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
Target Healthcare REIT plc
30
Annual Report and Financial Statements 2025
31
Corporate Governance
Strategic Report Financial Statements Additional Information
Corporate
Governance
In this section…
30 – 63
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
Target Healthcare REIT plc
32
Our experienced
and knowledgeable
Board are
responsible for
the effective
stewardship of
theCompany.
Board of Directors
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 40 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank
of Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the bank
she fulfilled several senior property finance
roles, ultimately serving for five years as Head
of Real Estate Restructuring in Scotland before
leaving the bank in 2015. She has subsequently
acted as a director of a number of companies in
the property and debt finance sectors. She has
been elected as a Governing Board Member
of Hillcrest Homes (Scotland) and serves as a
trustee of the Church of Scotland Housing
and Loan Fund.
Ms Fyfe is a member of the Royal Institution of
Chartered Surveyors, a member of the Investment
Property Forum and a former Policy Board
member of the Scottish Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department
for over 20 years, and served on its Executive
Board and Operating Committee, respectively
responsible for strategic direction and
day-to-day management.
He is a Fellow of the Royal Institution of Chartered
Surveyors, and has been extensively involved with
the RICS throughout his professional career. He
was formerly a member of the Policy Committee
of the British Property Federation, the RICS
Global Valuation Professional Board and the Bank
of England Commercial Property Forum.
Mr Brodtman is currently a non-executive director
of Grainger plc, a listed residential property
company, and Cadogan Group Limited. He also
holds a number of additional advisory roles,
and has further Board experience as a former
non-executive director of Investment Property
Databank and housing association Places for
People. He is keenly interested in the healthcare
sector, with relevant experience from his role as
a Trustee of Jewish Care, which provides health
and social care services for London’s Jewish
Community, including ten care homes with
some 500 residents.
Mr Cotton has over 40 years of experience
in the property sector and headed the real
estate corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners
andchairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc and
including advisory roles with Lloyds Bank and
Transport for London.
Mr Cotton is currently the chairman of Helical
plc and a consultant to Big Yellow Group plc,
where he served as a non-executive director
from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the Global
Managing Partner Audit for Deloitte. He held
a number of senior leadership roles within
Deloitte including as a member of the UK
Board of Partners and of the Global Executive
Group and the UK Executive Group before his
retirement from Deloitte in May 2015. During his
career at Deloitte, Mr Niblett served some of the
firm’s most significant public company clients,
working with them on commercial
and strategic issues as well as providing
audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee of
Forterra plc and an independent non-executive
director and senior independent director of Big
Yellow Group plc.
Mr Niblett also serves as a trustee of the Ruth
Strauss Foundation.
Dr Thompsell trained and originally practised
as a GP before switching to working in old
age hospital medicine, and then retraining
in old age psychiatry. She has significant
clinical experience of all aspects of caring
for older people and has held a number
of clinical and national leadership roles
allowing her to develop a comprehensive
knowledge of the care home sector. This
included 17 years at the South London and
Maudsley NHS Foundation Trust, where she
led a multidisciplinary team supporting care
homes for seven years and was the clinical
lead for a long-stay older people’s mental
health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at
NHS England, a member of the advisory
board to the Journal of Dementia Care, a
Medical Member of the First Tier Tribunal at
the UK Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment
1 May 2020 1 January 2023
1 November 2022 25 August 2021 1 February 2022
Country of residence
UK UK
UK UK UK
Independent
Yes Yes
Yes Yes Yes
Other public company directorships
None Grainger plc
Helical plc Big Yellow Group plc
Forterra plc
None
Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
Annual Report and Financial Statements 2025
33
Corporate Governance
Strategic Report Financial Statements Additional Information
Alison Fyfe Michael Brodtman Richard Cotton Vince Niblett Dr Amanda Thompsell
Independent Non-Executive Chair Independent Non-Executive Director Independent Non-Executive Director
and Senior Independent Director
Independent Non-Executive Director
and Chair of Audit Committee
Independent Non-Executive Director
Ms Fyfe is a highly experienced property
professional with over 40 years of experience
in surveying, banking and property finance.
Having trained and worked as a commercial
surveyor with Knight Frank in both London
and Edinburgh, she joined the Royal Bank
of Scotland in 1996 to specialise in property
finance. Over a period of 19 years with the bank
she fulfilled several senior property finance
roles, ultimately serving for five years as Head
of Real Estate Restructuring in Scotland before
leaving the bank in 2015. She has subsequently
acted as a director of a number of companies in
the property and debt finance sectors. She has
been elected as a Governing Board Member
of Hillcrest Homes (Scotland) and serves as a
trustee of the Church of Scotland Housing
and Loan Fund.
Ms Fyfe is a member of the Royal Institution of
Chartered Surveyors, a member of the Investment
Property Forum and a former Policy Board
member of the Scottish Property Federation.
Mr Brodtman has extensive knowledge of the
property sector. He worked for global property
advisers CBRE for over 40 years, retiring as
chairman of the UK Advisory division in June
2022. He led the firm’s Valuation department
for over 20 years, and served on its Executive
Board and Operating Committee, respectively
responsible for strategic direction and
day-to-day management.
He is a Fellow of the Royal Institution of Chartered
Surveyors, and has been extensively involved with
the RICS throughout his professional career. He
was formerly a member of the Policy Committee
of the British Property Federation, the RICS
Global Valuation Professional Board and the Bank
of England Commercial Property Forum.
Mr Brodtman is currently a non-executive director
of Grainger plc, a listed residential property
company, and Cadogan Group Limited. He also
holds a number of additional advisory roles,
and has further Board experience as a former
non-executive director of Investment Property
Databank and housing association Places for
People. He is keenly interested in the healthcare
sector, with relevant experience from his role as
a Trustee of Jewish Care, which provides health
and social care services for London’s Jewish
Community, including ten care homes with
some 500 residents.
Mr Cotton has over 40 years of experience
in the property sector and headed the real
estate corporate finance team at JP Morgan
Cazenove until April 2009. Subsequently he
was a managing director of Forum Partners
andchairman of Centurion Properties.
He has wide corporate experience as a former
non-executive director of Hansteen plc and
including advisory roles with Lloyds Bank and
Transport for London.
Mr Cotton is currently the chairman of Helical
plc and a consultant to Big Yellow Group plc,
where he served as a non-executive director
from 2012 until 2022.
Mr Niblett has many years of financial and
commercial experience having been the Global
Managing Partner Audit for Deloitte. He held
a number of senior leadership roles within
Deloitte including as a member of the UK
Board of Partners and of the Global Executive
Group and the UK Executive Group before his
retirement from Deloitte in May 2015. During his
career at Deloitte, Mr Niblett served some of the
firm’s most significant public company clients,
working with them on commercial
and strategic issues as well as providing
audit services.
Mr Niblett is an independent non-executive
director and chairman of the audit committee of
Forterra plc and an independent non-executive
director and senior independent director of Big
Yellow Group plc.
Mr Niblett also serves as a trustee of the Ruth
Strauss Foundation.
Dr Thompsell trained and originally practised
as a GP before switching to working in old
age hospital medicine, and then retraining
in old age psychiatry. She has significant
clinical experience of all aspects of caring
for older people and has held a number
of clinical and national leadership roles
allowing her to develop a comprehensive
knowledge of the care home sector. This
included 17 years at the South London and
Maudsley NHS Foundation Trust, where she
led a multidisciplinary team supporting care
homes for seven years and was the clinical
lead for a long-stay older people’s mental
health unit for a further five years.
Dr Thompsell is the National Specialist
Advisor: Older People’s Mental Health at
NHS England, a member of the advisory
board to the Journal of Dementia Care, a
Medical Member of the First Tier Tribunal at
the UK Ministry of Justice and a Community
Consultant in West London Mental Health
Trust. She is also the previous chair of the
Faculty of Old Age Psychiatry of the Royal
College of Psychiatrists.
Date of appointment
1 May 2020 1 January 2023
1 November 2022 25 August 2021 1 February 2022
Country of residence
UK UK
UK UK UK
Independent
Yes Yes
Yes Yes Yes
Other public company directorships
None Grainger plc
Helical plc Big Yellow Group plc
Forterra plc
None
Committee membership
Investment Committee (Chair)
Audit Committee
ESG Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
ESG Committee (Chair)
Audit Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Management Engagement Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Nomination Committee
Remuneration Committee
Audit Committee (Chair)
ESG Committee
Investment Committee
Management Engagement Committee
Nomination Committee
Remuneration Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Audit Committee
ESG Committee
Investment Committee
Management Engagement Committee
Target Healthcare REIT plc
34
Investment Manager
Kenneth MacKenzie
MBE MA CA
John Flannelly
BAcc FCA
Andrew Brown Scott Steven
MA
Alastair Murray
BA CA
Donald Cameron
BCom CA
James MacKenzie
LLB
Kenneth MacKenzie MBE is the
founder and Chief Executive
of Target. He is a Chartered
Accountant with over 50 years of
business leadership experience
with the last 20 in healthcare. In
addition to his responsibilities
as Target’s chief executive,
Kenneth leads the creation
and management of Target’s
client funds and oversees
fundraising and investor liaison
for the Group. In 2005, he led
the acquisition of Independent
Living Services (‘ILS’), Scotland’s
largest independent domiciliary
care provider. Kenneth grew
this business by acquisition
and put in place a new senior
management team before
exiting via a disposal to a private
equity house. Prior to his
involvement with ILS, Kenneth
negotiated the proposed
acquisition of a UK independent
living business in a JV with the
large US care home operator,
Sunrise Senior Living. Prior to his
involvement in the healthcare
sector, Kenneth has owned
businesses in the publishing,
IT, shipping and accountancy
sectors and he holds a number
of pro-bono charitable roles.
