Target Healthcare REIT plc Annual Report and Financial Statements 2024
Target Healthcare REIT plc
Annual Report and Financial Statements 2024
Investing
in care.
Delivering
returns.
5.05
6.00
6.13
2022
2023
2024
112.3
104.5
110.7
2022
2023
2024
Adjusted EPRA earnings
per share (pence)
2
6.13 +2.2%
ABOUT US
Responsible
investment
with a clear
purpose –
improving
the UK’s
care home
real estate.
Key financial metrics for the
year to, or as at, 30 June 2024
EPRA NTA per share (pence)
110.7 +5.9%
1Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
8.1
-1.2
11.8
2022
2023
2024
6.760
6.180
5.712
2022
2023
2024
72
97
107
2022
2023
2024
49.1
-6.6
73.0
2022
2023
2024
Accounting total return (per cent)
1
11.8%
Portfolio value (£ million)
908.5 +4.6%
Adjusted EPRA cost ratio (per cent)
4
19.1% +40 bps
Dividend cover (per cent)
2
107%
Net loan-to-value (per cent)
5
22.5%
Dividend per share (pence)
5.712 -7.6%
Average cost of debt
3
(per cent)
3.91 +21 bps
Strategic Report IFC-25
About Us IFC
Chair’s Statement 4
Our Market 6
Business Model 8
Our Strategy 10
Investment Manager’s Report 20
Principal and Emerging Risks
and Risk Management 22
Section 172 Statement 24
Corporate Governance 26-56
Board of Directors 26
Investment Manager 28
Directors’ Report 30
Statement of Directors’ Responsibilities 37
Corporate Governance Statement 38
Report of the Audit Committee 43
Directors’ Remuneration Report 48
Independent Auditor’s Report 51
Financial Statements 57-88
Consolidated Statement of
Comprehensive Income 57
Consolidated Statement of Financial Position 58
Consolidated Statement of Changes in Equity 59
Consolidated Statement of Cash Flows 60
Notes to the Consolidated
Financial Statements 61
Company Statement of Financial Position 79
Company Statement of Changes in Equity 80
Notes to the Company
Financial Statements 81
Additional Information 89-102
Notice of Annual General Meeting 89
Shareholder Information 92
Alternative Performance Measures 95
EPRA Performance Measures 96
Data Centre 98
Glossary of Terms and Definitions 99
Corporate Information 102
911.6
868.7
908.5
2022
2023
2024
3.31
3.70
3.91
2022
2023
2024
27.1
18.7
19.1
2022
2023
2024
22.0
24.7
22.5
2022
2023
2024
1 Based on EPRA NTA movement and dividends paid, see alternative performance measures on page 95.
2 Based on adjusted EPRA earnings, see note 8 to the consolidated financial statements and alternative
performance measures on page 95.
3 Weighted average cost of drawn debt, inclusive of amortisation of arrangement costs.
4 See EPRA performance measures on page 97.
5 See Glossary of terms and definitions on pages 99 to 101.
In this report...
IFRS profit (£ million)
73.0
This document is important and requires your immediate attention.
If you are in any doubt about the action you should take, you are recommended to seek your own independent financial advice from your stockbroker, bank
manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United
Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in Target Healthcare
REIT plc, please forward this document, together with the accompanying documents immediately to the purchaser or transferee, or to the stockbroker, bank or
agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.
2 Target Healthcare REIT plc
60%
50%
40%
20%
30%
10%
0%
2014 2015 2016 2017 2018 2019 2020 2021 2 022 2023
ABOUT US CONTINUED
Committed
long-term investment.
Our purpose is to accelerate the improvement in the physical standards
of UK care homes through long term, responsible investment in modern
real estate that delivers our return objectives to shareholders.
We are advocates of the benefits that intelligently designed, purpose-built care homes can bring and we
want more residents, care professionals and local communities to benefit from their positive social impact.
1 The Index is published annually and covers calendar years. There were 37 constituents in the Index for the year to 31 December 2023 and 10 for the 10-years to the same date.
Like-for-like rental growth
3.8%
Five-year average 2.8%
Rank of portfolio total return performance in MSCI UK
Annual Healthcare Property Index
#1/37
Year to 31 December 2023 (latest annual index)
Inflation-linked rental growth
• Our leases have annual, upwards-only rent reviews, linked
to inflation with collars and caps averaging around 1.5%
and 4.0%.
• We aim to pass the associated earnings growth on by way
of a progressive dividend.
Secure rental income
Our portfolio continued to demonstrate its durable
characteristics during the year:
• Nil vacancy
• Rent covers, profitability at home level, at record levels (1.9x)
• Private pay bias supporting resident average weekly fee
increases of 10%
• Near-full rent collection at 99%
These metrics strongly support long-term and growing
sustainable financial returns.
MSCI INDEX
MSCI UK Annual Healthcare Property Index Total Return THRL Property Portfolio Total Return (ungeared standing assets)
THRL Cumulative Compounded Outperformance
Portfolio total returns: Consistently outperform benchmark
Attractive property-derived total returns at low volatility from considered investment in a non-cyclical sector.
Our portfolio has outperformed the index annually since IPO in 2013, was the top performer in 2023, and is ranked second over the
10-year period to 31 December 2023.
1901
1951
1971
1991
2002
2004
2006
2008
2010
2012
2016
2020
2024
2028
2032
2036
2040
2044
2048
2052
2056
2014
2018
2022
2026
2030
2034
2038
2042
2046
2050
2054
2058
2060
0
5
10
15
20
25
Today
65-74 75-84 85+
2050
c.2x over 85s
Number of people (m)
3Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
C
(69-80)
B
(81-91)
A
(92-100)
F
(21-38)
G
(1-20)
E
(39-54)
D
(55-68)
*
1
nil
nil
nil
nil
88
11
Our approach
to responsible investment.
Our care homes are modern, purpose-built and are future-proofed for social
and environmental trends, supporting demand and financial performance.
2 This is not a profit forecast. Assumes rental growth is passed on via dividend growth, and investment yields remain constant or tighten.
T R E N D 1 :
Demographics
The need for quality care home capacity is driven by a population that is growing, ageing and encountering increased chronic illness
and dementia.
• The number of people aged over 85 is forecast to double from 1.8m to 3.6m by 2050 (Source: LaingBuisson, Care homes for older
people, 34th edition)
• 1 in 8 people aged over 85 will require residential care (Source: LaingBuisson, Care homes for older people, 34th edition)
T R E N D 3 :
Future-proofed modern real estate in
what is an overall poor-quality market
80% of UK care home real estate is either converted or, if
purpose-built, over 24 years old. Our portfolio is 100% purpose-
built with 84% of homes less than 14 years old.
Our homes offer:
• Sector-leading space per resident, inclusive of mixed
social spaces
• Outdoor access
• Private wet-room shower and WC facilities for each resident
See more on page 11. The sector is moving at pace to these
higher real estate standards, with 33% of rooms now compliant
relative to 14% in 2014. Poorer quality homes will become obsolete.
T R E N D 2 :
Carbon emissions and ESG
Our portfolio is sector-leading in modernity and energy-
efficiency credentials.
• Our EPC ratings are comfortably in compliance with
anticipated legislation
• Our first operationally Net Zero Carbon (NZC) care home
has reached practical completion and is scheduled to open
in the Autumn
• More details on our Net Zero Pathway (NZP) are shown on
pages 17 to 19
Commercial real estate owners with older/converted properties
face a significant financial and operating burden by way of
remedial capital expenditure.
* Anticipated minimum legislative requirement
T R E N D 4 :
Long-term investment with
compounding returns profile
• Consistent shareholder total returns through dividend and
capital appreciation², backed by compounding rental growth
annually guaranteed by lease collars
• Dividend fully covered by adjusted EPRA earnings
• Valuations exhibit low volatility with strong investment
demand as investment class has institutionalised
• WAULT of 26 years
PORTFOLIO EPC RATINGS
4 Target Healthcare REIT plc Target Healthcare REIT plc
Investing
in care.
Delivering
returns.
CHAIR’S STATEMENT
Dear Shareholder,
I am pleased to report that Target
Healthcare REIT has provided
another year of solid portfolio and
financial performance. Accounting
total return was 11.8%, reflecting the
continued resilience of our business
model and informed investment
approach. Our predictable and
robust rental stream provides annual
growth with its inflation-linkage,
and the valuations of our prime,
modern care home assets remain
stable given institutional investment
demand. Along with long-term
returns for shareholders, we firmly
believe our approach benefits our
wider stakeholder group, most
particularly our tenants and their
residents, and this will remain critical
to our approach.
1. Reflections
Listed property companies continue to largely
trade at a discount to EPRA NTA as investors’
capital allocations are directed elsewhere.
However, a more positive outlook for property
markets is perhaps being noticed as the trend
to lower inflation and interest rates solidifies.
In contrast to the share price discount,
property portfolios invested in modern assets
with strong environmental credentials and
solid underlying user demand fundamentals
have performed well. The main questions
being posed by participants in the listed
market to those running property companies
right now are:
Earnings – where is growth
coming from?
Our leases have contractual annual uplifts
linked to inflation and our operators’ improving
rent cover is evidence of their ability to pay
these growing rents on a sustainable basis.
This helps underpin our confidence in the
outlook for the Group’s earnings growth,
which should feed through to progressive
growth in dividends as we control operating
and finance costs.
Valuations – are they reliable?
The prevailing mismatch between market
evidence of direct investment in our
sector and stock market valuations has
attracted comment. Whilst we can’t answer
for all property, we have clear evidence
that transactions in prime care home real
estate such as ours are supportive of our
valuations. We have transacted on
£71 million of asset disposals since late 2022,
all at or above book value and with positive
return metrics. Our disposal of four assets in
June 2024 was at an implied net initial yield
of 5.6% and comprised some of our older
and less spacious properties. Reliability of
5Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
our valuations is further supported by their
lack of volatility. During the macro-driven
sector-wide yield shift seen in late 2022
the initial reaction was an outward yield
shift of 40-50bps in our assets which then
stabilised relatively quickly at only 30-40 bps
as evidence from transactional activity and
the strong underlying trading performance
across our portfolio provided reliable data
points for valuers. We have seen valuation
growth for six consecutive quarters since.
