Target Healthc. Regulatory News (THRL)

To: RNS Company Announcements

Date: 25 January 2016

Company: Target Healthcare REIT Limited

Subject: Net Asset Value and Portfolio Update

Net Asset Value and Portfolio Update

Target Healthcare REIT Limited (the "Company" and together with its subsidiaries, the "Group") announces that its unaudited EPRA NAV per share as at 31 December 2015 was 100.8 pence. The Group's care home assets held for the three month period increased in value by 2.2%. This valuation growth contributed towards a net increase of 1.6% in the EPRA NAV per share as at 31 December 2015 as analysed in the table below. The NAV total return for the quarter was 3.3%.

As at 31 December 2015 the Group owned thirty-one care homes with a market value of £167.2 million. The valuation of the homes is based on the independent external valuation of the Group's property portfolio prepared by Colliers International.

The EPRA NAV includes income and no provision for an accrued dividend has been made.

The next quarterly valuation of the property portfolio will be conducted by Colliers International during March 2016 and the unaudited NAV per share as at 31 March 2016 will be announced in April 2016.

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 30 September 2015 to 31 December 2015:

The EPRA NAV provides a measure of the fair value of a company on a long-term basis. As at 31 December 2015 there were no differences between the EPRA NAV stated above and that calculated under International Financial Reporting Standards.

A balance sheet summary is presented in the Appendix.

Highlights

- Dividends

The Company paid its first interim dividend for the year to 30 June 2016, in respect of the period from 1 July 2015 to 30 September 2015, of 1.545 pence per share on 27 November 2015. This reflects an annualised payment of 6.18 pence per share and a dividend yield of 5.7% based on the 22 January 2016 closing share price of 107.5 pence.

The Group's unaudited EPRA Earnings per share for the quarter was 1.33 pence.

- Gearing

The Group's borrowings remained unchanged at £31.5 million at 31 December 2015, giving a loan-to-value ratio of 18.8 per cent (calculated as total gross debt as a proportion of gross property value. As the Company expects to invest the vast majority of its current cash balance in new homes, cash has been excluded from the calculation).

- Portfolio

As at 31 December 2015 the Group owned thirty-one care homes with a market value of £167.2 million. On a like-for-like basis the portfolio has increased in value by 2.2% over the quarter reflecting an element of yield compression across individual assets as the underlying trading performance of the homes mature and uplifts from one rent review where rents increased by 2%, resulting in a like-for-like increase to portfolio passing rent of 0.1%.

As at 31 December 2015, the portfolio had an EPRA net initial yield of 7.1% (based on contractual net income) and an annualised rent roll of £12.5 million with a weighted average unexpired lease term of 29.2 years.

- Acquisitions in the period

The Group has completed £18.9 million of acquisitions in the three months to 31 December 2015, with a further £3.9 million having completed in January 2016:

· On 6 October 2015 the Group completed the acquisition of the Alexandra Court Care Centre in Kingston-Upon-Hull for approximately £6.2 million (including acquisition costs).

· On 13 November 2015 the Group completed the acquisition of two purpose-built care homes on Tyneside for approximately £12.8m (including acquisition costs). The homes continue to be operated by the incumbent operator, a long-established care home provider in the area who became the 10th tenant of the Group. The rents payable under the 35 year leases are subject to annual RPI-linked uplifts and incorporate caps and collars. The net initial yield is broadly consistent with the overall average yield of the existing portfolio.

· On 24 December 2015 the Group announced that it had exchanged contracts to acquire a care home in Sheffield which will be substantially redesigned and refurbished, incorporating: enlargement of bedrooms; addition of large ensuite bathrooms with wetroom showers; and the creation of additional public space and outdoor access.

The acquisition completed during January 2016, with the refurbishment works expected to be completed by September 2016. The overall price for the acquisition and subsequent renovation of the home is £3.9 million including costs.

Upon completion of the refurbishment works the care home will be leased to Care Concern Group, an existing tenant of the Group, for a period of 35 years. The transaction represents a net initial yield in excess of 7% with the rent payable under the lease being subject to annual uplift in line with the retail prices index subject to a cap and collar.

- Share issuance

On 25 November 2015, the Company completed a successful placing of 15,652,803 new Ordinary Shares ("New Ordinary Shares"). Furthermore, in response to excess demand for the New Ordinary Shares, the Company also sold its full balance of 14,229,822 Ordinary Shares which were held in treasury (the "Treasury Shares") raising, along with the placing of the New Ordinary Shares, total gross proceeds of approximately £31.1 million.

The Company currently has 172,180,851 ordinary shares in issue.

- Pipeline

Following its successful fundraise in November 2015 and the recent acquisitions noted above, the Group had cash reserves available for investment of approximately £36.2 million with near term investment opportunities and firm commitments totalling £39.6 million and £16.8 million respectively, for a total of £56.4 million. The Group expects by the end of February 2016 to complete on £16.5 million of these care home assets which are nearing the end of the due diligence process. The Group has also identified and agreed terms on a further £23.1 million of assets on which it hopes to complete its diligence process and acquire the majority of these assets by 30 June 2016.

In addition, the Investment Manager has identified further opportunities for the Group to acquire high quality assets being potential pre-let assets which could be financed by careful and disciplined forward funding arrangements. As the Company's Investment Policy is silent on forward funding arrangements the Board will shortly write to shareholders to clarify its planned approach and if required seek approval for any changes to the investment policy to permit some limited exposure to these investments within an appropriate and conservative risk framework.

The Group remains cognisant of the need to minimise the impact of cash drag on its returns and as such will continue to align where possible its ongoing capital requirements with its investment opportunities.

- Quarterly investor report

The Group's quarterly investor report for December 2015 is available on its website at:

 http://www.targethealthcarereit.co.uk/Financial%20reporting.aspx

Kenneth MacKenzie, Managing Partner of Target Advisers LLP, commented on the Group's activity during the period:

"We are delighted to have added a number of very high quality care homes to the portfolio, completing deals on some attractive assets. We are particularly pleased with the acquisition in Sheffield which presents an excellent refurbishment opportunity with a short period to completion. The refurbished home will provide the portfolio with a quality, long-duration asset at attractive pricing. In addition, it enables us to bring to the sector a care home which represents the Group's values of providing the very best environment for residents. The overall quality of our assets is reflected in strong performance which shows good capital growth over the quarter."

Enquiries:

Kenneth MacKenzie

Target Advisers

01786 845 912

Stifel Nicolaus Europe Limited

Mark Young, Roger Clarke, Neil Winward

020 7710 7600

Martin Cassels

R&H Fund Services Limited

0131 550 3760

Fiona Harris/Sam Emery

Quill PR

020 7466 5058 / 020 7466 5056

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