Net Asset Value, Corporate Update & Dividend

8 May 2025

Target Healthcare REIT plc and its subsidiaries

("Target Healthcare" or "the Company" or,

together with its subsidiaries, "the Group")

Net Asset Value, update on corporate activity and dividend declaration

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern, purpose-built care homes, announces its unaudited quarterly Net Asset Value ('NAV') as at 31 March 2025, an update on corporate activity and its third interim dividend for the year ending 30 June 2025.

Corporate activity highlights

Ninth consecutive quarter of EPRA NTA growth supported by rental income from prime care home real estate, an investment class underpinned by structural demographic tailwinds:

· EPRA Net Tangible Assets ('NTA') per share increased 0.3% to 113.0 pence (31 December 2024: 112.7 pence), reflecting a like-for-like valuation uplift driven by the portfolio's inflation-linked rent reviews

· EPRA "topped-up" net initial yield of 6.23% (31 December 2024: 6.20%) based on an annualised contractual rent of £61.3 million

· Adjusted EPRA EPS for the quarter of 1.472 pence per share, fully covering the quarterly dividend of 1.471 pence per share

· NAV total return of 1.6% for the quarter (based on EPRA NTA and including dividend payment)

· Net LTV of 22.9% (31 December 2024: 22.7%)

· Weighted average debt term of 4.5 years (31 December 2024: 4.7 years). Interest costs hedged on 92% of drawn debt to the relevant facility maturity date, with a weighted average cost of drawn debt of 3.94% (31 December 2024: 3.95%) (inclusive of amortisation of arrangement costs)

· Access to a further £71 million of committed, but undrawn, revolving credit facilities which, if drawn, would carry an interest rate of SONIA plus 2.22%

· Total capital available of £84 million as at 31 March 2025, net of the Group's capital commitments including the Group's remaining development asset

· Rent collection of 97% for the quarter

Continued strong underlying portfolio performance with rental growth driven by inflation-linked reviews and the acute nationwide undersupply of fit-for-purpose real estate: 

· Diversified portfolio of 94 assets let to 34 tenants valued at £930.0 million (31 December 2024: £924.7 million) reflecting an increase of 0.6% and like-for-like valuation increase of 0.3%, primarily driven by continued rental growth partially offset by a widening in the net initial yield

· Contracted rent increased 1.1%, driven by a 0.8% like-for-like increase predominantly from inflation-linked upwards-only annual rent reviews and 0.3% from the rentalisation of other capital expenditure

· WAULT of 25.8 years (31 December 2024: 26.1 years)

· High quality, modern and sustainable real estate portfolio:

o  100% of the portfolio rated EPC A or B, and therefore the portfolio is already compliant with the minimum energy efficiency standards anticipated to apply from 2030

o  Positive social impact from sector-leading real estate standards: 100% en suite wet-rooms; generous 48 sqm space per resident; sustainable rent of £200 per sqm

· Average rent cover on mature homes remained high, at 1.9x for the December 2024 quarter (most recent quarter of tenant data)

Kenneth MacKenzie, CEO of Target Fund Managers, commented:

"The Group's portfolio continues to outperform the MSCI UK Annual Healthcare Property Index, with a 2024 calendar year total return at the property level of 10.8% relative to the Index's 5.4%. Longer term performance has been equally strong, with the Group's portfolio ranking second out of the 12 index participants over the last 10 years, reflecting the attractive long-term returns and low volatility available from disciplined investment by a highly experienced team in this high-grade care home real estate asset class. 

"Index linked underlying rental growth continues to drive EPRA NTA growth despite the quarter's valuation reflecting a slight widening in the net initial yield, and fully incorporating recent market transactional evidence.

"Our management team remains focused on the portfolio, particularly opportunities to enhance revenues, progress potential tenancy changes and tighten-up the overall portfolio quality where appropriate, whilst remaining cognisant of the debt facilities due for renewal.

"Gordon Bland, the Manager's Finance Director, has decided to leave the business next month after 12 years. I'd like to thank him for his excellent work during that period, and we wish him well for the future. An Interim FD is in place as we transition to a permanent replacement, with a full search process being well advanced."