Debt – is it serviceable at higher rates?
Our debt levels are amongst the lowest in
the REIT universe at 22.5% net LTV and a net
debt to EBITDA ratio of 4.6x. We have greater
than 60% of our drawn debt on long-term,
low fixed rate facilities with remaining terms
of 8-13 years and we have executed value-
adding hedging strategies on our shorter-
term bank debt. Our ability to generate
capital from asset disposals has allowed us
to finance our development commitments
efficiently and manage debt levels.
Our forecasting has long anticipated higher
interest rate levels on the refinancing of
our shorter-term bank debt as our existing
hedged facilities mature, with this having
been reflected in all our material decision-
making. We have obtained terms to refinance
our shorter-term bank facilities (£170 million)
which we are currently assessing. The
structure of these revised facilities will be
aligned with our current capital requirements
and will provide the flexibility we need
to respond proactively to investment
opportunities as they are identified.
Assets and long-term fundamentals
– are they suitable for the changed
investment environment?
In short, we remain confident that our assets
and investment approach have the necessary
characteristics to support sustainable long-
term returns. Our portfolio is comprised of
high-quality care home real estate, which
is highly desired by operators for its well-
designed modern properties from which
they can provide profitable care, and by
institutional investors for its growing rental
income and low volatility of returns.
Our approach benefits from, but does
not rely upon, the widely understood
demographic changes from an ageing
population. We believe the future of care
home provision is in modern real estate
with en suite wet-rooms for all residents and
adequate social and outdoor space, of which
there is a chronic under-supply. Investing
capital in such property now may well be
lower-yielding given the high cost of land
and construction, however, the longevity
of our hold period and the compounding
effect of rents growing annually will provide
attractive returns. We further believe that
our approach helps mitigate the risk from
any issues that might arise with the public
funding of care. There are clear trends to
suggest that residents and their families
choose to live in a higher quality physical
environment where available, with significant
net wealth in those aged over 65 to support
this demand and the private fee bias of our
model. Our environmental credentials are
market leading within commercial real estate,
at 99% A & B EPC ratings, and will not require
the significant remedial capital expenditure
that many other portfolios will.
Further detail on the care home sector is
included in the Investment Manager’s Report
on pages 20 to 21.
2. Performance
Our accounting total return performance
was 11.8% for the year, driven by an EPRA
NTA increase of 5.9% (110.7 pence from
104.5 pence) and dividends paid in the year.
Adjusted EPRA earnings per share increased
by 2.2% to 6.13 pence translating to 107%
dividend cover for the year. Under the
widely-used EPRA earnings metric the
dividend was 133% covered. The quarterly
dividend paid in respect of the year was
2.0% higher than that at June 2023, as we
returned to a progressive dividend, though
the total dividend per share for the year
shows a reduction of 7.6% as the higher rate
for the first two quarters of the prior year are
still reflected in the annual change.
Our earnings outlook is robust, with rent
collection near full and supported by record
levels of rent cover for the portfolio. The
Investment Manager’s Report covers the
portfolio in more detail on pages 20 to 21.
We have minimised the impact of the higher
interest rate environment on our finance
costs through our existing long-term fixed
rate facilities, our hedging programme and
by using the proceeds from asset disposals
to reduce drawn debt.
The positive portfolio valuation movement
has been driven by market movements, our
disposals programme, and then the impact
of rental uplifts providing an overall increase
of 4.6% and a like-for-like increase of 3.7%.
Contracted rent has increased by 4.0% to £58.8
million, including 3.8% on a like-for-like basis.
3. ESG considerations
Target has a strong commitment to being a
responsible business, and our business model
is one which prioritises a positive social impact.
Through the year, we have been focussed on
finalising plans for our portfolio’s transition to
net zero carbon through our Net Zero Pathway
(NZP) plan.
Our starting point, measured by the carbon
intensity of our portfolio as calculated by
external experts, shows us to be in a very
strong position, one which is currently ahead
of where we need to be in order to meet
science-based target levels to restrict global
temperature increases to 1.5°C. We are
therefore in an excellent position relative to
other property companies. There is more detail
in our sustainability reporting and on page 17.
EPRA NTA per share movement
+5.9%
Dividend cover
107%
4. Annual General Meeting (‘AGM’)
The AGM will be held in London on
9 December 2024. Shareholders that are
unable to attend are encouraged to make
use of the proxy form provided in order to
lodge their votes, and to raise any questions
or comments they may have in advance of
the AGM through the Company Secretary.
5. Looking ahead
Our investment thesis is a simple one: we
invest in high-quality care home assets. This
approach has produced strong long-term
returns with low volatility of performance
as well as achieving our social purpose to
improve the standard of care homes real
estate. We encourage regular shareholder
engagement, which has been positive and
supportive of our patient and disciplined
strategy to grow the portfolio and further
our social purpose. We are open to, and
regularly assess, alternative approaches
and opportunities that fall outside our core
strategy and continue to consider where best
to invest shareholder capital. We remain firmly
committed to our investment approach and
therefore set the following priorities:
• Manage our portfolio to ensure its
performance is consistent with its
inherent quality and trading advantages;
• Be opportunistic and nimble with respect
to market conditions and all potential
uses of capital, supported by a stable yet
flexible funding platform; and
• Provide a growing dividend
complemented by attractive total returns
over the long-term.
In the absence of unforeseen circumstances,
the Board intends to increase the quarterly
dividend in respect of the year ending June
2025 by 3.0% to 1.471 pence per share,
providing an annual total dividend of 5.884
pence. This increase represents a modest
premium to RPI of 2.9% for the year ended
30 June 2024. The quality of our rental
stream and its guaranteed growth allow
us to grow our dividends to shareholders
with confidence.
Our portfolio consists of premium quality
assets in a defensive investment class with
compelling demand tailwinds, representing
a great foundation for our future.
Alison Fyfe
Chair
16 September 2024
6 Target Healthcare REIT plc
OUR MARKET
Principled
investment
exclusively in
well-designed,
purpose-built
care homes.
HIGH QUALITY
REAL ESTATE
94
homes
Portfolio
£909m
market value
£59m
contracted rent
DIVERSIFIED
INCOME
34
tenants
Fee sources
1
74%
private
26%
public
LONG-TERM
FOCUS
26.4 years
WAULT
Upwards only rent reviews
2
99%
inflation-linked
1%
fixed/other
Portfolio at 30 June 2024
1 52% privately paid, 22% topped up privately paid and 26% publicly funded.
2 99% of assets in the portfolio are subject to annual uplifts linked to inflation. The remaining home has a fixed annual uplift.
3 A further 126 beds will be added to the portfolio on completion of the two development sites held at 30 June 2024.
Scale
6,331
Beds
3
Track record
7.4% since launch
Accounting total return
(annualised)
Prudent
22.5%
Net loan-to-value
Business
7Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
2
1
18
22
7
13
5
5
13
8
84%
Purpose-built 2010 onward
16%
6%
6%
5%
5%
5%
4%
4%
4%
8%
37%
We have clear criteria for home design,
quality and facilities to provide great
environments for residents and care
providers. We invest in homes the
length and breadth of the UK, with
tenant diversification being key.
MSCI Region
Contracted
Rent (£m)
Market Value
(£m)
Yorkshire & The Humber 11.5 176.2
South East
11.2 185.1
North West
10.3 155.9
East Midlands
7.2 105.9
South West
4.8 70.1
Scotland
4.4 66.1
West Midlands
4.1 69.8
Eastern
3.6 52.8
North East
1.2 18.4
Wales
0.5 8.2
Total 58.8 908.5
= Number of properties in region
1
Our portfolio
Group
The first ten blocks represent our ten largest
operators, with the eleventh representing the
remaining 24 operators, each below 3.3%.
Year Vacancy Rate
2022 nil
2023 nil
2024 nil
Operator diversification by contracted rent
VACANCY LEVELS
Properties by date of construction Diversification
84%
13%
3%
Purpose-built 2010 onwards
Purpose-built 2000 – 2009
Purpose-built 1990 – 1999
8 Target Healthcare REIT plc
BUSINESS MODEL
Simple approach:
Best-in-class real estate
managed by a dedicated team.
We are a responsible investor in ESG-compliant, purpose-built care home
real estate which is commensurate with modern living and care standards.
Why we do it Strategic pillars How we do it 2024 highlights
We are advocates of the
benefits that intelligently
designed, purpose-built
care homes can bring and
we want more residents,
care professionals, families
and local communities to
benefit from their positive
social impact.
Our Investment Manager
is a specialist who
understands the
operational challenges
our tenants face on a
daily basis when
providing quality care.
1. Build high-quality portfolio
Acquire high quality real estate via a mix of
new developments, recently completed builds,
and modern assets at mature trading.
• Clearly defined “house standard” on
acceptable investment quality
• Specialist Investment Manager whose senior
team has spent 15 continuous years together in
the sector establishing a strong reputation and
enviable track record
Ensuring portfolio quality, with £43m completed developments
replacing £44m disposals
New build homes supported
5
Contractual rent
£58.8m
Disposals (net of costs)
£44.3m
Like-for-like valuation growth
3.7%
2. Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships
and our influence within a complex sector.
• Prominent and respected sector presence,
tenant selection based on shared values
• Frequent and regular monitoring and contact
with tenants:
– Home visits performed intelligently and
sensitively
– Monthly financial data collected and analysed
• Sharing of knowledge, insight, and best
practice with tenants supports their business
Strong rent collection supported by record portfolio rent cover
Portfolio occupancy
100%
Rent collection
99%
Mature portfolio rent cover
1.9x
Tenant experience positive
10/10
3. Deliver returns
Convert portfolio income and capital returns
into sustainable returns to shareholders through
disciplined financial and risk management.
