Investing in care.
Delivering returns.
Annual Report and Financial Statements 2025
Target Healthcare REIT plc Annual Report and Financial Statements 2025
0.0 114.8
104.5
110.7
114.8
2023
2024
2025
0.0 24.7
24.7%
22.5%
21.8%
2023
2024
2025
0
-1. 2%
11.8%
9.3%
2023
2024
2025
0.00 6.18
6.180
5.712
5.884
2023
2024
2025
0
-6.6
73.0
60.8
2023
2024
2025
0 107
97%
107%
103%
2023
2024
2025
Introduction
Who we are
2025 Financial highlights
We are
Target
Healthcare
We prioritise responsible investment
with a clear purpose – improving the
UK’s care home real estate.
1 Based on EPRA NTA movement and dividends paid, see alternative
performance measures on page 104.
2 Weighted average cost of drawn debt, inclusive of amortisation of
arrangement costs.
3 See Glossary of terms and definitions on page 109.
4 Based on adjusted EPRA earnings, see note 8 to the consolidated financial
statements and alternative performance measures on page 104.
5 See EPRA performance measures on page 106.
EPRA NTA per share (pence)
114.8 +3.7%
Total accounting return
1
9.3%
IFRS profit (£ million)
60.8
Net loan-to-value
3
21.8%
Dividend per share (pence)
5.884+3.0%
Dividend cover
4
103%
Annual Report and Financial Statements 2025
01
Corporate Governance
Strategic Report
Financial Statements Additional Information
868.7
908.5
929.9
2023
2024
2025
3.70
3.91
3.84
2023
2024
2025
6.00
6.13
6.08
2023
2024
2025
18.7%
19.1%
21.8%
2023
2024
2025
In this report…
04
Strategic Report
Chair’s Statement 05
Our Investments 08
Business Model 10
Our Strategy 12
Our Strategy in Action 19
Post Year-end Transactions 21
ESG Commitments 22
Investment Manager’s Report 24
Principal and Emerging Risks
and Risk Management 26
Section 172 Statement 28
30
Corporate Governance
Board of Directors 32
Investment Manager 34
Directors’ Report 36
Statement of Directors’
Responsibilities 43
Corporate Governance
Statement 44
Report of the Audit Committee 49
Directors’ Remuneration Report 54
Independent Auditor’s Report 58
64
Financial Statements
Consolidated Statement
of Comprehensive Income 66
Consolidated Statement
of Financial Position 67
Consolidated Statement
of Changes in Equity 68
Consolidated Statement
of Cash Flows 69
Notes to the Consolidated
Financial Statements 70
Company Financial Statements 88
98
Additional Information
Notice of AGM 98
Shareholder Information 101
Performance Measures 104
Glossary 108
Portfolio value (£ million)
929.9 +2.4%
Average cost of debt
2
3.84% -7bps
Adjusted EPRA earnings
per share (pence)
4
6.08 -0.8%
Adjusted EPRA
cost ratio
5
21.8% +270bps
Asset Management
This year our Investment
Manager completed
initiatives across a
number of homes to
secure rental income and
deliver shareholder value.
Read more: pages 19-20
Case studies
Target Healthcare REIT plc
2
1
18
22
7
12
5
5
13
8
At a Glance – Our Market
What we do
Our portfolio
Principled
investment
exclusively in
well-designed,
purpose-built
care homes
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.
1
= Number of properties in region
MSCI Region
Contracted
Rent (£m)
Market
Value (£m)
Yorkshire & The Humber 11.8 180.9
South East
11.5 179.3
North West
10.8 162.8
East Midlands
6.8 99.2
South West
5.9 83.5
Scotland
4.6 68.4
West Midlands
4.3 73.8
Eastern
3.7 54.5
North East
1.2 18.9
Wales
0.6 8.6
Total 61.2 929.9
Annual Report and Financial Statements 2025
03
Corporate Governance
Strategic Report
Financial Statements Additional Information
13%
3%
84%
16%
36%
4%
4%
8%
6%
6%
6%
5%
5%
4%
Results
Portfolio at 30 June 2025 Business
Scale
6,309
Beds
2
Track Record
7.5% since launch
Total accounting return
(annualised)
Prudent
21.8%
Net loan-to-value
High quality
real estate
Homes
93
Portfolio
£930m
market value
£61m
contracted rent
Diversified
Income
Tenants
34
Fee sources
1
79%
private
21%
public
Long-term
focus
WAULT
25.9 years
Upwards only
rent reviews
100%
inflation-linked
1 52% privately paid, 27% topped up privately paid and 21% publicly funded.
2 60 beds will be added on completion of the development site held at 30 June 2025.
Operator diversification by
contracted rent
Properties by date of
construction
Purpose-built 2010 onwards
Purpose-built 2000 – 2009
Purpose-built 1990 – 1999
The first ten blocks represent our
tenlargest operators, with the
eleventhrepresenting the remaining
24operators, each below 3.3%.
Target Healthcare REIT plc
04
Strategic
Report
In this section…
04 – 29
Chair’s Statement 05
Our Investments 08
Business Model 10
Our Strategy 12
Our Strategy in Action 19
Post Year-end Transactions 21
ESG Commitments 22
Investment Manager’s Report 24
Principal and Emerging Risks and Risk Management 26
Section 172 Statement 28
Annual Report and Financial Statements 2025
05
Corporate Governance
Strategic Report
Financial Statements Additional Information
Dear Shareholder,
I am pleased to deliver this update
following a successful year of active asset
management, during which the Company
has delivered solid portfolio and financial
performance. The Group has delivered a
total accounting return of 9.3% against what
has remained a challenging backdrop. This
shows the resilience of our business model
based on best-in-class real estate assets
operating in a specialist sector that has
demographics on its side.
The Group has continued to focus on its
regular asset management activities to
enhance returns, to improve the quality of its
real estate and to maintain its long-duration
income stream. We do this through curating
a high-quality property portfolio which
generates inflation-linked rental income and
capital value growth. We invest in care homes
with strong ESG credentials minimising any
additional capital expenditure needed to
meet increasing environmental standards.
Our approach of active portfolio
management has continued post-year end,
with the significant disposal of nine care
homes for £85.9 million, representing a
premium of 11.6% to their carrying value,
delivering shareholder returns and providing
capital for redeployment into best-in-class
assets over the course of the coming year.
With the disposal price representing a net
initial yield of 5.2%, and the Investment
Manager having identified a strong pipeline
of high-quality near-term assets at a net initial
yield of c.6%, the transaction is expected
to be earnings-enhancing. I discuss this
transaction further later in this statement.
1. Market overview
The share prices of listed real estate
companies remained volatile throughout
the year due primarily to the impact of wider
macroeconomic and geopolitical factors,
which have also resulted in interest rates not
falling as fast as had been anticipated. With
share prices having remained depressed and
the current market preference for scale, the
quantum of M&A activity across the property
sector as a whole has been significant.
This was also reflected in the healthcare
sector, with demand for both care home
real estate and operators remaining high,
primarily driven by overseas demand. This
level of investment demand, particularly for
prime care home real estate such as ours, is
expected to continue. The M&A activity has
reinforced the Company’s unique investment
proposition as the sole UK-listed specialist in
the care home sector.
Further consideration of the market from the
care home operators’ perspective is provided
in the Investment Manager’s Report on
pages 24 and 25.
Principled
investment
exclusively in
well-designed,
purpose-built
care homes
Alison Fyfe, Chair
Chair’s Statement
Target Healthcare REIT plc
06
2. Portfolio performance
The Group’s property portfolio continues
to perform well, driven by the strong level
of inflation-linked rental income growth.
At a property level, the portfolio has once
again outperformed the MSCI UK Annual
Healthcare Property Index, with a calendar
year standing assets total return for 2024 of
10.5% relative to the Index’s 5.4%, ranking
the portfolio in the top quartile for the year
and maintaining its record of outperforming
the Index in every year since our IPO. The
strength of this long-term performance is
illustrated by the portfolio recently winning
both the MSCI UK Property Investment
Award for the highest ten-year risk-adjusted
total return, a measure which compares
the portfolio against the entire MSCI
universe, and the highest relative total return
annualised over three years in the listed
funds category.
