Target Healthc. Regulatory News (THRL)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION IN PARTICULAR THE UNITED STATES, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (OTHER THAN THE UNITED KINGDOM, THE REPUBLIC OF IRELAND OR THE NETHERLANDS (AND, IN THE CASE OF THE NETHERLANDS, ONLY TO PROFESSIONAL INVESTORS)), CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND AND JAPAN

This announcement is an advertisement and not a prospectus. This announcement does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities in Target Healthcare REIT Limited (the "Company") or securities in any other entity, in any jurisdiction, including the United States, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction. This announcement does not constitute a recommendation regarding any securities. Any investment decision must be made exclusively on the basis of the final prospectus published by the Company and any supplement thereto.

TARGET HEALTHCARE REIT LIMITED

("Target" or the "Company", together with its subsidiaries, the "Group")

PROPOSED ISSUE OF EQUITY

The Company today announces a placing of new ordinary shares (the "Placing" and the "Placing Shares" respectively"). The Placing will target gross proceeds of up to £40 million by way of a non pre-emptive placing under its existing Placing Programme at 109 pence per Placing Share (the "Offer Price").

Highlights:

· Placing of up to 36,697,248 shares at 109 pence per Placing Share by way of a placing under the existing Placing Programme

· The Offer Price represents a discount of 4 per cent. to the closing share price of 113.5 pence per existing ordinary share in the capital of the Company ("Existing Ordinary Shares") on 23 October 2018 (being the last business day prior to the announcement of the Placing) and a premium of 2.7 per cent. to the Company's last reported EPRA NAV per Ordinary Share as at 30 September 2018 of 106.1 pence

· The Company has identified an investment pipeline of £79 million (the "Pipeline Assets") consisting of:

o £51 million of imminent acquisitions which it expects to commit to by the end of November 2018; and

o £28 million of near term acquisitions which are currently in advanced negotiations with vendors and which the Company expects to commit to acquiring in 2018.

Malcolm Naish, Chairman of the Company, said: 

"We continue to see attractive opportunities in the market and have identified a strong short term pipeline of assets that meet our strict investment criteria and which are either imminent or in advanced negotiations for acquisition. These investments will allow us to continue to drive the positive momentum behind the growth of the portfolio, while increasing our exposure to the demographically strong South East market and further diversifying the occupier base with the introduction of new tenants. Additionally, by bringing new shareholders onto the register and increasing the market capitalisation of the Company, the issue of equity will support improved liquidity and reduce the Company's ongoing costs per share." 

Background to the Placing 

The Company listed on the London Stock Exchange's Main Market on 7 March 2013 with an investment remit to focus on a diversified portfolio of modern, purpose-built care homes that are let to high quality tenants who demonstrate strong operational capabilities and a strong care ethos.

The Company's care homes typically benefit from favourable local dynamics and long leases at sustainable rental levels. These leases are typically structured to include annual rental uplifts (RPI linked or fixed) and cure rights. Target has built a portfolio of high quality assets in the right locations with the services and facilities that suit its tenants' needs. This is set against a background of an increasing population of over 85 year olds in the UK, a shift in how society cares for its elderly, and an insufficient supply of en-suite, fit-for-purpose accommodation.

Since IPO, the Company has carefully crafted an investment portfolio consisting of 58 modern, purpose-built care homes(1), let to 21 different tenants with a portfolio weighted average unexpired lease term of 28.3 years and annual (RPI or fixed) rental uplifts. The portfolio value as at 30 September 2018 was £404 million and the Company has a relatively conservative gearing policy with borrowings, over the medium term, representing approximately 25 per cent. of the Group's gross assets. Alongside its care home specialism, the Company has an income focus with the current annualised quarterly dividend amounting to 6.58 pence per share, a 6 per cent. dividend yield on the Offer Price. Since IPO to 30 September 2018, the Company has delivered total shareholders returns of 52 per cent.

Use of Proceeds

As at 12 October 2018, the Group had £22 million of cash and £64 million of debt available to be drawn. £36 million of this has been allocated to upcoming commitments of the Group's development programme, which will support the construction of six brand new care homes and the acquisition of a further care home upon completion of its construction, adding in total approximately £4 million to portfolio rent annually once operational. In addition, the Group has up to £19 million of potential deferred consideration payments on eight previously acquired assets and prudently apportions £13 million of cash for general corporate purposes, including dividends and working capital.

The Group has identified £51 million of imminent acquisitions which it expects to commit to by the end of November 2018. In addition, the Group has near term potential acquisitions totaling £28 million which are currently in advanced negotiations with vendors and which the Company expects to commit to acquiring in 2018. Together the Pipeline Assets will be a mixture of two forward funded opportunities and three purpose-built standing assets which will on completion, have a total of 333 beds, of which 100 per cent. will benefit from en-suite wet rooms. The two forward funded assets are expected to become operational in mid-2019. The weighted average unexpired lease term will be over 30 years with the majority of the pipeline assets being geographically located in the South-East of England. The average net initial yield on the pipeline assets is expected to be approximately 5.6 per cent which, whilst slightly below the Company's average portfolio yield, is a reflection of the South of England focus, property lay-out and design, accomplished operational credentials and covenants of the tenants as well as the potential for long term rental growth that the Company may benefit from if the acquisitions complete.

