Target Healthcare, specialist investor of purpose-built UK care homes announces year end results


Continued focus on high quality real estate and further portfolio diversification underpins strong operational and financial performance and dividend increase.

 Target Healthcare REIT plc (the “Company” or the “Group”), the listed specialist investor in modern, purpose-built UK care homes, is pleased to announce its results for the year ended 30 June 2020.




COVID-19 and Corporate Update

  • Resilient portfolio performance, with 95% of rent due on the March and June quarter dates collected.
  • Cash reserves of £36 million as at 30 June 2020, together with £28.0 million available in undrawn revolving credit facilities, and low net loan-to-value (“LTV”) of 18.7%, provides significant operational flexibility. The Group cautiously resumed new investment activity post year-end.
  • Tenants continue to benefit from the distinct nature of the Group’s modern portfolio, particularly the prevalence of en-suite wet rooms, in managing the pandemic and isolation / social distancing requirements.
  • Rent cover of mature homes in the portfolio, a key metric in monitoring the long-term sustainable rent levels, has remained unchanged at 1.6 times over the course of 2020. Going forward, homes are preparing for the winter while being much better prepared for a second wave.
  • The reduction in occupancy levels of the underlying tenant operators as a result of lockdown, which restricted viewings and new resident uptakes, are now being substantially matched by new enquiry levels.
  • As announced in May 2020, we are pleased that Ms Alison Fyfe has joined the Board as an independent non-executive Director.

 Financial Highlights

  • EPRA* NAV per share up 0.6% to 108.1p (2019: 107.5p).
  • NAV total return of 7.0% (2019: 8.1%)**, reflecting supportive adjusted EPRA earnings and a moderate level of capital growth.
  • Continued progressive dividend policy:
    • Dividend for the year ended 30 June 2020 increased by 1.5% to 6.68p (2019: 6.579p)
    • Proposed 0.6% increase to 6.72p for 2021, barring unforeseen circumstances.
  • IFRS profit for the year up 5.7% to £31.6 million (2019: £29.9 million).
  • Dividend cover on adjusted EPRA earnings of 76% (2019: 82%); fully covered based on EPRA earnings. The fall in adjusted EPRA earnings is primarily a result of a pause in investment activity due to COVID-19 and prudent provisioning in relation to rental income recognised from two tenants.
  • Oversubscribed £80 million equity issuance in September 2019, with proceeds subsequently fully deployed.
  • Increase in term of debt facilities with a £50 million 12-year term loan with a large insurer secured, combined with a one-year extension to the existing £80 million revolving credit facility with HSBC.

 Portfolio Highlights

  • Portfolio value increased by 23% to £617.6 million (2019: £500.9 million), comprising 71 homes and two pre-let sites, including like-for-like valuation growth of 2.8%.
  • Agreements to acquire 12 assets  for a total commitment of £117 million (including costs), at yields representative of assets of similar standard and location within the Group’s existing portfolio.
  • The Group completed its first property sales; with two disposals ahead of book value.
  • Contracted portfolio rent increased by 21% to £39.0 million (2019: £32.2 million), including like-for-like rental growth of 1.5%.
  • Number of tenants increased to 27 (2019: 24), further diversifying the tenant base.
  • Weighted average unexpired lease term (‘WAULT’) maintained at 29 years, despite the passage of time.
  • Successful re-tenanting in January 2020 of six care homes previously leased to Orchard Care Homes to two of the Group’s existing operators, resulting in no net loss in income or capital value to the Group.

 Market Outlook

  • Compelling supply and demand dynamics remain unchanged, supporting both investor and operator activity in the sector, with the number of people aged 85 or over in the UK forecast to double to 3.2 million in the next 20 years.
  • The Group’s acute focus on best in class, purpose-built homes with full en-suite wet rooms, which account for 95% of the portfolio is an increasingly attractive differentiator, with only 26% of rooms in the UK having en-suite wet rooms. 86% of homes in the portfolio are less than 10 years old.

* European Public Real Estate Association

** Based on EPRA NAV movement and dividends paid

Malcolm Naish, Chairman of the Company, said:

“The strong relationships we have with our tenants means we understand their operational stresses and strains, with updates received via many hundreds of phone calls and virtual meetings. The Manager has given help and support with sourcing of PPE, sharing of best practice and collation of sector news and guidance, as well as acting as a sounding board. Where appropriate, we have relaxed contractual obligations to ease cashflow pressures. All of this is in order to allow our tenants to focus on what they do best – providing care.


Our business model is designed to allow us to pay a regular, stable and attractive dividend in what may well be an entrenched “lower-for-longer” interest rate environment. Our portfolio has performed well during the year, and has thus far demonstrated a satisfying resilience during COVID-19. We have seen rental and valuation growth. Falls in occupancy levels as a result of lockdown are being substantially matched by new enquiry levels.

“The proposed dividend increase reflects both the Board’s confidence in the Group’s prospects and caution with regard to the ongoing COVID-19 situation. We are pleased to be able to continue delivering returns to shareholders.”


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