Target Healthcare REIT PLC · LSE:THRL
Target Healthcare REIT — H1 FY2024 Earnings Presentation
46 slides from Target Healthcare REIT's earnings presentation, Mar 12, 2024
Slide 1: Investing in care. Delivering returns.
Investing in care. Delivering returns. Interim Results for the six months ended 31 December 2023 Webinar and Presentation | 12 March 2024 | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 Roden Hall, Telford
Slide 2: Presentation Team Agenda
Presentation Team Agenda Section Page 1 Introduction & highlights 1 2 Portfolio performance 5 3 6 months financial results to 31 12 December 2023 4 Investment case 19 5 Market outlook 34 Q and A Kenneth MacKenzie Gordon Bland Chief Executive Finance Director Target Fund Managers Target Fund Managers
Slide 3: At a Glance: Target Healthcare REIT Portfolio
At a Glance: Target Healthcare REIT Portfolio Prime portfolio of modern, purpose-built homes with en suite wet-rooms as standard 98 6,460 £58m 99% Care Beds1 Contracted Rent Inflation-linked Homes rental uplifts 32 £911m 6.25% 26.0 Years Tenants Portfolio EPRA Topped- WAULT Value Up NIY | Investor R
Slide 4: Financial highlights: 6 months to 31 December 2023
Financial highlights: 6 months to 31 December 2023 EPRA NTA per share 106.7p +2.1% • 4th consecutive quarter of NTA growth | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 3
Slide 5: Financial highlights: 6 months to 31 December 2023
Financial highlights: 6 months to 31 December 2023 EPRA NTA per share Adjusted EPRA EPS 106.7p 3.05p +2.1% +1.3% • 4th consecutive quarter of NTA growth • Certainty of rental income growth | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 3
Slide 6: Financial highlights: 6 months to 31 December 2023
Financial highlights: 6 months to 31 December 2023 EPRA NTA per share Adjusted EPRA Dividend EPS 106.7p 3.05p 2.856p 7.1% yield1 +2.1% +1.3% 107% cover • 4th consecutive quarter of NTA growth • Certainty of rental income growth • 2% dividend growth, compared to 6 months to June 2023 1 Based on the 8
Slide 7: Portfolio Highlights: 6 months to 31 December 2023
Portfolio Highlights: 6 months to 31 December 2023 • 99% rent collection • 1.9x rent cover • Like-for-like rental growth 1.9% • 4th consecutive quarter of valuation growth (like-for-like 1.4%) - Portfolio valuation £911m (+4.9%) • Top performer (#1) for total returns in index • UK Healthcare Annual
Slide 8: Portfolio performance
Portfolio performance Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 5
Slide 9: Portfolio total returns – consistent index outperformance
Portfolio total returns – consistent index outperformance MSCI UK Healthcare Annual Property Index Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 6
Slide 10: Resident occupancy
Resident occupancy Mature* portfolio and full portfolio spot occupancies Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook *Mature homes being those which have traded for greater than 3 years | Investor ResultsPresentation: August ended for the six m
Slide 11: Rent Cover
Rent Cover Mature portfolio quarterly rent cover – Spot Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 8
Slide 12: Rent Cover
Rent Cover Mature portfolio quarterly rent cover – spot and last twelve months rolling Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 8
Slide 13: Rent Collection
Rent Collection Full portfolio quarterly rent collection Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 9
Slide 14: Maturing Portfolio
Maturing Portfolio Mature homes percentage of full portfolio Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 10
Slide 15: Rental Growth
Rental Growth Average uplift of rent reviews completed in quarter Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 11
Slide 16: 31 December 2023 Interim results
31 December 2023 Interim results Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 12
Slide 17: Earnings: 6 months to 31 December 23