• Annual rental growth from long-term
inflation-linked leases
• Stable cost base
• Conservative approach to debt with LTV at
22.5% and substantially fixed or hedged
interest costs
Earnings growth; NTA growth; dividend covered 107% by earnings
Adjusted EPRA EPS
6.13pence
NAV total return
11.8%
Like-for-like rental growth
3.8%
Adjusted EPRA cost ratio
19.1%
4. Social purpose
To adhere to our responsible investment
fundamentals, delivering positive social impact
allied with a firm commitment to environmental
sustainability and good governance.
• Commitment to our no compromise approach
on acceptable minimum real estate standards
for care setting
• Understand our influence and learn, reflect and
respond to feedback
Upgraded 59 beds to private wet-rooms; near-full coverage of
energy usage data obtained, reliably informing Net Zero Pathway
Purpose built homes
100%
Wet-rooms
99%
A and B EPC ratings
99%
Energy usage data collection
94%
9Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Our key strengths
The key strengths of our approach are:
1. Our premium quality real estate is attractive to both operators and investors, in that:
a. it is future-proofed against legislative change and societal trends influencing
demand, and;
b. it generates high quality earnings from financially sustainable rents.
2. Specialist manager, highly engaged within sector and with our tenants.
3. Prudent approach to financial risks with diversified income sources, low gearing
and long-term, fixed rate debt.
Why we do it Strategic pillars How we do it 2024 highlights
We are advocates of the
benefits that intelligently
designed, purpose-built
care homes can bring and
we want more residents,
care professionals, families
and local communities to
benefit from their positive
social impact.
Our Investment Manager
is a specialist who
understands the
operational challenges
our tenants face on a
daily basis when
providing quality care.
1. Build high-quality portfolio
Acquire high quality real estate via a mix of
new developments, recently completed builds,
and modern assets at mature trading.
• Clearly defined “house standard” on
acceptable investment quality
• Specialist Investment Manager whose senior
team has spent 15 continuous years together in
the sector establishing a strong reputation and
enviable track record
Ensuring portfolio quality, with £43m completed developments
replacing £44m disposals
New build homes supported
5
Contractual rent
£58.8m
Disposals (net of costs)
£44.3m
Like-for-like valuation growth
3.7%
2. Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships
and our influence within a complex sector.
• Prominent and respected sector presence,
tenant selection based on shared values
• Frequent and regular monitoring and contact
with tenants:
– Home visits performed intelligently and
sensitively
– Monthly financial data collected and analysed
• Sharing of knowledge, insight, and best
practice with tenants supports their business
Strong rent collection supported by record portfolio rent cover
Portfolio occupancy
100%
Rent collection
99%
Mature portfolio rent cover
1.9x
Tenant experience positive
10/10
3. Deliver returns
Convert portfolio income and capital returns
into sustainable returns to shareholders through
disciplined financial and risk management.
• Annual rental growth from long-term
inflation-linked leases
• Stable cost base
• Conservative approach to debt with LTV at
22.5% and substantially fixed or hedged
interest costs
Earnings growth; NTA growth; dividend covered 107% by earnings
Adjusted EPRA EPS
6.13pence
NAV total return
11.8%
Like-for-like rental growth
3.8%
Adjusted EPRA cost ratio
19.1%
4. Social purpose
To adhere to our responsible investment
fundamentals, delivering positive social impact
allied with a firm commitment to environmental
sustainability and good governance.
• Commitment to our no compromise approach
on acceptable minimum real estate standards
for care setting
• Understand our influence and learn, reflect and
respond to feedback
Upgraded 59 beds to private wet-rooms; near-full coverage of
energy usage data obtained, reliably informing Net Zero Pathway
Purpose built homes
100%
Wet-rooms
99%
A and B EPC ratings
99%
Energy usage data collection
94%
10 Target Healthcare REIT plc
These initiatives further enhance the
portfolio’s modernity and longevity.
The positive impact can be seen
through the progression in key portfolio
metrics relative to the start of the year:
PORTFOLIO MODERNITY
2024 2023
Purpose-built
2010 onwards 84% 80%
WAULT (years) 26.4 26.5
EPC A&B 99% 94%
OUR STRATEGY
We are creating a portfolio of
scale through investment in a mix
of development sites, recently
completed builds and modern assets
with a trading track record. Our
clear focus on the quality of real
estate and sustainable long-term
trading provides a stable platform
for consistent total returns.
Better care home real estate
is critical to our purpose:
to improve the standard
of living for older people
in the UK.
STRATEGIC PILLAR #1
BUILD HIGH–QUALITY PORTFOLIO
Focus on enhancing modernity
and quality metrics
Consistent with the prior year, the
negative spread between our marginal cost
of capital and available investment yields
have seen us pause new investment and
focus on enhancing the existing portfolio.
We have continued to dispose of assets
where their returns outlook is less
favourable and/or where they sit at the
lower end of our quality rankings. Disposal
proceeds have been applied to fund the
committed development of new-build
assets rather than drawing debt with an
expensive marginal cost.
Disposals of four assets this year follow last
year’s five disposals. All have been made at
or above carrying value, and at attractive
return metrics. We have been active on five
development sites during the year, with three
homes reaching practical completion, adding
203 beds and £2.5m of contractual rent to
the portfolio, including our first operationally
carbon zero home. We remain active on
two sites at year-end, which will add a
further 126 beds and £1.5m of contractual
rent at practical completion, expected in
Autumn 2024.
11Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
£50m
(£42m)
£1m
£31m
£869m
£909m
30 June 2023 Market yield shiftDisposals Rent reviews 30 June 2024Acquisitions and
developments
£750m
£800m
£850m
£900m
£950m
41%
97%
Listed Peers average
Company
29%
99%
Listed Peers average
Company
40m
2
48m
2
Listed Peers average
Company
£183
£195
Listed Peers average
Company
6.5%
6.2%
Listed Peers average
Company
£2.6k
£3.0k
Listed Peers average
Company
VALUATION ANALYSIS (£ MILLIONS)
Increase Decrease Total
Stable valuations growing with
rental income
The portfolio value increased by 4.6%
during the year, driven by an increase of
£50.3 million from capital expenditure
under the Group’s development and asset
improvement programmes, offset by
disposals of £42.4 million. On a like-for-like
basis, the valuation increased by 3.7%
largely reflecting the positive impact of
the Group’s rental growth on valuations
as well as yield stability.
Valuation certificates are received quarterly
by the Group from CBRE (from March 2024,
previously Colliers) with up-to-date values
reflecting latest asset trading and comparable
market transactions. The portfolio has a
strong track record of valuation growth
contributing to total returns, such as that
shown at portfolio level on page 2.
PREMIUM, PURPOSE-BUILT PORTFOLIO
We are significantly ahead of listed peers
1
across a range of key quality metrics
Purpose built since 2000
Average rent per m
2
Space per resident
% En suite wet-rooms
Average value per m
2
Portfolio Topped-up NIY
Best-in-class care home real estate
Our investment thesis remains that
modern, purpose-built care homes will
outperform poorer real estate assets and
provide compelling returns.
Wet-rooms (99%): These are essential for
private and dignified personal hygiene, with
a clear trend to this being the minimum
expected standard for care home beds.
Carbon reduction (99% EPC A or B;
100% C or better): Energy efficiency of
real estate is critical, with legislative change
and public opinion demanding higher
standards. Our portfolio is compliant with
anticipated incoming legislation.
Purpose-built and modern (100%): All
our properties are designed and built to be
used as care homes and to best meet the
needs of residents and staff.
Financials: Our metrics reflecting capital
values and rental levels compare
favourably with peers, despite significantly
better real estate, demonstrating
sustainability and longevity.
1 Listed Peers Average is comprised of publicly available information available or disclosed by Impact
Healthcare REIT and Aedifica (in relation to their UK portfolio).
Diversification
We continue to ensure the portfolio remains
diversified, by leasing our homes to a range
of high-quality regional operators. The
Group has 34 tenants, up from 32 due to the
completed developments and a re-tenanting,
and offset by the disposals in the year. The
largest tenant remains unchanged with Ideal
Carehomes (“Ideal”) operating 18 of the
Group’s homes and accounting for 16% of
contracted rent as at 30 June 2024. Ideal’s
care provision is performed exclusively from
modern, purpose-built homes, often brand-
new builds, and is one we have supported
for a number of years. During the year Ideal
was acquired by the UK’s largest care home
operator, HC-One. Overall, our top five
tenants account for 41% and top ten, 63%
of our contracted rents.
Underlying resident fees are balanced
between private and public sources, with
a deliberate bias towards private. There is
long-term evidence and strong current
anecdotal evidence that these residents are
more accepting of higher fees, particularly
for the quality real estate and care services
our properties and their operators provide.
Census data from our tenants show that
74% of residents are privately-funded,
with 52% being fully private and 22% from
“top up” payments where residents pay
over and above that which the Local
Authority funds for them. 26% of residents
are wholly publicly funded.
Geographically, following the disposals in
the year, the South East is now the Group’s
largest region by asset value, at 20%, with
Yorkshire and the Humber accounting
for 19%.
12 Target Healthcare REIT plc
SPOT RESIDENT OCCUPANCY RATES
MATURE HOMES: RENT COVER
65%
70%
75%
80%
90%
85%
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q1
2022
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Q4
2023
Q1
2024
Q2
2024
1.0x
1.2x
1.4x
1.6x
2.0x
1.8x
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q1
2022
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Q4
2023
Q1
2024
Q2
2024
Rent cover: spot Rent cover: rolling last 12 months
Total occupancy Mature homes occupancy
Portfolio operational performance
– Steady occupancy and strong
profitability continues at home level
Our completed portfolio is fully let with
long-term occupational leases to our
tenants, the care providers. Their underlying
resident occupancies have remained stable
at 87%, consistent with the 86% we reported
at this time last year. Operators continue
to focus on accepting new residents at
fee levels commensurate with the services
provided, rather than filling to capacity at
uneconomic fees. This approach efficiently
manages demand, minimises the need for
expensive agency staff, and facilitates a
care-led approach when welcoming new
residents to a home. Staffing shortages have
eased, having been an operational challenge
limiting occupancy growth in previous years.
