Target Healthcare (THRL), the £583m care home investor whose shares trailed on a 22% discount, has sold nine properties for £85.9m at an 11.6% premium to their 30 June valuation.
Kenneth MacKenzie, chief executive of Target Fund Managers, which runs the £712m portfolio, hailed it as “landmark” deal, the largest disposal in the real estate investment trust’s 12 years, that showed the desirability and demand for modern, purpose-built care homes.
Its shares gained 3%, or 2.9p, to 97.3p.
“The decision to divest these assets was primarily driven by our desire to actively manage the portfolio – including reducing our largest tenant exposure to under 10% – and to take advantage of a favourable market opportunity. As well as crystallising an attractive return for shareholders, it is also a strong validation of our portfolio valuation,” MacKenzie said.
The sale to an institutional investor represents an implied net initial yield of 5.24%.
The company also announced a debt refinancing with existing lenders which reduces its short-term borrowing from £170m to £130m, although £70m additional lending is available. While it has been agreed on lower margins, THRL will see its cost of borrowing rise to 4.3% from 3.9% including the £150m of long-term borrowing it has with Phoenix Group which is unchanged.
Proceeds from the sale and the borrowing will be invested in a pipeline of new assets offering a slightly higher net initial yield of around 6%. More details will be revealed at the annual results next month.
