Target Healthcare REIT, which invests in modern, purpose-built care homes, has announced Net Asset Value (NAV) total return of 3.3% for the second half of 2020 (2019: 3.8%), driven primarily by rental and valuation growth of the underlying portfolio. Share price total return for the period was 6.8% (2019: 3.3%) and group specific adjusted European Public Real Estate (EPRA) earnings per share was 2.66p per share (2019: 2.72p).
Dividends increased by 0.6% to 3.36p in respect of the period (2019: 3.34p) and dividends in respect of the period were 79% covered by adjusted earnings, and fully covered based on EPRA earnings per share. A dividend yield of 5.9% was based on the closing share price of 114p on 31 December 2020.
Target Healthcare had cash reserves of £18.3 million at the end of last year, together with £58 million available in undrawn revolving credit facilities, and low net loan-to-value of 22.2% (average cost of drawn debt 2.81%, average term to maturity 5.34 years), providing financial and operational flexibility.
The REIT’s oversubscribed £60 million equity issuance was completed this month and Target stated that it has identified an attractive pipeline of investment opportunities.
Target said its portfolio value has increased by £30 million, or 4.9%, to £647.7 million, including like-for-like valuation growth of 1.3%, with portfolio total returns of 4.1% (2019: 4.7%).
Its contractual rent has increased by 4.2% to £40.6 million per annum (2020: £39 million), including a like-for-like increase of 0.3%, with the assets that were subject to rent review in the period delivering an average increase of 1.7%.
It has EPRA topped-up net initial yield of 5.97% and EPRA net initial yield of 5.8%, and a weighted average unexpired lease term of 28.7 years (2020: 29 years).
By 1 February target said vaccinations had been made available to residents and staff in all of its care homes, with substantial uptake across both groups.
Target stated that it expects tenant occupancy to recover as new admissions can now occur more safely and residents are able to interact with visitors and local communities more regularly. It added that reports from its tenants indicate significant levels of enquiries from prospective residents.
Full en suite wet-rooms now account for 95% of the portfolio, which is leased at sustainable rental levels, creating a portfolio which is diversified by tenant and geography.
Target Healthcare’s chairman Malcolm Naish said: “The extensive feedback we have received throughout the period from care home managers and their teams has confirmed that the standards of our modern, purpose-built real estate have been vital to their efforts to provide dignified care for residents during the challenging circumstances of the pandemic.
“The Covid-19 vaccination programme provides a massive relief to residents, their friends and families, and care staff. While our outlook for our homes and the sector is optimistic, we recognise that trading conditions may remain challenging for a period for some homes as we continue to emerge from the worst of the pandemic. Positive relationships with our tenants are fundamental to our business model and we remain a highly engaged and supportive landlord.
“Our business model provides stable, non-cyclical returns from long-term, committed investment in UK care homes. Real estate standards across the sector remain generally poor and this significant undersupply of quality, and the increasing numbers of people over 85 years of age, allows us to invest with confidence for the long term.”
Date published: March 23, 2021