REG - Target H'care REIT - Net Asset Value, Corporate Update & Dividend

Target Healthcare ReitAnnouncement

05/02/2026 07:02

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RNS Number : 7683R  Target Healthcare REIT PLC  05 February 2026

5 February 2026

Target Healthcare REIT plc and its subsidiaries

 

("Target Healthcare" or "the Company" or,

together with its subsidiaries, "the Group")

 

Net Asset Value, update on corporate activity and dividend declaration

 

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern,
purpose-built care homes, announces its unaudited quarterly Net Asset Value
('NAV') as at 31 December 2025, an update on corporate activity and its second
interim dividend for the year ending 30 June 2026.

 

Corporate activity highlights

 

A focus on portfolio management initiatives, including the completion of the
disposal of nine care homes at a premium to carrying value and the
earnings-accretive acquisition of three care homes, delivered a twelfth
consecutive quarter of positive total returns.

 

·    The Group completed the sale of nine care homes for £85.9 million in
line with the exchange announced in the previous quarter, which represented a
premium of 11.6% to the carrying value at 30 June 2025 and an implied net
initial yield of 5.2%

·      The Group acquired three strongly performing modern operational
care homes and entered into a forward commitment to acquire a fourth,
redeploying more than 50% of the aforementioned disposal proceeds and
reflecting a blended acquisition net initial yield in excess of 6%

·    EPRA Net Tangible Assets ('NTA') per share increased 1.4% to 119.4
pence (30 September 2025: 117.7 pence), reflecting mainly a like-for-like
valuation uplift of 1.2% driven primarily by inflation-linked rent reviews

·      Total accounting return of 2.8% for the quarter (based on EPRA
NTA and including dividend payment)

·     EPRA "topped-up" net initial yield of 6.23% (30 September 2025:
6.24%) based on an annualised contractual rent of £59.5 million

·      Adjusted EPRA EPS for the quarter of 1.69 pence per share
(quarter to 30 September 2025: 1.71 pence)

·      Fully covered quarterly dividend of 1.508 pence per share

·     Net LTV of 15.2% as at 31 December 2025 (30 September 2025: 21.4%),
below the target level as the Group continues to redeploy the disposal
proceeds

·     Total debt facilities weighted average term of 5.6 years (30
September 2025: 5.9 years). Interest costs are fixed on £200 million of debt
until at least September 2030, at a weighted average cost of 3.89% (inclusive
of amortisation of arrangement costs)

·      The Group has total capital available of c.£100 million,
excluding the uncommitted accordion facility, to deploy subject to market
circumstances

·   The Investment Manager has identified a pipeline, in excess of the
capital available, of attractive, high-quality investment opportunities.
 These assets have an indicative blended net initial yield in excess of 6%.

·     Rent collection of 99% to date for this second quarter, with an
additional £1.9 million of historical rent arrears having been collected (of
which £0.7 million had been provided for at 30 September 2025)

 

Strong underlying performance from an enhanced real estate portfolio supported
by a highly-engaged manager, diversified tenant base and inflation-linked rent
reviews.

 

·     Diversified portfolio of 86 operational care homes let to 32 tenants
valued at £894.6 million (30 September 2025: 93 operational care homes,
£948.3 million) reflecting a like-for-like valuation increase of 1.2%,
primarily due to continued rental growth

·      Contracted rent increased by 0.9% on a like-for-like basis due to
inflation-linked upwards-only annual rent reviews

·      WAULT of 26.3 years (30 September 2025: 25.7 years)

·     High quality, modern and sustainable real estate portfolio, full
details of which are set out in the Group's Sustainability Report:

o  100% of the portfolio rated EPC A or B, and therefore the portfolio is
compliant with the minimum energy efficiency standards anticipated to apply
from 2030

o  Positive social impact from sector-leading real estate standards: 100% en
suite wet-rooms; generous 48 sqm space per resident; sustainable rent of £209
per sqm

·     Average rent cover on mature homes remained high, at 2.0x for the
September 2025 quarter (most recent quarter of tenant data) (2.0x for the June
2025 quarter)

 

 

Kenneth MacKenzie, CEO of Target Fund Managers, commented:

 

"Our focused asset management activities have continued to deliver shareholder
value.  As anticipated, we successfully collected the majority of the rent
arrears from the operator of the three properties re-tenanted in the previous
quarter, which contributed a further c.0.11 pence per share to the Group's
Adjusted EPRA EPS for the quarter. Our re-tenanting activities have also
resulted in rent collection returning towards 100% for this quarter on a fully
let portfolio.

 

"The completion of the nine-home disposal at an attractive premium to carrying
value, and subsequent reinvestment of over 50% of the proceeds into three
existing high-quality operational care homes and a forward commitment pre-let
to the same operator, supports our aim of continuous improvement of the
portfolio.