While rent collection fell marginally to 97%
for the reporting year, this was primarily the
result of matters which have subsequently
been resolved. This rental shortfall, and the
temporary reduction in EPRA earnings in
the final six months of the Group’s financial
year, was driven primarily by the following
two factors:
• One tenant at a single property
(representing 1.4% of the annual rent
roll) was not paying rent. The Group
took the difficult decision to place the
tenant into administration, resulting in
the Group funding administration costs
of c.£0.9 million. These additional costs
reduced the adjusted EPRA earnings per
share by c.0.14 pence and increased the
reported adjusted EPRA cost ratio by
c.146 basis points. However, this decisive
action protected the capital value of the
property, as well as the home’s staff and
the continuity of care for the residents,
by ensuring that the care home remained
operational throughout the period of
administration. Following strong demand
from alternative operators, the home was
successfully re-tenanted on 2 July 2025 at
an increased rental level, and an uplift in
the property valuation is anticipated in the
next quarterly valuation.
• One tenant at three properties
(representing 3.2% of the annual rent roll)
did not pay rent in full for the final quarter
of the year. All three of these properties
were re-tenanted to alternative operators
during September 2025 on similar lease
terms without any tenant incentives
being required. The Group has secured
a parent company guarantee from the
previous tenant which should support the
collection of the rent arrears outstanding.
The likelihood and financial impact of
such matters on the Group are mitigated
through proactive ongoing monitoring of
the tenants’ financial and operating position
and the maintenance of strong tenant
relationships; supporting our Investment
Manager’s engaged landlord approach and
well-resourced, specialist asset management
team. The Group’s investment approach of
curating a diversified portfolio of high-quality
real estate located in the right geographic
locations, underpinned by this sector
specialism, ensures strong demand from
alternative operators should a re-tenanting
represent the most appropriate course
of action.
Looking forward, in relation to the
sustainability of rents for the portfolio as a
whole, the Group’s average rent cover for
the last twelve months, at over 1.9 times,
represents the highest achieved since IPO and
provides a strong foundation for the Group.
It is to be expected that in any portfolio of
scale, particularly in this asset class and with
the Company’s preferred smaller operator
demographic, there will always be ongoing
asset management initiatives required to
maintain the quality of the portfolio and/
or adapt to the changes in operator tenant
circumstances that could arise over a 35-
year lease term. As well as the downside
protection discussed above, these may
also present opportunities to enhance
shareholder value. More detail on the asset
management initiatives undertaken during
the year is contained in the Investment
Manager’s Report on pages 24 and 25, and in
the detailed case studies on pages 19 and 20.
3. Financial performance
As noted above, we delivered a total
accounting return of 9.3% for the year,
driven by an EPRA NTA increase of 3.7%
(114.8 pence from 110.7 pence) and
dividends paid in the year.
Adjusted EPRA earnings per share decreased
marginally by 0.8% to 6.08 pence, translating
to 103% dividend cover for the year. The
quarterly dividend paid in respect of the
year increased 3.0% versus the previous
year, marking the Company’s return to a
progressive dividend.
The positive portfolio like-for-like valuation
movement was 2.6%, driven primarily by rent
uplifts of 3.3% offset by 0.7% from yield shift.
Contracted rent increased by 4.0% to £61.2
million, including 3.3% on a like-for-like basis.
4. Debt facilities and post year-end
refinancing
Subsequent to the year end, the Group has
refinanced its shortest dated loan facilities
replacing £170 million of facilities due to
expire in November 2025 with £130million
of committed facilities from the incumbent
lenders. £50 million are term loans on
which the interest rate has been fixed
through interest rate swaps and £80 million
are revolving credit facilities. These loan
facilities carry a minimum term of three
years, with the option to extend each term
by two additional one-year periods, subject
to the consent of the lending banks. The
loan facilities also include uncommitted
accordion facilities of up to a further
£70million, minimising commitment
fees in the short-term.
These facilities increase the average term
to maturity on the Group’s total committed
debt facilities to 5.9 years as at 30 September
2025, and result in an average cost of
drawn debt of 4.3% of which 81% is fixed
for a minimum of 5.0 years. This compares
to an average cost of drawn debt of 3.9%
immediately prior to the refinancing. Further
details are included on pages 17 and 21.
Overall, these facilities are intended
to provide the Group with certainty
over the availability and cost of its core
financing requirements, whilst retaining
sufficient flexibility to ensure effective cash
management in the short term.
5. Post year-end disposal
As referred to earlier in this statement, the
Group has recently disposed of nine care
homes. This represents the most significant
disposal undertaken by the Group since IPO,
with the sales price representing a significant
premium of 11.6% to the carrying value at
the balance sheet date. Whilst representing
an opportunity to crystallise an attractive
return for shareholders and evidencing
the realisable value of a representative
cross-section of the portfolio, this disposal
was primarily an asset allocation decision;
reducing the Group’s exposure to its current
largest tenant to c.8.8% from c.16.0%.
Total accounting return
+9.3%
Dividend cover
103%
EPRA NTA per share
movement
+3.7%
Chair’s Statement continued
Annual Report and Financial Statements 2025
07
Corporate Governance
Strategic Report
Financial Statements Additional Information
Given investors’ preference for scale, and
reflecting both our growth strategy and
confidence in the long-term financial
outlook for modern, purpose-built care
homes, the intention is to re-invest the
proceeds from the disposal into earnings-
enhancing acquisitions of standing assets
and forward funding of new developments.
The latter will utilise the revolving credit
facilities to minimise the impact of cash drag.
Such acquisitions are expected to follow the
Investment Manager’s measured approach
of identifying best-in-class properties in
the right geographical locations, which
are leased at sustainable rental levels and
acquired at appropriate yields. As previously
mentioned, the Group has a strong pipeline
of accretive investment opportunities
including high quality, strongly performing
existing UK care homes all with en suite
wet-rooms, and new purpose-built forward
funded assets in attractive locations.
6. Dividend
In the absence of unforeseen circumstances,
the Board intends to increase the quarterly
dividend in respect of the year ending
June 2026 by 2.5% to 1.508 pence per
share, providing an annual total dividend
of 6.032pence per share. This increase
represents a modest discount to the Group’s
like-for-like rental growth of 3.3%, in order to
reflect the one-off adjustment from resetting
the interest rate on the Group’s shortest
dated debt facilities.
7. Shareholder engagement
We have always placed a significant
emphasis on ensuring that the views of
shareholders are reflected in any strategic
decisions we take on behalf of the Company.
We recognise that there will generally be
a spectrum of views, particularly given
the current market environment for both
property and listed companies, and we have
sought to increase direct engagement with
shareholders in recent times.
8. Annual General Meeting (‘AGM’)
The AGM will be held in London on
4 December 2025. 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.
9. Outlook
We remain confident in the Group’s
investment strategy; investing in high-
quality care home assets with sustainable
rental streams. We therefore remain firmly
committed to continuing this approach
whilst increasing the scale of the portfolio
over time. The strong foundations provided
by (i) the modern, future-proofed portfolio;
(ii) the sustainable, long-term and inflation-
linked rental income; (iii) the strengthening
of the Group’s balance sheet; and (iv) the
availability of capital for re-investment, are
expected to provide a basis to further drive
shareholder returns. In order to achieve this
aim, the Group intends to:
• Re-invest the proceeds of the recent
disposal into standing assets and
forward fund acquisitions at earnings-
enhancing yields;
• Continue to identify and acquire further
investment opportunities on a measured
basis, through the use of additional
debt in the first instance, with the full
deployment of the Group’s available
capital of £139 million and its additional
debt accordion arrangements potentially
taking the Group’s LTV to c.30%; and
• Continue to consider further asset
management or investment activities,
including disposals, developments
and/or any other earnings-enhancing
opportunities that may arise, to further
improve the quality of our portfolio and
maintain its best-in-class credentials.
Despite the challenging market backdrop
for real estate, our portfolio continues to
consist of future-proofed, best-in-class real
estate in a defensive asset class supported
by compelling long-term demographic
tailwinds. This leaves the portfolio
well-positioned, with the Group ready
to act nimbly to take advantage of any
opportunities that the uncertain market
conditions may present.