Portfolio update

During the quarter, the following asset management initiatives were undertaken:

· Further progress at the Group's one remaining development site which is forecast to reach practical completion in June 2025 at which point it will be leased on pre-agreed terms to an existing tenant of the Group, adding a further £0.6 million to the Group's contractual rent;

· A capital payment of £1.5 million was made to a tenant in exchange for an increase in the contracted rent where the performance of the home was considered to justify an increase in the rental level. The payment was rentalised at a yield consistent with the initial investment proposition for the home;

· A performance payment of £0.9 million was made to a tenant where contracted performance conditions set at the time of entering into the initial lease had been met. The payment was rentalised at a yield greater than the portfolio EPRA "topped-up" Net Initial Yield; and

· The remaining 37 en suite wet-rooms were completed at a home undergoing refurbishment, increasing the contractual rent from the home and improving the portfolio's overall wet room percentage to 99.8%.

We are nearing resolution in a process to re-tenant an asset where rent was not being paid. We have had strong interest from multiple operators and we expect the asset to be re-tenanted at a similar, or improved, rental level. However, this has resulted in a short-term detrimental impact on rental income and additional administration costs, and the drop in EPRA earnings and lower rent collection in the quarter, which are expected to recover following resolution of this matter.

Debt facilities

As at 31 March 2025, the Group had committed debt facilities of £320 million, of which £249 million were drawn. The majority of the Group's drawn debt is long-term and fixed at low rates, with £150 million due to expire between 2032 and 2037. Of the Group's £170 million shorter dated facilities, £99 million were drawn.

In relation to these shorter dated debt facilities, which expire in November 2025, indicative refinancing terms have been obtained from a number of lenders, including each of the incumbent lenders, for a range of facility types and durations. The Group is pleased with the appetite shown and is continuing to carefully evaluate the proposals and the Group's expected capital requirements. 

A balance sheet summary and an analysis of the movement in the EPRA NTA over the quarter is shown in the Appendix of this announcement.

Announcement of third interim dividend

The Company today declares its third interim dividend for the year ending 30 June 2025, in respect of the period from 1 January 2025 to 31 March 2025, of 1.471 pence per share as detailed in the schedule below:

Interim Property Income Distribution (PID): 1.471 pence per share

Interim ordinary dividend: nil

Shareholders entitled to elect to receive distributions without deduction for withholding tax may complete the declaration form which is available on request from the Company through the contact details provided on its website www.targethealthcarereit.co.uk, or from the Company's registrar. Shareholders who qualify for gross payments are, principally, UK resident companies, certain UK public bodies, UK charities, UK pension schemes and the managers of ISAs, PEPs and Child Trust Funds, in each case subject to certain conditions. Individuals and non-UK residents do not qualify for gross payments of distributions and should not complete the declaration form.

LEI: 213800RXPY9WULUSBC04

ENDS

Enquiries:

Notes to editors:

UK listed Target Healthcare REIT plc (THRL) is an externally managed Real Estate Investment Trust which provides shareholders with an attractive level of income, together with the potential for capital and income growth, from investing in a diversified portfolio of modern, purpose-built care homes.

The Group's portfolio at 31 March 2025 comprised 94 assets let to 34 tenants with a total value of £930.0 million.

The Group invests in modern, purpose-built care homes that are let to high quality tenants who demonstrate strong operational capabilities and a strong care ethos. The Group builds collaborative, supportive relationships with each of its tenants as it believes working in this way helps raise standards of care and helps its tenants build sustainable businesses. In turn, that helps the Group deliver stable returns to its investors.

Important information

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the Market Abuse Regulations (EU) No. 596/2014, which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain. APPENDIX

1. Analysis of movement in EPRA NTA

The following table provides an analysis of the movement in the unaudited EPRA NTA per share for the period from 1 January 2025 to 31 March 2025:

The EPRA Best Practices Recommendations Guidelines state that companies should publish a set of three NAV metrics. The full set of EPRA NAV metrics are published in the Group's Annual Report.

At 31 March 2025, due to the valuation ascribed to the Group's interest rate derivative contracts used to hedge its exposure to variable interest rates, which are excluded from the calculation of the EPRA NTA, the unaudited NAV calculated under International Financial Reporting Standards was 113.2 pence per share.

^Consistent with standard valuation practice for assets under construction, the carrying value of these assets is calculated by the valuer through application of a discount to accumulated costs to date. This discount varies depending on factors such as the remaining development time. As the asset progresses towards completion, the discount that has been applied is unwound.

*Properties within the portfolio are stated at the market value provided by the external valuer and the IFRS effects of fixed/guaranteed minimum rent reviews are not reflected.

3. External Valuer

The valuation of the property portfolio as at 31 March 2025 was conducted by CBRE Limited.

4. EPRA NIY profiles and unwind of rent-free period

The Group currently has one asset with a rent-free period. As this unwinds, assuming no other changes including inter alia the portfolio valuation or rental profile, the EPRA yield profiles for the portfolio will be as follows: