TIDMTHRL
RNS Number : 9606D
Target Healthcare REIT Limited
15 October 2018
15 October 2018
Target Healthcare REIT Limited and its subsidiaries
("Target Healthcare" or "the Group")
Net Asset Value, update on corporate activity & dividend
declaration
Target Healthcare (LSE: THRL), the UK listed specialist investor
in purpose-built care homes, announces its unaudited quarterly Net
Asset Value (NAV) as at 30 September 2018 and provides an update on
its corporate activity and its dividend declaration.
Highlights
-- EPRA NAV per share of 106.1 pence (30 June 2018: 105.7
pence), resulting in a NAV total return for the quarter of 1.9%
-- 1.1% increase in like-for-like value of the operational
portfolio. 12 rent reviews completed at an average uplift of
3.1%
-- Total portfolio value of GBP403.7 million, comprising 58
assets, delivering an annualised rent roll of GBP26.4 million from
52 operational properties
-- Portfolio additions totalling GBP31.0 million (inclusive of
costs and funding commitments), being: the acquisition of one
operational home; two sites on which pre-let homes will be
constructed through forward funded development agreements; and, the
exchange of contracts to acquire one further newly constructed home
at practical completion in the second half of 2019.
-- First interim dividend declared for the year ending 30 June
2019 of 1.64475 pence per share, an increase of 2.0% on 2018's
dividend rate. On an annualised basis, this reflects a payment of
6.579 pence per share and a dividend yield of 5.8% based on the
closing share price on 12 October 2018
Kenneth MacKenzie, CEO of Target Fund Managers Limited,
commented:
"Building on the strong financial and operational performance
reported in our recent results, our focus remains on the delivery
of favourable shareholder returns through the growth of long term,
quality and highly visible income streams. A combination of our
rigorous approach to asset selection and the demographic changes
underpinning increasing demand for care homes which are well
located, modern and well-equipped with wet rooms is the foundation
for the continued performance of the portfolio, while new
investments are also diversifying our operator exposure.
Whilst the investment market remains competitive, our experience
and track record enables us to successfully identify and acquire
high quality assets, supporting the Group's growth ambitions. We
expect to shortly complete our diligence process on a number of
pipeline acquisitions which would see deployment of our remaining
investment capacity."
Net Asset Value
The Group announces that its unaudited EPRA NAV per share as at
30 September 2018 was 106.1 pence. The total return for the quarter
based on EPRA NAV was 1.9%.
A balance sheet summary and an analysis of the movement in the
EPRA NAV over the quarter is presented at the end of this
announcement in the Appendix.
Corporate Update
Portfolio performance
As at 30 September 2018 the Group's portfolio was valued at
GBP403.7 million and comprised of 52 operational care homes and 6
pre-let sites being developed via forward funding commitments with
established development partners. The portfolio had an EPRA
topped-up net initial yield of 6.41% based on an annualised rent
upon expiry of lease incentives of GBP26.4 million. Where rent
reviews were completed during the quarter, the average increase was
3.1%, resulting in a 0.6% like-for-like increase to the rent roll.
The portfolio's weighted average unexpired lease term was 28.25
years.
The portfolio value has increased by 4.7% over the quarter. Of
this, 3.6% comprises the new asset acquisitions and further
investment in the six development sites, with a like-for-like
movement in the operational portfolio of 1.1% predominantly
reflecting the impact of annual inflation-linked rental
reviews.
Debt facilities & swap arrangements
As at 30 September 2018, the Group's total borrowings were
GBP66.0 million, giving a gross loan-to-value ratio of 16.3%
(calculated as total gross debt as a proportion of gross property
value. As the Group expects to invest the vast majority of its
current cash balance in care home investments, cash has been
excluded from the calculation).
The Group, through facilities with RBS, HSBC and FCB, has
available fixed term debt of GBP70 million with an additional GBP60
million of more flexible debt available from revolving facilities.