 

"We have identified a growing pipeline of near-term assets. These assets,
evenly distributed between standing assets and forward funds/forward
commitments, are at various stages of evaluation and completion and have an
indicative blended net initial yield in excess of 6%. Although the timing of
completion and performance of the assets remains subject to due diligence,
market conditions, execution risk and other factors, we remain confident of
redeploying the disposal proceeds in modern, purpose-built assets, continuing
to pursue the Company's objective, in line with its investment policy."

 

 

Portfolio performance

The portfolio value increased by 1.2% over the quarter on a like-for-like
basis, and decreased by 5.7% in aggregate, with the movement comprised of:

·      10.0% decrease following property disposals;

·      3.1% increase due to property acquisitions and other capital
expenditure;

·      0.9% like-for-like increase from inflation-linked rent reviews;

·      0.2% like-for-like increase from the re-tenanting of a property;
and

·      0.1% like-for-like increase from a marginal tightening in the
portfolio's net initial yield.

 

Contractual rental income increased by 0.9% over the quarter on a
like-for-like basis, and decreased by 4.5% in aggregate, with the movement
comprised of:

·      8.6% decrease following property disposals;

·      3.2% increase due to property acquisitions and other capital
expenditure; and

·      0.9% like-for-like increase from 21 inflation-linked upwards-only
rent reviews, with an average uplift of 3.9%.

 

Portfolio update

During the quarter, the following investment and asset management initiatives
were undertaken:

·      The Group completed the acquisition of a portfolio of three
strongly performing modern operational care homes, and contracted on a forward
commitment to acquire a fourth, all in prime Central Scotland locations. The
total investment of £45m (including costs) across the two transactions
reflected a blended acquisition net initial yield in excess of 6%.

o  The three existing operational care homes, acquired via sale and leaseback
from an experienced operator with an unparalleled knowledge of its local
market, feature 100% en suite wet-room provision and have delivered
consistently strong rent cover generation greater than 2x. Serving a
private-pay client base and underpinned by compelling local demographics, the
properties benefit from 35-year, full repairing and insuring occupational
leases with RPI-linked caps and collars.

o  The development of the fourth property, a forward commitment pre-let to
the same operator, is already well advanced and is expected to reach practical
completion in summer 2026.

·     The Group completed the sale of nine care homes for £85.9 million
in line with the exchange announced in the previous quarter. This represented
a premium of 11.6% to the carrying value at 30 June 2025, with the property
values having been already uplifted to the net sales price at 30 September
2025;

·      The Group completed the disposal of an additional property for
£8.0 million which it had contractually agreed in August 2025, representing a
premium of c.13% to its carrying value at 30 June 2025 and c.4% to its
carrying value at 30 September 2025;

·      The successful re-tenanting of one asset, representing 1.0% of
the total rent roll, at an unchanged rental level and with no tenant
incentives granted. The remaining lease term was extended to 35 years and the
completion of the re-tenanting crystalised the payment of a surrender premium
of £1.4 million from the outgoing tenant without any negative impact on the
property valuation over the quarter;

·    Following the re-tenanting of three properties in late September 2025,
at an unchanged rental level to two existing tenants of the Group, the Group
announced that it had secured a parent company guarantee from the previous
tenant which supported the collection of the outstanding rent arrears. All
agreed rent arrears were received during the quarter, adding a further
non-recurring contribution of c.0.11 pence per share to the Group's quarterly
Adjusted EPRA EPS. This is in addition to the non-recurring contribution of
c.0.07 pence per share recognised in the quarter to 30 September 2025.

Debt facilities

As at 31 December 2025, the Group had committed debt facilities of £280
million, of which £203.5 million was drawn, representing a net LTV of 15.2%
(30 September 2025: 21.4%). Given the current pipeline and capital available,
the Group expects to increase the LTV to around 25% through further investment
in modern, purpose-built assets.

 

The Group's debt facilities at 31 December 2025 consisted of:

·     £150 million of drawn Fixed Rate Loans with a weighted average term
of 8.1 years and a weighted average interest rate of 3.18%;

·    £50 million of drawn Term Loan bank facilities with a remaining term
of 2.7 years, with the option of two one-year extensions thereafter subject to
lender consent, and a weighted average interest rate of 5.30% that has been
fixed though the use of interest rate swaps until September 2030; and

·    £80 million of revolving credit facilities ("RCF") with a remaining
term of 2.7 years, with the option of two one-year extensions thereafter
subject to lender consent, which carry a variable interest rate of SONIA plus
a margin of 1.50%. £3.5 million of the RCF was drawn at 31 December 2025.

 

All interest rates quoted above are exclusive of the amortisation of
arrangement fees.

 

The combined fair value of the £203.5 million of drawn loan facilities, based
on a discounted cashflow using the market rate of the relevant treasury plus
an estimate margin based on market conditions at 31 December 2025, was £178.0
million.

