Target Healthcare REIT, which invests in modern, purpose-built care homes, has announced quarterly European Public Real Estate Net Asset Value (NAV) per share of 108p as at 30 September 2020 (30 June 2020: 108.1p). The company stated that its portfolio continued to perform in line with recent quarters, with revaluation gains being offset by costs incurred as the group cautiously resumed acquisition activity. NAV total return including dividend was 1.5% for the quarter.
Target had available cash reserves of £17 million at 30 September 2020, together with £28 million available in undrawn facilities, and low net loan-to-value of 21.1% providing operational flexibility.
The company reported a 0.5% increase in the like-for-like value of its operational portfolio, with a total property portfolio value of £637.5 million and an EPRA topped-up net initial yield of 6.02%.
During the quarter Target conducted 13 rent reviews completed at an average uplift of 1.9% per annum. It reported like-for-like rental growth of 0.3%, and a contractual rent roll of £40.6 million per annum generated from 73 operational properties.
It has a weighted average unexpired lease term across the portfolio of 28.9 years. Rent collection is reported to be resilient, with around 90% of the rent due and payable to date in respect of the current quarter having been collected as at 2 November 2020.
Target has declared a first interim dividend of 1.68p per share for the year ending 30 June 2021, representing an increase of 0.6% on the fiscal year 2020 quarterly dividends. On an annualised basis, this reflects a payment of 6.72p per share and a dividend yield of 6.4% based on the closing share price of 105.6p on 2 November 2020.
Reporting on its quarterly acquisitions and asset management activity, Target said it acquired a 66-bed new-build care home in Bicester, Oxfordshire, for £15 million; on 30 September it acquired a pre-let development site for £7 million to construct a 72-bed care home in Chesterfield, Derbyshire; and it completed a pre-let development site in Burscough, Lancashire, in July, delivering an 80-bed care home
Kenneth MacKenzie, chief executive of Target Fund Managers, said: “The portfolio continues to benefit from the quality of the underlying real estate and its diversification characteristics, as demonstrated by the strong rental collection figures, rent covers being maintained and the like-for-like valuation increase.
“We have received positive feedback from care home managers that the standard of our real estate has made a real difference in their ability to successfully care for residents and manage their homes through the pandemic, in particular the full provision of private en suite wet-rooms. Whilst we remain highly vigilant to the ongoing threat of the pandemic, we are encouraged by the relatively low levels of Covid-19 prevalence our tenants are reporting. We would, however, expect infection rates to increase, and believe the combination of enhanced protocols, additional safety equipment, stable guidance from the authorities, and the experience of our tenants leaves them well-placed to manage further challenges. Together we are focused on recovering occupancy, enabling safe visiting, and caring effectively for our residents.
“Looking further ahead, we continue to undertake a rolling assessment of the portfolio, which includes identifying opportunities to manage the tenant base to ensure the long-term stability and sustainability of returns.
“Additionally, buoyed by the performance of our modern, fit-for-purpose care homes, we have cautiously resumed investment in our pipeline. Our intention is to carefully balance moving towards full investment, which will generate returns to fully cover the dividend, with the prudent retention of flexible debt capital.”
Date published: November 3, 2020