Target Healthcare reports steady growth

Target Healthcare Whittington House
Target Healthcare’s Whittington House

Target Healthcare REIT, which invests in purpose-built UK care homes, has announced its results for the year ending 30 June 2021.

Net asset value total return was 8.8% (2020: 7%), driven by growth of the underlying portfolio value as a result of modest yield compression and annual rental uplifts.

The company’s European Public Real Estate Association (EPRA) net tangible asset per share increased by 2.1% to 110.4p (2020: 108.1p), while group-specific adjusted EPRA earnings per share increased by 3.6% to 5.46p per share (2020: 5.27p), despite cautious investment activity as a result of Covid-19. Dividends increased by 0.6% to 6.72p (2020: 6.68p).

There was a low net loan-to-value of 15.9% as at 30 June 2021, with average cost of drawn debt at 2.9%, and average term to maturity 4.8 years.

The company reported two oversubscribed equity issuances during the period, as well as a £60 million equity issuance in March this year. There was a post-period-end £125 million equity issuance, announced on 10 September, with prompt deployment anticipated on assets under diligence.

95% of rents were collected and the portfolio value increased by £67.2 million, or 10.9%, to £684.8 million, including like-for-like valuation growth of 3.8% (2020: 2.8%). Contractual rent increased by 5.6% to £41.2 million per annum (2020: £39 million), with the assets that were subject to rent review in the period delivering an average increase of 1.8%.

Acquisition commitments during the year totalled £70 million, taking the portfolio to 77 properties, consisting of 73 operational care homes and four pre-let sites. Resident occupancy levels across the portfolio recovered from a low point in Q1 2021, with 12-month rolling rent cover of 1.5 times at 30 June 2021.

Target Healthcare REIT’s chairman Malcolm Naish said: “We are once again pleased to have achieved our key objectives – stable investment returns provided to shareholders and excellent care home real estate to our tenants and their residents. It is crucial to us that our long-standing approach is ‘doing the right thing’ through the provision of fit-for-purpose care facilities which are also comfortable living, visiting and social spaces. Our business model, which prioritises stability of returns, and our portfolio resiliency were fundamentals which stood out strongly during a period of uncertainty. We own real estate of the highest standards and build relationships with tenants who have proven to be capable of caring for residents and operating commercially well through the most challenging of conditions.

“Our recent £125 million equity issuance, alongside additional debt capacity, allows us to add further assets to the portfolio, including our first significant portfolio of 18 assets which will deliver £9.1 million of annual rent immediately following completion of the acquisition, expected imminently.

“The board remains confident in the group’s prospects, whilst remaining cautious and patient with respect to the portfolio returning to normalised trading levels. Our strategy and decisions will reflect our commitment to being a long-term backer of our tenants and the social care sector, doing so in a responsible and supportive manner.”

Date published: October 22, 2021

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