In addition to the investment opportunities identified, the Company also has an extensive pipeline of longer term opportunities where the timetable for potential completion remains uncertain, with the assets remaining subject to due diligence and negotiation. These assets which have been shown to the Company as a result of its strong relationships in the sector, including via existing tenants, will provide the Company with further investment optionality over the medium to longer term.

After accounting for pre-existing commitments and general corporate requirements, the Company has approximately £18 million of uncommitted capital available for new acquisitions with a near term pipeline of approximately £79 million. The Board of Directors are aware of the negative effect of cash drag on investment returns and therefore believe it is appropriate to target a fund raise of approximately £40 million at this point in time. This should ensure that the Company is able to commit the proceeds of the fund raise quickly with any additional funds required being provided by new borrowing facilities and/or additional equity as required.

Benefits of the Placing

The Board believes the Placing will confer the following benefits for shareholders and the Company: 

· enable the Company to continue with its growth strategy, provide scale to its investment portfolio and increase the liquidity of the shares by increasing the market capitalisation of the Company and further diversifying the shareholder register;

· provide additional capital which should enable the Company to take advantage of the current investment opportunities in the market and make further investments in accordance with the Company's investment policy and within its appraisal criteria;

· as the Company is actively considering a number of specific property opportunities, the Placing should assist in matching the capital requirements of the Company to the investment opportunities identified;

· the Company intends to use the net proceeds principally to invest in the Pipeline Assets. The Pipeline Assets provide the Company with the opportunity to invest in new, purpose-built care homes which will increase the Company's geographical exposure to the South-East of England;

· further diversify the Existing Portfolio by introducing new tenants to the Group and operating in geographical locations that are currently under-represented in the Existing Portfolio; and

· provide a larger equity base over which the fixed costs of the Company may be spread, thereby reducing the Company's ongoing costs per share.

Expected timetable

The timetable is subject to change at the discretion of the Company, Stifel Nicolaus Europe Limited ("Stifel") and Dickson Minto W.S. If any of the above times and/or dates change, the revised times and/or dates will be notified to shareholders by announcement through a Regulatory Information Service. References to time in this document are to London time.

Further information on the Placing

The Company proposes to raise gross proceeds of up to £40 million through the issue of up to 36,697,248 Placing Shares at 109 pence per Placing Share by way of the Placing. The Placing is being conducted in accordance with the Prospectus, as amended and supplemented, published on 1 February 2018.

The Placing Shares, when issued, will rank in full for all dividends or other distributions declared, made or paid after the admission of the Placing Shares issued under the Placing to the premium segment of the Official List and to trading on the London Stock Exchange's Main Market ("Admission") and in all other respects will rank pari passu with the existing Ordinary Shares. For the avoidance of doubt, the Placing Shares issued under the Placing will not qualify for the dividend declared on 15 October 2018 in respect of the quarter ended 30 September 2018. However, based on the current expected timetable, they will qualify for the dividend relating to the quarter ended 31 December 2018, which is expected to be declared in January 2019.

The Placing will close at 11 a.m. on 7 November 2018 or such later date as the Company, Stifel and Dickson Minto W.S., acting as sponsor to the Company may agree.

In accordance with the Prospectus published on 1 February 2018, the Directors implemented a Placing Programme to enable the Company to raise new capital in the period from the date of the Prospectus to 31 January 2019. Under the Placing Programme, the Company had the authority to issue up 150 million shares, less any shares already issued under the Programme. In February 2018, the Company raised gross proceeds of £94 million pursuant to a placing, open offer and offer for subscription of 87,037,038 Ordinary Shares (the "Initial Issue"). Following this therefore, the Company currently has authority to issue under the Placing Programme up to 62,962,962 new shares. In this Placing, the Directors are targeting an issue of up to 36,697,248 shares with the placing size based on the Company's short term acquisition pipeline as well as their ongoing focus to minimise any potential cash drag on returns. In the event that the number of Placing Shares applied for under the Placing exceeds 36,697,248, the Board of Directors have the ability to upsize the Placing up to 62,962,962 Placing Shares. Any upsizing would be subject to careful consideration of the prevailing market conditions, the availability and estimated price of the properties that the Investment Manager has identified as being suitable for purchase by the Company and the length of time it would likely take to acquire them. In the event that the number of Placing Shares applied for under the Placing exceeds the numbers of shares which the Board of Directors wish to issue under the Placing, it will be necessary to scale back applications. In such event, Placing Shares will be allocated at the discretion of the Board.

The Placing, which is not underwritten, is conditional upon, inter alia, Admission becoming effective no later than 8 a.m. on 12 November 2018 (or such later date as the Company and Stifel may agree in writing, being not later than 8 a.m. on 31 January 2019) and the Placing Agreement becoming wholly unconditional (save as to Admission) and not having been terminated in accordance with its terms prior to Admission.