Alison Fyfe
Chair
13 October 2025
Target Healthcare REIT plc
08
Our approach to investments
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.
Like-for-like rental growth
3.3%
Five-year average 3.1%
Inflation-linked rental growth
• Our leases have annual, upwards-only rent reviews, linked to inflation with
collars and caps averaging around 1.6% and 3.9%.
• We aim to pass on the associated earnings growth by way of a
progressive dividend.
Secure rental income
Our portfolio continued to demonstrate its durable characteristics during the year:
• Nil vacancy since launch in 2013
• Rent covers, reflecting profitability at home level, at record levels (above 1.9x)
• Private pay bias supporting resident average weekly fee increases of c.8%
• Rent collection at 97%
These metrics strongly support sustainable and growing financial returns.
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 the Group’s IPO in 2013. It is ranked second in its MSCI peer group over
the 10-year period to 31 December 2024 in terms of absolute return, and has recently won MSCI’s ‘highest 10-year risk-adjusted total
return’ award.
MSCI INDEX
MSCI UK Annual Healthcare Property Index Total Return Group Property Portfolio Total Return (ungeared standing assets)
Cumulative Compounded Outperformance
The Index is published annually and covers calendar years. There were 37 constituents in the Index for the year to 31 December 2024 and 12 for the 10-years to the
same date.
Portfolio total return performance
#2/12
as ranked in the MSCI UK Annual
Healthcare Property Index for the
10 years to 31 December 2024
(latest annual index)
80%
60%
70%
40%
50%
20%
30%
10%
0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Our Investments
Annual Report and Financial Statements 2025
09
Corporate Governance
Strategic Report
Financial Statements Additional Information
0 100
11
89
nil
nil
nil
nil
nil
0 100
11
89
nil
nil
nil
nil
nil
Responsible investment
Our care homes are modern, purpose-built and future-proofed for social and
environmental trends, meeting demand and supporting financial performance.
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 1.8 million to 3.6 million by 2050*
People over 85 who will require residential care*
1 in 8
Estimated number of people aged over 85 by 2050*
3.6m
* Source: LaingBuisson, Care homes for older people, 35
th
edition
T R E N D 3 :
Future-proofed modern real
estate in what is generally a
poor-quality market
79% of UK care home real estate is either converted or,
if purpose-built, over 25 years old. Our portfolio is 100%
purpose-built with 84% of homes less than 15 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 13. The sector is moving at pace to
these higher real estate standards, with 34% of rooms now
compliant relative to 14% in 2014. Poorer quality homes will
become obsolete.
T R E N D 4 :
Long-term investment with
compounding returns profile
• Consistent shareholder total returns through dividend
and capital appreciation¹, 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 25.9 years
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
opened in October 2024
• More details on our Net Zero Carbon Pathway (NZP) are
shown on page 22
Commercial real estate owners with older/converted
properties face a significant financial and operating burden
by way of remedial capital expenditure.
PORTFOLIO EPC RATINGS
1 This is not a profit forecast. Assumes rental growth is passed on via dividend growth, and investment yields remain constant or tighten.
Anticipated minimum legislative requirement
%
10
Target Healthcare REIT plc
Simple approach:
Best-in-class real estate
managed by a specialist
investment manager
We are a responsible investor in ESG-compliant, purpose-built care home real estate which
is commensurate with modern living and care standards.
Business model
Build high-quality portfolio
Acquire high quality real estate via a mix of new
developments, recently completed builds, and modern
assets at mature trading.
How we do it
• Specialist Investment Manager whose senior team
has spent 16 continuous years together in the sector
establishing a strong reputation and enviable track record
• Clearly defined ‘house standard’ on acceptable
investment quality
2025 highlights
Improved portfolio quality, one new home
opened with another completing soon.
New build homes
supported
1
Like-for-like
valuation growth
2.6%
Disposals (net of costs)
£9.8m
Contractual rent
£61.2m
Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships and our
influence within a complex sector.
How we do it
The Investment Manager:
• Has a prominent and respected sector presence, tenant
selection based on shared values
• Has frequent and regular monitoring and contact with
tenants:
– Home visits performed intelligently and sensitively
– Monthly financial data collected and analysed
• Shares knowledge, insight, and best practice with tenants
supporting their business
2025 highlights
Record portfolio rent cover with successful
re-tenantings to support future earnings.
Portfolio occupancy
100%
Rent collection
97%
Mature portfolio rent cover
1.9x
Tenant experience positive
10/10
Our Strategic Pillars
11
Annual Report and Financial Statements 2025
Corporate Governance
Strategic Report
Financial Statements Additional Information
Why we do it
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.
Key strengths of our approach
1. Our premium quality real estate is attractive to both operators
and investors, in that:
a. it is future-proofed against anticipated 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.
Deliver returns
Convert portfolio income and capital returns into sustainable
returns to shareholders through disciplined financial and
risk management.
How we do it
• Annual rental growth from long-term inflation-linked leases
• Stable ongoing cost base
• Conservative approach to debt with LTV at 21.8% and
substantially fixed or hedged interest costs
• Disposal of nine homes subsequent to the year end for
proceeds of £86 million, representing a premium of 11.6%
to their carrying value at 30 June 2025
2025 highlights
Like-for-like rental growth; NTA growth;
dividend covered 103% by earnings.
Adjusted EPRA EPS
6.08pence
Total accounting return
9.3%
Like-for-like rental growth
3.3%
Adjusted EPRA cost ratio
21.8%
Social purpose
To adhere to our responsible investment fundamentals,
delivering positive social impact allied with a firm commitment
to environmental sustainability and good governance.
How we do it
• 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
• Report in line with established standards, such as GRESB
and EPRA sBPR, with the results awarded under both
standards having improved over the year
2025 highlights
100% of beds have en suite wet-rooms;
pathway to being Net Zero Carbon unveiled.
Purpose-built homes
100%
En suite wet-rooms
100%
A and B EPC ratings
100%
Energy usage
data collection
94%
Target Healthcare REIT plc
12
Our Strategy
Our purpose: to improve
the physical standard of
UK care home real estate
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.
Focus on maintaining modernity
and quality metrics
The Group’s limited access to new capital
resulted in a temporary pause on new
investment during the year, and the Group
instead focused on enhancing the existing
portfolio. The single asset sold during the
year formed part of a wider transaction
to facilitate the exit of an operator tenant
from the market. Further details on asset
management initiatives are included in
the case studies on pages 19 and 20.
All disposals in recent years have been
made at or above carrying value, and at
attractive return metrics. We continue to
consider opportunistic disposals of assets
where the sale of existing properties and the
reinvestment in alternative assets improves
the overall quality of the Group’s portfolio,
as this is expected to maximise shareholders’
returns over the long-term. This approach
was demonstrated by the post year-end
disposal of nine homes leased to a single
tenant for £85.9 million, representing an
11.6% premium to carrying value, which
will provide capital for reinvestment.
We have also been active on two
development sites, with one home reaching
practical completion during the year and the
other in September 2025. The latter added
a further 60 beds and £0.6m of contractual
rent to the portfolio.
Well designed, purpose-built care homes
Our care homes are modern, purpose-built and are future-proofed for social and
environmental trends, meeting demand and supporting financial performance.
Strategic pillar #1
Build high-quality portfolio
These initiatives continue to maintain
the portfolio’s modernity and
longevity. The positive impact can be
seen through modest progression and
maintenance of key portfolio metrics:
PORTFOLIO MODERNITY
2025 2024
Purpose-built 2010
onwards 84% 84%
WAULT (years) 25.9 26.4
EPC A&B 100% 99%
En suite wet-rooms 100% 99%
Annual Report and Financial Statements 2025
13
Corporate Governance
Strategic Report
Financial Statements Additional Information
£9m
(£11m)
(£7m)
£30m
£909m
£930m
30 June 2024 Market yield shiftDisposals Rent reviews 30 June 2025Acquisitions and
developments
£850m
£900m
£950m
21%
97%
Company
England & Scotland
34%
100%
Company
England & Scotland
40m
2
48m
2
Company
England & Scotland
9.3 out of 10
9.6 out of 10
Company
England & Scotland
45%
100%
Company
England & Scotland
80%
75%
Company
England & Scotland
Best-in-class care home real estate
Our investment thesis remains that modern,
purpose-built care homes will outperform
poorer real estate assets and continue to
provide compelling returns.