John Flannelly is Head of
Investment at Target. He is a
Chartered Accountant with over
25 years’ experience, the last 19
of which have been in real estate
investment management. He
has primary responsibility for
investment activity across the
Target business. John has been
involved in the appraisal of several
hundred care home opportunities
resulting in the acquisition of more
than 100 properties for those
client funds. Prior to joining Target,
during his time as investment
director for an institutional investor,
John held board positions at a UK
top-10 care home operator and a
care home development business.
John started his career at Arthur
Andersen where he worked on
audits, financial due diligence and
corporate finance projects before
moving to the Bank of Scotland
initially to structure finance
packages for management buy-
outs and latterly to a role in real
estate investment management.
Andrew Brown is Head of
Healthcare at Target. Andrew
keeps the wider team up to date on
sector news and analysis, having
a unique knowledge acquired
over his lifetime, having been
active in the senior care sector
since the 1970’s. His primary
responsibilities include utilising this
extensive knowledge to support
the Asset Management team on
tenant relations and the oversight
of existing properties, as well
as the Investment team during
due diligence on prospective
acquisitions. Prior to joining Target
at its inception, he and his family
developed one of the UK’s largest
and most unique continuing care
retirement communities, now
known as Auchlochan Garden
Village. Andrew takes a keen
interest in care architecture and
can often be found poring over
a set of plans.
Scott Steven is Head of Asset
Management at Target. Scott
joined Target in 2017 from Lloyds
Banking Group. Prior to joining
Target, Scott had been responsible
for a portfolio of Lloyds Banking
Group’s loans to large property
groups, including care home
owners and operators. During
2018, Scott was appointed as the
Head of Asset Management at
Target, and holds responsibility
for tenant engagement and
portfolio decision-making with
a team of healthcare and asset
management professionals.
Alastair Murray was appointed
Chief Financial Officer at Target
in August 2025, having previously
fulfilled the role of the Finance
Director: Listed Funds since
April 2023. He is a Chartered
Accountant with extensive
experience in the financial
services, asset management
and SME sectors. He provides
financial input to the strategic
and commercial activities of the
senior management team and
leads the finance function where
his key responsibilities include:
financial planning and analysis;
risk management; ownership of
relationships with debt providers;
treasury services; and financial
reporting to shareholders. Alastair
previously worked at Bank of
Scotland Corporate Division for
17 years, including seven years
providing debt in support of
leveraged buy-outs and four years
developing divisional strategy,
before transition to a Finance
Director role in the SME sector for
12 years, prior to joining Target.
Donald Cameron is Company
Secretary and Director of Financial
Reporting at Target. He is a
Chartered Accountant with more
than 20 years of experience of
financial reporting and company
secretarial services within the
closed-ended investment
company sector. Having originally
qualified with Deloitte LLP, he
then worked for over ten years in
the Investment Trust Company
Secretarial team at F&C Asset
Management, acting for both
property and equity investment
companies. He is responsible for
providing company secretarial
services to the Board and for
statutory financial reporting.
He joined Target in 2019, having
provided similar services to
the Group for over three years
whilst working for Maitland
Group, a third-party provider
of corporate secretarial
andadministration services.
James MacKenzie is Head of
Investor Relations at Target. He
is a Solicitor with more than
20 years of corporate advisory,
relationship management and
corporate governance experience.
He last worked at Aegon UK where
he was General Counsel and
Company Secretary for the last
12 years before joining Target in
January 2025. At Aegon UK, James
provided strategic legal counsel
to the board and played a key role
in driving and supporting major
business change programmes,
including M&A activity. James
leads Target’s investor relations
function, with a particular focus
on growing and broadening its
capital partner base, including
on behalf of the Company.
The Investment Manager
The Group has appointed Target Fund Managers Limited (‘Target’ or the ‘Investment Manager’) as its investment manager pursuant to the
Investment Management Agreement. The Investment Manager is a limited company which is authorised and regulated by the FCA and has the
responsibility for the day-to-day management of the Group and advises the Group on the acquisition of its investment portfolio and on the
development, management and disposal of UK care homes and other healthcare assets in the portfolio. It comprises a team of experienced
individuals with expertise intheoperation of and investment in healthcare property assets.
Key personnel of the Investment Manager
The key personnel who are responsible for managing the Group’s activities are set out below.
Experts in strategic,
responsible investment
Annual Report and Financial Statements 2025
35
Corporate Governance
Strategic Report Financial Statements Additional Information
Kenneth MacKenzie
MBE MA CA
John Flannelly
BAcc FCA
Andrew Brown Scott Steven
MA
Alastair Murray
BA CA
Donald Cameron
BCom CA
James MacKenzie
LLB
Kenneth MacKenzie MBE is the
founder and Chief Executive
of Target. He is a Chartered
Accountant with over 50 years of
business leadership experience
with the last 20 in healthcare. In
addition to his responsibilities
as Target’s chief executive,
Kenneth leads the creation
and management of Target’s
client funds and oversees
fundraising and investor liaison
for the Group. In 2005, he led
the acquisition of Independent
Living Services (‘ILS’), Scotland’s
largest independent domiciliary
care provider. Kenneth grew
this business by acquisition
and put in place a new senior
management team before
exiting via a disposal to a private
equity house. Prior to his
involvement with ILS, Kenneth
negotiated the proposed
acquisition of a UK independent
living business in a JV with the
large US care home operator,
Sunrise Senior Living. Prior to his
involvement in the healthcare
sector, Kenneth has owned
businesses in the publishing,
IT, shipping and accountancy
sectors and he holds a number
of pro-bono charitable roles.
John Flannelly is Head of
Investment at Target. He is a
Chartered Accountant with over
25 years’ experience, the last 19
of which have been in real estate
investment management. He
has primary responsibility for
investment activity across the
Target business. John has been
involved in the appraisal of several
hundred care home opportunities
resulting in the acquisition of more
than 100 properties for those
client funds. Prior to joining Target,
during his time as investment
director for an institutional investor,
John held board positions at a UK
top-10 care home operator and a
care home development business.
John started his career at Arthur
Andersen where he worked on
audits, financial due diligence and
corporate finance projects before
moving to the Bank of Scotland
initially to structure finance
packages for management buy-
outs and latterly to a role in real
estate investment management.
Andrew Brown is Head of
Healthcare at Target. Andrew
keeps the wider team up to date on
sector news and analysis, having
a unique knowledge acquired
over his lifetime, having been
active in the senior care sector
since the 1970’s. His primary
responsibilities include utilising this
extensive knowledge to support
the Asset Management team on
tenant relations and the oversight
of existing properties, as well
as the Investment team during
due diligence on prospective
acquisitions. Prior to joining Target
at its inception, he and his family
developed one of the UK’s largest
and most unique continuing care
retirement communities, now
known as Auchlochan Garden
Village. Andrew takes a keen
interest in care architecture and
can often be found poring over
a set of plans.
Scott Steven is Head of Asset
Management at Target. Scott
joined Target in 2017 from Lloyds
Banking Group. Prior to joining
Target, Scott had been responsible
for a portfolio of Lloyds Banking
Group’s loans to large property
groups, including care home
owners and operators. During
2018, Scott was appointed as the
Head of Asset Management at
Target, and holds responsibility
for tenant engagement and
portfolio decision-making with
a team of healthcare and asset
management professionals.
Alastair Murray was appointed
Chief Financial Officer at Target
in August 2025, having previously
fulfilled the role of the Finance
Director: Listed Funds since
April 2023. He is a Chartered
Accountant with extensive
experience in the financial
services, asset management
and SME sectors. He provides
financial input to the strategic
and commercial activities of the
senior management team and
leads the finance function where
his key responsibilities include:
financial planning and analysis;
risk management; ownership of
relationships with debt providers;
treasury services; and financial
reporting to shareholders. Alastair
previously worked at Bank of
Scotland Corporate Division for
17 years, including seven years
providing debt in support of
leveraged buy-outs and four years
developing divisional strategy,
before transition to a Finance
Director role in the SME sector for
12 years, prior to joining Target.
Donald Cameron is Company
Secretary and Director of Financial
Reporting at Target. He is a
Chartered Accountant with more
than 20 years of experience of
financial reporting and company
secretarial services within the
closed-ended investment
company sector. Having originally
qualified with Deloitte LLP, he
then worked for over ten years in
the Investment Trust Company
Secretarial team at F&C Asset
Management, acting for both
property and equity investment
companies. He is responsible for
providing company secretarial
services to the Board and for
statutory financial reporting.
He joined Target in 2019, having
provided similar services to
the Group for over three years
whilst working for Maitland
Group, a third-party provider
of corporate secretarial
andadministration services.
James MacKenzie is Head of
Investor Relations at Target. He
is a Solicitor with more than
20 years of corporate advisory,
relationship management and
corporate governance experience.
He last worked at Aegon UK where
he was General Counsel and
Company Secretary for the last
12 years before joining Target in
January 2025. At Aegon UK, James
provided strategic legal counsel
to the board and played a key role
in driving and supporting major
business change programmes,
including M&A activity. James
leads Target’s investor relations
function, with a particular focus
on growing and broadening its
capital partner base, including
on behalf of the Company.
Alternative Investment Fund Managers Directive (‘AIFMD’)
The Board has appointed Target as the Group’s AIFM and Target has received FCA approval to act as AIFM of the Group. An additional requirement
of the AIFMD is for the Group to appoint a depositary, which oversees the property transactions and cash arrangements and other AIFMD
required depositary responsibilities. The Board has appointed IQ EQ Depositary Company (UK) Limited to act as the Company’s depositary.
