Target Healthc. Regulatory News (THRL)

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 June 2018 and provides an update on its corporate activity and its dividend declaration.

Highlights

· EPRA NAV per share of 105.7 pence (31 March 2018: 105.0 pence), resulting in a NAV total return for the quarter of 2.30%

· 2.0% increase in like-for-like value of the operational portfolio

· Total portfolio value of £385.5 million, comprising 55 assets, delivering an annualised rent roll of £26.0 million from 51 operational properties

· Acquisition of two luxury care homes during the quarter for a total consideration of £37.0 million, reflecting a yield representative of assets of similar standard and location within the portfolio

· 13 rent reviews completed at an average uplift of 3.25%

· Fourth interim dividend declared for the year ending 30 June 2018 of 1.6125 pence per share. On an annualised basis, this reflects a payment of 6.45 pence per share and a dividend yield of 5.7% based on the closing share price on 26 July 2018

· Post period acquisitions of a care home in Doncaster and development site in Lancashire for a total commitment of £13.9 million

Kenneth MacKenzie, CEO of Target Fund Managers Limited, commented:

"In an increasingly competitive market, we have continued to make progress in deploying the proceeds of the February capital raise having acquired £37.0 million of assets during the quarter, an additional £13.9 million this month, with additional near-term opportunities in the pipeline which we expect to announce shortly. All of these investments fit with our overall strategy of providing long duration, sustainable rental streams diversified by tenant, geography and end-payer, whether local authority or privately funded."

"The overall portfolio continues to perform strongly, reflecting the expertise of our team in identifying high quality assets and tenants that provide a safe, caring and homely environment for our end-users, as well as the supportive demand / supply dynamics that underpin the wider sector. Alongside this, having an engaged and collaborative relationship with our tenants, supporting them through active dialogue and regular monitoring of performance, remains crucial to ensuring the long term sustainability of the business."

Net Asset Value

The Group announces that its unaudited EPRA NAV per share as at 30 June 2018 was 105.7 pence. The total return for the quarter based on EPRA NAV was 2.30%.

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 June 2018 the Group's portfolio was valued at £385.5 million, comprising of 51 operational care homes and four sites being developed via forward fund commitments with established development partners. Based on current contracted rental income, the operational portfolio had an EPRA net initial yield of 6.44% and an annualised rent roll of £26.0 million. Where rent reviews were completed during the quarter, the average increase was 3.25%, resulting in a 0.8% like-for-like increase in the portfolio's passing rent. The portfolio's weighted average unexpired lease term was 28.5 years.

The portfolio value has increased by 12.9% over the quarter. Of this, 10.9% comprises the new asset acquisitions and further investment in the four development sites, with a like-for-like movement in the operational portfolio of 2.0% predominantly reflecting market yield shift and the impact of of annual inflation-linked rental reviews.

Debt facilities & swap arrangements

As at 30 June 2018, the Group's total borrowings were £66.0 million, giving a gross loan-to-value ratio of 17.1% (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 £70 million with an additional £60 million of more flexible debt available from revolving facilities. The Group has currently drawn £66 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 3.3 years.

Investment activity

In the three months to 30 June 2018, the Group has completed the following acquisitions:

· Two luxury properties in Cirencester and Camberley for a total consideration of £37.0 million (including acquisition costs). Both assets, totalling 137 bedrooms, are let to subsidiaries of Aura Care Living ("Aura") on 30 year full repairing and insuring occupational leases with RPI-linked rent increases subject to a cap and collar. Aura becomes the Group's twenty-first tenant. The yield is representative of assets of a similar standard and location within the Group's portfolio.

Subsequent to 30 June 2018, the Group has completed the acquisition of two further properties for a total value of £13.9 million (including acquisition and forward funding costs):

· A modern, purpose-built 43 bedroom 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.

Pipeline and Investment Market

Acquisition yields have continued to tighten as the market remains competitive, reflecting a supply deficit of appropriate quality modern homes and growing demand from the aging population.

The Group has £52 million of opportunities in advanced due diligence with the majority of these expected to complete over the next few months. This would see the proceeds of February's equity issuance fully deployed and the Group drawing on its available debt facilities.

A significant value of earlier stage pipeline opportunities are also being assessed by the Group's investment manager. This process continues to robustly consider the quality and design of the real estate, the ethos and operational capabilities of the operator, and the sustainability of the rental levels in concluding whether the Group's strict investment criteria are met.

Dividends in the period

The Company paid its third interim dividend for the year to 30 June 2018, in respect of the period from 1 January 2018 to 31 March 2018, of 1.6125 pence per share on 25 May 2018 to shareholders on the register on 4 May 2018.

The dividend reflects an annualised payment of 6.45 pence per share and a dividend yield of 5.7% based on the 26 July 2018 closing share price of 112.5 pence.

The Company had 339,217,889 ordinary shares in issue at 30 June 2018 and has not issued or bought back any shares since that date.

Announcement of fourth interim dividend

The Company has today declared its fourth interim dividend payment for the year ended 30 June 2018, in respect of the period from 1 April 2018 to 30 June 2018 of 1.6125 pence per share as detailed in the schedule below:

Interim Property Income Distribution (PID) 1.1287 pence per share 

Interim Ordinary Dividend 0.4838 pence per share

Ex-Dividend Date: 9 August 2018

Record Date: 10 August 2018

Pay Date: 31 August 2018

Investor relations

Shareholders will find the latest Group information, including its quarterly investor report for June 2018, at its website: https://www.targethealthcarereit.co.uk/

ENDS

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, through the assembly and management of a portfolio of modern, purpose built care homes.

The Group's current portfolio comprises 55 assets with a total value of circa £385.5 million (30 June 2018), which are let to 21 tenants.

The Group only invests in modern, purpose-built homes that provide the best environments for residents and their care providers and ensure they are let at a sustainable rent. 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 April 2018 to 30 June 2018:

\* The movement reflects a quarterly accrual of £0.18m (0.05 pence per share) for a performance fee, if payable, for the year from 1 January 2018 to 31 December 2018. This accrual is estimated using historic returns information of the portfolio and the IPD UK Annual Healthcare Property Index. Any fee will be calculated and payable once the Index figures for the year to 31 December 2018 are available, and may differ from the amount accrued up to that date.

Ordinarily the Group's EPRA NAV would differ from that calculated under International Financial Reporting Standards (IFRS), the latter including the value of the Group's interest rate derivative contracts. As at 30 June 2018 the value of these contracts was immaterial and therefore the EPRA NAV did not differ from the IFRS NAV.

*Investment properties stated at market value and ignore the IFRS effects of fixed/guaranteed minimum rent reviews.

The next quarterly valuation of the property portfolio will be conducted by Colliers International Healthcare Property Consultants Limited during September 2018 and the unaudited EPRA NAV per share as at 30 September 2018 will be announced in October 2018.