Quarterly Investor Report: | May 2023 |
Quarter ended 31 March 2023 |
Target Healthcare REIT plc and its subsidiaries ('the Group') is a leading investor in modern purpose-built UK care homes with en suite wet rooms. The Group's objective is to provide investors with an attractive quarterly dividend, generated from a portfolio diversified by tenant, geography and end-user payment profile, through responsible investment.
Group at a glance
Properties
97
Beds
6,705*
Tenants
32
Contracted rent
£55.9m
Property Value
£855.7m
Overview | Key ratios & financials | |||||||
Launch date | March 2013** | Investment properties | £855.7 million | |||||
ISIN | GB00BJGTLF51 | Drawn debt | £230.0 million | |||||
SEDOL | BJGTLF5 | EPRA NTA | £641.6 million | |||||
Company name | Target Healthcare REIT plc | EPRA NTA per share | 103.4 pence | |||||
Registered number | Quarterly NAV total return | |||||||
11990238 | 2.1% | |||||||
(including dividend) | ||||||||
Expected quarterly dividend | Feb/May/Aug/Nov | Quarterly Group specific | 1.52 pence | |||||
Financial year end | 30 June | adjusted EPRA earnings per | ||||||
share | ||||||||
Currency | Sterling | Quarterly dividend per share | 1.40 pence | |||||
Website | www.targethealthcarereit.co.uk | Dividend yield (02/05/2023) | 7.4% | |||||
Ordinary share class as at | 02/05/2023 | Loan-to-Value ('LTV')*** | 26.9% (gross); 23.8% (net) | |||||
Shares in issue | 620,237,346 | Management fee rate | 1.05% up to £500m NAV | |||||
Share price | 75.7 pence | 0.95% of £500m - £750m NAV | ||||||
0.85% of £750m - £1,000m NAV | ||||||||
Market capitalisation | £469.5 million | 0.75% of £1,000m - £1,500m NAV | ||||||
0.65% of £1,500m + NAV | ||||||||
Share price discount to EPRA | 26.8% | WAULT | 26.8 years | |||||
NTA | ||||||||
- Including planned beds in development sites
- Originally launched as Target Healthcare REIT Limited (Jersey registered: 112287)
- Gross LTV calculated as total gross debt as a proportion of gross property value. Net LTV calculated as total gross debt less cash, as a proportion of gross property value
Recent news
Prime UK care homes as an investment asset class continuesto attract investor demand underpinned by home trading performance and demographic tailwinds.
The rent cover of our tenants, which is a key profitability metric, has improved to 1.5x for the most recent quarter we have data for. This compares well to pre-pandemic norms despite being achieved at lower levels of underlying resident occupancy,currently 84%.
Further tenant profitability growth is anticipated as occupancy continues to improve towards pre-pandemic levels, which will further support valuations. The real estate standards fundamental to the strategy enable THR's tenants to attract private-fee paying residents at fee levels where they canincrease staff pay and reinvest in their business.
Performance
The portfolio value decreased by 1.4% over the quarter, following the disposal of four Northern Irish properties (-2.4%),offset by a like-for-like uplift in the operational portfolio value (+0.5%) and further investment into the portfolio, mainly associated with the four development properties (+0.5%).
Contractual rent decreased by 2.0%, as result of the propertydisposals (-2.8%)which was offset by inflation-linkedrent reviews in the quarter (+0.8%).
Asset Management and Investment Activity
The sale of the Northern Irish properties sees the Group achieve full exit from that geography. The aggregate disposalprice represented 2.5% of the Group's overall portfolio value and is ahead of carrying value at both Jun-22(the Group's lastfinancial year-end) and Dec-22.
The Group also completed the acquisition of a development site near Malvern, Worcestershire, following the receipt of planning consent for the construction of a 60-bedcare home.The home is pre-let to an existing tenant and has a capped development agreement which is underpinned by a fixed priceconstruction contract.
The re-tenanting of one home completed, which will alleviate cashflow pressures for the outgoing tenant, allowing a return to a fully rent-paying position on its three remaining homes.
Contractual rent for the incoming tenant remains the same.
Outlook
Rebasing our dividend in line with current earnings was recognition of the higher interest rate environment limiting the Company's ability to grow earnings through acquisitions at this time, as investment yields have remained relatively low for the prime UK care homes it invests in. We retain a strong conviction that improving portfolio performance, strong demographic tailwinds and our embedded inflation-linked rental growth willdrive long-termsustainable returns.
Summary balance sheet
£m | Mar-23 | Dec-22 | ||||
Property portfolio* | 855.7 | 867.7 | ||||
Cash | 26.4 | 21.8 | ||||
Net current assets/(liabilities) | (10.5) | (10.4) | ||||
Bank loans | (230.0) | (240.0) | ||||
Net assets | 641.6 | 639.1 | ||||
EPRA NTA per share (pence) | 103.4 | 103.0 | ||||
* Ignores the effect of fixed/guaranteed rent reviews. See note 9 to the Annual Report 2022 for full details.
Performance - NAV and share price total return
205 | |||||||||||||||||||||||||||||||||||
195 | NAV total return | ||||||||||||||||||||||||||||||||||
185 | |||||||||||||||||||||||||||||||||||
175 | Share price total return | ||||||||||||||||||||||||||||||||||
165 | |||||||||||||||||||||||||||||||||||
155 | |||||||||||||||||||||||||||||||||||
145 | |||||||||||||||||||||||||||||||||||
135 | |||||||||||||||||||||||||||||||||||
125 | |||||||||||||||||||||||||||||||||||
115 | |||||||||||||||||||||||||||||||||||
105 | |||||||||||||||||||||||||||||||||||
95 | Jun-13 | Sep-13 | Dec-13Mar-14Jun-14Sep-14Dec-14 | Mar-15Jun-15 | Sep-15 | Dec-15 | Jun-16 | Sep-16 | Dec-16 | Jun-17 | Sep-17 | Dec-17 | Jun-18 | Sep-18 | Dec-18 | Jun-19 | Sep-19 | Dec-19 | Jun-20 | Sep-20 | Dec-20 | Jun-21 | Sep-21 | Dec-21 | Jun-22 | Sep-22 | Dec-22 | ||||||||
Mar-13 | Mar-16 | Mar-17 | Mar-18 | Mar-19 | Mar-20 | Mar-21 | Mar-22 | Mar-23 |
Portfolio summary at 31 March 2023
Number of properties by geographic region | |||||||
Scotland | North East | ||||||
North West | Yorkshire & The Humber | ||||||
Wales | East Midlands | ||||||
West Midlands | East of England | ||||||
South West | South East | ||||||
Contracted rent by geographic region | |||||||
2%1% | 8 | ||||||
5% | |||||||
7% | 24% | ||||||
7% | |||||||
8% | 2 | ||||||
12% | 17% | 18 | |||||
17% | 26 | ||||||
13 | |||||||
Valuation by geographic region | 7 | ||||||
(including developments) | 5 | ||||||
1 | |||||||
Wales | |||||||
North East | 13 | ||||||
East of England | |||||||
4 | |||||||
South West | |||||||
West Midlands | |||||||
Scotland | |||||||
East Midlands | |||||||
North West | |||||||
South East | |||||||
Yorkshire & The Humber | |||||||
0% | 5% | 10% | 15% | 20% | 25% |
Directors | Investment Manager | Advisers | |
Alison Fyfe (Chair) | Target Fund Managers Ltd. | Administrator | Target Fund Managers Ltd. |
Michael Brodtman | Kenneth MacKenzie, | Depositary | IQ EQ Depositary Company (UK) Ltd. |
Richard Cotton | Gordon Bland | Broker | Stifel Nicolaus Europe Ltd. |
Vince Niblett | +44 (0) 1786 845 912 | Legal | Dickson Minto W.S. |
Dr Amanda Thompsell | targetfundmanagers.com | Auditors | Ernst & Young LLP |
This Report is intended solely for the information of the person to whom it is provided by the Group, the Investment Manager or the Administrator. This Report is not intended as an offer or solicitation for the purchase of shares in the Group and should not be relied on by any person for the purpose of accounting, legal or tax advice or for making an investment decision. The payment of dividends and the repayment of capital are not guaranteed by the Group. Any forecast, projection or target is indicative only and is not guaranteed in any way, and any opinions expressed in this Report are not statements of fact and are subject to change, and neither the Group nor the Investment Manager is under any obligation to update such opinions. Past performance is not a reliable indicator of future performance, and investors may not get back the original amount invested. Unless otherwise stated, the sources for all information contained in this report are the Investment Manager and the Administrator. Information contained in this Report is believed to be accurate at the date of publication, but none of the Group, the Investment Manager and the Administrator gives any representation or warranty as to the Report's accuracy or completeness. This Report does not contain and is not to be taken as containing any financial product advice or financial product recommendation. None of the Group, the Investment Manager and the Administrator accepts any liability whatsoever for any loss (whether direct or indirect) arising from any use of this Report or its contents. Target Healthcare REIT plc, registered in the UK (Registered Number: 11990238). Registered Office: Level 13, Broadgate Tower, 20 Primrose Street, London, EC2A 2EW.
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Target Healthcare REIT plc published this content on 09 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2023 14:17:02 UTC.