Target Healthcare REIT plc
36
Directors’ Report
The Directors present their report, along with the financial statements of the Group and Company on pages 66 to 97, for the year ended
30 June 2025.
The Directors consider that, following advice from the Audit Committee, the Annual Report and Consolidated Financial Statements taken as a
whole are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance,
business model and strategy. The Audit Committee has reviewed the Annual Report and Consolidated Financial Statements for the purpose of this
assessment. In reaching this conclusion, the Directors have assumed that the reader of the Annual Report and Consolidated Financial Statements
would have a reasonable level of knowledge of the investment industry in general and Real Estate Investment Trusts in particular. The outlook
for the Group can be found in the Chair’s Statement on pages 5 to 7 and the Investment Manager’s Report on pages 24 and 25. Principal and
emerging risks and uncertainties can be found on pages 26 and 27 with further information in Note 16 to the Consolidated Financial Statements.
Results and Dividends
The results for the year are set out in the following Consolidated Financial Statements. The Group has paid four quarterly interim dividends,
totalling 5.884 pence per share, to shareholders in relation to the year ended 30 June 2025. Details of the dividends paid are set out in Note 7
to the Consolidated Financial Statements, and a breakdown of the distributions paid analysed between Property Income Distributions (‘PIDs’)
and Ordinary Dividends are provided on page 102.
The Company
The Company is registered as a Public Limited Company in terms of the Companies Act 2006 (Registered number: 11990238 ) and is an
investment company under section 833 of the Companies Act 2006.
The Target Healthcare REIT group
company to the Group that was incorporated in the United Kingdom , the Company became the parent company of the Group in August
2019. The Company’s shares have been admitted to the premium segment of the Official List of the Financial Conduct Authority and to
trading on the Main Market of the London Stock Exchange. The Company is a constituent of the FTSE-250 Index.
The Company holds a number of wholly-owned subsidiaries, both directly and indirectly, details of which are set out in Note 11 to the
Consolidated Financial Statements and Note 3 to the Company Financial Statements. These subsidiary companies hold the majority of the
Group’s investment properties and loan facilities.
The Company is a member of the Association of Investment Companies (the ‘AIC’) and the European Public Real Estate Association (‘EPRA’).
Investment Objective
The Group’s investment objective is to provide shareholders with an attractive level of income together with the potential for capital and
income growth from investing in a diversified portfolio of freehold and long leasehold care homes that are let to care home operators;
and other healthcare assets in the UK.
Investment Policy
The Group pursues its objective by investing in a portfolio of care homes, predominantly in the UK, that are let to care home operators on full
repairing and insuring leases that are subject to annual uplifts based on increases in the UK retail prices index (subject to caps and collars) or
fixed uplifts. The Group is also able to generate up to 15 per cent of its gross income, in any financial year, from non-rental revenue or profit
related payments from care home operators under management contracts in addition to the rental income due under fully repairing and
insuring leases.
In order to spread risk and diversify its portfolio, the Group is also permitted to invest up to: (i) 15 per cent of its gross assets, at the time of
investment, in other healthcare assets, such as properties which accommodate GP practices and other healthcare related services including
occupational health and physiotherapy practices, pharmacies, special care schools and hospitals; and (ii) 25 per cent of its gross assets, at the
time of investment, in indirect property investment funds (including joint ventures) with a similar investment policy to that of the Group. The
Directors have no current intention to acquire other healthcare assets or indirect property investment funds. The Group may also acquire or
establish companies, funds or other SPVs which themselves own assets falling within the Group’s investment policy.
The Group may either invest in assets that require development or that are under development, which when completed would fall within the
Group’s investment policy to invest in UK care homes and other healthcare assets, including by means of the forward funding of developments
and forward commitments to purchase completed developments, provided that the Group will not undertake speculative development and
that the gross budgeted development costs to the Group of all such developments, including forward funding and forward commitments,
does not exceed 25 per cent of the Group’s gross assets on the commencement of the relevant development. Any development will only be
for investment purposes.
In order to manage risk in the portfolio, at the time of investment, no single asset shall exceed in value 20 per cent of the Group’s gross asset
value and, in any financial year beginning after the Group is fully invested, the rent received from a single tenant or tenants within the same
group (other than from central or local government, or primary health trusts) is not expected to exceed 30 per cent of the total income of the
Group, at the time of investment.
The Group will not acquire any asset or enter into any lease or related agreement if that would result in a breach of the conditions applying to
the Group’s REIT status.
Annual Report and Financial Statements 2025
37
Corporate Governance
Strategic Report Financial Statements Additional Information
The Group is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.
Gearing, calculated as borrowings as a percentage of the Group’s gross assets, may not exceed 35 per cent at the time of drawdown. The
Board currently intends that, over the medium term, borrowings of the Group will represent no more than approximately 30 per cent of the
Group’s gross assets at the time of drawdown. However, the Group’s borrowings may exceed this level from time to time as borrowings are
incurred to finance the growth of the Group’s property portfolio.
Any material change to the investment policy will require the prior approval of shareholders.
Dividend Policy
Subject to market conditions and the Company’s performance, financial position and financial outlook, it is the Directors’ intention to pay an
attractive level of dividend income to shareholders on a quarterly basis. In order to ensure that the Company continues to pay the required
level of distribution to maintain Group REIT status and to allow consistent dividends to be paid on a regular quarterly basis, the Board intends
to continue to pay all dividends as interim dividends. The Company does not therefore announce a final dividend. The Board believes this
policy remains appropriate to the Group’s circumstances and is in the best interests of shareholders.
Directors
Biographical details of the Directors, all of whom are non-executive, can be found on pages 32 and 33. As explained in more detail in the Corporate
Governance Statement on page 45, any new appointment by the Board is subject to election by shareholders at the Annual General Meeting (‘AGM’)
following the appointment. Thereafter the Board has agreed that all Directors will retire annually and, if appropriate, seek re-election.
Each of the Directors was re-elected at the AGM held on 9 December 2024 and, in line with the Company’s stated policy, will seek annual
re-election at the AGM to be held on 4 December 2025.
In making appointments to the Board, the Directors use a ‘skills and experience’ matrix to ensure the continued appropriateness of the Board
as a whole. The matrix covering the current members of the Board is set out below. The Directors continue to believe that the Board has an
appropriate balance of skills, experience, independence and knowledge of the Group to enable it to provide effective strategic leadership and
proper guidance of the Group. However, the Directors remains cognisant of both the need for regular refreshment of the membership of the
Board and the ‘comply or explain’ UK Listing Rules requirement in relation to diversity, and therefore it is expected that a sixth Director will be
appointed to the Board over the course of the following twelve months. It is intended that this appointment will (i) ensure that the Company
will be fully compliant with the diversity requirements of the UK Listing Rules; (ii) add further resilience, knowledge and experience to the
Board; and (iii) broaden the spread of tenure across the Board and thereby help to ensure that corporate knowledge and history is retained as
part of future succession planning.
Board Tenure Property
Technical
Accounting,
Governance
& Audit
Banking &
Debt Finance
Healthcare
Sector
Corporate
Finance &
Listed Markets
Other
ESG Matters
Alison Fyfe (Chair) 5.2 years
Vince Niblett 3.8 years
Amanda Thompsell 3.4 years
Richard Cotton 2.7 years
Michael Brodtman 2.5 years
areas of core skills, knowledge and experience secondary areas of competence and knowledge
The Board confirms that, following the evaluation process set out in the Corporate Governance Statement on pages 47 and 48, the
performance of each of the Directors continues to be effective and demonstrates commitment to the role. It is also considered that each of
the Directors has sufficient time to meet their Board responsibilities. There are no service contracts in existence between the Company and
any Director but each of the Directors has been issued with, and accepted the terms of, a letter of appointment that sets out the main terms
of his or her appointment. Amongst other things, the letter includes confirmation that the Directors have a sufficient understanding of the
Group and the sector in which it operates, and sufficient time available to discharge their duties effectively taking into account their other
commitments. These letters are available for inspection upon request at the Company’s registered office.
Capital Structure and Voting Rights
Details of the Company’s share capital are set out in Note 15 to the Consolidated Financial Statements. Details of voting rights are also
set out in the Notes to the Notice of Annual General Meeting. There are no significant restrictions concerning the transfer of securities in
the Company (other than certain restrictions imposed by laws and regulations such as insider trading laws); no agreements known to the
Company concerning restrictions on the transfer of securities in the Company or on voting rights; and no special rights with regard to control
attached to securities. There are no significant agreements which the Company is a party to that might be affected by a change of control of
the Company following a takeover bid, provided following such bid the Company’s shares continue to be traded on the main market of the
London Stock Exchange.
The Group’s borrowings are detailed in Note 13 to the Consolidated Financial Statements.
Target Healthcare REIT plc
38
Directors’ Report continued
Substantial Interests in Share Capital
As at 30 June 2025, the Company had received notification of the following holdings of voting rights (under the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules):
Number of
Ordinary Shares
held
Percentage
held*
Rathbones Investment Management Limited 50,161,197 8.1
Blackrock, Inc 33,745,156 5.4
Baillie Gifford & Co 25,358,041 4.1
Premier Miton Group plc 24,348,972 3.9
Alder Investment Management Limited 23,681,156 3.8
Waverton Investment Management Limited 18,869,630 3.0
* Based on 620,237,346 ordinary shares in issue as at 30 June 2025.
Since 30 June 2025, the Company has received notification that Blackrock, Inc has increased its overall holding to 36,971,529 Ordinary Shares,
representing 6.0 per cent of the ordinary shares in issue, and that Rathbones Investment Management Limited has decreased its overall
holding to 30,983,995 Ordinary Shares, representing 5.0 per cent of the ordinary shares in issue.
As at 13 October 2025, the Company has not received notification of any other changes in the holdings of voting rights (under the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules) compared with those above.