Rent covers have responded to this
approach. Having improved to a quarterly
1.9x for mature homes at the start of the
year, they have remained at these levels,
with the last 12 months returning cover
of 1.9x. These profitability levels support
rental payments and financial resilience,
and incentivise care providers to invest in
their businesses and people.
Clearly, should operators increase resident
occupancy levels towards 90% there
is potential for further growth in their
underlying profitability.
Rent collection was near-full at 99%
(2023: 97%) for the year, with no exclusions
for non-performing or turnaround homes.
OUR STRATEGY CONTINUED
STRATEGIC PILLAR #2
TRUSTED LANDLORD
Manage portfolio as a trusted landlord
in a fair and commercial manner.
The Investment Manager has deep experience within the sector and uses its unique
knowledge to manage the portfolio. Starting with informed assessment of home
performance using profitability and operational metrics, through empathetic and sensitive
engagement with our tenants and sector participants as a whole – we are trusted
and respected and people want to partner with us. This enables fair treatment and
commerciality to be balanced, essential in a complex sector.
13Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
MOVEMENT IN CONTRACTED RENT (£ MILLIONS)
£2.1m
£2.8m
(£2.7m)
£56.6m
£58.8m
30 June 2023 DisposalsAcquisitions and
developments
30 June 2024Rent reviews
£54.0m
£56.0m
£58.0m
£60.0m
£62.0m
Increase Decrease Total
Growing and compounding
rental income
The portfolio’s contractual rent roll was
£58.8 million at year-end (2023: £56.6
million). The 4.0% increase was driven
by positive contribution from capex and
our developments offset by our disposals
programme. Like-for-like rental growth,
which reflects the Group’s annual rent
reviews, is the Key Performance Indicator
used by management in assessing recurring
rental growth, with this being 3.8% for
the year.
Rent from the Group’s leases increase annually,
linked to inflation. Collars on this (typically
1.5%) ensure the Group receives guaranteed
growth, while caps (at a typical 4%) ensure
assets do not become over-rented, risking
rents becoming unaffordable, in periods of
higher inflation as we have seen recently.
This is an important aspect in providing
long-term security to our tenants, and in
achieving sustainable investment returns.
OUR TENANTS
Agreed that working with Target
was a positive experience
10/10
Previous survey (2022): 9/10
Agreed that Target provides real estate
that is a great working environment and
helps deliver dignified care to residents
9/10
Previous survey (2022): 9/10
Agreed that Target participates in sector
events and appropriately shares knowledge
10/10
Previous survey (2022): 10/10
OUR RESIDENTS
Our resident portfolio’s current
average rating is
9.4/10
with sufficient review volume and frequency
on “Carehome.co.uk” to be considered a
valuable data point for the quality of service
experienced by residents.
Resident satisfaction
Regulator (CQC in England) ratings are
informative but limited. The Investment
Manager also monitors reviews on
“Carehome.co.uk”, a “Tripadvisor” style
website for care homes, as a useful source
of real-time feedback which is more
focussed on the resident experience,
and that of their loved ones.
Tenant and resident satisfaction
We remain committed to our role as an
effective, supportive and engaged landlord.
We once again invited our tenants to provide
formal feedback via a survey performed
by an independent third party. We use this
output, alongside learnings from the many
informal points of contact we have, to inform
our approach. The survey returned positive
quantitative results, and more usefully
some qualitative feedback on how we
may consider altering our interactions
with tenants to recognise that no two
tenants are the same.
14 Target Healthcare REIT plc
Earnings
Earnings increased by 2.2%, as measured
by adjusted EPRA EPS; the Group’s primary
performance measure. Rental income has
increased by 4.0%, with reduced income
from prior year disposals countered by
inflation-linked rental growth and new leases
entered as the Group’s development assets
reach practical completion. Provisioning/
credit loss allowance (for doubtful debts)
was significantly reduced from the prior
year as the portfolio continues to perform
well from a rent collection and rent cover
perspective, though the reported movement
has increased on a net basis given the prior
year also benefitted from the recovery of a
substantial arrears balance.
The impact of inflation on the Group’s
operating expenses was controlled, with a
1.1% increase for the year.
Net finance costs increased to £10.8 million
from £9.4 million, driven by the increase in
drawn debt through the year and the higher
interest rate environment. The Group’s
interest costs are fixed/hedged on £230
million of drawn debt until November 2025.
Expense ratio
The Group’s expense ratios reflect these
movements. The adjusted EPRA cost ratio,
expressing costs as a percentage of the
Group’s rental income, increased slightly
to 19.1% from 18.7% with the £698k net
increase in the credit loss allowance and bad
debts in the year having a proportionately
larger numerator effect on the expenses
than the £3.0 million growth in the gross
rental income denominator. The Ongoing
Charges Figure, which provides a measure
of recurring operating expenses was fairly
stable at 1.51% (2023: 1.53%), the marginal
decrease being driven by reductions in the
Group’s recurring cost base such as the
outcome of the valuation tender conducted
during the year.
Total Returns
Accounting total return, using EPRA NTA
movement and dividends paid, was a healthy
11.8% for the year ended June 2024 and an
annualised 7.4% since launch. Our portfolio
has returned like-for-like valuation growth for
each of the six quarters since the December
2022 macro-driven response to the higher
OUR STRATEGY CONTINUED
interest rate environment. Our valuations
have been less volatile than the wider
commercial property population, as reported
within the MSCI Monthly Index (All Property)
(see chart on page 20), due to the strength
of investment demand and the trading
performance at the underlying home level.
This valuation performance, allied with our
dividend payouts, fully covered by earnings
for the same six-quarter period, has seen
EPRA NTA grow by 5.9% over the year, and
7.5% since the market nadir, and contribute
to total returns.
The consistency of Group level accounting
total returns and those at portfolio level (see
page 2) clearly demonstrate the stability of
our business model, and the defensive, non-
cyclical nature of prime care homes as a real
estate asset class.
2024
(£m) Movement
2023
(£m)
Rental income (excluding guaranteed uplift) 58.6 +4% 56.4
Administrative expenses (including management
fee and credit loss allowance) (11.6) +8% (10.7)
Net financing costs (10.8) +15% (9.4)
Interest from development funding 1.8 +100% 0.9
Adjusted EPRA earnings 38.0 +2% 37.2
Adjusted EPRA EPS (pence) 6.13 +2% 6.00
EPRA EPS (pence) 7.61 -1% 7.67
Adjusted EPRA cost ratio 19.1% +40 bps 18.7%
EPRA cost ratio 16.6% +80 bps 15.8%
Ongoing Charges Figure (‘OCF’) 1.51% -2 bps 1.53%
EARNINGS SUMMARY
STRATEGIC PILLAR #3
DELIVER RETURNS
Regular dividends for shareholders.
The Group has achieved earnings growth; NTA growth; and a dividend
fully covered by earnings from its disciplined financial and risk management.
15Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
5.9x
4.8x
4.6x
2022
2023
2024
Debt
Debt facilities were unchanged in the year
at £320 million. The weighted average term
to expiry on the Group’s total committed
loan facilities was 5.2 years (30 June 2023:
6.2 years), with drawn debt of £243 million
incurring a weighted average cost, inclusive
of amortisation of loan arrangement costs,
of 3.9% (3.7% on a cash only basis with
costs excluded).
Net debt to EBITDA ratio
This is a leverage ratio that compares the
Group’s long-term liabilities in the form
of net debt to an estimate of its cash flow
available to pay down this debt, in the
form of EBITDA (which stands for earnings
before interest, taxes, depreciation
and amortisation).
The Group uses adjusted EPRA earnings
as its EBITDA, and the gradual reduction
illustrates the improvement in the Group’s
ability to repay the capital value of its debt
from earnings over a period in which interest
rates have risen.
Debt Provider Facility Size Debt Type Drawn at 30 June 2024 Maturity
Phoenix Group £150m Term debt £150m (fixed rate) Jan 2037 – £63m
Jan 2032 – £87m
RBS £70m £30m Term debt
£40m Revolving credit facility
£30m (hedged)
£13m (floating rate)
Nov 2025
HSBC £100m Revolving credit facility £50m (hedged) Nov 2025
Total £320m £243m
DEBT ANALYSIS
Net LTV was 22.5%, with the Group’s
revolving credit facilities allowing flexible
drawdowns/repayments in line with
capital requirements.
Ahead of the earliest refinancing point in
November 2025, the Group has (i) obtained
refinancing terms from its existing bank
lenders and (ii) presented to a number of
lenders in the private placement markets.
Both avenues have yielded commercially
attractive refinancing terms and options,
and evidenced appetite/demand. These are
being carefully assessed with respect to the
Group’s preferred financing structure and
capital requirements.
EPRA NTA PER SHARE (PENCE)
(0.1)
0.3
5.8
5.9
(5.7)
104.5
110.7
30 June 2023 Property revaluationsDisposal Adjusted EPRA earnings Dividends paid 30 June 2024Acquisition costs
80.0
95.0
105.0
115.0
90.0
85.0
100.0
110.0
120.0
Increase Decrease Total
Net debt to EBITDA ratio
4.6x
16 Target Healthcare REIT plc
OUR STRATEGY CONTINUED
STRATEGIC PILLAR #4
SOCIAL PURPOSE
ESG commitments What this means for Target Status
Responsible
investment
Continue to provide better care home real estate which results in positive social impact for
residents, their carers and local communities.
