Target Healthcare REIT Limited Corporate Update, Net Asset Value & Dividend (3256D)

TIDMTHRL

RNS Number : 3256D

Target Healthcare REIT Limited

26 April 2017

26 April 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 March 2017 was 101.5 pence. The NAV total return for the quarter was 1.3%.

Corporate Update

Portfolio

As at 31 March 2017 the Group owned forty-four care homes with a market value of GBP274.6 million. The portfolio had an EPRA net initial yield of 6.75% (based on contractual net income) and an annualised rent roll of GBP19.8 million with a weighted average unexpired lease term of 29.6 years. Portfolio passing rent has increased by 8.7% during the quarter, 8.2% from additions and asset management activity, plus 0.5% from rent reviews.

The portfolio value has increased 8.5% over the quarter, with the like-for-like value up 0.5%. 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.

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 GBP30.0 million as at 31 March 2017, giving a loan-to-value ratio of 10.9% (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 weighted average interest cost on the GBP30.0 million of currently drawn debt of 2.36% for the period to 24 June 2019 and 2.25% 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 GBP20 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%, as described in its Investment Policy. To that end, the Group will look to increase its current debt levels and is currently in discussions with a new debt provider. Commercial terms have been agreed and documentation and diligence is currently being performed by the Group with its legal advisors. The facility is expected to be available to fund near-term investment opportunities upon the existing facilities being fully utilized.

Investment activity

In the three months to 31 March 2017, the Group's investment and asset management activities have comprised:

-- The acquisition of two purpose built care homes near Wimborne, Dorset for an undisclosed price. The two homes are adjacent to each other and comprise a total of 70 bedrooms. On acquisition the combined homes were let to Dorset Healthcare Limited, which is part of the Care Concern Group, an existing tenant of the Group. The lease is for 35 years with RPI-linked increases subject to a cap and collar. The Group and Care Concern intend to undertake renovation works to the combined homes, with a view to enlarging some bedrooms, providing additional lounge space and generally bringing the properties into line with others in the Group's portfolio. This will be carried out over a period of time to minimise disruption to the residents of the home.

-- In line with previous announcements in 2016 when contracts were exchanged, the Group confirms that it has now completed the acquisitions of two purpose-built care homes located in Kirby Cross near Frinton-on-Sea, Essex and Sutton-in-Ashfield, Nottinghamshire for a total consideration of approximately GBP14.8 million including acquisition costs. Care Concern leased Beaumont Manor near Frinton-on-Sea and Oakdale Care Group is the tenant at Kingfisher Court in Sutton-in-Ashfield, becoming the Group's 16(th) tenant.

Subsequent to 31 March 2017, the Group has acquired of a care home in Dover, Kent for a total consideration of GBP6.1 million including costs. The home has 79 large bedrooms over four floors and benefits from large lounges as well as a hairdressing salon and dedicated cinema room. Upon acquisition, the home was leased back to Athena Healthcare who developed the property, and is subject to a 35-year lease with RPI-linked uplifts with a cap and collar.

Pipeline and Investment Market

Since the Company's GBP84 million capital raise in May 2016, the Group has completed investments with an aggregate value of around GBP90 million.

The Investment Manager is analysing and performing diligence on a number of near-term investment opportunities and there continues to be a pipeline of assets where the timetable for potential completion remains subject to additional due diligence and vendor negotiations. Capital to fund the near-term investment opportunities will be provided by the revolving credit facility of the Group's debt facility as well as the new additional debt facility under consideration in order to ensure that the Company meets its medium term gearing targets.

Dividends in the period

The Company paid its second interim dividend for the year to 30 June 2017, in respect of the period from 1 October 2016 to 31 December 2016, of 1.570 pence per share on 24 February 2017. This reflects an annualised payment of 6.28 pence per share and a dividend yield of 5.5% based on the 25 April 2017 closing share price of 113.88 pence.

The Group's unaudited EPRA Earnings per share for the quarter were 1.31 pence, excluding the effects of the performance fee accruals as noted in the Appendix.

The Company had 252,180,851 ordinary shares in issue at 31 March 2017 and has not issued or bought back any shares since that date.

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

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

   Interim Property Income Distribution (PID)                     1.099 pence per share 
   Interim Ordinary Dividend                                               0.471 pence per share 
   Ex-Dividend Date:                                4 May 2017 
   Record Date:                                        5 May 2017 
   Pay Date:                                           26 May 2017 

Quarterly investor report

The Group's quarterly investor report for March 2017 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:

"We have had a good start to 2017 with positive momentum across a number of fronts. The portfolio continues to perform well. We have a diverse tenant base with long duration, upward only leases, which continue to contribute to portfolio passing rent increases alongside our acquisition activity. Over the quarter we invested the remaining proceeds of last year's equity raise and continue to see a number of new opportunities in the market. If these progress through our extensive due diligence procedures, they will in the short-term be funded via additional gearing in order to ensure the Group is fully invested with borrowings in-line with our stated target. The team is focused on delivering on our promises to shareholders and, as our portfolio matures following recent acquisitions, we are encouraged by the Group's prospects."

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 January 2017 to 31 March 2017:

 
                                                                            Pence per share 
------------------------------------------------------------------  ----------------------- 
 EPRA NAV per share as at 31 December 2016                                            101.8 
 
   Property revaluation                                                                 0.5 
 Property acquisition costs & other capital items                                     (0.3) 
 Movement in revenue reserve (excluding performance fee accruals)                       1.3 
 Movement in performance fee accruals*                                                (0.2) 
 Second interim dividend payment for the year to 30 June 2017                         (1.6) 
------------------------------------------------------------------  ----------------------- 
 EPRA NAV per share as at 31 March 2017                                               101.5 
------------------------------------------------------------------  ----------------------- 
 Percentage change in the 3 month period                                             (0.3%) 
------------------------------------------------------------------  ----------------------- 
 

*To recognise: (1) an under-accrual of the performance fee payable to the investment manager for the year to 31 December 2016, and; (2) an accrual for a performance fee, if due, for the year from 1 January 2017 to 31 December 2017. 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 2017 will be calculated once the Index figures for the year to 31 December 2017 are available.

The EPRA NAV provides a measure of the fair value of a company on a long-term basis. As at 31 March 2017 the EPRA NAV stated above differed from that calculated under International Financial Reporting Standards of 101.4 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.

The Group has settled its claim, disclosed in its interim report and financial statements to 31 December 2016, with its previous tax adviser. The financial impact has been recognised within the EPRA NAV as at 31 March 2017.

 
 SUMMARY BALANCE SHEET (Unaudited) 
                                       Mar-17   Dec-16   Sept-16   Jun-16 
                                         GBPm     GBPm      GBPm     GBPm 
 Investment properties                  274.6    253.1     232.3    210.7 
 Cash                                    11.6     26.7      42.6     65.1 
 Net current assets 
  / (liabilities)                       (0.1)    (1.9)     (1.6)    (1.2) 
 Bank loan                             (30.0)   (21.0)    (21.0)   (21.0) 
 Net assets                             256.1    256.9     252.3    253.6 
                                    ---------  -------  --------  ------- 
 
 EPRA NAV per share 
  (pence)                               101.5    101.8     100.0    100.6 
 
 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 June 2017 and the unaudited EPRA NAV per share as at 30 June 2017 will be announced in July 2017.

This information is provided by RNS

The company news service from the London Stock Exchange

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April 26, 2017 02:00 ET (06:00 GMT)