Share Issuance and Share Buy Backs
At the Annual General Meeting held on 9 December 2024, shareholders granted authority for the Company to issue up to 62,023,700 ordinary
shares on a non-pre-emptive basis for cash. This equated to 10 per cent of the shares in issue at the time of passing of the resolution. As at
13 October 2025, the Company has not issued any shares under this authority. The authority will expire on the earlier of 9 March 2026 or the
conclusion of the forthcoming Annual General Meeting, which is expected to be held on 4 December 2025. It is expected that the Company
will continue to seek this authority on an annual basis.
At the Annual General Meeting held on 9 December 2024, shareholders granted authority for the Company to buy back up to 92,973,578
ordinary shares for cancellation or for holding in treasury. The Company did not buy back any shares under this authority, which will expire
at the conclusion of the forthcoming Annual General Meeting.
Statement of Disclosure of Information to Auditor
As far as the Directors are aware, there is no relevant audit information of which the Group’s auditor is unaware, and each Director has taken
all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and
to establish that the Group’s auditor is aware of that information.
Continuation Vote
In accordance with the Company’s Articles of Association, an ordinary resolution is required to be put to shareholders at the AGM to be held in
2027 and at every fifth annual general meeting thereafter to seek their approval to the continuation of the Company. If the continuance vote is
not passed, the Directors are required to convene a general meeting of the Company within six months thereafter at which a special resolution
will be proposed to either wind up voluntarily or reconstruct the Company. A resolution in relation to the continuation of the Company was
last proposed at the AGM held on 6 December 2022, in relation to which 100 per cent of the votes cast were in favour of the resolution.
Going Concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.
They have considered the current cash position of the Group, forecast rental income and other forecast cash flows; taking into consideration
the potential impact of current economic conditions on both the Group, any increase in the likelihood that the tenants of its investment
properties will not be able to meet their contractual rental obligations on a timely basis and recent changes to both the Group’s investment
portfolio, debt financing and the longer term viability considerations set out below. The Group had agreements relating to its ongoing
borrowing facilities with which it has complied during the year.
The Board has considered the ability of the Group to fully draw, repay, refinance or increase its loan facilities on, or before, their expected maturity
date. As part of this assessment the Board noted that the Group had net current liabilities at 30 June 2025. This was resolved subsequent to the
year end, when the Group entered into new loan facilities, each with terms of at least three years, in place of the existing facilities which had been
due to expire in November 2025. The Directors also considered the Group’s exposure to rising interest rates, with the interest rate on 95 per cent
of the Group’s drawn debt at 30 June 2025, and 81 per cent of its drawn debt at 13 October 2025, being fixed until the expiry of the relevant loan
facility. The Board also noted that, subsequent to the year end, the Group had entered into an agreement to dispose of certain of its properties,
the proceeds of which were expected to be used to temporarily reduce the Group’s unhedged debt exposure.
The Directors have also considered the Group’s level of uninvested capital, the current status of the property investment market and the
Group’s pipeline of capital commitments and other investment opportunities. Based on all the information considered, the Directors believe
that the Group has the ability to meet its financial obligations as they fall due to 31 December 2026, which is a period of at least 12 months
from the date of approval of the financial statements. For this reason, the Board continues to adopt the going concern basis in preparing the
financial statements.
Viability Statement
The AIC Code requires the Board to assess the Group’s prospects, including a robust assessment of the emerging and principal risks facing the
Group including those that would threaten its business model, future performance, solvency or liquidity. This assessment is undertaken with
the aim of stating that the Directors have a reasonable expectation that the Group will continue in operation and be able to meet its liabilities
as they fall due over the period of their assessment.
Annual Report and Financial Statements 2025
39
Corporate Governance
Strategic Report Financial Statements Additional Information
The Board has conducted this review over a five-year time horizon, which is a period thought to be appropriate for a company investing in
UK care homes with a long-term investment outlook. At each Board Meeting, the Directors consider the key outputs from a detailed financial
model covering a similar five-year rolling period, as this is considered the maximum timescale over which the performance of the Group can
be forecast with a reasonable degree of accuracy. At 30 June 2025, the Group had a property portfolio which has long leases and a weighted
average unexpired lease term of 25.9 years.
Following the Group’s refinancing in September 2025, the Group’s committed loan facilities have staggered expiry dates with £130.0 million
being committed until at least 23 September 2028, £87.3 million to 12 January 2032 and £62.7 million to 12 January 2037. The Group’s debt
facilities also include additional accordion facilities which, subject to approval of the relevant lender, may provide additional uncommitted loan
facilities of up to £70.0 million until at least 23 September 2028. At 13 October 2025, the Group had drawn borrowings of £247.6 million
consisting of:
• £150.0 million on which the interest rate had been fixed directly until at least 12 January 2032 at a maximum weighted interest rate of
3.18per cent per annum;
• £50.0 million on which the interest rate had been hedged or capped through interest rate derivatives until 23 September 2030 at a
weighted average margin of 5.30 per cent per annum; and
• £47.6 million which carried interest at SONIA plus a weighted average margin of 1.50 per cent per annum, with SONIA capped at 3.0 per
cent per annum for the short period to 5 November 2025.
All interest rates stated exclude the amortisation of arrangement costs on each of the relevant loan facilities.
The Directors’ assessment of the Group’s principal risks are highlighted on pages 26 and 27. The most significant risks identified as relevant to
the viability statement were those relating to:
• Poor performance of investments/investment assets: The risk that a tenant is unable to sustain a sufficient rental cover, leading to a loss of
rental income for the Group;
• High inflationary environment: The risk that the level of the UK inflation rate results in a real term decrease in the Group’s income or erodes
the profitability of tenants;
• Adverse interest rate fluctuations: The risk that an increase in interest rates may impact property valuations, increase the cost of the Group’s
variable rate debt facilities, and/or limit the Group’s borrowing capacity;
• Negative perception of the care home sector: The risk that overall demand for care home beds is reduced resulting in a decline in the
capital and/or income return from the property portfolio; and
• Reduced availability of care home staff: The risk that unavailability of staff restricts the ability of tenants to admit residents or results in
significant wage cost inflation, impacting on the tenants’ rental cover and leading to a loss of rental income for the Group.
In assessing the Group’s viability, the Board has considered the key outputs from a detailed model of the Group’s expected cashflows over
the coming five years under both normal and stressed conditions. The stressed conditions, which were intended to represent severe but
plausible scenarios, included modelling increases in interest rates of 200bps per annum compared to market forecasts at 30 June 2025, a
reduction in the capital value of the property portfolio of 20 per cent and a significant default on rental receipts from the Group’s tenants
equating to an aggregate of c.13 per cent of the Group’s contracted rent roll. The stressed level of default from the Group’s tenants assumed
in the financial modelling was based on a detailed assessment of the financial position of each individual tenant or tenant group and the
structure in place to secure rental income (such as the strength of tenants’ balance sheets, rental guarantees in place or rental deposits held).
The financial modelling assumed that the Group’s dividend continued to be paid throughout the five year period of the assessment, and that
the financial covenants on the Group’s loan facilities remained substantially unchanged. Under the stressed scenario, the Group’s net LTV was
forecast to reach a peak of 31 per cent and no breaches were forecast in relation to the Group’s compliance with the financial covenants on
each of its loan facilities.
Based on the results of the scenario analysis outlined above, the Board has a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the five year period of its assessment.
Audit Tender
The Company last undertook an audit tender in relation to the period from 1 July 2022, which resulted in a recommendation that the
incumbent auditors, Ernst & Young LLP (‘EY’) be re-appointed as auditors. The Company will next be required to conduct a tender of audit
services, and a mandatory rotation of audit firm, by 30 June 2032. The Company does not anticipate undertaking a further tender of audit
services to the Group during the forthcoming year.
Significant Votes Against Previous Resolutions
There were no significant votes against the resolutions proposed at the Annual General Meeting held on 9 December 2024.
Resolutions to be Proposed at the AGM
Directors’ remuneration
The Directors’ remuneration policy and annual report on Directors’ remuneration, which can be found on pages 54 to 57, provide detailed
information on the remuneration arrangements for the Directors of the Company. The Directors’ Remuneration Policy, which is
proposed for approval every three years and which is unchanged from that approved by shareholders in 2022, is being put to shareholders
at the 2025 AGM and will be proposed as an ordinary resolution (resolution 2). Shareholders are also requested to approve the Directors’
Annual Report on Directors’ Remuneration for the year ended 30 June 2025 (resolution 3).
As detailed in the Directors’ Annual Report on Directors’ Remuneration, the present limit on Directors’ fees is an aggregate of £300,000 per
annum. Primarily to allow for the appointment of an additional Director, as discussed on page 37, whilst providing headroom for future annual
increases in order to reflect market changes in the level of Directors’ fees payable, it is proposed that the limit on Directors’ fees is increased to
an aggregate of £350,000 (resolution 4).
Target Healthcare REIT plc
40
Directors’ Report continued
Resolutions to be Proposed at the AGM continued
Dividend policy
The Company’s dividend policy is set out on page 37. In order to be able to continue paying a consistent dividend on a regular basis, and to
ensure that sufficient distributions are made to meet the Company’s REIT status, the Company intends to continue to pay all dividends as
interim dividends. Recognising that this means that shareholders will not have the opportunity to vote on a final dividend, the Company will
instead propose a non-binding resolution to approve the Company’s dividend policy at the AGM (resolution 5). The Directors anticipate that
such non-binding resolution to approve the Company’s dividend policy will be proposed annually.
Auditor
The Independent Auditor’s Report can be found on pages 58 to 63. EY has indicated its willingness to continue in office and a resolution will
be proposed at the AGM to re-appoint EY as Auditor until the conclusion of the AGM to be held in 2026 (resolution 6). A separate resolution
will be proposed to authorise the Directors to determine the Auditor’s remuneration (resolution 7).
