Target Healthcare (THRL), a £580m investor in care homes, is lobbying the government to reconsider its proposed ban on upward only rent reviews in leases made in July.
“Whilst aimed at retail properties, this has the potential for significant unintended consequences elsewhere,” even if legislation was not retrospective the real estate investment trust said.
“We do not believe that the proposal would be a welcome change and are working with the British Property Federation and others in the sector to help inform the government on the potential impact on the sector if it were to proceed.”
Target made its comments in annual results for the year to 30 June which showed a total accounting return of 9.3% with net tangible assets (NTA) per share up 3.7% to 114.8p.
Adjusted EPRA earnings per share dipped from 6.13p to 6.08p as a result of extra costs replacing two tenants in July who were not paying rent.
Rent collection also fell from 99% to 97% but total covered dividends rose 3% to 5.884p per share, with a further rise to 6.032p targeted for the current financial year to June 2026.
The shares shed 1.1p to 94p at an 18% discount to the new NTA and a forward yield of 6.4%.
Our view
Richard Williams, property analyst at QuotedData, said: “The proposed ban on upward only rent reviews will achieve the opposite to its intention of reviving high streets and hospitality sectors. Most leases on the high street are now under five years (with the sector having reinvented itself following the so-called death of the high street) and so do not include rent review clauses anyway.
“On a side note, if the government wanted to help with the revival of the high street it should look at reforming business rates. Instead the proposed ban only threatens much-needed investment into the sector from landlords (and therefore the good work that has been happening to revive town and city centres) and has the potential to severely impact other sectors where longer leases are the norm such as offices, data centres, industrial and care homes.
“THRL is among many landlords that are now trying to get the new housing secretary to see sense. It was noted by THRL’s manager on an analyst call this morning that new leases that include caps and collars (an agreed maximum and minimum increase in rent at rent reviews, typically 4% and 0%) may not fall under the ban. This is the case for the majority of inflation-linked lease contracts, including those at THRL.”