Support the sector’s transition from poor real estate standards via long-term financial/
investment support for new developments.
Obtain reliable certification and insightful data on the energy efficiency of our real estate.
Increase data coverage of energy consumption by our tenants, aiding transparency and
our ability to positively influence energy efficiency.
Ensure ESG factors embedded into acquisition process and portfolio management.
Net zero commitment.
Responsible
partnerships
Engage with tenants to ensure real estate is meeting their operational and staff needs,
allowing effective care for residents.
Use energy data obtained from tenants to positively influence behaviours where possible.
Be a responsible landlord to our tenants and their communities through significant
challenges, such as pandemics.
Responsible
business
To establish an ESG Committee to provide appropriate focus and impetus to ESG matters.
Ensure the benefits of Board diversity are achieved.
Participate in benchmarking and sector appropriate programmes to provide comparable
information to stakeholders.
Other reporting: Align financial and non-financial reporting with widely used frameworks.
To achieve our social purpose.
To adhere to our responsible investment fundamentals, delivering
positive social impact allied with a firm commitment to environmental
sustainability and good governance. We have a clear ESG Charter
(Targeting Tomorrow) to ensure the social impact objective we
launched with remains embedded in our business for years to come,
working with shareholders, tenants and other stakeholders.
We have made firm ESG commitments which we measure and report
progress on annually.
Partially met
Met
17Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
We’ll continue to perform diligence to
ensure we are educated and informed.
Our NZP will have meaningful and
realistic targets, and will include
stakeholder value as an objective
when considering how best to
deliver a zero-carbon portfolio.
Annual Carbon Intensity (kgCO
2
/m
2
)
70
60
50
40
30
20
10
0
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
ESG Commitments in focus:
Net Zero Pathway (NZP).
Quality of input data
Achieving a zero-carbon portfolio is a crucial
part of our suite of “targeting tomorrow”
commitments as a responsible business.
It is essential to adopt a strategy that is:
(i) based on comprehensive and reliable data;
(ii) achievable and measurable; and
(iii) suitably ambitious.
We have collaborated with our tenants and
are now collecting their energy usage data to
an extent (94% coverage) which our external
technical experts inform us compares
strongly to sector averages. This rich data
allows a reliable analysis of our starting
position and of the impacts of initiatives.
Any such output would be significantly
diminished without the quality of input
data we have.
Output status
The output we currently have:
• Benchmark data on where we currently
stand on carbon intensity, relative to the
CRREM and SBTi joint 1.5°C decarbonisation
pathway, required to achieve net zero in
an appropriate timeframe
• Suggested energy efficiency and carbon
reduction initiatives relevant to our properties
• Cost estimates and impact assessments
on carbon intensity
Next steps
We are carefully considering this information
with respect to:
• How likely is grid decarbonisation and
how much reliance should we place on
this versus prioritising on-site renewables?
• How effective are on-site electrification
initiatives? (the most relevant question is
the relationship between heat pumps and
existing heat distribution systems within
a property)
• What are our views on the value of
offsetting initiatives, and the future
outlook for that market?
Certainties
• Our portfolio’s modernity provides an
excellent starting point (see “Baseline –
no action” on chart to the right where
we benchmark significantly ahead of
the CRREM and SBTi current required
minimum level of intensity)
• There are a number of interventions we
can pursue to reduce carbon intensity,
which appear to be effective from a cost
perspective. We are currently focussed on
increasing our understanding of these to
rank our preferred initiatives.
CARBON INTENSITY
Baseline – no action
Baseline – identified interventions
SBTi (1.5 degrees)
Science Based Targets initiative (‘SBTi’) is a corporate climate action organisation that enables companies and
financial institutions worldwide to play their part in combating the climate crisis.
Carbon Risk Real Estate Monitor (CRREM) is a project developed by the Sustainability Consortium to help investors
assess and manage risk in the real estate sector related to climate change.
18 Target Healthcare REIT plc
Environmental
EPC ratings
1
99%
A-B ratings
100%
A-C ratings
Important measure of energy efficiency and
legislative rating
BREEAM In-Use certificates
12% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2023 calendar year
(2022: 46%).
Responsible investment
• Increased coverage of portfolio
with green lease provisions to
49% from 22%.
• Supported installation of photovoltaic
systems on two properties with five
more post year-end. Average carbon
savings of 20%.
• Pilot study on thermal insulation in
one property completed. Average
carbon savings of 3%.
OUR STRATEGY CONTINUED
Social
Wet-rooms
99%
Defining proxy for real estate quality and
social impact. National Comparative: 33%*
*Source: Carterwood
Space per resident
48m
2
We assess this against peers and
compare favourably.
New homes/beds built with our
direct support
2
17/1,144
A further measure of our social impact
in supporting the sector’s transition to
modern real estate.
Responsible partnerships
• Pleasing feedback received from
tenant survey (see page 13).
Governance
& transparency
ESG committee
Met at least quarterly.
£1m
Approved budget for energy
efficiency initiatives.
GRESB
60
2022’s score of 60 was our inaugural
published submission and was in line with
our peer group. We anticipate an improved
score and peer group position when the
2023 results are released shortly.
Board diversity
40%
Board composition remains at 40% female,
in-line with the ‘Women in Leadership’
2025 target set by the FTSE Women
Leaders Review.
Responsible business
• Significant progress made in journey
to net zero carbon, with positive
benchmark position confirmed
(see page 17).
2024 activity and highlights.
1 Non-English homes follow a different rating system and have been converted to English equivalent ratings.
2 Since the launch of Target Healthcare REIT in March 2013. Direct support refers to contractual financial commitment to forward fund or forward commit to a development.
19Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Environmental
EPC ratings
1
99%
A-B ratings
100%
A-C ratings
Important measure of energy efficiency and
legislative rating
BREEAM In-Use certificates
12% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2023 calendar year
(2022: 46%).
Responsible investment
• Increased coverage of portfolio
with green lease provisions to
49% from 22%.
• Supported installation of photovoltaic
systems on two properties with five
more post year-end. Average carbon
savings of 20%.
• Pilot study on thermal insulation in
one property completed. Average
carbon savings of 3%.
Social
Wet-rooms
99%
Defining proxy for real estate quality and
social impact. National Comparative: 33%*
*Source: Carterwood
Space per resident
48m
2
We assess this against peers and
compare favourably.
New homes/beds built with our
direct support
2
17/1,144
A further measure of our social impact
in supporting the sector’s transition to
modern real estate.
Responsible partnerships
• Pleasing feedback received from
tenant survey (see page 13).
Governance
& transparency
ESG committee
Met at least quarterly.
£1m
Approved budget for energy
efficiency initiatives.
GRESB
60
2022’s score of 60 was our inaugural
published submission and was in line with
our peer group. We anticipate an improved
score and peer group position when the
2023 results are released shortly.
Board diversity
40%
Board composition remains at 40% female,
in-line with the ‘Women in Leadership’
2025 target set by the FTSE Women
Leaders Review.
Responsible business
• Significant progress made in journey
to net zero carbon, with positive
benchmark position confirmed
(see page 17).
20 Target Healthcare REIT plc
Portfolio performance
Two key portfolio metrics are presented on
page 2 of this report which are reflective of
the investment grade characteristics of our
prime, modern UK care home portfolio.
Firstly, rental growth was 3.8% on a like-
for-like basis (2023: 3.8%) and has been
supported by a quality rental stream from
34 tenants with robust rent covers of
1.9x (2023: 1.6x). Underlying demand for
places in our homes remains high at 87%
mature home occupancy (2023: 85%) with
scope for further profitability growth as
occupancy trends further towards the 90%
long-term average.
Secondly, portfolio-level total returns
continue to impress. We are delighted to
have been the top performer in the MSCI
UK Annual Healthcare Property Index for
the calendar year 2023, coming first of
37 contributors at 9.7% total return. More
importantly, this is sustained performance
as we rank second over the 10-year period
ending 2023. Investment demand in an
active market supports valuations, with the
like-for-like valuation growth for the year of
INVESTMENT MANAGER’S REPORT
Portfolio
performance
and UK care home
investment market.
3.7% largely driven by the growth in rents
as valuation yield volatility remains low for
prime care homes.
Our portfolio metrics are strong. 90% of
homes are mature in their trading, 84%
are younger than 2010-build date, and the
WAULT remains long at over 26 years. These
characteristics and the bias towards private-
fee payments of our tenants’ revenue (74%)
all support the quality of our rental stream
and its annual and compounding long-term
growth. We continue to be able to re-tenant
assets to alternative operators where it
benefits the overall portfolio. We transitioned
a home in the North-East of Scotland to an
operator with a core focus in that region,
and consistent with previous tenant changes,
this was achieved at no change to the
prevailing, sustainable rent level and with
no Group-funded incentives required. The
portfolio metrics have also benefitted from
our disposal programme. The £44.3 million
transaction for four care homes prior to the
year-end was (i) at an implied NIY of 5.6%,
ahead of the portfolio average of 6.2%, (ii)
for four of the oldest assets in the portfolio;
and (iii) for four of the shortest remaining
lease terms. The proceeds have been used
to reduce drawn debt levels and to fund
construction of the Group’s development
assets, providing brand new, purpose-built
beds on 35-year leases to replace the older
assets subject to disposal.
Care home trading
Our typical investment appraisal is based on
a home’s ability to achieve earnings at least
1.6x the home’s rent, to provide headroom
and financial resilience. The portfolio has
achieved 1.9x rent cover this year, endorsing
our investment case on the trading potential
of prime care home real estate, particularly
given resident occupancy is not at capacity.
We continue to believe this is at least partly
due to tenants’ reluctance to fill beds ‘at any
cost’, with many being resistant to accepting
financially unviable fees from publicly-
funded sources. Profitability follows growing
revenue in a well-run business, and we
believe this trend will continue for those who
have chosen to follow a ‘quality first’ ethos
with regard to building suitability. There is
increasing evidence that post Covid the flight
to quality is accelerating with families willing
and prepared to pay for better facilities for
their loved ones.
