Target Healthcare REIT posted an impressive NAV total return of 11.8% in annual results for the year ended 30 June 2024.
The care home landlord reported an EPRA net tangible assets (NTA) uplift of 5.9% over the year to 110.7p per share. This was mainly due to a 4.6% increase in the value of its 94-home portfolio to £908.5m.
Adjusted EPRA earnings per share increased 2.2% to 6.13p per share (2023: 6.00p), which fully covered annual dividends of 5.712p. The dividend was cut last year (from 6.18p in 2023), but the company now intends to raise the quarterly dividend for the financial year ending 30 June 2025 by 3.0% to 1.471p per share, representing an annual total dividend of 5.884p.
The uplift in the value of its portfolio was down to a 4.0% increase in contracted rent to £58.8m (2023: £56.6m), including a ike-for-like increase of 3.8% (2023: 3.8%) predominantly driven by rent reviews.
Key metrics of underlying trading performance at its homes also improved, with 99% of rent collected for the year (2023: 97%) and mature homes rent cover of 1.9x (2023: 1.75x). Mature homes spot occupancy remained steady at 87%. The company maintains one of the longest weighted average unexpired lease terms in the listed UK real estate sector of 26.4 years (2023: 26.5 years).
Net loan-to-value (LTV) was 22.5% as at 30 June 2024, with an average cost of drawn debt of 3.91% and weighted average term to maturity of 5.2 years. 95% of total drawn debt is fully hedged to maturity.
Three newly developed care homes were added to the portfolio, with two additional homes (126 beds) under development at year end. Disposals of £44.3m were made during the year, ahead of carrying value, for four older assets with the shortest remaining lease terms in the portfolio.
Alison Fyfe, chair of the company, said: “Target Healthcare REIT has provided another year of solid portfolio and financial performance. Accounting total return was 11.8%, reflecting the continued resilience of our business model and informed investment approach. Our predictable and robust rental stream provides annual growth with its inflation-linkage, and the valuations of our prime, modern care home assets remain stable given institutional investment demand.
“Our portfolio is comprised of high-quality care home real estate, which is highly desired by operators for its well-designed modern properties from which they can provide profitable care, and by institutional investors for its growing rental income and low volatility of returns. We have clear evidence that transactions in prime care home real estate such as ours are supportive of our valuations.
“Along with long-term returns for shareholders, we firmly believe our approach benefits our wider stakeholder group, most particularly our tenants and their residents, and this will remain critical to our approach.”