Earnings: 6 months to 31 December 23 6 months to 6 months to December December Change Portfolio Performance 2023 2022 (%) Rental income (excluding guaranteed uplifts) (£m) 28.6 28.1 1.8% Admin Expenses (including management fee) (£m) (5.5) (5.4) 1.9% 6 months financial Net Financing costs (£m) (5.2)
Slide 18: Earnings: 6 months to 31 December 23
Earnings: 6 months to 31 December 23 6 months to 6 months to December December Change Portfolio Performance 2023 2022 (%) Rental income (excluding guaranteed uplifts) (£m) 28.6 28.1 1.8% Admin Expenses (including management fee) (£m) (5.5) (5.4) 1.9% 6 months financial Net Financing costs (£m) (5.2)
Slide 19: Earnings: 6 months to 31 December 23
Earnings: 6 months to 31 December 23 6 months to 6 months to December December Change Portfolio Performance 2023 2022 (%) Rental income (excluding guaranteed uplifts) (£m) 28.6 28.1 1.8% Admin Expenses (including management fee) (£m) (5.5) (5.4) 1.9% 6 months financial Net Financing costs (£m) (5.2)
Slide 20: Earnings: 6 months to 31 December 23
Earnings: 6 months to 31 December 23 6 months to 6 months to December December Change Portfolio Performance 2023 2022 (%) Rental income (excluding guaranteed uplifts) (£m) 28.6 28.1 1.8% Admin Expenses (including management fee) (£m) (5.5) (5.4) 1.9% 6 months financial Net Financing costs (£m) (5.2)
Slide 21: Earnings: 6 months to 31 December 23
Earnings: 6 months to 31 December 23 6 months to 6 months to December December Change Portfolio Performance 2023 2022 (%) Rental income (excluding guaranteed uplifts) (£m) 28.6 28.1 1.8% Admin Expenses (including management fee) (£m) (5.5) (5.4) 1.9% 6 months financial Net Financing costs (£m) (5.2)
Slide 22: Earnings: 6 months to 31 December 2023
Earnings: 6 months to 31 December 2023 6 months to 6 months to Portfolio Performance December December 2023 2022 Adjusted EPRA earnings (£m) 18.9 18.7 6 months financial (i) Adjust in: Guaranteed uplifts income (£m) 5.5 5.9 results to 31 December (ii) Adjust out: Interest from development funding (£
Slide 23: Earnings summary – NTA bridge
Earnings summary – NTA bridge EPRA NTA per share (pence) Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 15
Slide 24: Balance sheet summary
Balance sheet summary As at 31 December As at 30 June 2023 (£m) 2023 (£m) Change Portfolio market value (per independent valuers) * 911.1 868.7 42.4 Cash 17.6 15.4 2.2 Working capital * (14.7) (6.2) (8.5) Debt (252.5) (230.0) (22.5) EPRA Net Tangible Assets (NTA) 661.5 647.9 13.6 EPRA NTA per share
Slide 25: Debt summary
Debt summary Fixed/hedged positions as follows: Debt well-hedged prior to rates movement • £180m (71% of drawn debt) hedged or fixed before H2 2022 interest rate increases • Further £50m capped during H2 2022 (91% of total drawn debt) Interest rate sensitivity • £22.5m (9% of drawn debt) floating ra
Slide 26: Debt summary
Debt summary 31 Dec 30 June 2023 2023 (£m) (£m) Net LTV 25.8% 24.7% % drawn debt fixed rate or hedged 91% 100% Average cost of drawn debt (inc. arrangement costs) 4.05% 3.70% Fixed/hedged positions as follows: £150m £30m £50m Phoenix debt at 3.18% RBS swapped at 2.48% HSBC capped, weighted average (
Slide 27: Investment case
Investment case Portfolio Performance 6 months financial results to 31 December 2023 Investment Case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 19
Slide 28: Strong tailwinds - Demographics
Strong tailwinds - Demographics Fundamental demand dynamics 13.4% 85+ Of over 85s require demographic expected to long-term residential care1 almost double to 3.2 million in the next 25 years1 2048 c.2x over 85s Today The sector’s supply and demand fundamentals provides insulation from macro headwin
Slide 29: Strong tailwinds - Trend to quality
Strong tailwinds - Trend to quality Market shift towards en suite wet-rooms, with largest operator in the sector making clear move to prime real estate UK care home real estate en suite wet-room provision1 14% 32% 2014 2023 68% 86% Clear market shift to ESG-compliant care homes however today 68% of
Slide 30: Strong tailwinds - Trend to quality
