Target Healthcare REIT reported a 6.9% fall in EPRA net tangible assets (NTA) to 104.5p per share in full year results to 30 June 2023.
The care home landlord said that valuations had stabilised over the second half of its financial year following the impact of higher interest rates in the first half. Uplifts of 1.5% in the second half of the year was predominantly down to the effect of inflation-linked leases.
Over the course of the year the value of its portfolio fell 4.1% on a like-for-like basis to £868.7m.
Group specific adjusted EPRA earnings per share increased 18.8% to 6.00p (2022: 5.05p). The annual dividend decreased by 8.6% to 6.18p (2022: 6.76 pence), following the reduction announced in the first quarter of 2023.
The company said that it intends to increase the quarterly dividend for the current year ending 30 June 2024 by 2.0% to 1.428p, representing an annual total dividend of 5.712p.
Net loan-to-value (LTV) was 24.7% at 30 June 2023, with an average cost of drawn debt of 3.7% and weighted average term to maturity of 6.2 years. 100% of total drawn debt was fully hedged to maturity against further interest rate increases.
Portfolio performance
The portfolio of 97 properties, consisting of 93 modern operational care homes and four pre-let sites, is let to 32 tenants with a total value of £868.7m. 97% of rent was collected for the year, with 99% rent collection and mature home rent cover of 1.75x for the most recent quarter. Spot occupancy (beds occupied) at its mature homes was 86% (100% of Target’s care homes are let to care home providers).
Contractual rent increased by 2.0% to £56.6m per annum (2022: £55.5m), including a like-for-like increase of 3.8% predominantly driven by rent reviews.
During the year the company sold £27m of non-core, older assets, ahead of book value.
The company has one of the longest weighted average unexpired lease terms (WAULT) in the listed UK real estate sector of 26.5 years (2022: 27.2 years).
Alison Fyfe, chair of the company, said: “The board remains confident in the group’s prospects. Our portfolio consists of premium quality assets in a critical real estate investment class with compelling sector tailwinds.
“Our portfolio is performing strongly, benefitting from our initiatives to dispose of non-core assets, from further capex to refresh or enhance our real estate, from our active engagement with tenants, and from the more favourable trading environment. Our vacancy rate remains at nil with rent collection, rent cover and underlying resident occupancy all improving. Asset valuations remain stable, and our financing costs are well-protected from higher interest rates.
“This improvement in portfolio performance, when combined with our effective management of interest rate exposure, gives us confidence in the group’s earnings outlook, allowing us to increase our dividend in line with rental growth.”
THRL : Target Healthcare REIT reports stabilising values and earnings growth
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