The Group has currently drawn GBP66.0 million of fixed term debt on
which the interest rate has been fixed through the use of interest
rate swaps. The Group's weighted average cost on its drawn debt,
inclusive of amortisation of arrangement costs, is 3.12% with a
weighted average term to expiry of 3.0 years.
Investment activity
In the three months to 30 September 2018, the Group's activity
in relation to new investments has been:
-- The acquisition of a 40-bed care home in Doncaster, South
Yorkshire. Operated by Orchard Care Homes, an existing tenant of
the Group, the home is let on a full repairing and insuring lease
with 24 years remaining and is subject to annual RPI-linked rent
increases subject to a cap and collar.
-- A development site for an 80-bed care home in Burscough,
Lancashire. The development will be carried out in partnership with
Athena Healthcare ("Athena"), an existing tenant of the Group,
under a capped development contract, and subject to a forward
funding agreement. On completion of the building, which is expected
in Q4 2019, the home will be let to Athena for 35 years on a full
repairing and insuring lease with RPI-linked rent increases subject
to a cap and collar.
-- A development site for a 66-bed care home in Wetherby, West
Yorkshire. The development will be undertaken by LNT Construction
Limited a sister company of Ideal Carehomes Limited ("Ideal"), an
existing tenant of the Group. Practical completion is expected in
early 2019 at which point the home will be let to Ideal for 35
years on a full repairing and insuring lease with RPI-linked rent
increases subject to a cap and collar.
-- An exchange of contracts to acquire a pre-let, purpose-built
home in Newtown, Powys. The home, which marks the Group's first
transaction in Wales, will offer 73 bedrooms over three floors all
with en-suite wetrooms. On completion, the property will be leased
to a new tenant, Caresolve Operations Limited, for 35 years on a
full repairing and insuring lease with annual, upwards-only,
RPI-linked uplifts, incorporating a cap and collar.
Pipeline and Investment Market
We continue to witness significant investor demand in the UK
care home real estate sector, bringing competition for assets and a
tightening of yields. This tightening is evident for the modern,
purpose-built homes which are compliant with our investment
criteria, as well as the poorer quality real estate which comprises
the majority of beds in the market.
As at 12 October the Group has GBP22 million of cash and GBP64
million of debt available to be drawn. GBP36 million of this has
been allocated to upcoming commitments of the Group's development
programme, which will support the construction of seven brand new
care homes adding GBP4 million to portfolio rent annually once
operational. In addition, the Group has up to GBP19 million of
potential deferred consideration payments on eight previously
acquired assets and prudently apportions GBP13 million of cash to
general corporate purposes, including dividends and working
capital. Therefore, after accounting for pre-existing commitments
and general corporate requirements, the Group has approximately
GBP18 million of uncommitted capital available for new
acquisitions.
The Group has near term potential acquisitions totalling GBP79
million which are currently in advanced due diligence and which the
Group expects to commit to acquiring by the end of 2018. In
addition to the investment opportunities identified, the Group has
an extensive pipeline of longer-term opportunities where the
timetable for potential completion remains uncertain, with the
assets remaining subject to due diligence and negotiation.
In light of these opportunities, and the Group's current cash
position, the Directors are considering the optimal way to finance
any further asset acquisitions, including issuance of new equity.
The Group is cognisant of the negative effect of cash drag on its
returns. Accordingly, if an equity raise is launched, the Directors
expect it to be relatively small allowing the Group to quickly
invest the proceeds. Any equity raise in the near term is likely to
be carried out under the remaining placing programme and
shareholder authorities.
Dividends in the period
The Company paid its fourth interim dividend for the year to 30
June 2018, in respect of the period from 1 April 2018 to 30 June
2018, of 1.6125 pence per share on 31 August 2018 to shareholders
on the register on 10 August 2018.
The Company had 339,217,889 ordinary shares in issue at 30
September 2018 and has not issued or bought back any shares since
that date.