Average weekly fees for residents have
increased by c.9%-10% as a result of the
above approach and inflationary cost
increases are largely being passed on. Staff
costs are the largest and potentially most
volatile expense item for a home and are
therefore the bellwether for the sustainability
of home profitability. Staff costs per resident
per week have increased by a similar
percentage as fees, whilst agency usage
and costs have reduced as operators
manage costs.
8.00%
7.00%
6.00%
5.00%
2.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2024
4.0 0%
3.00%
2023
Company topped-up NIY MSCI monthly index – all property NIY
COMPANY TOPPED-UP NIYS AND MSCI MONTHLY INDEX – ALL PROPERTY NIYS
21Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Investment market
Low volatility of valuation continues
The UK care home investment market
remained muted relative to the pre-2022
average. Some of the major investors paused
activity, with availability of capital and the
yield available relative to the risk-free rate
being constraining factors. Scarcity of
quality product in the market has also been
a key theme with sales activity in the main
driven by investment holders requiring
to re-balance their asset weightings and
to generate liquidity. There has been
competitive tension for prime assets, with
lower demand for sub-prime where pricing
has moved out towards net initial yields
of 10%. Care homes with strong ESG
credentials remain attractive targets for
investment activity.
On pricing, the reaction to the 2022
mini budget was an initial outward
yield movement of 40-50 bps which
then softened marginally to 30-40 bps.
This reflects what we observed in the
transactional market for deals completing,
and also in the portfolio EPRA topped-up NIY
of 6.20% compared to that of two years ago
at 30 June 2022 of 5.82%. Prime care homes
have once again proven to be less volatile
than All Property whilst still providing returns
at an attractive spread to the risk-free rate.
Health and social care update
We note below a number of areas which
are prominent in our minds and those of
our tenants:
Change of Government and the future
of social care
During the July 2024 General Election
campaign, the Conservatives chose to
promote their multi-year funding settlement
to Local Authorities as well as their
commitment to implement the previously
postponed ‘Dilnot’ cap on social care costs
from October 2025. Labour mirrored the
same care cap proposal along with the
creation of a National Care Service, and an
intention to establish a fair pay agreement
across the sector.
Subsequent to its win the new Labour
government cancelled the proposed ‘Dilnot’
cap on care costs and proposed instead
a much broader rethink of policy, likely
including a Royal Commission on the matter.
Private operators may be encouraged by
pre-election comments of Wes Streeting,
(now) Secretary of State for Health and Social
Care, who said he was ‘pragmatic’ about
the use of private health in support of the
NHS going forward. Also, it is recognised by
Government that care homes and the wider
social care sector are an essential aide to
the smooth running of the NHS. The Labour
Government has set a priority on improving
the flow through NHS hospitals – including
by allowing earlier discharges and the likely
consequence of this will be to increase
demand for care home provision.
Staffing and inflationary pressures
Recruitment has eased considerably over the
course of the year, and while concerns have
been raised recently about the fall in health
and social care worker visa applications,
many operators are reporting stable staffing,
with the use of expensive agency support
reduced back to more historical low levels
and used mainly for routine gaps in staffing,
brought about by unplanned shortages such
as sickness cover. Operators are however
watching applications with some disquiet,
as the previous Government’s decision to
restrict accompanying dependants from
applicants (while not doing the same for
NHS applicants) has created a nervousness
that future applicants may choose other
geographies over the UK and worry that
come reapplication time for existing visa
holders, unknown numbers may not choose
to stay.
The minimum wage rise, while putting
pressure on organisations who rely on lower
publicly funded fee rates, is widely supported
by the sector, who value the dedication
of those who choose the sector as much
from a vocational perspective as simply
just routine employment. Most operators
will however be watching with interest the
new Government’s intention to introduce
collective and fair pay agreements across
adult social care, which will push costs up
going forward with a resultant pressure on
fee inflation.
Demographics of those of working age
may become more of a challenge for the
sector. The 150,000 vacancy volume across
the sector has recently been reduced to
130,000, according to the organisation ’Skills
for care’, but the same organisation notes
if the workforce need grows in line with
demographic changes an extra 440,000
roles will be required by 2035. There are
currently 440,000 posts filled by people who
will reach retirement age in the next 10 years.
Regulation
English operators who have suffered
some frustration with the Care Quality
Commission (CQC), since the introduction
of the regulator’s new ‘single assessment
framework’ last autumn, feel slightly
vindicated in the Government’s ‘Dash’ report,
which highlights some serious concerns
in the methodology for inspections and
ratings. Wes Streeting, the Secretary of State
for Health and Social Care, went as far as to
say it was clear to him that the CQC was ‘not
fit for purpose’. While this is a relief to many
operators, in that they too found difficulty in
understanding what was expected of them,
it potentially causes further frustration in
the delay of inspections for homes deemed
‘Required Improvement’, where operators
are delayed in communicating a clean bill
of health to potential clientele. It is too early
to say whether the CQC will be subject to
tinkering reform, or whether more sweeping
change will take place.
Target Fund Managers Limited
16 September 2024
22 Target Healthcare REIT plc
RISK REPORT
Risk
Description of risk and factors affecting
risk rating
Mitigation
Risk rating
& change
Poor performance
of investments/
investment assets
There is a risk that a tenant’s business could become
unsustainable if its care homes trade poorly. This
could lead to a loss of income for the Group and
an adverse impact on the Group’s results and
shareholder returns. The strategy of investing in new
purpose-built care homes could lead to additional
fill-up risk and there may be a limited amount of time
that operators can fund start-up losses.
The Investment Manager focuses on tenant
diversification across the portfolio and, by considering
the local market dynamics for each home, aims to
ensure that rents are set at sustainable levels. Rent
deposits or other guarantees are sought, where
appropriate, to provide additional security for the
Group. The Investment Manager has ongoing
engagement with the Group’s tenants to proactively
assist and monitor performance.
High
High inflationary
environment
An increase in the UK inflation rate to a level above
the rent review caps in place across the portfolio’s
long-term leases may result in a real term decrease
in the Group’s income and be detrimental to its
performance. In addition, cost increases for tenants,
particularly in relation to staffing and utilities, may
erode their profitability and rent cover unless their
revenue increases accordingly.
The Group’s portfolio includes inflation-linked leases,
with primarily annual upwards-only rent reviews within
a cap and collar. The gradual fall in the RPI inflation
rate since October 2022 means that, at 30 June
2024, the rate of inflation was below the level of the
Group’s rent review caps. The Investment Manager
is monitoring tenant performance, including rent
covers and whether average weekly fees paid by the
underlying diversified mix of publicly funded and
private-fee paying residents are growing in line
with inflation.
Medium
Adverse interest
rate fluctuations/
debt covenant
compliance
Adverse interest rate fluctuations will increase the
cost of the Group’s variable rate debt facilities; limit
borrowing capacity; adversely impact property
valuations; and be detrimental to the Group’s
overall returns.
The Group has a conservative gearing strategy and,
although net gearing is anticipated to increase as the
Group nears full investment, this reduced following the
property disposals in June 2024. Loan covenants and
liquidity levels are closely monitored for compliance
and headroom. The Group has fixed interest costs on
£230 million of its total borrowings of £243 million as
at 30 June 2024.
Medium
Negative perception
of the care home
sector
A negative perception of the care home sector,
due to matters such as societal trends, pandemic
or safeguarding failures, or difficulties in accessing
social care, may result in a reduction in demand
for care home beds, causing asset performance to
fall below expectations despite the demographic
shifts and the realities of needs-based demand in
the sector. The resultant reputational damage
could impact occupancy levels and rent covers
across the portfolio.
The Group is committed to investing in high quality
real estate with high quality operators. These assets
are expected to experience demand ahead of the
sector average while in the wider market a large
number of care homes without fit-for-purpose
facilities are expected to close. A trend of improving
occupancy rates across the portfolio has been noted
in recent times.
Medium
Availability of capital
Without access to equity or debt capital, the Group
may be unable to grow through acquisition of
attractive investment opportunities. This is likely
to be driven by both investor demand and lender
appetite which will reflect Group performance,
competitor performance, general market conditions
and the relative attractiveness of investment in UK
healthcare property.
The Group maintains regular communication with
investors and existing debt providers, and, with the
assistance of its broker and sponsor, regularly monitors
the Group’s capital requirements and investment
pipeline alongside opportunities to raise both equity
and debt. Whilst the Company’s shares remain at a
discount, potentially limiting access to equity capital
for further growth, discussions with existing and
potential lenders indicate sufficient appetite to enable
a refinancing on acceptable terms of the Group’s loan
facilities due to expire in November 2025.
Medium
ESG and climate
change
A change in climate, such as an increased risk of
local or coastal flooding, or a change in tenant/
investor demands or regulatory requirements for
properties which meet certain environmental criteria,
such as integral heat pumps, may result in a fall in
demand for the Group’s properties, reducing rental
income and/or property valuations.
The Group is committed to investing in high quality real
estate with high quality operators. The portfolio’s EPC
and BREEAM in-use ratings suggest the portfolio is well
positioned to meet future requirements/expectations.
The Investment Manager uses a house standard to
ensure ESG factors are fully considered during the
acquisition process.
Medium
Principal and emerging risks
and risk management.
23Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
STRATEGIC OBJECTIVES RISK TREND
To grow a robust
portfolio
Risk
increased
Risk
unchanged
Risk
decreased
Dividend focus Specialist, engaged
manager
Responsible
investment
Risk
Description of risk and factors affecting
risk rating
Mitigation
Risk rating
& change
Reduced availability
of carers, nurses and
other care home
staff
The combined impacts of the pandemic and
increased employment and wage inflation in
competing sectors has reduced the availability
of key staff in the care sector which may result in
a reduction in the quality of care for underlying
residents, restrict tenants from being able to admit
residents or result in wage inflation.
