TIDMTHRL
RNS Number : 6922W
Target Healthcare REIT PLC
27 April 2021
27 April 2021
Target Healthcare REIT plc 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 modern, purpose-built care homes, announces its unaudited
quarterly Net Asset Value (NAV) as at 31 March 2021, together with
an update on corporate activity, and declares its third interim
dividend for the year ending 30 June 2021.
Corporate activity highlights
Continued NAV progression and balance sheet strength
-- EPRA NAV per share increased by 0.8% to 109.1 pence (31
December 2020: 108.2 pence) reflecting improved earnings and
valuation uplifts across the portfolio from modest yield tightening
and annual rental uplifts
-- NAV total return (including dividend) of 2.5% for the quarter
-- Substantially oversubscribed placing raised gross proceeds of
GBP60 million, with strong support from existing and new
shareholders. The targeted size of the placing was increased from
GBP50 million during the marketing period due to investor demand
and strong acquisition pipeline visibility
-- Available cash & undrawn debt totalled GBP132.6 million,
with a low net loan-to-value ("LTV") of 13.4% providing significant
operational flexibility. All proceeds from the equity placing have
been allocated to acquisitions under non-binding heads-of-terms,
and in the meantime have been used to temporarily reduce drawn debt
during the diligence periods.
Portfolio performance
-- 1.0% increase in the like-for-like value of the operational
portfolio; total property portfolio value of GBP650.8 million and
an EPRA net initial yield of 5.94%
-- 19 rent reviews were completed at an average uplift of 1.8%
per annum with a 0.4% like-for-like growth in contractual rent
-- Weighted average unexpired lease term across the portfolio of 28.6 years
-- Rent collection continues to be resilient, with 92% of the
rent due and payable to date in respect of the current quarter
having been collected as at 23 April 2021, in line with recent
quarters, demonstrating the stable and secure nature of the
portfolio's cashflows
-- Occupancy levels across the mature portfolio have stabilised
in recent weeks, with recovery anticipated during 2021 based on
underlying demand as evidenced from strong enquiry levels from
potential residents, as reported by our tenants
-- COVID-19 cases remain low across the portfolio (<1% of
beds). Residents in 100% of homes were offered a first vaccine dose
by the end of January, with the substantial majority now also
having had access to their second dose.
Acquisitions, disposals & asset management
-- Substantially all capital available for investment has been
allocated to Board-approved acquisitions with heads-of-terms
agreed, inclusive of March's equity proceeds, with these
transactions advanced to formal due diligence ahead of expected
exchange of contracts/completion in the near term
-- The disposal of one asset (c.1% of portfolio value) for sale
proceeds ahead of both carrying value and cost
-- Re-tenanted one asset (c.1% of portfolio value) from large
national operator to a family-owned operator on a lengthened lease
term, providing an immediate net valuation uplift and better
positioning the home for the future. Lease transfer payment
received to fund agreed capex on home, cover rent incentives
granted to incoming tenant and to reflect the change in
circumstances.
-- Overall net reduction of 0.8% in contractual rent as a result
of the like-for-like rental growth stated above and the combined
1.2% reduction from the disposal and re-tenanting
Dividend
-- Third interim dividend of 1.68 pence per share declared for
the year ending 30 June 2021, representing an increase of 0.6% on
the FY 2020 quarterly dividends. On an annualised basis, this
reflects a payment of 6.72 pence per share and a dividend yield of
5.7% based on the closing share price of 117.60 pence on 26 April
2021
Kenneth MacKenzie, CEO of Target Fund Managers, commented:
" The successful capital raise in March allows us to continue
our mission to support the sector through careful investment
exclusively in modern, purpose-built care homes. We have heard
powerful first-hand accounts from home managers and staff relating
how the standards of our real estate have proven essential in their
efforts to protect the wellbeing and dignity of residents through
the COVID-19 pandemic.
"The non-cyclical nature of returns continue to attract
participants to the market. We will not deviate from our
disciplined investment approach, focussing on the sustainability of
rent levels and the ability of a home to thrive within the dynamics
of its local market. We base our assessment on knowledge gained
having analysed thousands of homes, the skills of our stable and
experienced investment team, and our proprietary research
database.
"This is long-term investment with a positive social impact
within a complex sector. A diversified portfolio of scale carefully
assembled and managed with our specialist knowledge, will deliver
sustainable returns whilst also delivering better living
environments for those elderly people with care needs."
Net Asset Value
The Group's unaudited EPRA NAV per share as at 31 March 2021 was
109.1 pence. The total return for the quarter based on EPRA NAV was
2.5%.
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 2021, the Group's portfolio was valued at
GBP650.8 million and comprised 75 properties, consisting of 72
operational care homes and three pre-let sites, which are being
developed through capped forward funding commitments with
established development partners.
The portfolio value increased by 0.5% over the quarter. This
comprised a 0.7% increase from further investment into the
development portfolio, a 1.2% decrease as a result of asset
disposals, and a like-for-like uplift in the operational portfolio
value of 1.0%. The latter movement reflects yield tightening in the
investment market for modern, purpose-built care homes, the
portfolio's inflation-linked rental reviews and the result of asset
management initiatives.
Contractual rent increased by 0.4% from inflation-linked
upwards-only rent reviews, which averaged uplifts of 1.8%.
Following portfolio management activities resulting in the disposal
of one asset and the re-tenanting of another, contractual rent has
seen an overall net reduction of 0.8%.
