Target Healthcare Reit Share Discussion Threads

[trcml] 30/3/2023 11:49

Index-linked rent are normally based on the index 2 months prior to the review date.I don't knw wther the indexation for Target's holdings are upwards-only but if so then ok, but if upward or downward then rent level could fluctuate.

[jimbobbaby] 29/3/2023 18:13

I think there is always going to be a lag in the inflation uplift. Rent reviews may be every few years, certain times of the year etc so I doubt you'd ever see an exact match and especially in the early years of rising inflation. I would be more concerned if a larger inflation related effect doesn't start arriving in the next couple of years given the likely lag. But if it doesn't you'd be a bit late finding out at that point. Next years results will probably tell.

[spoole5] 29/3/2023 15:43

Bottom in?

[creme de menthe] 28/3/2023 15:03

Director buy, 30,000 at 67p

[trcml] 27/3/2023 11:27

I am considering buying, Unlikely the lenders would foreclose, too political. Good to see rising yields for property such as this. Yield compression caused by low interest rates has enabled commercial property investment to deviate from funfdamentals. Probably the time has come to value prop cos on rental income, rather than capital value. Demand for long lease investments shows no sign of abating and unlikly as there is a shortage. Normal for buying price to exceed cost of borrowing; the difference would be funded from other sources.

[spectoacc] 27/3/2023 08:47

Edited. No point repeating the same things across multiple threads.

[ghhghh] 27/3/2023 08:31

"...Interest rates have reached 14-year highs, meaning our marginal rate of financing currently exceeds the initial rental yields we can obtain on new investments. This changes our view on what earnings levels are achievable."

I've banged on about the importance of replacement cost and this has never been more germane than here. With SOHO, Civitas and Target trading at such eye watering discounts to NAV, with inflation having whacked up new build costs and interest rate rises the final kick in the gonads, where is the desperately required new build going to come from?

[ghhghh] 27/3/2023 07:55

20% dividend cut was flagged so 17% okay.

Agree I'd like to know more about the 1.8%, I thought 1% minimum annual uplift capped at 4% max. I assume it's bit of a movable feast if some tenants are replaced on new leases.

The fundamentals look good and Target appear to be at the top end in terms of product offering eg wet rooms and EPC ratings.

[spectoacc] 27/3/2023 07:53

Twice in the first page they say "inflation-linked", eg:

"..Offset by a 1.8% increase from inflation-linked rental uplifts".

Again - RPI was 17%.

This line from the Chairman struck me:

"...Interest rates have reached 14-year highs, meaning our marginal rate of financing currently exceeds the initial rental yields we can obtain on new investments. This changes our view on what earnings levels are achievable."

Cutting the divi seems the sensible thing. Selling the NI homes seems sensible to address the increasing LTV. Guess the question is whether things improve, or get worse, from here.

[spectoacc] 27/3/2023 07:37

Had to read down a bit to find that, and of course it's not cut, it's "rebased". Hmm.

Key line for me is this:

"Contractual rent increased by 2.9% to GBP57.1 million (June 2022: GBP55.5 million), including like--for-like rental growth of 1.8%"

RPI inflation hit 17% in the year, and is currently over 13%. Do holders really regard their income as "inflation-linked"? Why? LFL rental growth was 1.8%.

1.8%!

NAV gone up over 25% but today's disposals should help.

Rent collection isn't 100%.

Occupancy surprisingly low, even if Covid still given as an excuse.

But a fair bit in the price here too.

[ammons] 27/3/2023 07:35

Indeed. "Rebased" to an annual 5.6p which is still a decent yield at the current price.

[spoole5] 27/3/2023 07:31

17% divi cut

[spoole5] 22/3/2023 08:36

Daily ATLs. Results usually out by now.......

[spoole5] 21/3/2023 12:21

Discount over 30% here now

[bdog51] 10/3/2023 16:31

A lot of investment trusts carrying a discount to NAV given the dire market conditions. But Target's discount is around 27% which seems way overdone to me. Must be good value at these levels given the dividends available.

[cheshirecat2] 10/3/2023 13:29

Yield trap or just part of wider sell off?

[cheshirecat2] 10/3/2023 13:28

Bought here around 85p for the yield- do we think this is just part of a wider sell off vs some concerns around the debt/divi?

[spoole5] 10/3/2023 11:12

Pushing 10% yield on these now. 25% ltv

[bodgeman] 02/3/2023 16:54

Thank you very much for this and taking the time. Yes I read it on the following article that you already found.



I haven't seen the correction. 25% sounds much better.

[al101uk] 01/3/2023 17:56

From Target Healthcares own investor diclosure document:

Gearing policy

"Gearing calculated as borrowings as a percentage of the Group's assets, may not exceed 35 per cent at the time of drawdown. The Board currently intends that, over the medium term, borrowings of the Group will represent approximately 25 per cent. of the Group's gross assets at the time of drawdown. However, it is expected that Group borrowings will exceed this level from time to time as borrowings are incurred to finance the growth of the property portfolio."

And from the most recent NAV RNS:

"As at 31 December 2022, the Group's total borrowings were £240 million, representing a net LTV of 25.1% (total gross debt less cash, as a proportion of gross property value). The Group's weighted average cost on its drawn debt, inclusive of amortisation of loan arrangement costs, was 3.79% (30 September 2022: 3.49%). This excludes the amortisation of the cost of the interest rate cap, the upfront cost of which has already been deducted in full from the EPRA NTA as shown in the table in the appendix. The increase over the quarter was due to the increase in market interest rates impacting the variable rate applied to the Group's revolving credit facilities."

I can only find positive recent write ups, which are listed at the bottom of the page here:



Have you a link to go with your quote? Googling your quote gets no results.

edit - Found it:



The article was just plain wrong, he corrected it on Motley Fool:



Now reads:

"With the old world of cheap credit firmly in the rear-view mirror, I am wary of highly leveraged companies. Fortunately, Target Healthcare has its debt burden under control. The Company’s Net Loan-to-Value is 25% — calculated as total debt less cash held divided by the value of the property portfolio."

[bodgeman] 01/3/2023 17:48

This is what I read in a MF article....

"Unfortunately, Target Healthcare has a lot more debt than equity on its books. To be precise, it has 33 times more debt than equity. That is like you or me buying a £250,000 house by putting down a measly deposit of £7,500 (just 3%, when the UK average is 15%) and funding the rest with a bank loan."

[spoole5] 24/2/2023 20:42

Net LTV 25%. Highly geared?

[bodgeman] 24/2/2023 18:01

Was probably comments from BoE about interest rates, the inflation pivot may be later in the year and the reports that economy is doing better than expected - hence less pressure on BoE to go softly on the next raise. Target are highly geared but luckily hedged - but markets dont like that.

[schlumberger74] 22/2/2023 21:38

Any idea for the price drop today ?

[cwa1] 09/2/2023 08:19

XD for 1.69p this morning, pay day 24/2