TIDMTHRL
RNS Number : 4776H
Target Healthcare REIT PLC
04 August 2021
4 August 2021
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 June 2021, together with
an update on corporate activity, and declares its fourth interim
dividend for the year ended 30 June 2021.
Corporate activity highlights
Continued NAV progression, balance sheet strength and portfolio
growth
-- EPRA NAV per share increased by 1.2% to 110.4 pence (31 March
2021: 109.1 pence) primarily reflecting valuation uplifts across
the portfolio driven by modest yield compression and annual rental
uplifts
-- NAV total return (including dividend) of 2.8% for the quarter
-- Available cash and undrawn debt in excess of GBP100 million,
with a low net loan-to-value ("LTV") of 15.9% providing significant
operational flexibility
-- GBP33 million of new investment commitments undertaken in the
period, with the remaining capital available from the March 2021
equity raise allocated to Board-approved deals, which are in
late-stage diligence.
Portfolio performance
-- 1.4% increase in the like-for-like value of the operational
portfolio; total property portfolio value of GBP684.8 million and
an EPRA "topped-up" net initial yield of 5.83%
-- 17 rent reviews were completed at an average uplift of 2.3%
per annum, contributing a 0.6% increase to like-for-like
contractual rent
-- Weighted average unexpired lease term across the portfolio
increased to 28.8 years (31 March 2021: 28.6 years) and remains one
of the longest in the listed real estate sector
-- Portfolio cashflows continue to improve from their robust
base. Current period rent collection is following the pattern seen
for the two most recent quarters (calendar Q1 21 and Q4 20) which
each returned 96%, an improvement from the 94% collected for the
two quarters prior
-- Occupancy levels across the mature portfolio have commenced
their anticipated recovery from the low points seen in Q1 2021,
with encouraging growth in the quarter of c.5 percentage points.
This aligns with the strong enquiry levels from potential residents
reported by our tenants in recent months. Reported COVID-19 cases
across the portfolio remain very low.
Acquisitions and asset management
-- On 4 June 2021, the Group acquired a well-established luxury
care home in Scotland. The home is situated in a densely populated
area and has spacious bedrooms with full en-suite wetroom
facilities, exceptional living space for the residents, and
impressive outdoor space on all floors
-- On 3 June 2021, a pre-let development site subject to a
forward funding agreement was acquired in Olney, Buckinghamshire.
Construction on the home has commenced and is expected to complete
in the first half of 2023
-- Shortly after the quarter end, practical completion was
achieved at the Group's development site in Rudheath, Cheshire,
delivering a 68-bed care home and lease commencement with another
of the Group's existing tenants
-- Each of the three homes noted above will be operated on fully
repairing and insuring occupational leases, with terms of 30-years
or longer, which include annual, upwards-only RPI-linked increases,
subject to a cap and collar
-- The Group has resolved the position with a tenant of two of
its homes, which had already been in financial distress prior to
the COVID-19 pandemic. Net income and valuation are each positively
impacted immediately, with a partial settlement being received for
arrears which had been provided for:
o One home (representing c.1% of portfolio by value) has been
re-tenanted to a family-owned operator, a new tenant to the Group,
on revised rental terms and a lengthened lease duration
o Terms have been agreed with a new tenant for the second home,
which is being progressed to complete shortly. Current rent is
being waived on this home whilst the re-tenanting progresses, with
the existing tenant continuing to care for residents and facilitate
an orderly handover.
Dividend
-- Fourth interim dividend of 1.68 pence per share declared for
the year ended 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
5.4% based on the closing share price of 124.0 pence on 3 August
2021
Kenneth MacKenzie, CEO of Target Fund Managers, commented:
"We continue to grow the portfolio by adding high quality
assets, including new developments, which we are confident will
perform and contribute positively to stable returns over the
long-term. We have several other deals progressing to completion
which would see our remaining capital being put to work, as we play
our part in the sector's efforts to modernise its real estate.
Investing only in high quality, purpose-built and future proof
homes is fundamental to our mission to support the care sector
whilst delivering attractive returns to shareholders.
"The valuation uplifts we have seen during the quarter
demonstrate the quality of the portfolio we have been patiently
building. Furthermore, the increase in occupancy we are seeing is
encouraging and as anticipated based on feedback from our tenants
in recent months. We have achieved a milestone in resolving key
portfolio challenges in respect of two tenants, with one further
re-tenanting transaction to conclude. We will closely monitor the
other tenant's continued improvements in trading, as we will for
all tenants as we emerge from the pandemic, supporting them in our
capacity as an engaged landlord."
Net Asset Value
The Group's unaudited EPRA NAV per share as at 30 June 2021 was
110.4 pence. The total return for the quarter based on EPRA NAV was
2.8%.
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 30 June 2021, the Group's portfolio was valued at GBP684.8
million and comprised 77 properties, consisting of 73 operational
care homes and four pre-let sites, which are being developed
through capped forward funding commitments with established
development partners. As noted above, one of these developments
reached completion in early July 2021.