Wet-rooms (100%): These are essential for
private and dignified personal hygiene, with
a clear trend to this being the minimum
expected standard for care home beds.
Energy efficiency (100% EPC A or B):
Energy efficiency of real estate is critical,
with legislative change and public opinion
demanding higher standards. Our portfolio
is already fully compliant with anticipated
incoming legislation, reducing capital
expenditure requirements.
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, and are expected to
remain in demand by tenant operators.
Financials: Our metrics reflecting capital
values and rental levels compare favourably
with other care home portfolios, despite
being significantly better real estate,
demonstrating sustainability and longevity.
Relatively stable valuations
growing with rental income
The portfolio value increased by 2.4% during
the year. This primarily reflected the like-for-
like movement of 2.6%, consisting of 3.3%
from the positive impact of the rental growth
on valuations, offset by an outward yield
shift of 0.7%. The Group’s capital expenditure
added £9 million in value, offset by an
£11million decrease from the disposal of
one property and the receipt of a surrender
premium in relation to another.
Valuation certificates are received quarterly by
the Group from its external valuers 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 the portfolio level on page 8.
Diversification
We continue to ensure the portfolio remains
diversified, by leasing our homes to a
range of high-quality regional operators.
The Group’s total number of tenants has
remained unchanged overall at 34, despite
the portfolio activity in the year.
The largest tenant at 30 June 2025 also
remained unchanged with Ideal Carehomes
(‘Ideal’), part of the wider HC-One group,
operating 18 of the Group’s homes and
accounting for c.16% of contracted rent.
However, the disposal subsequent to the
year end of nine homes leased to Ideal has
reduced this exposure to c.9% with tenant
diversification becoming more evenly spread
across the portfolio.
Underlying resident fees are balanced
between private and public sources, with
a deliberate bias towards private. There
is strong anecdotal evidence that these
residents are more accepting of higher fees,
particularly for the quality real estate and
care services that our properties and their
operators provide.
Census data from our tenants show that 79%
of residents are privately-funded, with 52%
Increase Decrease Total
Sources: Target Fund Managers Limited, Carterwood and carehome.co.uk
* Comparative EPC ratings are for illustrative purposes only, capturing homes with matched postcodes.
being fully private and 27% from ‘top
up’ payments where residents pay over
and above that which the Local Authority
funds for them. 21% of residents are wholly
publicly funded.
Geographically, Yorkshire and the Humber
remained the Group’s largest region by asset
value at 30 June 2025, at 19.5%, marginally
ahead of the South East, which accounted
for 19.3%. The impact on the key portfolio
statistics from the significant post-year end
disposal does not significantly change the
portfolio’s geographical weighting.
PREMIUM, PURPOSE-BUILT PORTFOLIO
Our portfolio remains sector leading in relation to a range of key quality metrics.
ANNUAL MOVEMENT IN PORTFOLIO VALUATION (£ MILLIONS)
Purpose-built since 2000
carehome.co.uk average rating
Space per resident
% En suite wet-rooms
Regulatory ratings: ‘good’ or better
EPC ratings: B or better*
Target Healthcare REIT plc
14
60%
70%
80%
100%
90%
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
Q3 2024
Q2 2024
Q4 2024
Q1 2025
Q2 2025
1.0x
1.2x
1.4x
1.6x
2.2x
1.8x
2.0x
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
Q3 2024
Q4 2024
Q1 2024
Q2 2024
Q1 2025
Q2 2025
Strategic pillar #2
Trusted landlord
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 86%,
consistent with the 87% 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. Despite the changes to the licensing
regime, which reduced the availability of
overseas staff, most operators are now
reporting stable workforce numbers.
Rent covers have remained stable at
over 1.9x for the year, rising to 2.0x for the
most recent available quarter (June 2025).
These profitability levels support rental
payments and financial resilience, and
incentivise care providers to invest in
their businesses and people.
Despite increased staff costs following
increases in both the national living wage and
employers’ national insurance contributions,
operators have generally been able to
increase revenues to maintain profitability.
Rent collection was 97% for the year (2024:
99%), with no exclusions for non-performing
or turnaround homes. The slight dip in 2025
was primarily due to the position with two
tenants, and were resolved subsequent to
the year end. These are covered in more
detail in the Chair’s Statement on pages 5
to 7 and in the case study on page 19.
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 an 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.
SPOT RESIDENT OCCUPANCY RATES
MATURE HOMES: RENT COVER
Rent cover: spot Rent cover: rolling last 12 months
Total occupancy Mature homes occupancy
Our Strategy continued
ANNUAL MOVEMENT IN CONTRACTED RENT (£ MILLIONS)
Annual Report and Financial Statements 2025
15
Corporate Governance
Strategic Report
Financial Statements Additional Information
£1.9m
£0.9m
(£0.7m)
£0.3m
£58.8m
£61.2m
30 June 2024 Disposals Other rent increases
(Capex and deferred
consideration)
30 June 2025Rent reviews Development
completed
£56.0m
£58.0m
£60.0m
£62.0m
Growing and compounding
rental income
The portfolio’s contractual rent roll was
£61.2million at year-end (2024: £58.8million).
The 4.0% increase in contractual rent over
the year was driven by like-for-like rental
growth, being the Key Performance Indicator
used by management in assessing recurring
rental growth, of 3.3%.
The positive contribution from capex and
our developments, offset by our disposal,
contributed the remaining 0.7%.
Rent from the Group’s leases increase
annually, linked to inflation. Collars on
this (averaging c.1.6%) ensure the Group
receives guaranteed growth, while caps
(averaging c.3.9%) ensure assets do not
become over-rented, risking rents becoming
unaffordable, in periods of higher inflation
as we have seen in recent years. This is an
important aspect in providing long-term
security to our tenants, and in achieving
sustainable investment returns.
Tenant and resident satisfaction
We remain committed to our role as an
effective, supportive and engaged landlord.
We have previously 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.
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.
OUR TENANTS
OUR RESIDENTS
Agreed that working with Target
was a positive experience
9.6/10
Previous survey (2023): 9/10
Agreed that Target provides high-
quality real estate that supports the
working environment and helps
deliver dignified care to residents
9.2/10
Previous survey (2023): 9/10
Agreed that Target understands the
needs of the tenants’ business
9.2/10
Previous survey (2023): 9/10
Our resident portfolio’s current
average rating is
9.6/10
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 of homes in the portfolio.
Increase Decrease Total
Target Healthcare REIT plc
16
Our Strategy continued
Regular dividends for shareholders
The Group has achieved like-for-like rental growth; NTA growth; and a dividend
fully covered by earnings from its disciplined financial and risk management.
Strategic pillar #3
Deliver Returns
Earnings
Earnings decreased by 0.8%, as measured
by adjusted EPRA EPS; the Group’s primary
performance measure. Rental income for
the year has increased by 3.3%, driven
primarily by inflation-linked rental growth
plus completed developments. This is
partially offset by the annualised effect of
disposals, mainly in the prior year.
The credit loss allowance (for doubtful debts)
increased compared to the prior year as,
although the portfolio as a whole generally
performed well from a rent collection and
rent cover perspective, the provision in
relation to two tenants was increased by £1.5
million to £2.9 million. Of these, one tenant
at a single home was re-tenanted on 2 July
2025, and it is anticipated that the majority
of the fully provided for rental arrears of
£1.3million will not be recovered. The three
homes leased to the second tenant were
re-tenanted in September 2025 and,
although the rent arrears remain outstanding
at the time of writing, the contractual terms
of the re-tenanting include terms which
improve the Group’s ability to recover the
rent outstanding.
The Group’s reported operating expenses
increased significantly, by 27.1%, however
this was primarily due to the non-recurring
administration costs associated with the
property which was re-tenanted in July 2025.
Excluding these one-off costs, operating
costs increased by 2.6% in the year.