Announcement of first interim dividend
The Company has today declared its first interim dividend
payment for the year ending 30 June 2019, in respect of the period
from 1 July 2018 to 30 September 2018 of 1.64475 pence per share as
detailed in the schedule below:
Interim Property Income Distribution (PID) 1.64475 pence per share
Ex-Dividend Date: 25 October 2018
Record Date: 26 October 2018
Pay Date: 30 November 2018
The dividend reflects an annualised payment of 6.579 pence per
share and a dividend yield of 5.8% based on the 12 October 2018
closing share price of 112.5 pence.
Investor relations
Shareholders will find the latest Group information, including
its quarterly investor report for September 2018, at its website:
https://www.targethealthcarereit.co.uk/
S
Enquiries:
Kenneth MacKenzie; Gordon Bland
Target Fund Managers Limited
01786 845 912
Mark Young; Neil Winward; Tom Yeadon
Stifel Nicolaus Europe Limited
020 7710 7600
Martin Cassels
Maitland Administration Services (Scotland) Limited
0131 550 3760
Dido Laurimore; Claire Turvey; Richard Gotla
FTI Consulting
020 3727 1000
TargetHealthcare@fticonsulting.com
Notes to editors:
UK listed Target Healthcare REIT Limited (THRL) is an externally
managed Real Estate Investment Trust which aims to provide
shareholders with an attractive level of income, together with the
potential for capital and income growth, from investing in a
diversified portfolio of modern, purpose-built care homes.
The Group's current portfolio comprises 58 assets with a total
value of circa GBP403.7 million (30 September 2018), which are let
to 21 tenants.
The Group only invests in modern, purpose-built homes that are
let to high quality tenants who demonstrate strong operational
capabilities and a strong care ethos. The Group aims to build
collaborative, supportive relationships with each of its tenants as
it believes working in this way helps raise standards of care and
helps its tenants build sustainable businesses. In turn, that helps
the Group deliver stable returns to its investors.
Important information
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information Service
this inside information is now considered to be in the public
domain.
APPENDIX
Analysis of movement in EPRA NAV
The following table provides an analysis of the movement in the
unaudited EPRA NAV per share for the period from 1 July 2018 to 30
September 2018:
Pence per share
----------------
EPRA NAV per share as at 30 June 2018 105.7
Revaluation gains / (losses) on investment properties 1.2
Net effect of acquisition costs and assets under construction^ (0.5)
Movement in revenue reserve 1.3
Fourth interim dividend payment for the year to 30 June 2018 (1.6)
---------------------------------------------------------------- ----------------
EPRA NAV per share as at 30 September 2018 106.1
---------------------------------------------------------------- ----------------
Percentage change in the 3-month period 0.4%
---------------------------------------------------------------- ----------------
Ordinarily the Group's EPRA NAV would differ from that
calculated under International Financial Reporting Standards
(IFRS), as the latter includes the value of the Group's interest
rate derivative contracts. As at 30 September 2018 the value of
these contracts was immaterial and therefore the EPRA NAV did not
differ from the IFRS NAV.
Summary balance sheet (unaudited)
Sept-18 Jun-18 Mar-18 Dec-17
GBPm GBPm GBPm GBPm
Investment properties* 403.7 385.5 341.4 334.9
Cash 24.0 41.4 85.3 14.9
Net current assets / (liabilities)* (1.9) (2.4) (4.7) (5.5)
Bank loan (66.0) (66.0) (66.0) (81.0)
-------- ------- ------- -------
Net assets 359.8 358.5 356.0 263.3
-------- ------- ------- -------
EPRA NAV per share (pence) 106.1 105.7 105.0 104.4
^Consistent with standard valuation practice for assets under
construction, the carrying value is shown at a discount to
accumulated costs to date. This discount reflects the remaining
development time and is anticipated to unwind as the asset reaches
practical completion.
*Investment properties are stated at market value and the IFRS
effects of fixed/guaranteed minimum rent reviews are not
reflected.
The next quarterly valuation of the property portfolio will be
conducted by Colliers International Healthcare Property Consultants
Limited during December 2018 and the unaudited EPRA NAV per share
as at 31 December 2018 will be announced in January 2019.
This information is provided by RNS, the news service of the
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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