Last checked at 
16 May 2014 07:00
To: RNS
From: Target Healthcare REIT Limited
Date: 16 May 2014
Interim Management Statement
Introduction
Target Healthcare REIT Limited ("Target Healthcare" or "the Company"), a specialist investor in UK care homes, is today pleased to issue its Interim Management Statement for the period from 1 January 2014 to 31 March 2014.
Investment objective
The Company's investment objective is 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 freehold and long leasehold care homes that are let to care home operators; and, other healthcare assets in the UK.
Highlights
· Acquisition of a care home in January 2014 for approximately £4.3 million (including acquisition costs).
· Unaudited Net Asset Value ("NAV") per share as at 31 March 2014 of 96.0 pence.
· Third and fourth interim dividends paid of 0.44 pence per share and 1.06 pence per share on 28 February 2014.
Performance summary
Capital Values | As at 31 March 2014 | As at 31 December 2013 |
Movement |
Net asset value per share (pence) * | 96.0 | 95.9 | 0.1 |
Ordinary share price (pence) | 102.25 | 105.00 | (2.75) |
Premium to net asset value | 6.5% | 9.5% |
|
* Calculated under International Financial Reporting Standards.
(Sources: R&H Fund Services Limited and Bloomberg)
Period commentary
The Company's NAV at 31 March 2014 was 96.0 pence per share and the share price was 102.25p reflecting a premium to NAV of 6.5%. The NAV per share increased by 0.1 pence (0.1%) during the period from 1 January 2014 to 31 March 2014.
The Company had a positive cash balance at 31 March 2014 of approximately £41.0 million.
Property acquisition
In January 2014, the Company completed the acquisition of a modern, purpose-built care home for approximately £4.3 million, including acquisition costs. Located in the suburbs of Glasgow, the care home opened in November 2013 and is leased to existing operator Mossvale Care Home Limited, part of the Care Concern Group.
The Company is pleased to report that as at 31 March 2014 the property portfolio comprised eleven care home assets and the aggregate net initial rental yield on acquisition across the portfolio remains ahead of the 7% blended initial yield modelled pre-launch. The rents payable are subject to annual uplifts in line with the retail prices index subject to a cap and collar.
Geographical analysis
Location | % of Portfolio As at 31 March 2014 |
Scotland | 36.2% |
East Midlands | 26.6% |
Yorkshire & Humberside | 16.1% |
North West | 21.1% |
Dividends
The Company paid both its third and fourth interim dividends on 28 February 2014. The third interim dividend of 0.44 pence per share was in respect of the period from 1 October to 27 October 2013. The fourth interim dividend of 1.06 pence per share was in respect of the period from 28 October to 31 December 2013.
Subsequent events
During April and May 2014, the Company announced it had acquired four modern, purpose-built care homes for a total consideration of approximately £17.8 million, including acquisition costs, and had also exchanged contracts to acquire another care home which is due to be completed and opened in summer 2014 for approximately £5.3 million, including acquisition costs. This sees the investment portfolio increase to sixteen care homes.
On 29 April 2014, the Company declared its fifth interim dividend payment of 1.5 pence per share for the period from 1 January 2014 to 31 March 2014. This will be paid to shareholders on 30 May 2014.
Outlook
The Company is pleased to report that the good level of investment activity across the UK elderly care sector which it reported in February 2014 has continued. In addition to the established specialist healthcare investors active in the market, the Company's investment adviser has reported the increasing prevalence of generalist investors attracted to the sector in search of potentially attractive yields.
As competition for assets increases, the Company is seeing further evidence to indicate that yields are hardening, particularly for multi-asset portfolios and / or strong tenant covenants, and it is not expected that this trend will reverse in the short-term. Nevertheless, the investment adviser believes that the Company is well-placed to capitalise on its established relationships with regional and national operators and agents, and it continues to build an attractive pipeline of single and multi-asset care home investment opportunities.
As a result, the Company is pleased to report it is currently in advanced, non-binding legal negotiations to acquire approximately £35.5 million of care home assets and also maintains a good investment pipeline of opportunities which could be converted over the next few months, subject to the availability of capital.
In light of the above, the Company remains confident of being able to continue to grow the portfolio in line with its investment parameters.
Enquiries
Kenneth MacKenzie | Target Advisers LLP | 01786 406 581 |
Martin Cassels | R&H Fund Services Limited | 0131 524 6140 |
Graeme Caton | Winterflood Securities | 020 3100 0268 |