Target Healthcare REIT reports further asset growth

6th May 2026 10:16

(Sharecast News) - Target Healthcare REIT reported further growth in net tangible assets and earnings in the March quarter on Wednesday, supported by inflation-linked rent reviews and asset management activity.

The FTSE 250 specialist investor in modern, purpose-built care homes said EPRA net tangible assets rose 1.0% to 120.6p per share at 31 March, from 119.4p at the end of December.

The increase mainly reflected a 0.8% like-for-like valuation uplift driven by inflation-linked rent reviews.

It delivered a total accounting return of 2.3% for the quarter, based on EPRA NTA and including the dividend paid.

Adjusted EPRA earnings were 1.60p per share, compared with 1.58p in the prior quarter, excluding a non-recurring contribution from historical rent arrears recovered during that period.

Target declared a fully covered third interim dividend of 1.508p per share for the year ending 30 June, to be paid as a property income distribution.

The dividend would be paid on 29 May to shareholders on the register on 15 May, with an ex-dividend date of 14 May.

The portfolio comprised 86 operational care homes let to 31 tenants, with a value of £903.2m at the end of March, up from £894.6m at the end of December.

Contracted rent increased 0.9% on a like-for-like basis, mainly from inflation-linked upwards-only annual rent reviews, with a further 0.1% increase from rentalised capital expenditure.

Annualised contractual rent stood at £60.1m, compared with £59.5m at the end of December.

The EPRA topped-up net initial yield was unchanged at 6.23%.

Target said rent collection was 99% for the quarter.

After the quarter ended, the group sold at carrying value the property responsible for the uncollected rent.

Chief executive Kenneth MacKenzie said the company continued to curate "a best-in-class portfolio" through asset management and capital redeployment.

"I am also pleased to note that, subsequent to the quarter end, we disposed of one home which was responsible for the rent arrears in the current quarter and would expect the portfolio to return to full rent collection in the quarter to 30 June 2026," he said.

During the quarter, Target re-tenanted one asset, representing 0.9% of the rent roll, to an existing tenant.

It granted a 12-month rent-free period in exchange for a contractual rent increase of more than 6%, an extension of the remaining lease term by about 14 years to 35 years and additional green lease clauses.

A £1.6m capital expenditure facility was also granted for further improvements, which would be rentalised if used.

The group rentalised about £1.2m of capital expenditure across seven properties, including photovoltaic panel installations, at a blended investment yield above the portfolio net initial yield of 6.2%.

MacKenzie said the company's investment in solar panels was now supported by a full year of energy usage data, showing it was attractive for both landlord and tenant.

He said Target was also investing in an extension at one home to increase capacity by four beds to 72, with expenditure to be fully rentalised.

The portfolio's weighted average unexpired lease term was 26.1 years, compared with 26.3 years at the end of December.

All properties are rated EPC A or B, making the portfolio compliant with minimum energy efficiency standards expected from 2030.

Mature home rent cover remained high at 1.9 times for the December 2025 quarter, the latest period of tenant data, compared with 2.0 times in the September quarter.

Net loan-to-value was unchanged at 15.2%, below the group's target of around 25%, as it continued to redeploy disposal proceeds from the previous quarter.

Total capital available was about £100m, excluding the uncommitted accordion facility.

Target said its investment manager was building a pipeline of high-quality opportunities in excess of available capital, with further acquisitions expected to be committed before the June year end.

The pipeline had an indicative blended net initial yield above 6%.

"We remain focused on executing on our pipeline of opportunities as we look to re-deploy the remaining c.£40m of disposal proceeds from the sub portfolio sale late last October," MacKenzie said.

"We have agreed terms and are in legals for purchases at a value in excess of those disposal proceeds and expect these disposal proceeds to have been materially committed by the end of the company's financial year."

As at 31 March, the group had £280m of committed debt facilities, of which £203.5m was drawn.

Its debt facilities had a weighted average term of 5.4 years, with interest costs fixed on £200m of debt until at least September 2030 at a weighted average cost of 3.89%, including amortisation of arrangement costs.

At 0957 BST, shares in Target Healthcare REIT were up 2.49% at 107.2p.

Reporting by Josh White for Sharecast.com.

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