The portfolio value increased by 5.2% over the quarter. This
comprised a 1.1% increase from further investment into the
development portfolio, a 2.7% increase resulting from acquisitions,
and 1.4% from a like-for-like uplift in the operational portfolio
value. The last movement reflects modest yield compression 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 2.2% over the period,
comprising:
-- 0.6% from 17 inflation-linked upwards-only rent reviews, with an average uplift of 2.3%.
-- Following the asset management activities in relation to two
homes, a 0.2% uplift resulting from the re-tenanted asset and a
temporary 1.2% reduction in relation to the other asset
-- 2.6% as a result of new acquisitions
The portfolio's weighted average unexpired lease term increased
slightly to 28.8 years (31 March 2021: 28.6 years) as a result of
new acquisitions and successful asset management activity including
the abovementioned re-tenanting and new lease agreements.
The portfolio had an EPRA topped-up net initial yield of 5.83%
based on an annualised contractual rent of GBP41.2 million. The
portfolio's EPRA net initial yield was 5.76% with one asset in a
rent-free period.
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 is working through the diligence process
on a number of transactions, which when progressed to completion
will see all available equity and debt capital invested.
Debt facilities and swap arrangements
As at 30 June 2021, the Group's total borrowings were GBP130
million, giving a net LTV of 15.9% (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 2.90% (31 March 2021: 2.95%). The weighted average term
to expiry was 4.8 years (31 March 2021: 5.1 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 30 June 2021, the Group has
drawn GBP80 million of fixed term debt, with interest costs fixed,
and GBP50 million under the revolving credit facilities which carry
a variable interest rate linked to SONIA.
Dividends in the period
The Group paid its third interim dividend for the year ended 30
June 2021, in respect of the period from 1 January 2021 to 31 March
2021, of 1.68 pence per share, on 28 May 2021 to shareholders on
the register on 14 May 2021. This distribution was wholly comprised
of a property income distribution (PID).
Valuation
The property portfolio was externally valued at GBP684.8 million
at 30 June 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 30 June
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 fourth interim dividend
The Company today declares its fourth interim dividend for the
year ended 30 June 2021, in respect of the period from 1 April 2021
to 30 June 2021, of 1.68 pence per share as detailed in the
schedule below:
Interim Property Income Distribution (PID): 0.168 pence per share
Interim Ordinary Dividend: 1.512 pence per share
Ex-Dividend Date: 12 August 2021
Record Date: 13 August 2021
Payment Date: 27 August 2021
The dividend reflects an annualised payment of 6.72 pence per
share and a dividend yield of 5.4% based on the 3 August 2021
closing share price of 124.0 pence.
The Company had 511,541,694 ordinary shares in issue at 30 June
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 30 June 2021 comprised 77 assets let to
28 tenants with a total value of GBP684.8 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 April 2021 to 30
June 2021:
Pence per share
----------------
EPRA NAV per share as at 31 March 2021 109.1
Revaluation gains / (losses) on investment properties 1.7
Revaluation gains / (losses) on assets under construction^ 0.3
Net impact of acquisition costs (0.2)
Movement in revenue reserve 1.2
Third interim dividend payment for the year to 30 June 2021 (1.7)
------------------------------------------------------------- ----------------
EPRA NAV per share as at 30 June 2021 110.4
------------------------------------------------------------- ----------------
Percentage change in the quarter 1.2%
------------------------------------------------------------- ----------------
The EPRA Best Practices Recommendations Guidelines published in
October 2019, which became effective for the Company for the year
ended 30 June 2021, state that companies should publish a set of
three NAV metrics. The EPRA NAV included in this, and previous,
company announcements is equivalent to the EPRA Net Tangible Assets
("NTA"). The Company intends to continue to announce the EPRA NTA
on a quarterly basis and will provide the full EPRA NAV set of
metrics in its Annual Report.
At 30 June 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/NTA, the NAV calculated under International Financial
Reporting Standards was 110.5 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)
Jun-21 Mar-21 Dec-20 Sep-20
GBPm GBPm GBPm GBPm
Property portfolio* 684.8 650.8 647.7 637.5
Cash 21.1 26.6 18.3 17.5
Net current assets
/ (liabilities)* (11.0) (5.1) (9.2) (9.1)
Bank loans (130.0) (114.0) (162.0) (152.0)
------------- -------- -------- --------
Net assets 564.9 558.3 494.8 493.9
------------- -------- -------- --------
EPRA NAV per share
(pence) 110.4 109.1 108.2 108.0
*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 October 2021 and the unaudited EPRA NTA per share as
at 30 September 2021 is expected to be announced in October
2021.
3. EPRA NIY profiles and unwind of rent-free periods
The Group currently has one asset in a rent-free period which
will expire in August 2022. At that point, assuming no other
changes, including inter alia the portfolio valuation or rental
profile, the EPRA topped-up NIY (currently 5.83%) and EPRA NIY
(currently 5.76%) will be equal.
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END
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