 

Following the refinancing of the Group's bank facilities in September 2025, an
early repayment charge will apply if the £130 million of Term Loans and RCF
are cancelled or prepaid early. This potential payment, which would be in
addition to the repayment of the par value of the drawn bank borrowings and
any early termination costs that may arise as a result of breaking or reducing
the interest rate swaps, would have equated to an aggregate maximum sum of
£1.55 million at 31 December 2025, and this will decline over the remaining
term of these facilities. The Fixed Rate Loans are repayable at their par
value of £150 million together with a prepayment amount calculated on the
basis of a Modified Spens clause. Due to movements in interest rates no
additional prepayment amount would have arisen as at 31 December 2025.

 

A balance sheet summary and an analysis of the movement in the EPRA NTA over
the quarter is shown in the Appendix of this announcement.

 

Announcement of second interim dividend

 

The Company today declares its second interim dividend for the year ending 30
June 2026, in respect of the period from 1 October 2025 to 31 December 2025,
of 1.508 pence per share as detailed in the schedule below:

 

Interim Property Income Distribution (PID):    1.508 pence per share

Interim ordinary
dividend:
nil

 

 Ex-Dividend Date:  12 February 2026
 Record Date:       13 February 2026
 Payment Date:      27 February 2026

 

Shareholders entitled to elect to receive distributions without deduction for
withholding tax may complete the declaration form which is available on
request from the Company through the contact details provided on its website
www.targethealthcarereit.co.uk (http://www.targethealthcarereit.co.uk) , or
from the Company's registrar. Shareholders who qualify for gross payments are,
principally, UK resident companies, certain UK public bodies, UK charities, UK
pension schemes and the managers of ISAs, PEPs and Child Trust Funds, in each
case subject to certain conditions. Individuals and non-UK residents do not
qualify for gross payments of distributions and should not complete the
declaration form.

LEI: 213800RXPY9WULUSBC04

 

ENDS

 

Enquiries:

 

 Target Fund Managers Limited     Tel: 01786 845 912
 Kenneth MacKenzie

 James MacKenzie
 Alastair Murray

 Stifel Nicolaus Europe Limited   Tel: 020 7710 7600
 Mark Young
 Rajpal Padam
 Catriona Neville

 Panmure Liberum Limited          Tel: 020 3100 2000
 Jamie Richards
 David Watkins

 FTI Consulting                   Tel: 020 3727 1000
 Dido Laurimore                   TargetHealthcare@fticonsulting.com
 Richard Gotla

Notes to editors:

 

UK listed Target Healthcare REIT plc (THRL) is an externally managed FTSE 250
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 December 2025 comprised 86 assets let to 32
tenants with a total value of £894.6 million.

 

The Group 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.

Important information

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the Market
Abuse Regulations (EU) No. 596/2014, which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as amended. Upon the publication of this
announcement via Regulatory Information Service, this inside information is
now considered to be in the public domain.

APPENDIX

 

1.     Analysis of movement in EPRA NTA

 

The following table provides an analysis of the movement in the unaudited EPRA
NTA per share for the period from 1 October 2025 to 31 December 2025:

 

                                                                  Pence per share
 EPRA NTA per share as at 30 September 2025                       117.7

 Revaluation gains / (losses) on investment properties            1.5
 Net impact of acquisition                                        (0.3)
 Gain on disposal                                                 0.1
 Gain from surrender premium received on re-tenanting             0.2
 Movement in revenue reserve                                      1.7
 First interim dividend payment for the year ending 30 June 2026  (1.5)
 EPRA NTA per share as at 31 December 2025                        119.4
 Percentage change in the quarter                                 1.4%

 

At 31 December 2025, including the valuation ascribed to the Group's interest
rate derivative contracts used to hedge its exposure to variable interest
rates, which are excluded from the calculation of the EPRA NTA, the unaudited
NAV calculated under International Financial Reporting Standards was also
119.4 pence per share.

 

 

 2.     Summary balance sheet (unaudited)

                                      Dec-25        Sept-25       Jun-25        Mar-25
                                      £m            £m            £m            £m
 Property portfolio*                  894.6         948.3         929.9         930.0
 Cash                                 67.2          44.4          39.7          36.3
 Net current assets / (liabilities)*  (17.6)        (15.2)        (15.7)        (16.2)
 Loans                                (203.5)       (247.6)       (242.0)       (249.0)
 Net assets                           740.7         729.9         711.9         701.1

 EPRA NTA per share (pence)           119.4         117.7         114.8         113.0

 

*Properties within the portfolio are stated at the market value provided by
the external valuer and the IFRS effects of fixed/guaranteed minimum rent
reviews are not reflected.

 

3.     External Valuer

The valuation of the property portfolio as at 31 December 2025 was conducted
by CBRE Limited.

 

4.     EPRA NIY profiles and unwind of rent-free period

 

The Group currently has one asset with a rent-free period. As this unwinds,
assuming no other changes including inter alia the portfolio valuation or
rental profile, the EPRA yield profiles for the portfolio will be as follows:

 

                           31 December 2025  31 March  2026
 EPRA "topped-up" NIY      6.23%             6.23%
 EPRA NIY                  6.17%             6.23%
 Contractual rent (£m)     59.5              59.5
 Passing rent (£m)         58.9              59.5

 

 

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