Target Healthcare REIT Limited Corporate Update, Net Asset Value & Dividend (0195V)

TIDMTHRL

RNS Number : 0195V

Target Healthcare REIT Limited

25 January 2017

25 January 2017

Corporate Update, Net Asset Value & Dividend announcement

Net Asset Value

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 2016 was 102.1 pence. The EPRA NAV total return for the quarter was 3.6%.

Corporate Update

Portfolio

As at 31 December 2016 the Group owned forty-one care homes with a market value of GBP253.1 million. The portfolio had an EPRA net initial yield of 6.7% (based on contractual net income) and an annualised rent roll of GBP18.2 million with a weighted average unexpired lease term of 29.4 years. Portfolio passing rent has increased by 7.5% from portfolio additions during the quarter, including the completion of development works on one asset.

The portfolio value has increased 9% over the quarter, with the like-for-like value up 2.3%. The increase reflects our acquisitions in the period, value generated from our ongoing embedded rental uplifts, and also an element of yield compression across individual assets, including the forward commitment asset acquired in October 2016.

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

Debt facility & swap arrangements

The Group's total borrowings were GBP21.0 million as at 31 December 2016, giving a loan-to-value ratio of 8.3% (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 new care homes, cash has been excluded from the calculation.

The Group's interest rate swap arrangements provide an all-in interest cost on the GBP21.0 million of currently drawn debt of 2.35% for the period to 24 June 2019 and 2.20% thereafter until 1 September 2021.

The Group has total agreed facilities of GBP50 million, consisting of a GBP30 million term loan and a GBP20 million revolving credit facility. The current debt availability allows the Group to flexibly manage its capital structure as it provides GBP29 million in short-term available capital to fund the completion of transactions. Over the medium term the Group is committed to maintaining a loan-to-value ratio of approximately 20%. The Directors are cognisant that the cost of debt remains attractive, and that the Group's gearing level will remain below the stated target when available capital is fully utilized. Therefore the Group is actively exploring opportunities to increase its available debt facilities, which when complete would be used to fund near-term investment opportunities.

Pipeline and Investment Market

In the three months to 31 December 2016, the Group's investment and asset management activities have comprised:

-- The completion of an acquisition of a purpose built care home in Tonbridge, Kent for approximately GBP12.2 million including acquisition costs. The Group had previously entered into a forward commitment to acquire this property. The home is let to Abbeyfield Kent Society, a charitable organisation which provides care and housing to over 400 people at 14 locations across Kent. The lease is for a 30 year term with RPI-linked uplifts subject to a cap and collar. Abbeyfield is the Group's 15th tenant and further diversifies the Group's tenant base.

-- Another new tenant will be added upon the completion of the acquisition of a purpose-built care home located in the town of Sutton-in-Ashfield, Nottinghamshire where contracts have been exchanged to acquire the home for approximately GBP5.6 million including acquisition costs. The transaction is expected to conclude by April 2017 once the build has been completed and the home has been fitted out to the specifications of the Group and the incoming tenant.

-- The completion of a substantial redesign and renovation works at its home in Sheffield which is now open to residents.

Since the Company's GBP84 million capital raise in April 2016, the Group has completed investments and made firm commitments with an aggregate value of GBP77 million. In addition the Group has near-term investment opportunities of GBP30 million, of which it hopes to complete or commit to the majority following diligence processes. The Investment Manager continues to identify a wider pipeline of assets where the timetable for potential completion remains subject to due diligence and vendor negotiations.

Dividends in the period

The Company paid its first interim dividend for the year to 30 June 2017, in respect of the period from 1 July 2016 to 30 September 2016, of 1.570 pence per share on 25 November 2016. This reflects an annualised payment of 6.28 pence per share and a dividend yield of 5.7% based on the 24 January 2017 closing share price of 111 pence.

The Group's unaudited EPRA Earnings per share for the quarter were 1.36 pence, excluding the effects of the accrual for potential performance fee for the year to 31 December 2016 as noted in the Appendix.