The Group is committed to investing in high
quality real estate with high quality operators and
these should be better placed to attract staff. The
Investment Manager continues to engage with
tenants in the portfolio and to share examples of
best practice in recruitment and retention of staff.
Medium
Development costs
The high inflationary environment, particularly for
building materials and staff, combined with supply
chain difficulties, may result in an increased risk that
the developers of contracted developments do not
fulfil their obligations and/or may increase the cost
of new development opportunities.
The Group is not significantly exposed to
development risk, with forward funded acquisitions
being developed under fixed price contracts, with
the Investment Manager having considered both the
financial strength of the developer and the ability of
the developer’s profit to absorb any cost overruns.
As at 30 June 2024, the Group held only two
remaining developments.
Medium
Breach of REIT
regulations
A breach of REIT regulations, primarily in relation
to making the necessary level of distributions,
may result in loss of tax advantages derived from
the Group’s REIT status. The Group remains fully
compliant with the REIT regulations and is fully
domiciled in the UK .
The Group’s activities, including the level of
distributions, are monitored to ensure all conditions
are adhered to. The REIT rules are considered during
investment appraisal and transactions structured to
ensure conditions are met.
Medium
Changes in
government policies
Changes in government policies, including those
affecting local authority funding of care, may render
the Group’s strategy inappropriate. Secure income
and property valuations will be at risk if tenant
finances suffer from policy changes.
Government policy is monitored by the Group to
increase the ability to anticipate changes. The Group’s
tenants also typically have a multiplicity of income
sources, with their business models not wholly
dependent on government funding.
Medium
Reliance on third
party service
providers
The Group is externally managed and, as such,
relies on a number of service providers. Poor quality
service from providers such as the Investment
Manager, company secretary, broker, legal advisers
or depositary could have potentially negative impacts
on the Group’s investment performance, legal
obligations, compliance or shareholder relations.
The Investment Manager, along with all other
service providers, is subject to regular performance
appraisal by the Board. The Investment Manager has
retained key personnel since the Group’s IPO and
has successfully hired further skilled individuals and
invested in its systems.
Medium
Failure to
differentiate qualities
from competitors
or poor investment
performance
Failing to differentiate strategy and qualities from
competitors is a significant risk for the business,
with increased competition in the healthcare real
estate sector. The failure to communicate these
effectively to stakeholders could have a negative
impact on the Company’s share price, future
demand for equity raises and/or debt finance
and wider reputational damage.
The stakeholder communications strategy of the
Group has always been to highlight the quality of the
real estate in which the Group invests. The regular
production of investor relations materials (annual and
interim reports, investor presentations and quarterly
factsheets) along with direct engagement with
investors helps to mitigate this risk.
Medium
The Company’s risk matrix is reviewed regularly by the Board as detailed on page 44. Emerging risks are identified though regular discussion at
Board meetings of matters relevant to the Company and the sectors in which it operates; including matters that may impact on the underlying
tenant operators. In addition, the Board holds an annual two-day strategy meeting which includes presentations from relevant external
parties to ensure that the Board is fully briefed on relevant matters. At the strategy meeting, as part of an overall SWOT analysis, principal and
emerging risks are discussed and reviewed to ensure that they have all been appropriately identified and, where necessary, addressed.
The detailed consideration of the Company’s viability and its continuation as a going concern, including sensitivity analysis to address the
appropriate risks, is set out on pages 32 and 33.
24 Target Healthcare REIT plc
SECTION 172 STATEMENT
Promoting the success of
Target Healthcare REIT plc.
The Board considers that it has made decisions
during the year which will promote the success of
the Group for the benefit of its members as a whole.
(a) The likely consequences of any
decision in the long-term
Our investment approach is long-term with an average lease length of 26.4 years. We believe this is
the most responsible approach to provide stability and sustainability to tenants and key stakeholders.
Therefore, most decisions require consideration of long-term consequences, from determining a
sustainable rent level and the right tenant partner for each investment, to considering the impact
of debt and key contracts with service providers on the recurring earnings which support dividends
to shareholders.
(b) The interests of the
Company’s employees
The Company is externally managed and therefore has no employees.
(c) The need to foster the Company’s
business relationships with
suppliers, customers and others
As a REIT with no employees, the Board works in close partnership with the Manager, which runs
the Group’s operations and portfolio within parameters set by the Board and subject to appropriate
oversight. The Manager has deep relationships with tenants, the wider care home sector, and many of
the Group’s other suppliers. These are set out in more detail in the table on the following page.
(d) The impact of the Company’s
operations on the community
and the environment
The Board is confident the Group’s approach to investing in a sensitive sector is responsible with
regard to social and environmental impact. This is set out in more detail in the community and the
environment section of the table on the following page.
(e) The desirability of the Company
maintaining a reputation for high
standards of business conduct
The Board requires high standards of itself, service providers and stakeholders. The Group’s purpose
and investment objectives dictate that these standards are met in order to retain credibility. The ethos
and tone is set by the Board and the Manager.
(f) The need to act fairly as between
members of the Company
The Board encourages an active dialogue with shareholders to ensure effective communication,
either directly or via its broker and/or Manager. The interests of all shareholders are considered when
issuing new shares and/or considering the level of distributions or other return of capital.
The significant transactions where the interests of stakeholders were actively considered by the Board during the year were:
Dividends paid
The Board recognised the importance of
dividends to its shareholders and, after
careful analysis of the Group’s forecast net
revenue concluded that, having reduced
the quarterly dividend in January 2023, it
was in the interests of all stakeholders to
increase the Company’s dividends in relation
to the year ended 30 June 2024 to reflect
underlying rental growth whilst remaining at
a level which is expected to be fully covered
with the potential for further growth. As set
out in more detail in the Chair’s Statement,
the Board intends to increase the quarterly
dividends for 2024/25 by a further 3%.
Ongoing investment and asset
management activity
The Group acquired a new development
site in July 2023. The new, high-quality beds
brought to the market by completion of this
operationally net carbon zero home in June
2024, combined with the Group’s other
developments and its asset management
activities to increase the percentage of wet
rooms in the property portfolio to 99%,
illustrate the Group’s intent of improving the
overall level of care home real estate in the
UK. This approach targets attractive long-
term returns to shareholders by focusing on
a sustainable and ‘future proofed’ sector of
the care home market.
The overall quality of the Group’s portfolio
was also improved by the disposal of four
homes from the portfolio which were in the
lower quartile of the portfolio with respect
to age, lease length and overall building
quality. The disposal at an implied net initial
yield of 5.64%, demonstrated to the market
the institutional grade quality and demand
for both the Group’s prime care home real
estate portfolio and for the wider sector.
The Group has particularly considered the
level of carbon emissions from its property
portfolio, significantly improving the level of
data collection and significantly advancing
its determination of a plan to reach net zero
carbon in line with the science-based target
to limit warming to 1.5°C.
The Group completed the re-tenanting of
a property with the rental level remaining
unchanged and green provisions being
included in the revised lease.
Capital financing
The Board continued to minimise the
Group’s exposure to rising interest rates on its
borrowings by allocating the proceeds from
the disposal above to reduce the Group’s
more expensive unhedged debt and fund the
remaining development pipeline. The Board
has encouraged the Investment Manager to
progress the exploration of options available
to refinance the Group’s shortest dated debt
facilities which expire in November 2025.
Director appointments
With the completion in the prior year of the
Board’s succession plan for the medium
term, Dr Thompsell took on the role of
chair of the Nomination Committee, in
addition to her existing role as chair of the
Remuneration Committee, to ensure the
ongoing effectiveness of the Board and
continue the process of planning for the
longer term. In addition, subsequent to
the year-end, Mr Cotton has been
appointed as chair of the Management
Engagement Committee.
25Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Stakeholders
The Company is a REIT and has no executive directors or employees and is governed by the Board of Directors. Its main stakeholders are
shareholders, tenants and their underlying residents, debt providers, the Investment Manager, other service providers and the community and
the environment. The Board considers the long-term consequences of its decisions on its stakeholders to ensure the long-term sustainability
of the Company.
Shareholders
Shareholders are key stakeholders and the Board proactively seeks the views of its shareholders and places great
importance on communication with them.
The Board reviews the detail of significant shareholders and recent movements at each Board Meeting and receives
regular reports from the Investment Manager and Broker on the views of shareholders, and prospective shareholders,
as well as updates on general market trends and expectations. The Chair and other Directors make themselves
available to meet shareholders when required to discuss the Group’s business and address shareholder queries.
The Directors make themselves available at the AGM in person, with the Company also providing the ability for any
questions to be raised with the Board by email in advance of the meeting.
The Company and Investment Manager also provide regular updates to shareholders and the market through the Annual
Report, Interim Report, Sustainability Report, regular RNS announcements, quarterly investor reports and the Company’s
website. The Investment Manager holds a results presentation on the day of publication of each of the Annual and
Interim Reports, and meets with analysts and members of the financial press throughout the year.
Tenants and
underlying residents
As set out in more detail on pages 12 and 13, the Investment Manager liaises closely with tenants to understand their
needs, and those of their underlying residents, through visits to properties and regular communication with both care
home personnel and senior management of the tenant operators. The effectiveness of this engagement is assessed
through a regular tenant survey which, during 2024, was undertaken by an external third-party.
The Investment Manager also receives, and analyses, management information provided by each tenant at least
quarterly and regularly monitors the CQC, or equivalent, rating for each home and any online reviews, such as
carehome.co.uk. Any significant matters are discussed with the tenant and are included within the Board reporting.
Debt providers
The Group has term loan and revolving credit facilities with the Royal Bank of Scotland plc, HSBC Bank plc and
Phoenix Group (see Note 13 to the Consolidated Financial Statements for more information). The Company maintains
a positive working relationship with each of its lenders and provides regular updates, at least quarterly, on portfolio
activity and compliance with its loan covenants in relation to each loan facility. The Company has commenced
discussions with both existing and potential new lenders in relation to refinancing the proportion of its debt facilities
which will expire in November 2025.
