Target Healthcare announces that it has completed the disposal of four UK care homes for £44.5 million to the incumbent tenant. The sale price reflects a modest premium to the portfolio’s carrying value at both 31 December 2023 (the latest date prior to the offer being received) and 31 March 2024, and an implied net initial yield of 5.64%.

Proceeds from the disposal, which represented 326 beds and c.4.6% of the Group’s overall portfolio value, will enable a partial repayment of the Group’s revolving credit facilities and therefore reduce its unhedged interest cost. Overall, the disposal reduces net LTV by approximately 3.8%.

These assets were originally constructed in 2007/08, and were consequently amongst the oldest assets in the Group’s portfolio, and had a c.12% lower gross internal floor space per resident than the portfolio’s weighted average. In addition, these assets represented the Group’s four shortest lease terms, with an average of 13.6 years remaining. Following the disposal, the portfolio’s weighted average unexpired lease term increases to 26.3 years from 25.8 years, and the Group’s weighting to Yorkshire and the Humber reduces, an area that was previously its largest geographical exposure.

These properties were originally acquired as part of the significant portfolio acquisition in December 2021. Despite the relatively short holding period for a property investment, this disposal enabled the Company to crystalise significant value from these assets, resulting in an annualised ungeared IRR in excess of 7% over the period of ownership (including both acquisition and sales costs) and is a testament to the Group’s asset management expertise.

Scott Steven, Head of Asset Management at Target Fund Managers, commented:

“These care homes have been a successful investment for the Group, delivering a consistent and attractive rental yield over the period of ownership, combined with the realisation of a capital uplift on disposal. We care deeply about the quality of our assets and the services they facilitate; however we are not unduly attached to holding onto the bricks and mortar where we identify opportunities to improve both the overall portfolio and the Group’s capital structure. This disposal is a clear illustration of our ability to pro-actively manage the portfolio to provide an attractive and sustainable level of income, together with the potential for growth, from our diversified portfolio of modern, purpose-built care homes.”