Election of Directors
As explained in more detail on page 37, each Director is subject under the Articles of Association to election by shareholders at the AGM
following their appointment and, by policy of the Board, by annual re-election thereafter. Resolutions 8 to 12 therefore propose each of the
Directors for re-election. The biographies of each of the Directors, which include the skills and experience each Director brings to the Board
for the long-term sustainable success of the Company, are detailed on pages 32 to 33. In addition, how these individual skills and experience
contribute to the Board as a whole are set out in the matrix on page 37. Having considered the knowledge, experience and contribution of
each Director putting themselves forward, the Board has no hesitation in recommending their re-election to shareholders.
Share Issuance Authority
The Directors are seeking authority to allot additional new shares which would not require the publication of a prospectus. Resolution 13 will,
if passed, authorise the Directors to allot new shares of £0.01 each up to an aggregate nominal amount representing 10 per cent of the issued
shares at the date of the passing of resolution 13. Based on the shares in issue at 13 October 2025, this resolution would therefore authorise
the Directors to allot up to 62,023,700 ordinary shares.
In accordance with the provisions of the Company’s Articles of Association and the UK Listing Rules, the directors of a premium listed
company are not permitted to allot new shares (or grant rights over shares) for cash at a price below the net asset value per share of those
shares without first offering them to existing shareholders in proportion to their existing holdings. Resolution 14, which is a special resolution,
seeks to provide the Directors with the authority to issue shares of £0.01 each or sell shares held in treasury on a non-pre-emptive basis for
cash (i.e. without first offering such shares to existing shareholders pro-rata to their existing holdings) up to an aggregate nominal amount
representing 10 per cent of the issued ordinary share capital of the Company at the date of the passing of resolution 14.
The authorities granted under resolutions 13 and 14 will expire at the conclusion of the next AGM of the Company after the passing of the
resolutions, expected to be held in December 2026, or on the expiry of 15 months from the passing of the resolutions, unless they are
previously renewed, varied or revoked. It is expected that the Company will seek these authorities on an annual basis. The authorities sought
under resolutions 13 and 14 will only be used to issue shares at a premium to net asset value and only when the Directors believe that it would
be in the best interests of shareholders as a whole to do so.
Authority to Buy Back Ordinary Shares
Any buy back of ordinary shares will be subject to the Companies Act 2006 (as amended), the UK Listing Rules and within guidelines
established by the Board from time to time (which will take into account the income and cash flow requirements of the Company).
Resolution 15 will be proposed as a special resolution and seeks to provide the Directors with the authority to purchase up to 92,973,578
ordinary shares or, if less, the number representing approximately 14.99 per cent of the Company’s ordinary shares in issue at the date of the
passing of resolution 15. Any shares purchased by the Company may be cancelled or held in treasury. The Company does not currently hold
any shares in treasury.
For each ordinary share, the minimum price (excluding expenses) that may be paid on the exercise of this authority will not be less than the
nominal value of each ordinary share at the date of purchase. Under the UK Listing Rules, the maximum price that may be paid on the exercise
of this authority must not exceed the higher of: (i) 105 per cent of the average of the middle market quotations (as derived from the Daily
Official List of the London Stock Exchange) for the shares over the five business days immediately preceding the date of purchase; and (ii) the
higher of the last independent trade and the highest current independent bid on the trading venue on which the purchase is carried out.
This authority will expire at the conclusion of the next AGM of the Company after the passing of this resolution unless it is previously renewed,
varied or revoked.
Notice for General Meetings
Resolution 16 is being proposed to reflect the provisions of the Companies Act 2006 relating to meetings and the minimum notice period
for listed company General Meetings being increased to 21 clear days, but with an ability for companies to reduce this period to 14 clear days
(other than for AGMs), provided that the Company offers facilities for shareholders to vote by electronic means and that there is an annual
resolution of shareholders approving the reduction in the minimum period for notice of General Meetings (other than for AGMs) from 21 clear
days to 14 clear days. The Board is therefore proposing resolution 16 as a special resolution to ensure that the minimum required period for
notice of General Meetings of the Company (other than for AGMs) is 14 clear days.
The approval will be effective until the earlier of 15 months from the passing of the resolution or the conclusion of the next AGM of the
Company, at which it is intended that a similar resolution will be proposed. The Board intends that this flexibility of a shorter notice period to
be available to the Company will be used only for non-routine business and only where needed in the interests of shareholders as a whole.
Annual Report and Financial Statements 2025
41
Corporate Governance
Strategic Report Financial Statements Additional Information
Recommendation
The Directors consider each resolution being proposed at the Annual General Meeting to be in the best interests of the Company and its
shareholders as a whole and they unanimously recommend that all shareholders vote in favour of them, as they intend to do in respect of
their own beneficial holdings of shares which amount in aggregate to 88,262 ordinary shares representing approximately 0.01 per cent of the
current issued share capital of the Company.
Directors’ Deeds of Indemnity
The Company has entered into deeds of indemnity in favour of each of the Directors. The deeds give each Director the benefit of an indemnity
to the extent permitted by the Companies Act 2006 against liabilities incurred by each of them in the execution of their duties and the exercise
of their powers. A copy of each deed of indemnity is available for inspection at the Company’s registered office during normal business hours
and will be available for inspection at the Annual General Meeting. The Company also maintains directors’ and officers’ liability insurance.
Conflicts of Interest
Under the Companies Act 2006 a Director must avoid a situation where he or she has, or could have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interests. The requirement is very broad and could apply, for example, if a Director becomes a
director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise
conflicts and potential conflicts, where appropriate, where the Articles of Association contain a provision to this effect. The Company’s Articles
of Association give the Directors authority to approve such situations. The Company maintains an up-to-date register of Directors’ conflicts of
interest which have been disclosed to, and approved by, the other Directors. This register is considered at each scheduled Board meeting. The
Directors are required to disclose to the Company Secretary any changes to conflicts or any potential new conflicts.
The Investment Manager has in place a conflicts of interest and allocation policy which aims to ensure a fair allocation of investment
opportunities and to mitigate potential conflicts of interest that may arise where the Investment Manager provides investment management,
investment advice or other services to other funds that may have similar investment policies to that of the Company. The Company has
reviewed, and accepted, the policy which remained unchanged during the course of the year.
Depositary
IQ EQ Depositary (UK) Limited (the ‘Depositary’) acts as the Group’s depositary in accordance with the AIFM Directive. The Depositary’s
responsibilities, which are set out in an Investor Disclosure Document available on the Company’s website, include cash monitoring, record
keeping and verification of non-custodial assets and general oversight of the Group’s portfolio. The Depositary receives for its services a fee
based on the value and activity of the property portfolio, payable quarterly. For the year ended 30 June 2025, the fees paid totalled £165,000
(2024: £212,000).
Other Companies Act 2006 Disclosures
The rules for appointment and replacement of Directors are contained in the Articles of Association of the Company. In respect of retiral by
rotation, the Articles of Association provide that each Director is required to retire at the third annual general meeting after the annual general
meeting at which last elected. As mentioned on page 45, the Board has agreed that all Directors will retire annually.
Any amendment of the Company’s Articles of Association and powers to issue and buy back shares require shareholder authority.
There are no agreements between the Company and the Directors providing for compensation for loss of office that occurs because of
a takeover bid.
Future Developments of the Company
The future success of the Company in pursuit of its investment objective is dependent primarily on the performance of its investments and
the outlook for the Company is set out in the Chair’s Statement on pages 5 to 7 and the Investment Manager’s Report on pages 24 and 25.
Environmental, Social and Governance Principles
The Company seeks to conduct its affairs responsibly and environmental factors are, where appropriate, taken into consideration in relation
to investment decisions taken on behalf of the Group, with all investment acquisitions being assessed by the Investment Manager in line with
their “house standard” approach which more explicitly evaluates ESG matters in relation to each proposed acquisition. Further details are
contained on pages 18, 22 and 23 and in the Corporate Governance Statement on page 48.
The Company published its annual Sustainability Report in July 2025, covering ESG matters in more detail, and intends to continue to publish
such report annually to 31 December each year to align with the Group’s data collection and reporting under the GRESB framework (as
considered in more detail on the following page).
Greenhouse Gas Emissions/Streamlined Energy and Carbon Reporting
All of the Company’s activities are outsourced to third parties. As such it does not have any physical assets, property, employees or operations
of its own and does not generate any greenhouse gas or other emissions. As the Group has entered into operational leases on its property
portfolio, the Company does not have operational control over these properties and therefore assesses that the tenant should report on any
carbon emissions associated with the operation of the care homes. Following this assessment, the Group is categorised as a lower energy
user under the HM Government Environmental Reporting Guidelines March 2019 (‘the Guidelines’) and is not required to make the detailed
disclosures of energy and carbon information set out within the Guidelines within this Annual Report. Disclosures on the property portfolio’s
environmental sustainability performance measures, prepared in accordance with the latest European Public Real Estate Association’s (‘EPRA’)
sustainability Best Practices Recommendations (sBPR), which in turn are aligned principally with the Global Reporting Initiative (‘GRI’) Standards,
are included in the Company’s separate Sustainability Report, as referred to above. The Company achieved an EPRA sBPR Gold Award for its
report in relation to the year ended 31 December 2024, as published in July 2025.
Target Healthcare REIT plc
42
Directors’ Report continued
Taskforce on Climate-related Financial Disclosures (‘TCFD’)
The Company acknowledges the recommendations of the Financial Stability Board TCFD to improve and increase reporting of climate-related
financial information and will work towards mitigating, where appropriate, the physical climate risks and opportunities arising in the property
portfolio. Further detail on the climate risks in the portfolio are detailed in the ‘principal and emerging risks and risk management’ on page 26
and consideration of the impact of climate risks on the market value of the property portfolio is included in Notes 9 and 16 to the Consolidated
Financial Statements. More information is included in the Company’s separate Sustainability Report.
