Target Healthcare REIT | Winterflood Research

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6.2% prospective yield with inflation-linked income

Target Healthcare REIT was launched in March 2013, with the aim of building a modern, purpose-built portfolio of UK care homes, to provide long-term and stable income to shareholders. The fund has been managed by Kenneth MacKenzie of Target Fund Managers Limited since launch and he is supported by a team of five. At the end of 2021 the portfolio contained 98 assets, with a WAULT of 27.5 years. 96% of rooms have en-suite wet rooms and 62% of the fund’s rental income is from private fee-paying residents.

In the six months to 31 December 2021, the fund’s EPRA NTA per share increased by 0.4% from 110.4p to 110.8p, while the NAV total return was +3.4%. The overall portfolio value increased by 27% over the period to £870.5m, driven by £191m of new investments and development commitments, including an 18-home portfolio acquired for £159m, which was the fund’s largest investment since launch. Adjusted EPRA earnings per share for the six months were 2.36p, down from 2.66p in the six months to 31 December 2020, reflecting the temporary cash drag from the time between the £125m equity issuance and the completion of the portfolio acquisition. Dividends totalling 3.38p per share have been declared in respect of the half-year, in line with the target of 6.76p per share for the year to 30 June 2022. Dividend cover for the interim period was 65%, although it is expected to reach 101% once the fund is fully invested and geared. The fund has delivered annual dividend increases each year since launch.

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