TIDMTHRL
RNS Number : 0542S
Target Healthcare REIT PLC
06 July 2020
6 July 2020
Target Healthcare REIT plc and its subsidiaries
("Target Healthcare" or "the Group")
Business & portfolio updates and acquisition of Oxfordshire
care home
Target Healthcare (LSE: THRL), the UK listed specialist investor
in modern, purpose-built care homes, provides a business update and
announces the acquisition of a newly-developed care home in
Bicester, Oxfordshire, for a total consideration of GBP15 million
including costs.
Rental collection and dividend reaffirmation
The Group's portfolio has continued to demonstrate its high
quality and defensive characteristics throughout the COVID-19
pandemic. 96% of the rent payable in respect of the recent quarter
dates(1) has been collected, after allowing for agreements in
respect of a limited proportion of the portfolio's 71 operational
care homes to pay monthly in advance. Excluded from this collection
analysis are two of the portfolio's immature care homes on which
agreements were in place prior to the pandemic to defer rental
payments. The 4% of rent currently outstanding relates to care
homes where active asset management initiatives are in place which
provide strong visibility of value recovery in the near-term.
As a result of the quarter's strong rental collection, the
Company reaffirms its intention to pay its fourth-quarter interim
dividend, for the period 1 April 2020 to 30 June 2020, in-line with
expectations and as per the normal timetable, with announcement due
in early August 2020.
Portfolio update
We have kept in close contact with our tenants to provide
support, share best practice, and to continue our monitoring
programme as an informed and engaged landlord. As at 2 July, five
of the portfolio's 71 operational care homes were reporting
confirmed or suspected COVID-19 cases, representing 15 of 4,925
beds (0.3%), down from a peak of 162 (3.2%) during the third week
of April. Tenants are reporting an improvement in new resident
enquiries in recent weeks, whilst exploring ways to facilitate safe
visiting practices in line with government guidance.
Investment activity
The Group has acquired a new-build care home in Bicester,
Oxfordshire for a consideration of GBP15 million inclusive of
costs. The high quality, 66 bed, purpose-built asset is let to
Ideal Carehomes ("Ideal"), the Group's largest existing tenant with
leases on 12 assets including this one. Ideal has agreed a 35-year,
fully repairing and insuring occupational lease which includes
annual, upwards-only RPI-linked increases, subject to a cap and
collar. The acquisition yield on the transaction is representative
of assets of a similar standard and location within the Group's
portfolio, operated by a well-capitalised tenant.
Having recently reached practical completion, the property has
been finished to a high standard by specialist elderly care home
developer, LNT Care Developments, with the inclusion of full en
suite wet-room facilities, large public spaces and a high-quality
fit-out. The investment proposition for the property is
predominantly targeting the self-funded, lower-acuity residential
care market, supported by the positive underlying demographics and
strong wealth characteristics of the local area.
Following the transaction, which was funded from existing cash
resources, the financial position of the Group remains robust,
evidenced by a strong balance sheet with a low net loan-to-value of
20.6% and remaining uncommitted capital of approximately GBP26
million.
Additionally, the Group has reached practical completion on the
development of an 80-bed care home in Burscough, Lancashire. The
home was completed under a forward-fund arrangement pre-let to
Athena Healthcare, an existing tenant of the Group, and will open
to residents in July 2020.
Kenneth MacKenzie, CEO of Target Fund Managers, commented:
"Target Healthcare was created to provide long-term stable
income on the foundation of stable rents received from modern
purpose-built care homes, operated wisely by dedicated care
providers. COVID-19 arrived on these shores six months ago and our
foundation remains, as does our long-term stable income. While we
postponed some acquisitions early on in the pandemic to ensure a
robust balance sheet, we now have sufficient visibility to continue
our mission of creating a stable income platform of scale, while
working to our long held ESG values, providing modern purpose-built
care homes for their residents. We have been hugely impressed with
the devotion and resilience of our tenants in their delivery of
care to their residents during this difficult time.
"After very careful consideration we have proceeded with the
acquisition of the Bicester home to add a further quality asset to
our robust portfolio, and are pleased that practical completion has
been reached on the construction of the home in Burscough. Each of
these further demonstrates the support the Group provides towards
the much-needed modernisation of the sector's real estate. The
fundamentals for the UK's elderly healthcare sector remain strong
and we remain steadfast in our conviction as to the advantages of
the Group's ethos and strategy of owning modern, purpose-built care
homes which by design promote enhanced infection control and allow
for effective isolation, as needed, of residents in their own rooms
through the provision of private en suite wet-rooms.
"The acquisition together with the completion of the Burscough
development add two best-in-class assets to the portfolio which
will supplement earnings while also strengthening our relationships
with operationally astute and valued tenants of the Group."
[1] 24 June England, Wales and Northern Ireland, 28 May
Scotland
All enquiries: Kenneth MacKenzie / John Flannelly 01786 845 912
Target Fund Managers 020 7710 7600
Mark Young / Mark Bloomfield
Stifel Nicolaus Europe Limited
Dido Laurimore / Claire Turvey / 020 3727 1000
Richard Gotla targethealthcare@fticonsulting.com
FTI Consulting
Notes to editors:
UK listed Target Healthcare REIT plc (THRL) is an externally
managed Real Estate Investment Trust which provides 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 portfolio at 31 March 2020 comprised 73 assets, 71
operational assets and 2 pre-let development sites, let to 27
different tenants with a total value of GBP613.4 million.
The Group only invests in modern, purpose-built care homes that
are let to high quality tenants who demonstrate strong operational
capabilities and a strong care ethos. The Group builds
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.
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END
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