Target Healthcare REIT Completes Disposal of UK Care Homes for £44.5m

Strategic Insights -

Target Healthcare REIT has successfully completed the disposal of four UK care homes, realizing a significant £44.5m, or a modest premium to the book value at 31 March 2024. The sales price reflects a net initial yield of 5.64%. The proceeds from the disposal will enable a partial repayment of the group's revolving credit facilities and reduce its unhedged interest cost, ultimately reducing net LTV by around 3.8%. The disposal of these assets, which represented 326 beds and 4.6% of the group's overall portfolio value, is a strategic move to improve the company's portfolio and capital structure.

Key Takeaways:

  • The disposal represents 326 beds and 4.6% of the group's overall portfolio value, with the proceeds enabling a partial repayment of the group's revolving credit facilities.
  • The sale price reflects a net initial yield of 5.64%, with the proceeds supporting a reduction in the group's unhedged interest cost.
  • The disposal reduces net LTV by around 3.8%, following the removal of the group's four shortest lease terms, with an average of 13.6 years remaining.
  • The properties were originally acquired as part of a portfolio acquisition in December 2021 and realized an annualised ungeared IRR in excess of 7% (including both acquisition and sales costs).
  • The company's share price currently trades at a 31% discount to the NAV, while the sale price at book value, and the fact these are not among the best assets in the portfolio, should provide confidence in the company's NAV.
  • The company's asset management team has demonstrated their ability to proactively manage the portfolio to provide an attractive and sustainable level of income, together with the potential for growth, from the diversified portfolio of modern purpose-built care homes.

Statistics:

  • 326 beds were part of the disposal, representing 4.6% of the group's overall portfolio value.
  • The sale price reflects a net initial yield of 5.64%.
  • Proceeds from the disposal will support a reduction in the group's unhedged interest cost.
  • The disposal reduces net LTV by around 3.8%.
  • The properties were originally acquired as part of a portfolio acquisition in December 2021.
  • The annualized ungeared IRR realized by the group's care homes exceeded 7% (including both acquisition and sales costs).
  • The company's share price currently trades at a 31% discount to the NAV.

Sources:

  • Association of Investment Companies press release.