Strong tailwinds - Trend to quality Market shift towards en suite wet-rooms, with largest operator in the sector making clear move to prime real estate UK care home real estate en suite wet-room provision1 14% 32% 2014 2023 Target 68% 86% Clear market shift to ESG-compliant care homes however today
Slide 31: Investment market – Significant gap between prime and non-prime real estate
Investment market – Significant gap between prime and non-prime real estate 1. Deal Volumes (£m) - Institutional & private capital remains active within prime | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 1 – Source: Colliers / Target Fund Managers Limited 22
Slide 32: Investment market – Significant gap between prime and non-prime real estate
Investment market – Significant gap between prime and non-prime real estate 2. Pricing Category of care home NIY “ It’s mostly SNF assets. It’s both in the US and the UK. We’re now “ quoting cap rates north of 9%. Super-prime 4.50% - 4.75% Omega Healthcare Investors, Inc. May 2023 PRIME Prime 5.50%
Slide 33: Valuations: Real estate quality drives resilience
Valuations: Real estate quality drives resilience Premium, purpose-built portfolio. Significantly ahead of peers across range of key quality metrics % En suite Wet-rooms Listed Peers Average is comprised of publicly available information available or disclosed by | Investor ResultsPresentation: Augu
Slide 34: EPCs
EPCs Target EPC breakdown EPC A & B Rated EPC Rating % THR portfolio A 8% B 90% C 2% D or below - | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 25
Slide 35: Modernity Age of Buildings
Modernity Age of Buildings Key Purpose built 2010's + Purpose built 00's Purpose built 90's Purpose built pre-90's Conversion / extension | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 26
Slide 36: Valuations: Real estate quality drives resilience
Valuations: Real estate quality drives resilience Premium, purpose-built portfolio. 31 December 2023 Significantly ahead of peers across range of key quality metrics Interim results But valuation basis? 6 months financial results to 31 December 2023 Investment Case Market outlook Listed Peers Averag
Slide 37: Modern, fit for purpose homes: Dartford
Modern, fit for purpose homes: Dartford | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 28
Slide 38: Spacious rooms
Spacious rooms | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 29
Slide 39: Fully equipped Wet-rooms
Fully equipped Wet-rooms | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 30
Slide 40: Wide corridors
Wide corridors | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 31
Slide 41: Outdoor space
Outdoor space | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 32
Slide 42: King’s Court
King’s Court | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 33
Slide 43: Market outlook
31 December 2023 Interim results 31 December 2023 Interim results 6 months financial results to 31 December 2023 Investment case Market outlook | Investor ResultsPresentation: August ended for the six months 2021 31 December 2023 34
Slide 44: Care home sector: update & outlook
Care home sector: update & outlook Tailwinds Inflation/Costs Staffing – Demographics – Inflation easing – Increased availability of staff – Private-pay fees – Wage inflation has been supported – Visa schemes now more – Needs-based care reality by resident fee increases (public widely used & private)
Slide 45: Summary
Summary Real estate quality – Supports values, investor demand Portfolio performance – Improved during year, supports rental income Balance sheet – Conservative LTV, fixed/hedged finance costs Demographics & trends to quality – Significant gap between prime and non-prime Q&A real estate | Investor R
Slide 46: Important Information
Important Information For the purpose of this disclaimer, the “Presentation” shall mean and include these slides, all comments made by the presenter(s) of the slides and any question and answer session or discussion related to it. The Presentation has been prepared solely for information purposes an
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