Rent collection, at 92% of the rent due and payable in respect
of the current quarter as at 23 April 2021, remains consistent with
recent quarters. Tangible progress has been made in relation to two
tenants who comprise the majority of recent and ongoing rent
arrears, with a re-tenanting transaction imminent on one tenant and
trading performance improving towards levels anticipated by our
investment case at the other.
The portfolio's weighted average unexpired lease term remained
broadly flat at 28.6 years (31 December 2020: 28.7 years).
The portfolio had an EPRA net initial yield of 5.94% based on an
annualised contractual rent of GBP40.3 million. The portfolio had
no assets in rent-free periods, therefore the EPRA topped-up net
initial yield is the same as the EPRA net initial yield and is not
disclosed separately.
Pipeline and investment market
The investment market for high quality, modern, fit-for-purpose
assets which meet the Group's investment criteria remains very
competitive. Strong investor appetite continues, with the best
properties and sites attracting offers and transacting at
pre-COVID-19 pandemic pricing.
The Investment Manager, as well as working through the diligence
process on transactions which will see the equity proceeds
invested, is also assessing a number of earlier stage opportunities
as the anticipated uptick in the construction/development of
fit-for-purpose care homes following COVID-19 becomes more
apparent. Commitments to future acquisitions will continue to be
considered carefully, taking into account both the market outlook
and the Group's available capital.
Debt facilities and swap arrangements
As at 31 March 2021, the Group's total borrowings were GBP114
million, giving a net LTV of 13.4% (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 arrangement
costs, was 2.95% (31 December 2020: 2.81%). The weighted average
term to expiry was 5.1 years (31 December 2020: 5.3 years).
The Group has GBP80 million of fixed term debt facilities and
GBP140 million of revolving credit facilities, with a diversified
mix of maturities and lenders. As at 31 March 2021, the Group has
drawn GBP80 million of fixed term debt, with interest costs fixed,
and GBP34 million under the revolving credit facilities which carry
a variable interest rate linked to SONIA.
Dividends in the period
The Group paid its second interim dividend for the year to 30
June 2021, in respect of the period from 1 October 2020 to 31
December 2020, of 1.68 pence per share, on 26 February 2021 to
shareholders on the register on 12 February 2021. This distribution
was wholly comprised of a property income distribution (PID).
Valuation
The property portfolio was externally valued at GBP650.8 million
at 31 March 2021.
The pandemic and the measures taken to tackle COVID-19 continue
to affect economies and real estate markets globally. Nevertheless,
as at the valuation date some property markets have started to
function again, with transaction volumes and other relevant
evidence returning to levels where an adequate quantum of market
evidence exists upon which to base opinions of value. Accordingly,
and for the avoidance of doubt, the Colliers valuation at 31 March
2021 is not reported as being subject to 'material valuation
uncertainty' as defined by VPS 3 and VPGA 10 of the RICS Valuation
- Global Standards.
Announcement of third interim dividend
The Company today declares its third interim dividend for the
year ending 30 June 2021, in respect of the period from 1 January
2021 to 31 March 2021, of 1.68 pence per share as detailed in the
schedule below:
Interim Property Income Distribution (PID): 1.68 pence per share
Ex-Dividend Date: 13 May 2021
Record Date: 14 May 2021
Payment Date: 28 May 2021
The dividend reflects an annualised payment of 6.72 pence per
share and a dividend yield of 5.7% based on the 26 April 2021
closing share price of 117.60 pence.
During the quarter, the Company issued 54,054,054 ordinary
shares at a price of 111 pence per ordinary share. The Company had
511,541,694 ordinary shares in issue at 31 March 2021 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:
Kenneth MacKenzie; Gordon Bland
Target Fund Managers Limited
01786 845 912
Mark Young; Mark Bloomfield
Stifel Nicolaus Europe Limited
020 7710 7600
Dido Laurimore; Claire Turvey; Richard Gotla
FTI Consulting
020 3727 1000
TargetHealthcare@fticonsulting.com
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 2021 comprised 75 assets let
to 27 tenants with a total value of GBP650.8 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 NAV
The following table provides an analysis of the movement in the
unaudited EPRA NAV per share for the period from 1 January 2021 to
31 March 2021:
Pence per share
----------------
EPRA NAV per share as at 31 December 2020 108.2
Revaluation gains / (losses) on investment properties 1.3
Revaluation gains / (losses) on assets under construction^ (0.1)
Net impact of equity issuance -
Movement in revenue reserve 1.2
Second interim dividend payment for the year to 30 June 2021 (1.5)
-------------------------------------------------------------- ----------------
EPRA NAV per share as at 31 March 2021 109.1
-------------------------------------------------------------- ----------------
Percentage change in the quarter 0.8%
-------------------------------------------------------------- ----------------
The EPRA NAV provides a measure of the fair value of a company
on a long-term basis. At 31 March 2021, due to the valuation
ascribed to the Group's interest rate derivative contract used to
hedge its exposure to variable interest rates, which is excluded
from the calculation of the EPRA NAV, the NAV calculated under
International Financial Reporting Standards was 109.2 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-21 Dec-20 Sep-20 Jun-20
GBPm GBPm GBPm GBPm
Property portfolio* 650.8 647.7 637.5 617.6
Cash 26.6 18.3 17.5 36.4
Net current assets
/ (liabilities)* (5.1) (9.2) (9.1) (7.7)
Bank loans (114.0) (162.0) (152.0) (152.0)
-------- ---------- -------------- -----------
Net assets 558.3 494.8 493.9 494.3
-------- ---------- -------------- -----------
EPRA NAV per share
(pence) 109.1 108.2 108.0 108.1
*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 July 2021 and the unaudited EPRA NAV per share as at
30 June 2021 is expected to be announced in July 2021.
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END
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