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

Highlights

· EPRA NAV per share of 105.0 pence (31 December: 104.4 pence), resulting in a NAV total return for the period of 2.1%

· 0.6% increase in like-for-like portfolio value. Total portfolio value of £341.4 million across 53 assets, delivering an annualised rent roll of £23.6 million from 49 operational properties

· 12 rent reviews completed at an average uplift of 3.9%

· Unaudited EPRA Earnings per share for the quarter of 1.39 pence

· Third 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 6.0 % based on the 24 April closing share price

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

"The existing portfolio continues to perform well with stable rental returns growing with the increased level of inflation that we are currently seeing in the market. We continue to act as an engaged landlord with regular site visits and an active tenant dialogue which gives us additional assurance with regard to the operational performance of our homes whilst also allowing our tenants to benefit from our sector specialist knowledge and experience.

The team is currently highly focused on investing the proceeds of our recent capital raise. We were delighted to acquire two exciting opportunities in Lancashire and Shropshire in March and look forward to providing further updates in due course."

1. Net Asset Value

The Group announces that its unaudited EPRA NAV per share as at 31 March 2018 was 105.0 pence. The NAV total return for the quarter was 2.1%.

A balance sheet summary and an analysis of the movement in the EPRA NAV over the quarter is presented in the Appendix.

2. Corporate Update

2a. Portfolio performance

As at 31 March 2018 the Group's portfolio was valued at £341.4 million and comprised of 49 operational care homes and 4 sites being developed via forward fund commitments. Based on current contracted rental income, the portfolio had an EPRA net initial yield of 6.58% and an annualised rent roll of £23.6 million. Where rent reviews completed during the quarter, the average increase was 3.9%, resulting in the passing rent for the portfolio as a whole increasing by 0.8%. The portfolio's weighted average unexpired lease term was 28.7 years.

The portfolio value has increased 1.9% over the quarter. Of this, 1.3% reflects the acquisition of, and further investment in, the 4 development sites, with a like-for-like movement in the operational portfolio of 0.6% reflecting predominantly the impact of rising rents generated by the annual inflation-linked rental reviews.

2b. Debt facilities & swap arrangements

On 29 January 2018, the Group entered into a new three year revolving credit facility of £40 million with HSBC Bank plc (the "HSBC facility"). This facility further enhances the flexibility of the Group's debt arrangements, with the addition of a new lending partner adding diversification to the financing structure.

The Group used £25.0 million of cash from its February equity issuance to repay revolving credit facilities which had been drawn to fund acquisitions. As at 31 March 2018, the Group's total borrowings were £66.0 million, giving a gross loan-to-value ratio of 19.3% (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 Company has available fixed term debt of £70 million provided by RBS and FCB with an additional £60m of more flexible debt available from the revolving facilities provided by HSBC and RBS. Currently, all of the £66m of debt currently drawn is fixed term and also benefits from fixed interest costs as a result of the Group's interest rate swap arrangements. The Group's weighted average cost on its drawn debt, inclusive of amortisation of arrangement costs, is 2.94% with an average term to expiry of 3.5 years.

2c. Investment activity

In the three months to 31 March 2018, the Group has entered into contracts to acquire and forward-fund the development of three new care homes. Consistent with previous forward-funding opportunities, the Group will earn a coupon through the construction phase which will support its progressive dividend objective.

· A 70 bed home in Earl Shilton, Leicestershire, for a total cost of c. £6.3 million. The development will be carried out under a fixed price contract with the Care Concern Group, an existing tenant, who will lease the property on a 35-year RPI-linked lease subject to a cap and collar.

· Two new care homes located near Shrewsbury, Shropshire and in Preston, Lancashire, for a combined cost of approximately £15.6 million. The completed 64 and 74 bed homes will be let to Rotherwood Healthcare and L&M Healthcare respectively, both new tenants to the Group. Construction is to be undertaken on the basis of fixed price contracts with the developers, and the completed homes will be let on long-term (30+ years), RPI-linked leases subject to caps and collars.

2d. Pipeline and Investment Market

During February 2018 the Group raised gross proceeds of £94.0 million through the issue of 87,037,038 Ordinary Shares ("New Shares") by way of a Placing, Open Offer and Offer for Subscription (together the "Share Issue"). The Group has subsequently acquired two assets for a total consideration of £15.6 million (which excludes approximately £3.0m of potential deferred consideration) in Shropshire and Lancashire and has a wider identified investment pipeline of £91.0 million which is currently in due diligence. The Group therefore remains on track to announce significant further acquisitions over the next few months.

2e. Dividends in the period

The Company paid its second interim dividend for the year to 30 June 2018, in respect of the period from 1 October 2017 to 31 December 2017, of 1.6125 pence per share on 23 February 2018 to shareholders on the register on 2 February 2018.

The dividend reflects an annualised payment of 6.45 pence per share and a dividend yield of 6.0% based on the 24 April 2018 closing share price of 107.5 pence.

The Company had 339,217,889 ordinary shares in issue at 31 March 2018 and has not issued or bought back any shares since that date.

3. Announcement of Third Interim Dividend for the year ending 30 June 2018

The Company has today declared its third interim dividend payment for the year ending 30 June 2018, in respect of the period from 1 January 2018 to 31 March 2018 of 1.6125 pence per share as detailed in the schedule below:

Interim Property Income Distribution (PID) 1.6125 pence per share 

Ex-Dividend Date: 3 May 2018

Record Date: 4 May 2018

Pay Date: 25 May 2018

4. Other

4a. Investor relations

Shareholders will find the latest Group information, including its quarterly investor report for March 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 53 assets with a total value of circa £341.4 million (31 March 2018), which are let to 20 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 January 2018 to 31 March 2018:

\* The movement in revenue reserve includes (1) £0.15m (0.06 pence per share) to recognise an under-accrual of performance fee payable to the Manager in respect of the year to 31 December 2017, and (2) a quarterly accrual of £0.18m (0.07 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.

The EPRA NAV provides a measure of the fair value of a company on a long-term basis. As at 31 March 2018 the EPRA NAV stated above differed from that calculated under International Financial Reporting Standards of 105.1 pence per share. This was due to the valuation of the Group's interest rate derivative contracts used to hedge its exposure to variable interest rates, which is excluded from the calculation of the EPRA 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 June 2018 and the unaudited EPRA NAV per share as at 30 June 2018 will be announced in July 2018.