The Company had 252,180,851 ordinary shares in issue at 31 December 2016 and has not issued or bought back any shares since that date.

Announcement of Second Interim Dividend for the year ending 30 June 2017

The Company has today declared its second interim dividend payment for the year ending 30 June 2017, in respect of the period from 1 October 2016 to 31 December 2016 of 1.570 pence per share as detailed in the schedule below:

   Interim Property Income Distribution (PID)                     1.256 pence per share 
   Interim Ordinary Dividend                                                   0.314 pence per share 
   Ex-Dividend Date:                    2 February 2017 
   Record Date:                            3 February 2017 
   Pay Date:                                   24 February 2017 

Quarterly investor report

The Group's quarterly investor report for December 2016 will shortly be 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:

"In addition to our regular and sustainable dividend we are delighted to have delivered strong EPRA NAV growth during the quarter. We believe this performance reflects the underlying quality of our portfolio. The team remains focused on delivering on our promises to shareholders. We continue to rigorously review new opportunities for further sector investment and our commitment to being an engaged landlord is unabated. We remain incredibly excited about the prospects for the Company in 2017."

Enquiries:

Kenneth MacKenzie

Target Advisers

01786 845 912

Stifel Nicolaus Europe Limited

Mark Young, Neil Winward, Tom Yeadon

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

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.

APPIX

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 October 2016 to 31 December 2016:

 
                                                                                                     Pence per share 
-------------------------------------------------------------------------------------------  ----------------------- 
 EPRA NAV per share as at 30 September 2016                                                                    100.0 
 
   Property revaluation                                                                                          2.5 
 Property acquisition costs                                                                                    (0.1) 
 Movement in revenue reserve (excluding performance fee accrual for year to 31 December 
  2016)                                                                                                          1.4 
 Movement in performance fee accrual*                                                                          (0.1) 
 First interim dividend payment for the year to 30 June 2017                                                   (1.6) 
-------------------------------------------------------------------------------------------  ----------------------- 
 EPRA NAV per share as at 31 December 2016                                                                     102.1 
-------------------------------------------------------------------------------------------  ----------------------- 
 Percentage change in the 3 month period                                                                        2.1% 
-------------------------------------------------------------------------------------------  ----------------------- 
 

*An accrual for a performance fee, if due, for the year from 1 January 2016 to 31 December 2016, payable to the investment manager. The accrued amount is estimated based on historic portfolio performance relative to the MSCI UK Annual Healthcare Property Index. The final performance fee for the year to 31 December 2016 will be calculated once the Index figures for the year to 31 December 2016 are available.

The EPRA NAV provides a measure of the fair value of a company on a long-term basis. As at 31 December 2016 the EPRA NAV stated above differed from that calculated under International Financial Reporting Standards of 102.0 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.

 
 SUMMARY BALANCE SHEET (Unaudited) 
                                       Dec-16   Sept-16   Jun-16   Mar-16 
                                         GBPm      GBPm     GBPm     GBPm 
 Investment properties                  253.1     232.3    210.7    184.1 
 Cash                                    26.7      42.6     65.1     23.0 
 Net current assets 
  / (liabilities)                       (1.4)     (1.6)    (1.2)    (2.0) 
 Bank loan                             (21.0)    (21.0)   (21.0)   (31.5) 
 Net assets                             257.4     252.3    253.6    173.6 
                                    ---------  --------  -------  ------- 
 
 EPRA NAV per share 
  (pence)                               102.1     100.0    100.6    100.8 
 
 Ignores the effect of fixed/guaranteed 
  rent reviews 
 

The next quarterly valuation of the property portfolio will be conducted by Colliers International Healthcare LLP during March 2017 and the unaudited EPRA NAV per share as at 31 March 2017 will be announced in April 2017.

This information is provided by RNS

The company news service from the London Stock Exchange

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January 25, 2017 02:00 ET (07:00 GMT)