Acquisition of new development & other completions

20 January 2020

Target Healthcare REIT plc and its subsidiaries

("Target Healthcare" or "the Group")

Acquisition of new development site in Cheshire for £9.7 million, completion of three previously announced acquisitions in Yorkshire and Wales and practical completion on a care home in Birkdale

Target Healthcare (LSE: THRL), the UK listed specialist investor in modern, purpose-built care homes, announces that it has completed the acquisition of a new development site in Cheshire, for £9.7 million, including transaction costs, as it continues to deploy the proceeds from its recent oversubscribed capital raise.  The Group is also pleased to confirm that it has now completed on the three previously announced acquisitions located in Yorkshire and Wales. In addition, the construction of the Group's care home development in Merseyside has reached practical completion.

Acquisition of new development site in Cheshire

The Group has acquired a development site and entered into a forward funding agreement for the development of a new elderly care home in Rudheath, Cheshire. The completed care home will be let to an existing tenant, L&M Healthcare, on a 30 year lease. The net initial yield on the transaction is consistent with the Group's current portfolio average.

Planning consent was received in October 2019 with the development phase expected to take 16 months. The property will provide full en-suite wetroom facilities, in line with Target Healthcare's strict investment criteria, together with large public spaces and a high-quality fit-out.

The development is to be undertaken on the basis of a fixed-price contract with the developer, a sister company of L&M Healthcare. The completed property will benefit from the favourable underlying demographic and wealth characteristics of the local area and has been pre-let on a full repairing and insuring lease with annual RPI-linked rent increases, subject to a cap and collar. Consistent with previous forward funding opportunities, the Group will earn interest through the construction phase.

L&M Healthcare currently operates five high-quality care homes across the North West of England, including Hulton Hall, a 74-bed care home in Preston, Lancashire owned by the Group which opened in late summer 2019.

Completion of three previously announced acquisitions

The Group has also completed the acquisitions of two care homes in Yorkshire and a third home in Wales. The two separate acquisitions were previously announced on the exchange of contracts in November 2019 and September 2018 respectively. 

The Yorkshire homes in Scarborough and Pudsey will be leased to a subsidiary of Burlington Care, an existing tenant which operates care homes in Yorkshire, North Lincolnshire and the North East of England. The home in Newtown, Wales will be operated by Sandstone Care, a new tenant of the Group, thereby adding further diversification to the portfolio with the Group's portfolio of homes now being operated by 28 different tenants.

Practical completion of a care home development in Birkdale

Finally, the Group has reached practical completion on the development of a 55-bed care home in Birkdale, Merseyside, under a forward funding agreement. The home, which opens in January 2020, will be operated by Athena Healthcare Group, an existing tenant.

John Flannelly, Head of Investment at Target Fund Managers, commented:

"We continue to identify and invest in modern, purpose-built care homes to grow the portfolio, leveraging our experience and proprietary research capabilities and at yields underpinning our ability to consistently deliver attractive returns for shareholders. The Cheshire development follows the £81.3 million of acquisitions announced in November 2019, meaning we have now completed on the pipeline transactions identified at the time of the September 2019 fundraise.

"These transactions demonstrate our ongoing commitment to support the development of high-quality care homes across the country, further strengthen our relationships with existing tenants whilst allowing us to support a new operator, with proven expertise in the care sector, to enter the care home market.

"We are working on a number of other opportunities that, subject to terms being agreed and diligence successfully completed, would see the remaining available capital being deployed in Q1 2020."

Target Healthcare REIT plc legal entity identifier: 213800RXPY9WULUSBC04       

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Notes to editors:

UK listed Target Healthcare REIT plc (THR) is an externally managed Real Estate Investment Trust which aims to provide shareholders with an attractive level of income, together with the potential for capital and income growth, through the assembly and management of a portfolio of modern, purpose-built care homes.

The Group's portfolio at 30 September 2019 comprised 63 assets let to 26 different tenants, with a total portfolio value of £511.4 million. In addition to the acquisitions and completions disclosed in this announcement, the Group has previously completed the acquisition of a further six care homes and a block of retirement apartments in Q4 2019.

The Group only invests in modern, purpose-built homes that provide the best environments for residents and their care providers and ensure they are let at a sustainable rent. The Group aims to build 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.