Investment
Manager
The Investment Manager has responsibility for the day-to-day management of the Group pursuant to the Investment
Management Agreement. The Board, and its committees, are in regular communication with the Investment
Manager and receive formal presentations at every Board Meeting to aid its oversight of the Group’s activities and the
formulation of its ongoing strategy.
The Board, through the Management Engagement Committee, formally reviews the performance of the Investment
Manager, the terms of its appointment and the quality of the other services provided at least annually. Further details on
this process and the conclusions reached in relation to the year ended 30 June 2024 are contained on page 39.
Other service
providers
The Board, through the Management Engagement Committee, formally reviews the performance of each of its
significant service providers at least annually. The reviews will include the Company’s legal adviser, broker, tax adviser,
auditor, depositary, external valuer, company secretary, insurance broker, surveyors and registrar. The purpose of
these reviews is to ensure that the quality of the services provided remains of the standard expected by the Board
and that overall costs and other contractual arrangements remain in the interests of the Group and other significant
stakeholders. The Investment Manager also reports regularly to the Board on these relationships.
The significant other service providers, particularly the Group’s legal advisers and brokers, are invited to attend Board
Meetings, including the annual Strategy Meeting, and report directly to the Directors where appropriate.
Community and
the environment
The Group’s principal non-financial objective is to generate a positive social impact for the end-users of its real estate.
Investment decisions are made based on the fundamental premise that the real estate is suitable for its residents, the staff
who care for them, and their friends, families and local communities, both on original acquisition and for the long-term.
Environmental considerations are an integral part of the acquisition and portfolio management process, given the
strategy of only acquiring modern buildings which benchmark well from an energy efficiency aspect and which
meet the requirements of the Investment Manager’s ESG Charter ‘Targeting Tomorrow’. Under the remit of the ESG
Committee, the progression of the Group’s ESG strategy has prioritised gathering useful energy/consumption data
on its portfolio, whilst identifying and commencing work on a straightforward hierarchy of initiatives to maximise the
Group’s impact over both the short and longer term; and progressing the formation of a longer term portfolio strategy
in relation to setting and meeting the Group’s net zero carbon target.
On behalf of the Board
Alison Fyfe
Chair
16 September 2024
26 Target Healthcare REIT plc
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 35 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank
of Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the bank
she fulfilled several senior property finance
roles, ultimately serving for five years as Head
of Real Estate Restructuring in Scotland before
leaving the bank in 2015. She has subsequently
acted as a director of a number of companies
in the property and debt finance sectors.
She has been elected as a Governing Board
Member of Hillcrest Homes (Scotland) and
serves a trustee of the Church of Scotland
Housing and Loan Fund.
Ms Fyfe is a member of the Royal Institution
of Chartered Surveyors, a member of the
Investment Property Forum and a former
Policy Board member of the Scottish
Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department
for over 20 years, and served on its Executive
Board and Operating Committee, respectively
responsible for strategic direction and day-to-
day management.
He is a Fellow of the Royal Institution of
Chartered Surveyors, and has been extensively
involved with the RICS throughout his
professional career. He was formerly a
member of the Policy Committee of the British
Property Federation, the RICS Global Valuation
Professional Board and the Bank of England
Commercial Property Forum.
Mr Brodtman is currently a non-executive
director of Grainger plc, a listed residential
property company, and has further Board
experience as a former non-executive
director of Investment Property Databank and
housing association Places for People. He
is keenly interested in the healthcare sector,
with relevant experience from his role as a
Trustee of Jewish Care, which provides health
and social care services for London’s Jewish
Community, including ten care homes with
some 500 residents.
Mr Cotton has over 40 years of experience
in the property sector and headed the real
estate corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners and
chairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc and
including advisory roles with Lloyds Bank and
Transport for London.
Mr Cotton is currently the chairman of Helical
plc and a consultant to Big Yellow Group plc,
where he served as a non-executive director
from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the Global
Managing Partner Audit for Deloitte. He held
a number of senior leadership roles within
Deloitte including as a member of the UK
Board of Partners and of the Global Executive
Group and the UK Executive Group before his
retirement from Deloitte in May 2015. During
his career at Deloitte, Mr Niblett served some
of the firm’s most significant public company
clients, working with them on commercial
and strategic issues as well as providing
audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee
of Forterra plc and an independent non-
executive director and senior independent
director of Big Yellow Group plc.
Mr Niblett also serves as a trustee of the Ruth
Strauss Foundation.
Dr Thompsell trained and originally
practised as a GP before switching to
working in old age hospital medicine,
and then retraining in old age psychiatry.
She has significant clinical experience
of all aspects of caring for older people
and has held a number of clinical and
national leadership roles allowing her to
develop a comprehensive knowledge of
the care home sector. This included 17
years at the South London and Maudsley
NHS Foundation Trust, where she led a
multidisciplinary team supporting care
homes for seven years and was the clinical
lead for long-stay older people’s mental
health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at
NHS England, a member of the advisory
board to the Journal of Dementia Care, a
Medical Member of the First Tier Tribunal at
the UK Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment
1 May 2020 1 January 2023
1 November 2022 25 August 2021 1 February 2022
Country of residence
UK UK
UK UK UK
Independent
Yes Yes
Yes Yes Yes
Other public company directorships
None Grainger plc
Helical plc Big Yellow Group plc
Forterra plc
None
Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
BOARD OF DIRECTORS
Our experienced
and knowledgeable
Board are responsible
for the effective
stewardship of
the Company.
27Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 35 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank
of Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the bank
she fulfilled several senior property finance
roles, ultimately serving for five years as Head
of Real Estate Restructuring in Scotland before
leaving the bank in 2015. She has subsequently
acted as a director of a number of companies
in the property and debt finance sectors.
She has been elected as a Governing Board
Member of Hillcrest Homes (Scotland) and
serves a trustee of the Church of Scotland
Housing and Loan Fund.
Ms Fyfe is a member of the Royal Institution
of Chartered Surveyors, a member of the
Investment Property Forum and a former
Policy Board member of the Scottish
Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department
for over 20 years, and served on its Executive
Board and Operating Committee, respectively
responsible for strategic direction and day-to-
day management.
He is a Fellow of the Royal Institution of
Chartered Surveyors, and has been extensively
involved with the RICS throughout his
professional career. He was formerly a
member of the Policy Committee of the British
Property Federation, the RICS Global Valuation
Professional Board and the Bank of England
Commercial Property Forum.
Mr Brodtman is currently a non-executive
director of Grainger plc, a listed residential
property company, and has further Board
experience as a former non-executive
director of Investment Property Databank and
housing association Places for People. He
is keenly interested in the healthcare sector,
with relevant experience from his role as a
Trustee of Jewish Care, which provides health
and social care services for London’s Jewish
Community, including ten care homes with
some 500 residents.
Mr Cotton has over 40 years of experience
in the property sector and headed the real
estate corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners and
chairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc and
including advisory roles with Lloyds Bank and
Transport for London.
Mr Cotton is currently the chairman of Helical
plc and a consultant to Big Yellow Group plc,
where he served as a non-executive director
from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the Global
Managing Partner Audit for Deloitte. He held
a number of senior leadership roles within
Deloitte including as a member of the UK
Board of Partners and of the Global Executive
Group and the UK Executive Group before his
retirement from Deloitte in May 2015. During
his career at Deloitte, Mr Niblett served some
of the firm’s most significant public company
clients, working with them on commercial
and strategic issues as well as providing
audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee
of Forterra plc and an independent non-
executive director and senior independent
director of Big Yellow Group plc.
Mr Niblett also serves as a trustee of the Ruth
Strauss Foundation.
Dr Thompsell trained and originally
practised as a GP before switching to
working in old age hospital medicine,
and then retraining in old age psychiatry.
She has significant clinical experience
of all aspects of caring for older people
and has held a number of clinical and
national leadership roles allowing her to
develop a comprehensive knowledge of
the care home sector. This included 17
years at the South London and Maudsley
NHS Foundation Trust, where she led a
multidisciplinary team supporting care
homes for seven years and was the clinical
lead for long-stay older people’s mental
health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at
NHS England, a member of the advisory
board to the Journal of Dementia Care, a
Medical Member of the First Tier Tribunal at
the UK Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment
1 May 2020 1 January 2023
1 November 2022 25 August 2021 1 February 2022
Country of residence
UK UK
UK UK UK
Independent
Yes Yes
Yes Yes Yes
Other public company directorships
None Grainger plc
Helical plc Big Yellow Group plc
Forterra plc
None
Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
28 Target Healthcare REIT plc
Experts in
strategic,
responsible
investment.
INVESTMENT MANAGER
The Investment Manager
The Group has appointed Target Fund Managers Limited (‘Target’ or the ‘Investment Manager’) as its investment manager pursuant to the
Investment Management Agreement. The Investment Manager is a limited company which is authorised and regulated by the FCA and has the
responsibility for the day-to-day management of the Group and advises the Group on the acquisition of its investment portfolio and on the
development, management and disposal of UK care homes and other healthcare assets in the portfolio. It comprises a team of experienced
individuals with expertise in the operation of and investment in healthcare property assets.
Alternative Investment Fund Managers Directive (‘AIFMD’)
The Board has appointed Target as the Group’s AIFM and Target has received FCA approval to act as AIFM of the Group. An additional requirement
of the AIFMD is for the Group to appoint a depositary, which oversees the property transactions and cash arrangements and other AIFMD
required depositary responsibilities. The Board has appointed IQ EQ Depositary Company (UK) Limited to act as the Company’s depositary.
Key personnel of the Investment Manager
The key personnel who are responsible for managing the Group’s activities are set out on the following page.