GRESB Framework
GRESB is a mission-driven and investor-led organisation that provides actionable and transparent ESG data to financial markets. GRESB collects,
validates, scores, and independently benchmarks ESG data to provide business intelligence, engagement tools, and regulatory reporting
solutions. This helps to aid transparency and comparability, and allows assessment of performance and trends. The Company submitted data
to GRESB under this framework and achieved a score of 80 in relation to the year ended 31 December 2024, placing the Group second in its
peer group and resulting in the award of three green stars. This continues to demonstrate the underlying quality of the property portfolio and
the Group’s tangible progress in ESG measurement and reporting.
Modern Slavery Act 2015
As an investment company with no employees or customers and which does not provide goods or services in the normal course of business,
the Company considers that it does not fall within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a human
trafficking statement. However, as a matter of good corporate governance and to reflect the Group’s commitment to high business standards
throughout its supply chains, the Company has chosen to publish a Modern Slavery and Human Trafficking Statement, the full detail of
which is available on request. The Company’s own supply chain, which consists predominantly of professional advisers and service providers
in the financial services industry, is considered to be low risk in relation to this matter but this is regularly considered by the Management
Engagement Committee as part of their review of each significant service provider. The Group takes a zero-tolerance approach to modern
slavery and human trafficking and expects all those it deals with to demonstrate the same attitude.
Criminal Finances Act 2017
The Company has a zero tolerance policy to tax evasion and the facilitation of tax evasion. The Company is fully committed to complying with
all legislation and appropriate guidelines designed to prevent tax evasion and/or the facilitation of tax evasion in the jurisdictions in which the
Company, its service providers and business partners operate.
The Company is subject to the Criminal Finances Act 2017 and has adopted a policy, endorsed by the Board, designed to prevent tax evasion
and the facilitation of tax evasion. The policy establishes a culture across the Company and in relation to its service providers and other
counterparties, in which tax evasion and the facilitation of tax evasion is unacceptable. The policy is based on a detailed risk assessment
undertaken by the Board annually.
UK Bribery Act 2010
In order to ensure compliance with the UK Bribery Act 2010, the Directors confirm that the Company follows a zero tolerance approach
towards bribery, insofar as it applies to any Directors of the Company or employee of the Investment Manager or any other organisation with
which the Company conducts business, and a commitment to carry out business openly, honestly and fairly.
The Board also ensures that adequate procedures are in place and followed in respect of the appointment of third-party service providers and
the acceptance of gifts and/or hospitality.
Financial Instruments
The Company’s financial instruments comprise its cash balances, external loans and debtors and creditors that arise directly from
its operations such as deposits held on behalf of tenants and accrued rental income. The financial risk management objectives and
policies arising from its financial instruments and the exposure of the Company to risk are disclosed in Note 16 to the Consolidated
Financial Statements.
Annual General Meeting
The Company is required by law to hold an Annual General Meeting and it will be held at the offices of Dickson Minto LLP, Dashwood House,
69 Old Broad Street, London EC2M 1QS on 4 December 2025 at 4.00 p.m. The Notice of Annual General Meeting is set out on pages 98 to 100.
We would strongly encourage all shareholders to make use of the proxy form provided in order to lodge your votes. Shareholders are also
encouraged to raise any questions or comments they may have in advance of the AGM through the Company Secretary
(info@targetfundmanagers.com). These will be relayed to the Board and either the Company Secretary or the Board will respond in due course
either directly or by making available a summary of responses to any frequently asked questions on the Company’s website.
On behalf of the Board
Alison Fyfe
Chair
13 October 2025
Annual Report and Financial Statements 2025
43
Corporate Governance
Strategic Report Financial Statements Additional Information
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to
prepare the Consolidated Financial Statements in accordance with UK-adopted International Financial Reporting Standards (‘IFRSs’) in
conformity with the Companies Act 2006 and have elected to prepare the parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), including Financial Reporting Standard
101 ‘Reduced Disclosure Framework’. Under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules, group financial
statements are required to be prepared in accordance with UK-adopted IFRSs.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs and profit or loss of the Company and Group for that period. In preparing these Financial Statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed
and explained in the Financial Statements; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Financial Statements
and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ responsibility statement in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. The Directors consider
the Annual Report and the Financial Statements, taken as a whole, provide the information necessary to assess the Company’s position,
performance, business model and strategy and are fair, balanced and understandable.
Directors’ responsibility statement under the disclosure guidance and transparency rules
To the best of our knowledge:
• the Consolidated Financial Statements, prepared in accordance with UK-adopted IFRSs, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the Annual Report, including the Strategic Report and the Directors’ Report, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
Disclosure of information to the auditor
The Directors confirm that:
• so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditor is aware of that information.
On behalf of the Board
Alison Fyfe
Chair
13 October 2025
Target Healthcare REIT plc
44
Introduction
The Board of Target Healthcare REIT plc has considered the Principles and Provisions of the AIC Code of Corporate Governance (‘AIC Code’).
The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the ‘UK Code’), as well as setting out
additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting
Council, provides more relevant information to shareholders. The Company has complied with the Principles and Provisions of the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and
Provisions set out in the UK Code to make them relevant for investment companies. The UK Code is available on the website of the Financial
Reporting Council: www.frc.org.uk
The Board
The Board is responsible for the effective stewardship of the Group’s affairs and reviews the schedule of matters reserved for its decision,
which are categorised under various headings. These include investment strategy, investment policy, finance, risk, investment restrictions,
performance, marketing, adviser appointments and the constitution of the Board. It has responsibility for all corporate strategic issues,
dividend policy, share buyback policy and corporate governance matters which are all reviewed regularly. The Board as a whole, through
the Investment Committee, is responsible for authorising all purchases and sales within the Group’s portfolio and for reviewing the quarterly
independent property valuation reports produced by the Group’s external valuer.
In order to enable them to discharge their responsibilities, all Directors have full and timely access to relevant information. At each meeting,
the Board reviews the Group’s investment performance and considers financial analyses and other reports of an operational nature. The Board
monitors compliance with the Company’s objectives and is responsible for setting investment and gearing limits within which the Investment
Manager has discretion to act, and thus supervises the management of the investment portfolio which is contractually delegated to the
Investment Manager.
The table below sets out the number of scheduled Board and Committee meetings held during the year and the number of meetings attended
by each Director. This includes a two-day strategy meeting held at an external venue by the Board during June 2025 in order to consider strategic
issues, with a similar such meeting expected to be held on an annual basis. In addition to these scheduled meetings, there were a further 10
Board and Board Committee meetings held during the year. These additional meetings included regular updates with the Investment Manager
and other appropriate advisers on significant matters arising to ensure that appropriate actions were taken on a timely basis.
Board Audit Committee
Investment
Committee
Management
Engagement
Committee
ESG Committee
Nomination
Committee
Remuneration
Committee
Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended
Alison Fyfe 5 5 3 3 4 4 4 4 4 4 3 3 1 1
Vince Niblett 5 5 3 3 4 4 4 4 4 4 3 3 1 1
Michael Brodtman 5 5 3 3 4 4 4 4 4 4 3 3 1 1
Richard Cotton 5 5 3 3 4 4 4 4 4 4 3 3 1 1
Amanda Thompsell 5 5 3 3 4 4 4 4 4 4 3 3 1 1
Each of the Directors has signed a letter of appointment with the Group which includes twelve months’ notice of termination by either party.
These are available for inspection at the Company’s registered office during normal business hours and are also made available at annual
general meetings.
Corporate Governance Statement
Welcome to the Corporate
Governance section
of the Annual Report
The aim of this section is to set out the framework
under which the independent Board, and its various
sub-committees, ensure that both the Company and
the service providers acting on its behalf make
appropriate decisions and undertake actions in line
with the interests of the Company’s stakeholders.
Alison Fyfe, Chair
Annual Report and Financial Statements 2025
45
Corporate Governance
Strategic Report Financial Statements Additional Information
Individual Directors may, at the expense of the Group, seek independent professional advice on any matter that concerns them in the
furtherance of their duties. The Group maintains appropriate directors’ and officers’ liability insurance. The Board has direct access to company
secretarial advice and services. The Company Secretary is responsible for ensuring that Board and Committee procedures are followed and
applicable regulations are complied with.
Investment management
Target provides investment management and other services to the Group. Details of the arrangements between the Group and the
Investment Manager in respect of management services are provided in the financial statements. The Board keeps the appropriateness of the
Investment Manager’s appointment under review. In doing so the Board reviews performance quarterly and considers the past investment
performance of the Group and the capability and resources of the Investment Manager to deliver satisfactory investment performance in the
future. It also reviews the length of the notice period of the investment management agreement (‘IMA’) and the fees payable to the Investment
Manager, together with the standard of the other services provided.
During the year, through the Management Engagement Committee, the Board considered the appropriateness of the terms of the Investment
Manager’s appointment, including seeking independent advice and views from the Company’s brokers and legal advisers, and concluded that:
• the Investment Manager’s investment performance remained satisfactory, considering, amongst other matters, the continued significant
outperformance of the Group’s property portfolio compared to the MSCI UK Annual Healthcare Property Index;
• the level of fees payable to the Investment Manager remained appropriate. This assessment reviewed the appropriateness and effectiveness
of the tiered management fee structure;
• the specialist nature of the properties in which the Company invests requires a detailed knowledge of the sector, and that the nature of the
asset class means that investment decisions tend to be long-term in nature, and that therefore the two-year notice period remains appropriate;
balancing the interests of the Company in supporting the performance of its incumbent Investment Manager against retaining the Company’s
ultimate sanction of being able to replace the Investment Manager; and the standard of other services provided remained appropriate.
