Care homes investor Target Healthcare REIT has announced it is raising approximately £50 million in new money at an issue price of 111 pence per new ordinary share.

The price represents a discount of 4.8% to the closing share price of 116.6p per existing ordinary share in the capital of the company on 11 February. This is at a 2.6% premium to the company’s last reported European Public Real Estate Association net asset value per ordinary share of 108.2p as at the end of last year.

Target stated that the Covid-19 pandemic has not substantially affected its rental income or its portfolio’s cashflows. Vaccinations have been made available to residents and staff in all of its care homes, with substantial uptake, allowing for increased admissions and, eventually, safer visits and more social activities for residents, ultimately enabling occupancy recovery. The company’s investment manager, Target Fund Managers, said that a number of the company’s tenants have recently reported high levels of enquiries, with one of the company’s largest tenants receiving record levels of new enquiries last month.

The investment manager also highlighted a pipeline of £224 million, consisting of £47 million of imminent acquisition assets comprising three operational modern care homes and one forward funding project, as well as £177 million of near-term pipeline assets which are currently in negotiations consisting of 10 operational modern care homes, five forward funding projects and one forward commitment to acquire a pre-let care home upon construction reaching practical completion.

Target Healthcare intends to raise additional equity capital through the issue of up to 150 million new shares in the 12-month period from 4 March 2021 to 11 February 2022, which it said will allow it to tailor future equity issuance to its pipeline, providing flexibility and minimising cash drag.

Target Healthcare chairman Malcolm Naish said: “The very challenging period we have come through has clearly shown that the kinds of assets we own, together with the operational capabilities of our dedicated and professional occupier base, are well-placed to manage the complex requirements of the care home sector and its residents. The momentum behind the underlying fundamentals of the sector remains unchanged, as reflected in the record level of enquiries last month which was reported by one of the company’s largest tenants, and with the roll out of the vaccination programme progressing well, we are in a position now to respond to that demand.

 “The pandemic has starkly underlined the critical need for more high-quality, well-designed care homes. While we prudently paused our investment programme in the first half of 2020, we now believe there is sufficient visibility to return to our disciplined acquisition strategy. We have identified a strong pipeline of attractive potential investments and the structure of the fundraise we are announcing today provides us with the flexibility to be selective, but also to act quickly in a competitive market.”

Date published: February 12, 2021

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