The Company will apply for admission of the Placing Shares to listing on the premium listing segment of the Official List of the Financial Conduct Authority (the "FCA") and to trading on the main market for listed securities of London Stock Exchange plc (the "London Stock Exchange"). It is expected that settlement of subscriptions in respect of the Placing Shares and Admission will take place and that trading in the Placing Shares will commence at 8.00 a.m. (London time) on, or around, 12 November 2018.

The Placing Shares will be issued in registered form and may be held in uncertificated form. The Placing Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The Placing Shares will be eligible for settlement through CREST with effect from Admission. 

Participation in the Placing will only be available to persons in member states of the EEA who are qualified investors as defined in article 2.1(e) of the Prospectus Directive ("Qualified Investors"). 

The Placing is subject to the terms and conditions set out in the Prospectus which was published on 1 February 2018. 

Dealing codes

Ticker: THRL

ISIN for the new ordinary shares: JE00B95CGW71

SEDOL for the new ordinary shares: B95CGW7

The Company's legal entity identifier: 2138008VQQ5Y9QXMX749

Enquiries:

Target Fund Managers Limited (Investment Manager to the Company)

Notes

Terms used and not defined in this announcement bear the meaning given to them in the Prospectus published on 1 February 2018.

(1) The Company had 55 assets and 21 operators as at 30 June 2018. This comprised 51 operational care homes and 4 sites being developed via forward fund commitments. In July 2018 the Company acquired 1 operational care home and 1 pre-let development site, for a total value of £13.9 million (including costs). In September 2018 the Company announced the further acquisitions of both a pre-let development site in West Yorkshire and a commitment to acquire a care home in Wales for a total value of £17.1 million (including costs).

Important Information

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service this information is now considered to be in the public domain.

The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time.

This announcement does not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The Placing Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the Placing Shares in the United States.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, any securities in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, any securities will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement is not for release, publication or distribution to persons in the United States, Canada, Australia, the Republic of South Africa, New Zealand or Japan, and should not be distributed, forwarded to or transmitted in or into any jurisdiction, where to do so might constitute a violation of local securities laws or regulations.

Stifel Nicolaus Europe Limited, which is authorised and regulated by the Financial Conduct Authority, is acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Stifel Nicolaus Europe Limited or advice to any other person in relation to the matters contained herein.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. The Company, Target Fund Managers Limited and Stifel Nicolaus Europe Limited expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

None of the Company, Target Fund Managers Limited, Dickson Minto W.S. or Stifel Nicolaus Europe Limited, or any of their respective affiliates, accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, Target Fund Managers Limited, Dickson Minto W.S. and Stifel Nicolaus Europe Limited, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing and the Placing Programme.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the Placing Shares and determining appropriate distribution channels.

Marketing disclosures pursuant to AIFMD (as defined below)

The Company is an externally managed alternative investment fund and has appointed Target Fund Managers Limited as its alternative investment fund manager (the "AIFM").

Pursuant to Article 23 of AIFMD and the Alternative Investment Fund Managers Regulations 2013 (No. 1173/2013) and the Investment Funds Sourcebook of the FCA (the "UK AIFMD Rules"), the AIFM is required to make available to persons in the European Union who are invited to and who choose to participate in the Placing, by making an oral or written offer to subscribe for Placing Shares, including any individuals, funds or others on whose behalf a commitment to subscribe for Placing Shares is given (the "Subscribers") certain information (the "Article 23 Disclosures"). For the purposes of the Placing, the AIFM has made the Article 23 Disclosures available to Subscribers in the 'Investor Relations' section of the Company's website at: www.targethealthcarereit.co.uk.

PRIIPS

In accordance with the Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products ("PRIIPs") and its implementing and delegated acts (the "PRIIPs Regulation"), the AIFM has prepared a key information document (the "KID") in respect of the Ordinary Shares. The KID is made available by the AIFM to "retail investors" prior to them making an investment decision in respect of the Ordinary Shares at www.targethealthcarereit.co.uk.

If you are distributing Ordinary Shares, it is your responsibility to ensure that the KID is provided to any clients that are "retail clients".

The Company is the only manufacturer of the Ordinary Shares for the purposes of the PRIIPs Regulation and none of Stifel or the AIFM are manufacturers for these purposes. None of Stifel or the AIFM makes any representations, express or implied, or accepts any responsibility whatsoever for the contents of the KID prepared by the Company nor accepts any responsibility to update the contents of the KID in accordance with the PRIIPs Regulation, to undertake any review processes in relation thereto or to provide the KID to future distributors of Ordinary Shares. Each of Stifel or the AIFM and their respective affiliates accordingly disclaim all and any liability whether arising in tort or contract or otherwise which it or they might have in respect of the key information documents prepared by the Company. Investors should note that the procedure for calculating the risks, costs and potential returns in the KID are prescribed by laws. The figures in the KID may not reflect actual returns for the Company and anticipated performance returns cannot be guaranteed.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (OTHER THAN THE UNITED KINGDOM, THE REPUBLIC OF IRELAND OR THE NETHERLANDS (AND, IN THE CASE OF THE NETHERLANDS, ONLY TO PROFESSIONAL INVESTORS)), CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL