Target Healthcare REIT, which invests in modern, purpose-built UK care homes, has announced annual profit of £31.6 million for the year ending 30 June 2020, up 5.7% from £29.9 million reported last year.

The company’s European Public Real Estate net asset value (NAV) rose 0.6% to 108.1p, from 107.5p in 2019. Its NAV total return was 7% (2019: 8.1%), reflecting supportive adjusted EPRA earnings and a moderate level of capital growth.

The dividend for the year increased by 1.5% to 6.68p (2019: 6.579p) and Target has proposed a 0.6% increase to 6.72p for 2021, barring unforeseen circumstances.

The company has 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.

Target’s portfolio value increased over the year 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%.

The company signed agreements to acquire 12 assets for £117 million, at yields representative of assets of similar standard and location within the group’s existing portfolio, and completed its first property sales, with two disposals ahead of book value.

Its contracted portfolio rent increased by 21% to £39 million (2019: £32.2 million), including like-for-like rental growth of 1.5%. The number of tenants increased to 27, from 24 in 2019.

The weighted average unexpired lease term was maintained at 29 years.

Target also re-tenanted of six care homes in January 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.

Overall the group said its portfolio performance had been resilient, with 95% of rent due on the March and June quarter dates collected.

Target chairman Malcolm Naish 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.”

Date published: October 6, 2020

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