Due to fixed interest rates and stable debt
levels, with the Group’s interest costs being
fixed/hedged on £230 million of drawn debt
until November 2025, net finance costs
remained largely unchanged at £10.2million.
The majority of the net saving arose from
£0.4 million of interest earned on cash held
in a secured account under the terms of
the loan facilities following the property
disposals near the end of the prior year.
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 to 21.8%
from 19.1%, due mainly to the net increase in
the credit loss allowance and the £0.9 million
of non-recurring tenant administration costs.
The Ongoing Charges Figure, which provides
a measure of recurring operating expenses
and which excludes non-recurring property
expenses, including bad debts, was stable at
1.51% (2024: 1.51%).
Total Returns
Total accounting return, using EPRA NTA
movement and dividends paid, was a healthy
9.3% for the year ended June 2025 and an
annualised 7.5% since launch. Our portfolio
has returned like-for-like valuation growth for
each of the ten quarters since the December
2022 macro-driven response to the higher
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 24), 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,
has seen EPRA NTA per share grow by 3.7%
over the year, and contribute to total returns.
The consistency of Group level total
accounting 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.
EARNINGS SUMMARY
2025
(£m) Movement
2024
(£m)
Rental income (excluding guaranteed uplift) 60.6 +3% 58.6
Administrative expenses (including management fee
and credit loss allowance) (13.4) +15% (11.6)
Net financing costs (10.2) -5% (10.8)
Interest from development funding 0.7 -59% 1.8
Adjusted EPRA earnings 37.7 -1% 38.0
Adjusted EPRA EPS (pence) 6.08 -1% 6.13
EPRA EPS (pence) 7.72 +1% 7.61
Adjusted EPRA cost ratio 21.8% +270 bps 19.1%
EPRA cost ratio 18.3% +170 bps 16.6%
Ongoing Charges Figure (‘OCF’) 1.51% – 1.51%
Annual Report and Financial Statements 2025
17
Corporate Governance
Strategic Report
Financial Statements Additional Information
3.5
0.1
0.2
6.1
(5.8)
110.7
114.8
30 June 2024 Disposals and
surrender premium
Revaluations
– developments
Adjusted EPRA earnings Dividends paid 30 June 2025Revaluations
– standing assets
80.0
95.0
105.0
120.0
125.0
115.0
90.0
85.0
100.0
110.0
130.0
0.0 4.8
4.8x
4.6x
4.6x
2023
2024
2025
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 4.2 years (30 June 2024:
5.2 years), with drawn debt of £242 million
incurring a weighted average cost, inclusive
of amortisation of loan arrangement costs,
of 3.8% (3.7% on a cash only basis with
costs excluded).
Net LTV at 30 June 2025 was 21.8% (2024:
22.5%), with the Group’s revolving credit
facilities allowing flexible drawdowns/
repayments in line with capital requirements.
Subsequent to the year end, the Group
has refinanced each of its debt facilities
with RBS and HSBC as set out in the table
below. Both facilities have been extended
by threeyears, with the option of two
further one-year extensions, subject to
lender approval. The facilities also include
accordion elements providing, in aggregate,
additional uncommitted borrowings of a
further £70million.
Further details on the refinancing are
provided on page 21 and in Note 20 to the
Consolidated Financial Statements.
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 Debt Type at 30 June 2025
Drawn at
30 June 2025
Maturity at
30 June 2025
Debt Type
(post refinancing)
Maturity
(post refinancing)
Phoenix
Group
£150m Term debt £150m (fixed rate) Jan 2037 – £63m
Jan 2032 – £87m
£150m Term debt (fixed) Jan 2037 – £63m
Jan 2032 – £87m
RBS £30m Term debt
£40m Revolving credit facility
£30m (hedged)
£12m (floating rate)
Nov 2025 £20m Term debt (hedged)
£30m Revolving credit facility
Sept 2028 (with two
1-year extensions)
HSBC £100m Revolving credit facility £50m (hedged) Nov 2025 £30m Term debt (hedged)
£50m Revolving credit facility
Sept 2028 (with two
1-year extensions)
Total £320m £242m £280m
EPRA NTA PER SHARE (PENCE)
DEBT ANALYSIS
The post refinancing loan facilities also include accordion options which, subject to the approval of the relevant bank, increase the
quantum of the RBS facility by a further £30 million and the HSBC facility by a further £40 million.
Net debt to EBITDA ratio
4.6x
Increase Decrease Total
Target Healthcare REIT plc
18
Our Strategy continued
Strategic pillar #4
Social purpose
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.
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 carbon commitment with comprehensive, ambitious and realistic targets set with a
clear pathway including measurable milestones.
Responsible
partnerships
Engage with tenants to ensure real estate is meeting their operational and staff needs, allowing
effective care for residents.
Be a responsible landlord to our tenants and their communities through significant challenges,
such as pandemics.
Use energy data obtained from tenants to positively influence behaviours where possible.
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.
Partially met Met
Annual Report and Financial Statements 2025
19
Corporate Governance
Strategic Report
Financial Statements Additional Information
Our Case Studies
Our Strategy in Action
Trusted
landlord
Build high-
quality portfolio
Previous Refurbishment and Tenant Support Results in Long-Term Improvements
This case study evidences the positive impact that can be
generated through the Group’s engaged landlord approach,
and also illustrates why, in contrast to the situation above, the
Investment Manager will ordinarily choose to engage with a
tenant to resolve any issue which arises during the tenancy, to
minimise the crystallisation of bad debts and avoid incurring the
costs of administration.
Background
The Group purchased a property in the North West of England
in 2017 with the intention of refurbishing it to lift the late
1990’s home’s real estate quality to a modern market-leading
standard. This refurbishment, which ultimately completed in
April 2024, has provided positive social improvements for the
home’s residents, including the conversion of all en suite WCs
into full wet-rooms. Energy efficiency enhancements were
also delivered which have collectively improved the home’s
environmental credentials, leading to an EPC “A” on this property.
Activity in the year
Although the home experienced operational challenges during
the refurbishment, which in turn led to rent arrears, the Group
supported the tenant through the turnaround of the home, such
that rent arrears, which had reached £0.4 million at the end of
the prior year, were fully repaid by 30 June 2025 and the tenant
is now building up a rent deposit. Moreover, the subsequent
strong financial and operational performance of the home,
delivering a rent cover of >2.0 times in the year, means that pre-
agreed lease performance triggers have been met, generating
a rent increase of more than 6%, which is accretive in terms of
both rental income and property value.
Successful Re-tenanting After Operator in Administration
The current year saw the Group place a tenant into
administration. The first time since the Group’s IPO in 2013.
Background
In 2021, the Group forward funded the development of a new
care home in the South of England, supporting a tenant who was
a small, family-owned operator. This tenant had a strong track
record operating older care homes, and wished to re-position
their group towards modern, best-in-class real estate. Although
the home started well with good early ratings, the trading
performance of the tenant’s remaining older care homes across
its wider group declined. Consequently, the tenant became
unable to meet their rental obligations.
Activity in the year
Despite initially attempting to work with the tenant to help it
meet its rental obligations, the wider tenant group’s challenges
impacted on the leasehold operations’ performance, including
a downwards re-rating of the care home by the Care Quality
Commission. Ultimately, it was concluded that, both to protect
the interests of the Company’s shareholders and to ensure
continuity for the staff and residents of the care home, it was
best for the Group to place the tenant into administration.
Whilst an independent care consultancy firm temporarily ran
the care home on behalf of the administrators, the leasehold
interest was marketed. This attracted significant interest from
multiple operators, resulting in the care home being successfully
re-tenanted within four months of the administration. The strong
operator demand meant that the Group was not required to
offer any rent incentives as part of the transaction, and the new
tenant also accepted a modest increase in the passing rent.
Whilst the administration ultimately resulted in exceptional
costs of £0.9 million and an increase in accrued rental arrears
of £0.8 million during the current year (to a total of £1.3 million
at 30 June 2025), the improved passing rent from 2 July 2025
onwards is expected to result in an increase in the forthcoming
quarterly property valuation. In addition, there is the potential
for further future income and capital upside via the ongoing
lease, both via a contractual stepped rent and further potential
rent increases linked to the care home’s future operational
performance. Importantly, delivering the re-tenanting has
secured the future stability of the care home, ensuring a
sustainable, secure and high-quality environment for residents,
their families and staff alike.