The Management Engagement Committee has noted that certain listed investment companies have amended their management fee
arrangements, following shareholder pressure for greater alignment between the interests of the investment company (and their shareholders
as a whole) and those of their external managers. There are certain important features of the running of the Group which are not directly
comparable to other listed companies in the real estate and alternatives sectors, nevertheless the Board is keen to see greater alignment and
has initiated discussions with the Investment Manager in this regard.
The Directors considered the Investment Manager’s provision of Company Secretarial services and concluded that the provision of such
services did not create a conflict of interest, compromise the ability of the Board to hold the Investment Manager to account, or result
in any diminution in the quality of governance or reporting that would warrant a change in this arrangement. This assessment took into
consideration the fiduciary duties of a Company Secretary, the Directors’ access to independent professional advice where necessary and the
Group’s appointment of, and regular liaison with, external legal advisers and brokers.
The Directors are satisfied with the Investment Manager’s ability to deliver satisfactory investment performance and the quality of other
services provided. It is therefore their opinion that the continuing appointment of the Investment Manager on the terms agreed is in the
interests of shareholders as a whole.
Appointments, diversity, tenure and succession planning
Directors may be appointed by the Company by ordinary resolution or by the Board. All new appointments by the Board are subject to
election by shareholders at the next AGM following their appointment. The Company’s Articles of Association require all Directors to retire by
rotation at least every three years. However, in accordance with the recommendations of the AIC Code, the Board has agreed that all Directors
will retire annually and, if appropriate, seek re-election.
The Board believes in the benefits of diversity, including skills and experience, gender, social and ethnic backgrounds, cognitive and personal
strengths and length of service. The aim of the Company is to have an appropriate level of diversity in the boardroom, including each of the
Committees, in order to bring constructive challenge and fresh perspectives to discussions. These matters were all expressly considered
as part of the externally-facilitated recruitment processes completed in relation to the appointment of each of the existing Directors, which
were designed to identify a diverse range of potential candidates, with a number of female candidates and candidates from a minority ethnic
background being interviewed. The subsequent appointments were based on merit and objective criteria in order to ensure that the Board
collectively had the necessary combinations of skills, experience and knowledge.
The Board supports the overall recommendations of the FTSE Women Leaders Review and Parker Review for appropriate gender and ethnic
diversity and notes that the UK Listing Rules include ‘comply or explain’ targets that at least 40 per cent of the Board should be held by
women, that at least one of the senior board positions should be held by a woman, and that at least one member of the Board should be from
a minority ethnic background. At the year end, 40 per cent of the Board were women and Ms Fyfe was Chair and therefore the Company
meets the first two of these targets. The Company’s non-compliance with the third is explained in more detail on the following page. In
accordance with UKLR 6.6.6R (9), (10) and (11) the Board has provided the following information in relation to its diversity. This information has
been collected by self-disclosure directly from the individuals concerned who were asked to confirm their gender and ethnicity. There have
been no changes to the composition of the Board since 30 June 2025.
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(Chair and the SID)
Men 3 60% 1
Women 2 40% 1
Not specified/prefer not to say – – –
Target Healthcare REIT plc
46
Corporate Governance Statement continued
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(Chair and the SID)
White British or other White (including minority-white groups) 5 100% 2
Mixed/Multiple ethnic groups – – –
Asian/Asian British – – –
Black/African/Caribbean/Black British – – –
Other ethnic group – – –
Not specified/prefer not to say – – –
As an externally managed investment company with no executive directors, the Company does not have all the senior positions on its Board
referenced in the UK Listing Rules, specifically it does not have either a chief executive or a chief financial officer. Accordingly, the Company
only has two of these senior positions on its Board, being the positions of chair and senior independent director.
As the Company is an investment company with no executive directors and a small board relative to that which would be expected for a trading
company of equivalent size, it has not managed to comply with the diversity target relating to ethnicity in that none of the current Directors come
from an ethnic minority background. This is the case even though, as set out on the previous page, the aim of recruiting a suitable director of an
ethnic minority background was expressly considered during the appointment processes conducted previously and the various firms of external
recruitment consultants engaged to support the recruitment processes were each explicitly requested to address diversity considerations.
The Board remains cognisant of the UK Listing Rules and supports the Parker Review recommendations in relation to ethnic diversity and
commits to addressing them at such time as future recruitment is undertaken. Therefore, although the conclusions of both the externally
facilitated Board Performance Review conducted in the prior year and the current year internal assessment process, as set out on page 47, were
that Board was operating effectively as currently constituted, the Directors intend to appoint a sixth Director to the Board over the course of the
following year in order both to address diversity concerns and to bolster the resilience of the Board and aid in its succession planning.
The Board will continue to take all matters of diversity into account and the benefits of diversity will continue to be considered as an important
factor in all future appointments. All appointments will continue to be based on merit and objective criteria and will not discriminate on the
grounds of matters such as gender, ethnicity, socio-economic background, religion, sexual orientation, age or physical ability.
The Board’s policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no
limit on the overall length of service of any of the Company’s Directors, including the Chair, has been imposed. However, the Board does not
currently envisage that any Director will serve for more than the nine-year period that the AIC Code considers could impair, or could appear
to impair, a non-executive Directors’ independence. This may, however, be adjusted for reasons of flexibility and continuity should this be
recommended by the Nomination Committee and concluded by the Board to be in the best interests of the Company.
Whenever there are new appointments, these Directors receive an induction from the Investment Manager and Company Secretary on joining
the Board. All Directors receive other relevant training, collectively or individually, as necessary.
Independence of Directors
The Board, which is composed solely of independent non-executive Directors, regularly reviews the independence of its members. All the
Directors have been assessed by the Board as remaining independent of the Investment Manager and of the Group itself; none has a past
or current connection with the Investment Manager and each remains independent in character and judgement with no relationships or
circumstances relating to the Group that are likely to affect that judgement.
The basis on which the Group aims to generate value over the longer term is set out in its objective and investment policy as contained on
pages 36 and 37. An investment management agreement between the Group and Target sets out the matters over which the Investment
Manager has authority and the limits beyond which Board approval must be sought. All other matters, including investment and dividend
policies, corporate strategy, gearing, corporate governance procedures and risk management, are reserved for the approval of the Board
of Directors.
The Board meets at least quarterly and receives full information on the Group’s investment performance, assets, liabilities and other relevant information
in advance of Board meetings. Throughout the year a number of committees have been in place as detailed below. The committees operate within
clearly defined terms of reference which are available on request or for inspection at the Company’s registered office during normal business hours.
Senior Independent Director
The Company has appointed Mr Cotton as Senior Independent Director. The role of the senior independent director is to provide a sounding
board for the chair and to serve as an intermediary for the other directors and shareholders. The senior independent director will also lead
the appraisal of the chair’s performance, and will lead any other discussion of the non-executive directors without the chair being present on
other occasions as necessary.
Removal of Directors
The Company may by special resolution remove any Director before the expiration of his or her period of office.
Audit Committee
The Board has established an Audit Committee, the role and responsibilities of which are set out in the report on pages 49 to 53.
Remuneration Committee
The Board has established a Remuneration Committee, the role and responsibilities of which are set out in the report on page 54.
Annual Report and Financial Statements 2025
47
Corporate Governance
Strategic Report Financial Statements Additional Information
ESG Committee
The Board has established an ESG Committee which comprises all the Directors and which is chaired by Mr Brodtman. The Committee
oversees the formulation and implementation of the Group’s ESG policy and strategy, including scrutinising those matters delegated to the
Investment Manager. It is responsible for proposing targets to achieve the Board’s policy objectives and monitors progress against those
targets, taking into consideration developments in relation to legal and regulatory requirements and industry practice which may have an
impact on the Group’s activities. The Committee reviews and approves any material public reporting and market disclosures, including within
the Annual Report and the Sustainability Report, in respect of ESG matters.
The ESG Committee met formally on four occasions throughout the year to consider the progress and status of relevant ESG matters, as
reported by the Investment Manager, and to continue the process of developing challenging, but achievable and realistic, targets for the
Group. This included consideration of the appropriate means of measuring results and monitoring progress against those targets. The
members of the ESG Committee also discussed the progress of the Net Zero Carbon Pathway and continued the process of reaching net
zero carbon, including the setting of appropriate interim targets and consideration of any external factors which may prevent the Group
from achieving its stated targets. The Committee also monitored progress in relation to the annual GRESB submission for the year ended
31 December 2024, and reviewed and approved the Group’s annual Sustainability Report which was subsequently published in July 2025.
The Investment Manager has reported to the ESG Committee on its property-by-property asset management plan to identify and implement
initiatives where the energy efficiency and carbon emissions of the Group’s property portfolio can be further improved, with the initial capital
expenditure budget of £1 million previously approved by the ESG Committee continuing to be allocated to appropriate projects.
In addition to the formal meetings of the Committee, monthly meetings were held between the Chair of the Committee and appropriate
representatives of the Investment Manager.
Management Engagement Committee
The Board has established a Management Engagement Committee which comprises all the Directors and which is chaired by Mr Cotton.
Mr Cotton was appointed as chair of the Management Engagement Committee with effect from 4 September 2024 and has chaired all
meetings held throughout the year. The Committee reviews the appropriateness of the Investment Manager’s continuing appointment
together with the terms and conditions thereof on a regular basis. It also reviews the terms and quality of service received from other service
providers on a regular basis. Further details of the work undertaken by the Management Engagement Committee in relation to the terms of
appointment of the Investment Manager is set out on page 45. The Management Engagement Committee oversaw the review of the services
provided by the Company’s Depositary, which resulted in the retention of the incumbent provider but with a significant reduction in the overall
depositary fee payable with effect from 1 January 2025.
