Last checked at 
6 Feb 2020 07:00
6 February 2020
Target Healthcare REIT plc and its subsidiaries
("Target Healthcare" or "the Group")
Re-tenanting of six former Orchard Care homes
Further to the announcement of 23 September 2019, that Orchard Care Homes ("Orchard") had notified the Group of its intention to exit its six leasehold homes, Target Healthcare (LSE: THRL), the UK listed specialist investor in modern, purpose-built care homes, confirms that these six care homes have been successfully re-tenanted to two of the Group's existing operators.
The re-tenanting will result in the Orchard homes being split by geography into two sub-portfolios (the North West and Yorkshire). This is consistent with the Group's strategy to manage its tenant concentration risk. Burlington Care now operates the three care homes in Yorkshire and Sandstone Care operates the three care homes located in the North West.
Target Healthcare has continued to receive the contracted rental income throughout the re-tenanting process and, whilst new rental incentives have been offered in relation to some of the properties, these are offset by Orchard's rent deposits that will be retained by the Group. On a consolidated basis, there will be no material change in the contracted rental income the Group will receive from these six properties once the rental incentives expire.
The Group's independent valuer has reviewed the re-tenanting terms and advised that the successful completion of the re-tenanting will result in a small valuation uplift for the portfolio compared with the values both prior to the original Orchard notification and as at 31 December 2019. Further uplifts are expected once the above rental incentives unwind.
Scott Steven, Head of Asset Management at Target Fund Managers, commented: "The successful re-tenanting of these care homes, within a relatively short timeframe and with no material financial impact, is a clear endorsement of the Group's investment strategy to invest in modern, purpose-built care homes complete with wet-rooms, located in areas with strong underlying demographics and leased at sustainable rental levels to ensure the care homes are attractive to a range of operators.
"The need to progress re-tenanting strategies remains relatively rare, but where it is necessary we seek outcomes that maintain and, where possible, enhance the Group's diversified income streams and portfolio value. Importantly, by acting as a responsible landlord, we have facilitated an outcome which has minimised disruption to the residents and staff who live and work in our homes."
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Notes to editors:
UK listed Target Healthcare REIT plc (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 portfolio at 31 December 2019 comprised 71 assets let to 28 different tenants, with a total value of £589.9 million. Following the successful re-tenanting of six care homes previously let to Orchard Care Homes to two existing tenants, there are currently 27 tenants across the Group.
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.