This case study demonstrates the benefit of the Group’s
investment approach of investing in high-quality purpose-built
care homes in the right locations. This ensures that, where an
issue does arise with the incumbent tenant, the underlying
demand for the real estate from alternative operators helps to
protect the fundamental capital value over the long-term.
Deliver
returns
Social
purpose
Target Healthcare REIT plc
20
Our Case Studies
Our Strategy in Action continued
Deliver
returns
Supporting Operator Exit From Care Home Market
This case study illustrates that ongoing re-tenanting activity is
an inherent part of the asset management activity of the Group,
used to proactively address the changes in the tenant operators’
strategy that may arise over a 35-year lease, and should not
be viewed as the retrospective resolution of issues which have
arisen. In this case, the disposal of one property, and the
re-tenanting of two others, was undertaken to facilitate the
tenant’s preference to exit the care operator market whilst
delivering shareholder value and ensuring uninterrupted care
provision for the residents.
Background
The owner of a tenant leasing three of the Group’s homes
decided to exit the elderly care market. This was not a distressed
situation, and they maintained their support for the operator
throughout the strategically motivated exit process.
Activity in the year
The Investment Manager discussed with the operator how to
deliver both a positive long-term solution for the homes and
sought to deliver a strong financial outcome for the Group’s
shareholders. The compelling local demographics and high-
quality real estate resulted in several interested operators, and
the Investment Manager’s priority was to find the “right” operator
to deliver a long-term, high-quality service to residents.
The Investment Manager identified operators who it considered
to be the best “fit” for each home, ultimately recommending
the re-tenanting of two of the homes and the sale of the third.
In relation to the re-tenantings, one of the homes has now
transitioned smoothly to the new operator, an existing tenant
of the Group, and the second is expected to transition by the
end of 2025 once the incumbent tenant has completed certain
works at the property.
Overall, a positive financial result was achieved for the Group’s
shareholders. With approximately 15 years remaining on the
leases, material exit premiums from the outgoing tenant,
significantly in excess of any leases incentives paid to the
incoming tenants, were agreed for two of the homes. One of
these was received in the year, and the second will be received
in the forthcoming year once the transition of the related home
has completed. The sale proceeds reflected a premium of 8%
to the prevailing external valuation. The surrender premium
received, combined with this uplift on the disposal, added 0.2%
to the Group’s total accounting return for the year. A further
0.2% will be added in the current year on receipt of the
second surrender premium. Working closely with the
operators, the Investment Manager has delivered an
excellent solution for residents, staff, the local
communities and the Company’s shareholders.
Social
purpose
Annual Report and Financial Statements 2025
21
Corporate Governance
Strategic Report
Financial Statements Additional Information
Significant Post-Year End Transactions
Disposal of nine care homes
Subsequent to the year end, the Group has entered into an agreement
to sell a portfolio of nine care homes, leased to Ideal Carehomes
(‘Ideal’), to an institutional purchaser for £85.9 million. This represents
a premium of 11.6% to the Group’s carrying value at the year end and
an implied net initial yield of 5.24%.
This disposal, which represent 537 beds and a total of c.8.3% of the
Group’s overall portfolio value as at 30 June 2025, is highly accretive,
adding 1.4 pence to the Group’s EPRA NTA per share. However, the
primary intention of the transaction is to reduce the Group’s exposure
to its largest tenant, something which the Investment Manager has
been considering since Ideal was acquired by the UK’s largest care
home operator, HC-One, in the prior year. Prior to this disposal, Ideal
was the Group’s largest tenant, accounting for c.16% of the Group’s
contracted rent as at 30 June 2025.
Completion of the disposal is unconditional and is expected to take
place on 22 October 2025, and will result in an annualised ungeared
internal rate of return (‘IRR’) in excess of 11%, demonstrating the
Group’s active approach to portfolio management and ability to
drive shareholder returns.
The impact that the disposal would have had on the Group’s
aggregate portfolio at 30 June 2025, all else being equal, is shown
in the tables below.
Use of Proceeds
The Group has a strong pipeline of near-term assets at a net initial
yield of c.6%. This comprises a combination of accretive investment
opportunities including high-quality, strongly performing existing
homes and new purpose-built forward funded assets. The acquisition
of the first of the existing homes is expected to take place in
November. Execution of this pipeline is expected to fully utilise the
proceeds of the disposal as well as make efficient use of the new
debt facilities detailed below, and will result in a refreshed Group
portfolio with longer average unexpired lease terms, more homes
capable of being operationally net zero carbon, a more diverse
tenant base and an improved yield on assets.
Debt refinancing
As set out in the table on page 17, the Group refinanced its shortest
dated debt facilities on 23 September 2025.
This results in the Group having committed debt facilities of £280
million, including £200 million on which the interest rate has been
fixed/hedged until at least 23 September 2030 at a weighted average
rate of 3.9% (30 June 2025: £230 million at 3.7%). The Group has
additional revolving credit facilities of £80 million, of which £47.6
million is currently drawn. The drawn element is likely to be repaid
initially with the proceeds from the disposal and, once redrawn, will
carry interest at SONIA plus a margin, including arrangement costs,
of 1.8%. It is anticipated that the Group will hedge the revolving credit
facilities in due course through the use of interest rate caps.
The transaction improves tenant diversification and provides further capital to re-invest in earnings accretive, and portfolio enhancing,
acquisitions without significantly changing the other key portfolio statistics. The tables below show the impact of adjusting the
portfolio at 30 June 2025 to exclude the nine assets which the Group has agreed to sell.
Portfolio at
30 June 2025 Disposals
Portfolio at
30 June 2025
(adjusted)
Total contracted rent £61.2m £4.8m £56.4m
Rent per bed £9,696 £8,952 £9,765
Total portfolio value £929.9m £77.0m £853.0m
EPRA topped-up
net initial yield 6.22% 5.85% 6.25%
Rent cover (spot) 2.0x 2.2x 2.0x
Rent cover
(last twelve months) 1.9x 2.4x 1.9x
Average age of homes 12 years 13 years 12 years
Mature homes 93% 100% 93%
WAULT 26 years 24 years 26 years
Tenant diversification (by rental income)
Portfolio at
30 June 2025 Disposals
Portfolio at
30 June 2025
(adjusted)
Largest tenant 16% 100% 9%
Largest five tenants 41% – 37%
Largest ten tenants 64% – 61%
Geographical diversification
The disposal does not significantly change the geographical
weighting of the portfolio.
Significant post-year end
transactions: Disposal
and Refinancing
Target Healthcare REIT plc
22
Annual Carbon Intensity (kgCO
2
/m
2
)
60
50
40
30
20
10
0
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
The Company’s starting point is
advantageous, meaning the Company
will have less to do than its competitors
to reduce carbon intensity towards zero.
ESG Commitments
Our Net Zero Carbon
Pathway sets out a clear,
science-based roadmap
to achieve net zero
carbon emissions across
firstly, our operations
and then, secondly,
our portfolio. We are
guided strongly by our
comprehensive datasets
from our real estate.
Net Zero Carbon Pathway
• 2025 Scope 1 and 2 net zero
carbon achieved
• 2030 target to have renewable energy
generation (or heat pumps) at 50% of
its homes
• 2040 net zero carbon target for property
portfolio related Scope 3 emissions
Quality of input data
Achieving a net 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 are now collecting our tenants’ energy
usage data to an extent which allows a
reliable analysis of our portfolio’s current
position and of the impacts of initiatives.
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.
• Suggested energy efficiency and
carbon reduction initiatives relevant
to our properties.
• Cost estimates and impact assessments
on carbon intensity.
Timeline and actions
• Between 2025 and 2030: Quick wins:
energy efficiency measures, such as
thermal installation in plant rooms (2-3%
CO
2
savings) and increase renewable
energy generation (including by heat
pumps) at 50% of homes.
• Between 2025 and 2035: Increase PV
or solar thermal panel coverage towards
100% of portfolio.
• Between 2030 and 2040: Electrification
of heating, phase out gas boilers and
install heat pumps and appropriate
upgrade of distribution in homes.
Our portfolio’s modernity provides an
excellent starting point as illustrated in
the graph below.
Risks and areas outside our control
• Suitable technology being available at the
required scale and cost, per expectations
as advised by our external experts, in the
time period outlined.
• Materials and labour being available such
that the Group is able to have technology
installed in a sensible timeframe and at
fair, market (not surge) pricing.
• Agreement with tenants as to disruption
timeframes for works.
• That the relevant investment costs do
not depress investment returns to such
an extent the Group cannot achieve its
investment objectives to the satisfaction
of shareholders.
ESG Commitments in focus:
Net Zero Carbon Pathway
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.
Annual Report and Financial Statements 2025
23
Corporate Governance
Strategic Report
Financial Statements Additional Information
2025 activity and highlights
EPC ratings
1
100% A-B ratings
Important measure of energy efficiency
and legislative rating.
BREEAM In-Use certificates
11% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2024 calendar year.
Responsible investment
As an investor we understand that our actions
have influence. We use our platform to lead by
example through embedding appropriate ESG
considerations into our decision-making.
• Increased coverage of portfolio with green
lease provisions to 61% from 49%.
• Carbon reduction investment programme
continues with 40% of the portfolio
currently benefitting from renewable energy
generation, heat pumps, or both.
• Steady, increasing installations of photovoltaic
or solar thermal panels in homes.
• EPRA sBPR Gold Award achieved in relation
to most recent Sustainability Report.
Environmental
Governance & transparency
Social
En suite wet-rooms
100%
Defining proxy for real estate
quality and social impact.
National Comparative: 34%*
* 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
We engage with all our
stakeholders to drive the
creation of economic, social and
environmental value around our
buildings and in wider society.
£1m
Approved budget for energy
efficiency initiatives.
Board diversity
40%
Board composition remains at
40% female, with at least one
senior board position held by a
woman, in line with the ‘Women
in Leadership’ 2025 target set by
the FTSE Women Leaders Review.
Action will be taken in relation to
the Board’s ethnic diversity over
the forthcoming year.
ESG committee
Met at least quarterly.
GRESB
80
Improved score to 80 from
71 in the Group’s third year of
assessment. This results in the
Group earning three green stars
and places us second in our
peer group.
Responsible business
We treat all stakeholders with
respect and deal fairly in a manner
consistent with how we would
expect to be treated ourselves.
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.
Target Healthcare REIT plc
24
8.00%
7.00%
6.00%
5.00%
2.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20252024
4.0 0%
3.00%
2023
Investment Manager’s Report
Portfolio performance
and UK care home
investment market
GROUP TOPPED-UP NET INITIAL YIELD (‘NIY’) AND MSCI MONTHLY INDEX – ALL PROPERTY NIY
Portfolio performance
During the year, property level transactions
completed by the Group remained low
with (i) a single property disposal, which
formed part of a wider asset management
transaction; and (ii) the progression of
two development sites, with one reaching
practical completion during the year and the
other completing subsequent to the year
end. Transactions did, however, continue to
be considered, with a significant disposal of
nine care homes subsequent to the year end,
as set out in detail on page 21.
As expected in any portfolio of scale and
with a wide range of tenant operators, asset
management activities continued. These
included (i) converting a further 41 rooms
to provide full en suite wet-rooms across
two homes thereby increasing the portfolio
towards 100% wet-rooms; (ii) making, and
rentalising, performance payments totalling
£3.4 million for three homes thereby
increasing the contracted rent from the
portfolio by £0.2 million per annum; (iii)
re-tenanting two homes, from two different
tenant operators, on attractive financial
terms and with any tenant incentives being
funded by the outgoing tenants; and (iv)
reaching agreement to re-tenant a third
home, which will result in a further
surrender premium being received during
the current year. Overall, these activities
demonstrate an ability to re-tenant high-
quality properties of the type held by the
Group to alternative operators where it
benefits the overall portfolio.
As set out in the case study on page 19,
on 2 July 2025 the Group also completed
the re-tenanting of the home which had
contributed significantly to the increase in
the Group’s costs and credit loss allowance
in the year, securing its future stability.
At the portfolio level, two key portfolio
metrics are presented on page 8 which
are reflective of the investment grade
characteristics of our prime, modern UK
care home portfolio. Firstly, rental growth
was 3.3% on a like-for-like basis (2024: 3.8%)
and this has been supported by a quality
rental stream from 34 tenants with a robust
average rent cover for the last twelve months
of over 1.9x (2024: 1.9x), the highest reported
by the Group since IPO. Underlying demand
for places in our homes remains high at 86%
mature home occupancy (2024: 87%), with
scope for further profitability growth were
occupancy to trend further towards the 90%
long-term average.
Secondly, portfolio-level total returns remain
strong. We are pleased to have continued
to perform well against the MSCI UK Annual
Healthcare Property Index for the calendar
year 2024, with a standing assets return
of 10.5% for the year compared to the
benchmark return of 5.4%. More importantly,
this is sustained performance as the Group’s
portfolio also ranks second of 12 over the
10-year period ending 2024. This long-term
portfolio performance resulted in the Group
recently winning the MSCI award for the
highest 10-year risk adjusted total return.
The like-for-like valuation growth for the year
was 2.6%, primarily driven by 3.3% from the
growth in rents and the expiry of rent free
periods, offset by 0.7% from an outward
movement in valuation yields.
Our overall portfolio metrics remain strong.
92% of homes are mature in their trading,
84% have a younger than 2010-build
date, and the WAULT remains long at over
25 years. These characteristics, and the
bias towards private-fee payments of our
tenants’ revenue (79%) all support the quality
of our rental stream and its annual and
compounding long-term growth.
Group’s topped-up NIY MSCI Monthly Index – All Property NIY
Annual Report and Financial Statements 2025
25
Corporate Governance
Strategic Report
Financial Statements Additional Information
Property regulation
In July 2025, the Government issued a
proposal to ban upward only rent reviews in
leases. Whilst aimed at retail properties, this
has the potential for significant unintended
consequences elsewhere. The details remain
unclear at this stage, although it would appear
that any legislation will not be retrospective,
so the Group’s existing leases would not
be directly affected. We do not believe that
the proposal would be a welcome change
and are working with the British Property
Federation and others in the sector to help
inform the Government on the potential
impact on the sector if it were to proceed.
Care home trading
Our typical investment appraisal has
historically been based on a home’s ability to
achieve earnings of at least 1.6x the home’s
rent. More recently, a level of 1.8x has been
sought, to provide headroom and financial
resilience. The mature homes portfolio has
achieved over 1.9x rent cover for the last
twelve months, the highest since IPO, and
2.0x rent cover for the final quarter of the
year, endorsing our investment case on the
trading potential of prime care home real
estate. Average weekly fees for residents
have increased by c.8% across the portfolio’s
mature homes during the year, illustrating
that inflationary cost increases are largely
being passed on by operator tenants.
Investment market
Low volatility of valuation continues
The UK care home investment market has
seen transaction volumes increase compared
with the prior year. The US REITs, in particular,
have begun investing significant capital in our
sector and this trend is expected to continue.
This will provide both structural support and
transactional evidence to corroborate property
valuations. Some US REITs are investing on a
slightly different basis to the Group by taking
an ownership interest in care home operations
in addition to acquiring the freehold interest in
the properties. We believe that there are many
operators for whom the Group’s partnership
approach and more traditional triple net lease
structures are preferable to the management
contract arrangements preferred by some
investors and that this remains a suitable
market for us to be investing in.
Other market participants have returned to
investment activity and it is anticipated that
new investors may enter the care home
sector meaning that investment demand,
particularly for prime care home real estate
such as ours, is expected to remain robust.
Market pricing has remained relatively flat
in recent quarters and supports both the
current portfolio valuation and the indicative
pipeline pricing.
