Target Healthcare disposes of nine UK care homes, completes debt refinancing

(Sharecast News) - Real estate investment trust Target Healthcare said on Thursday that it has disposed of nine UK care homes above carrying value to an institutional purchaser. Target Healthcare said the "landmark transaction" of £85.9m represented its largest disposal since IPO and was transacted at a 11.6% premium to the group's carrying value as of 30 June. The sale price represented an implied net initial yield of 5.24%.

The FTSE 250-listed firm stated the "highly accretive disposal", which represents 537 beds and roughly 8.3% of the group's overall portfolio value, reduces its exposure to its current largest tenant, HC‑One/Ideal Carehomes, from around 16.0% to approximately 8.8% based on rental income.

Completion of the disposal, which was unconditional and expected to take place on 22 October, will result in an annualised ungeared internal rate of return in excess of 11%.

Target Healthcare also announced the completion of its debt refinancing, agreeing to improved terms with The Royal Bank of Scotland plc and HSBC UK, and revealed that its investment manager, Target Fund Managers, had appointed Alastair Murray as chief financial officer, replacing Gordon Bland.

Additionally, Target said it has "a strong pipeline of near-term assets" at a net initial yield of roughly 6%, made up of a combination of accretive investment opportunities, including high-quality, strongly performing existing UK care homes, all with en suite wet-rooms and new purpose-built forward-funded assets.

Target stated the acquisition of the first of the existing care homes in the pipeline was expected to take place in November. Executing on the rest of this pipeline of assets was expected to utilise the proceeds from the disposal, as well as making efficient use of its new debt facilities.

As of 0830 BST, Target Healthcare shares were up 1.27% at 95.60p.

Reporting by Iain Gilbert at Sharecast.com