------- -------- --------
EPRA NTA per share (pence) 105.6 104 .5 103.4 103.0
*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.
The next quarterly valuation of the property portfolio will be
conducted by Colliers International Healthcare Property Consultants
Limited during January 2024 and the unaudited EPRA NTA per share as
at 31 December 2023 is expected to be announced in January
2024.
3. EPRA NIY profiles and unwind of rent-free periods
The Group currently has two assets 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:
30 Sept 31 Dec 31 March 30 June
2023 2023 2024 2024
EPRA topped-up NIY 6.22% 6.22% 6.22% 6.22%
------- ------ -------- -------
EPRA NIY 6.05% 6.14% 6.18% 6.22%
------- ------ -------- -------
Contractual rent (GBPm) 57.1 57.1 57.1 57.1
------- ------ -------- -------
Passing rent (GBPm) 55.6 56.4 56.8 57.1
------- ------ -------- -------
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END
MSCNKDBDFBDDNKN
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November 01, 2023 03:00 ET (07:00 GMT)
Target Healthcare Reit (LSE:THRL)
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