Health and social care update
We note below a number of areas which
are prominent in our minds and those of
our tenants:
Social care reform
The social care review led by Baroness Casey
commenced this May, with an initial report
due out in 2026. While many in the sector
feel the process is a repeat of numerous
other similarly well-intentioned reviews
carried out over previous decades, there
is some optimism that Baroness Casey
will indeed bring some pragmatism to the
process. The second phase of the review,
scheduled to report back in 2028, will build
on the initial recommendations, but again
there are fears that the timing of this element
may be overshadowed by a future election,
and become lost or diluted in the process.
Current ministers, helpfully, do express a
strong belief that an efficient and productive
NHS is increasingly dependent on a fully
functional and aligned social care sector.
Further scrutiny via Baroness Casey should at
least help to keep the sector’s frustrations on
the Government’s radar. During spring, the
sector further welcomed the NHS 10-year
plan – the sector being well positioned to
assist in the provision of resources.
Spring statement and
spending reviews
Both of these proved to be a frustration
for the sector, with little mention of wider
support to social care. The Association of
Directors of Adult Social Services Spring
Survey further highlighted the challenging
situation that many Local Authorities (“LAs”)
find themselves in, with increasing care costs
driven by ageing demographics consuming
the lion’s share of their budgets. The
squeeze on LAs has been compounded by
cuts to Independent Care Boards with NHS
Continuing Healthcare services in places
being withdrawn. Our recent research notes
that the numbers receiving domiciliary care
have dropped between 2016 and 2023 due
to the increased cost of domiciliary care per
person – which doubled between the same
dates. Likewise, we note that the numbers
of private residents entering care homes has
now overtaken publicly funded placements,
likely an indication of the pressure on LA
budgets as much as demographics.
Staffing
We reported six months ago that operators
were much more comfortable with staffing
recruitment, despite more onerous conditions
on overseas recruitment including the
restriction on accompanying family members.
However, operators were dismayed in May
by the blanket Government restriction on
overseas recruitment for the social care
sector. Between 2022 and 2024, 185,000
care staff were recruited from overseas, while
going forward 43,000 new care workers will
be required every year until 2035, excluding
the current c.135,000 vacancies, all of which
causes consternation within the sector.
Proposed changes in employment legislation
are also awaited with some trepidation.
Costs and fees
Care home operating costs have mainly
increased on the back of minimum wage
and NIC increases, albeit ancillary costs have
been relatively subdued. This has led to large
fee increases for the fourth year running,
with operators, where possible, passing
the costs onto residents. This continues to
equate to private fee increases of around
8%to 10% per annum. Families, overall,
have reportedly remained forbearing, likely
due to inflationary pressures being widely
publicised. LA fee increases, as far as we
can ascertain, seem to be between 3% to
6%. Nursing homes, the majority of homes
within the Group, have received a useful 7.7%
rise in Funded Nursing Care payments.
Regulatory
The Care Quality Commission (CQC)
continues to face challenges in scaling the
inspection regime up to its own targets, with
many organisations frustrated by extended
timescales between inspections and slow
results process. The CQC report some
progress but dated inspection reports remain
unhelpful to both operators and the general
public, who may need to make decisions for
the appropriate placement of their loved ones.
Target Fund Managers Limited
13 October 2025
Target Healthcare REIT plc
26
Risk Report
Principal and emerging risks
and risk management
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. Rent cover, a key measure of
the underlying home profitability, is currently at the highest
level since the Group’s IPO.
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. Despite the rise in the RPI inflation rate
since June 2024, the rate of inflation remained below
the level of the majority 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. The gearing
level remained consistent throughout the year, although
net gearing is anticipated to increase as the Group nears full
investment. Loan covenants and liquidity levels are closely
monitored for compliance and headroom. The Group
had fixed interest costs on 95% of its total borrowings
as at 30 June 2025 and, as part of its more recent loan
refinancing, entered into new five-year interest rate swaps
to hedge its interest rate exposure.
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, with occupancy
rates approaching pre-pandemic levels.
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 brokers 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, the loan
facilities due to expire in November 2025 were successfully
refinanced subsequent to the year end.
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
Annual Report and Financial Statements 2025
27
Corporate Governance
Strategic Report
Financial Statements Additional Information
Risk
Description of risk and factors
affecting risk rating Mitigation
Risk rating
& change
Reduced availability
of carers, nurses
and other care
home staff
Recent trends have reduced the availability of
key staff in the care sector which may result
in a reduction in the quality of care for the
underlying residents of our homes, 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 2025, the Group held only one
remaining development, although this may increase as
the Group invests its available capital.
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,
brokers, 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 significant
service providers, is subject to regular performance
appraisal by the Board. The Investment Manager has
retained the majority of 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 50. 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 38 and 39.
STRATEGIC PILLARS RISK TREND
Build high-quality
portfolio
Deliver
returns
Trusted
landlord
Social
purpose
Risk
increased
Risk
unchanged
Risk
decreased
Target Healthcare REIT plc
28
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 25.9 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 Investment Manager,
which runs the Group’s operations and portfolio within parameters set by the Board and subject to
appropriate oversight. The Investment 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 Investment 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 brokers and/or Investment 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:
Ongoing investment and
asset management activity
The Group was actively engaged in several
re-tenantings during the year. Further details
on which are described in detail in the case
studies on pages 19 and 20.
One of these involved placing a tenant
into administration, the first time that this
has been undertaken by the Group and a
decision which was not taken lightly given
both the costs involved and its potential
impact across a number of stakeholders. This
transaction required careful consideration by
the Board to balance the competing interests
of the Group, its shareholders, the tenant
operator and the staff and residents of the
relevant care home. Despite the additional
costs involved in this process, it resulted in
a successful re-tenanting of the care home;
preventing a further loss of rental income
and protecting capital value for the Group,
whilst ensuring continuity of the home’s
operations for staff and residents.
Another significant tenant activity involved an
operator who decided to exit the elderly care
home market. Working with the operator,
the Group disposed of one property in
June 2025 and agreed the re-tenanting
of another two care homes to existing
tenants of the Group.
A further home was re-tenanted to
accommodate an operator which had also
taken the strategic decision to exit the elderly
care sector. This introduced a new tenant
with an experienced management team
and ensured the continued provision of
care services to the local community, whilst
securing attractive financial terms for the
Group and its shareholders.
Subsequent to the year end, the Group
agreed a transaction to sell nine properties
as set out in detail on page 21.
The Board also determined, and approved
for publication, the Group’s Net Zero Carbon
Pathway, including an initial interim target
and intended timescale, as part of its annual
Sustainability Report.
Advisers
The Board appointed Panmure Liberum
Limited as joint broker during the year to
improve both investor engagement and the
quantum and availability of market research
published in relation to the Group.
Board
The Board concluded that, both in order to
meet the ‘comply or explain’ requirement
of the UK Listing Rules to have at least one
Director from an ethnic minority and to aid
the Board with future succession planning,
a sixth Director should be appointed to the
Board over the following twelve months.
Capital financing
The Board finalised the refinancing of its
shortest dated debt facilities with each of
the existing lenders in advance of their
November 2025 expiry. This required the
Board to assess the appropriate gearing level
of the Group and the potential lenders to
be considered, as well as the appropriate
duration, interest rate hedging strategy and
financial terms of the loan facilities.
Dividends paid
The Board recognised the importance of
dividends to its shareholders and, after
careful financial analysis, decided to increase
the Company’s dividends in relation to the
year ending 30 June 2026 to reflect net
rental growth whilst remaining at a level
which is expected to be fully covered with
the potential for further growth.
Annual Report and Financial Statements 2025
29
Corporate Governance
Strategic Report
Financial Statements Additional Information
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 brokers 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 14 and 15, 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 Notes 13 and 20 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. Since the year-end, the Group
has finalised the refinancing of the proportion of its debt facilities which had been due to 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 2025 are contained on page 45.
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, brokers, 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 progressing work on a straightforward hierarchy of initiatives to maximise the Group’s impact over
both the short and longer term. The Group is now working on improving its feedback and reporting to tenants of the
data collected in order to highlight areas in which they may be able to improve their own performance. The Group
has formulated and published a high-level longer term portfolio strategy in relation to setting and meeting the Group’s
net zero carbon target, including initial consideration of a short term interim target and intended timescale.
On behalf of the Board
Alison Fyfe
Chair
13 October 2025