Investment Committee
The Board has established an Investment Committee which comprises all the Directors and which is chaired by Ms Fyfe. The Committee
reviews each investment paper prepared by the Investment Manager and is responsible for authorising all purchases and sales, and significant
capital expenditure or asset management activities, within the Company’s portfolio. The Investment Committee considered each investment
paper as and when circulated by the Investment Manager, providing independent challenge where appropriate, and met quarterly to formally
ratify the Investment Committee’s decision to approve or decline each of the investment recommendations proposed. Amongst other matters,
the Investment Committee particularly considered the investment and asset management activities described in detail on pages 19 to 21.
Nomination Committee
The Board has established a Nomination Committee which comprises all the Directors and which is chaired by Dr Thompsell. The Committee’s
terms of reference do not permit the Committee to be chaired by the Chair of the Board when considering the appointment of his or her successor.
The Board considers that, given its size, it would be unnecessarily burdensome to establish a separate nomination committee which did not
include the entire Board. This is considered appropriate given the Board consists solely of independent, non-executive Directors and ensures
that all Directors are kept fully informed of any issues that arise.
The Nomination Committee is responsible for:
• reviewing and nominating candidates for the approval of the Board to fill vacancies on the Board of Directors and to lead the process for
appointments, including the selection and appointment of any external recruitment consultant;
• considering and reviewing the composition and balance of the Board;
• ensuring that plans are in place for orderly succession to the Board and overseeing the development of a diverse pipeline for succession; and
• reviewing the re-appointment of Directors, as they fall due for re-election, under the terms of their appointment and the AIC Code, and
making recommendations to the Board as considered appropriate.
All of the Nomination Committee’s responsibilities have been carried out over the period of review.
Assessment of the Board and Committees
During the year, the performance of the Board, Committees and individual Directors was evaluated through an assessment process led by the
Chair. This process involved the completion of questionnaires tailored to suit the nature of the Company and, as required, discussions with
individual Directors and individual feedback from the Chair to each of the Directors. The evaluation of the Chair was led by the Senior
Independent Director in consultation with the other Directors.
The main findings of the assessment were:
• that the minor points for development and suggestions raised following the externally-facilitated assessment of the Board in the prior year had
been appropriately actioned and were functioning effectively;
• that the meetings of the Board and Committees were effectively conducted and chaired, aided by appropriate agendas and supporting
papers, and were of sufficient duration, regularity and timeliness to support effective decision making;
• that the current Directors resulted in a balanced Board with the necessary range of skills and experience to enable effective oversight over
the Group and the performance of the Investment Manager, although recruitment of a sixth Director over the following year would help to
address both Board diversity and support future succession planning.
Target Healthcare REIT plc
48
Assessment of the Board and Committees continued
The conclusion from the performance review process conducted in relation to the year ended 30 June 2025 was that the Board and each
committee was operating effectively, with an appropriate and sufficient balance of experience and skills. An assessment process led by an
external facilitator was last conducted in relation to the year ended 30 June 2024 and the Board anticipates having an externally facilitated
Board performance review conducted at least every three years.
Relations with shareholders
The Group pro-actively seeks the views of its shareholders and places great importance on communication with them. The Board receives
regular reports from the Investment Manager and Brokers on the views of shareholders, and the Chair and other Directors make themselves
available to meet shareholders when required to discuss the Group’s business and address shareholder queries. The Chair has held a number
of discussions directly with shareholders over the course of the year on specific areas of interest, and the Board has considered the views of
other shareholders that preferred to meet with the Investment Manager. The Board also requested that its broker(s) pro-actively engage with
significant shareholders in relation to a number of pre-determined questions in order to ensure that the Directors were fully informed on the
up-to-date views of shareholders immediately prior to the Board’s annual strategy meeting. It is expected that direct meetings with the Chair,
or the chair(s) of the relevant Committee(s), will continue to be made available to shareholders, although this may be through the use of video
conferencing facilities.
The Notice regarding the Annual General Meeting is included on pages 98 to 100. It is intended that the AGM will be held physically at the offices
of Dickson Minto LLP, Dashwood House, 69 Old Broad Street, London EC2M 1QS. However, as set out on page 42, shareholders are encouraged
to lodge their votes with the Registrar either by use of the proxy form provided, or by electronic means, and to submit any questions they may
have for the Directors or Investment Manager in advance through the Company Secretary (info@targetfundmanagers.com). The Annual Report
and Notice of Annual General Meeting are posted to shareholders at least 21 clear days before the Annual General Meeting.
Environmental, Social and Human Rights Issues
Responsible Investment and Environmental, Social and Governance (‘ESG’) considerations are core values of the Group and its Investment
Manager. In collaboration with its tenants, the Group provides demonstrable social impact within best-in-class care homes. These are considered
in more detail on pages 18, 22 and 23. The Group has also published a separate Sustainability Report for the year to 31 December 2024.
A summary of the key ESG considerations in the investment and asset management approach followed by the Group is as follows:
• ESG considerations lie at the heart of the Group’s approach because of our belief that a strong care ethos is essential for the long-term
performance of our investments. The Investment Manager commits extensive resources to incorporating ESG (and responsible investing
principles) throughout their investment and decision-making processes, both at the time of the acquisition of any asset and on an ongoing
basis. The Investment Manager has implemented a ‘house standard’ investment approach which formally guides how ESG factors are
considered for each new investment opportunity, which is refreshed on a regular basis.
• Before acquiring any home, the Investment Manager reviews on a granular level, inter alia: the position of the home in the community and
how the home engages with its community, the building layout and facilities, the natural environment of the home, the management team
and general governance shown by the tenant as well as any relevant ratings by regulatory bodies such as the Care Quality Commission.
• Once the Group has acquired a care home, the Investment Manager undertakes regular reviews of the environmental, social, governance
and ethical policies that the home has in place and (to the extent possible) their adherence to these policies in the delivery of their services.
• The Investment Manager’s role as an engaged landlord includes careful monitoring of the home and ongoing dialogue with management.
In usual circumstances, the Investment Manager will visit every home at least every six months, occasionally visiting the properties
unannounced to gauge the culture and engage with tenants who wish to improve their homes, potentially providing support and funding
for this. The Investment Manager is monitoring the portfolio on an ongoing basis to pro-actively assess opportunities to further improve
the portfolio’s environmental or social credentials.
• The Group’s vision of care includes promoting the conservation, protection and improvement of the physical and natural environments
surrounding care homes not least because this makes the care home more attractive for both tenants and residents.
Stewardship Code
The Investment Manager is a signatory to the Stewardship Code published by the Financial Reporting Council. Stewardship is the responsible
allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the
economy, the environment and society. The Stewardship Code sets high stewardship standards for asset owners and asset managers, and for
service providers that support them. The Investment Manager’s Stewardship Code Statement of Compliance for the year ended 31 December
2024 is available on its website at www.targetfundmanagers.com.
On behalf of the Board
Alison Fyfe
Chair
13 October 2025
Corporate Governance Statement continued
Annual Report and Financial Statements 2025
49
Corporate Governance
Strategic Report Financial Statements Additional Information
Composition of the Audit Committee
An Audit Committee has been established with written terms of reference which are reviewed at each meeting and which are available
on request. The Audit Committee currently comprises all Directors and is chaired by Mr Niblett. The Board will consider each Director’s
membership of the Audit Committee on a case-by-case basis but, in general, believes that, given the Group’s size, a committee which
includes all Directors is appropriate and will enable all Directors to be kept fully informed of any issues that arise.
The Board consider that the Chair’s experience of the property and finance sectors is invaluable to the Audit Committee, particularly in regard
to providing guidance in relation to the appropriateness and risks regarding the Group’s loan facilities and related hedging derivatives and in
assessing and providing challenge to the external valuation of the Group’s property portfolio, and therefore, in line with the AIC Code, the
Board believes it appropriate that the Chair remains a member of the Committee.
At least one member of the Audit Committee has recent and relevant financial experience and the Committee as a whole has competence
relevant to the sectors in which the Group operates; which are considered to be healthcare, property and investment.
Role of the Audit Committee
The Committee’s responsibilities are shown in the table below together with a description of how they have been discharged. More detailed
information on certain aspects of the Committee’s work is given in the subsequent text.
Responsibilities of the Audit Committee How they have been discharged
Monitoring the integrity of the half-year
and annual financial statements, and
any formal announcements relative
to the Group’s financial performance,
including the appropriateness of
the accounting policies applied and
any significant financial reporting
judgements and key assumptions.
This includes consideration of the
narrative elements of the half-year
and annual financial reports, including
whether, taken as a whole, they are
fair, balanced and understandable and
provide the necessary information for
shareholders to assess the Group’s
position, performance, business
model and strategy.
The Committee met three times during the year to:
• review the contents of the half-yearly report, and to consider the audit plan and the proposed
audit fee;
• consider, in advance of the Company’s year end, any significant changes to accounting
standards, judgements or estimates, or other disclosure requirements expected to apply at the
Group’s year end; and
• review the contents of the Annual Report, including the structure and content of the Strategic
Report, the impact of changes in financial reporting standards and other areas of guidance, and
approving the Group’s significant accounting policies, judgements and estimates, going concern
and viability statements.
The Investment Manager and Company Secretary attended each of these meetings, with the Auditor
also attending the meetings at which the audit plan and the contents of the half-yearly and annual
reports were reviewed. The significant matters considered by the Group are listed on pages 52 and
53. In addition, during the year the Committee kept under review the statutory financial reporting
of each of the Group’s subsidiaries for the year ended 30 June 2024, the reporting timetable for the
year ended 30 June 2025 and the internal financing structure of the Group, including the quarterly
settlement of intercompany loans and the payment of intragroup dividends. The Committee
also noted the resignation of the Investment Manager’s Finance Director and participated in the
recruitment process in relation to the appointment of his successor. The Committee also ensured
that this did not adversely impact on the accuracy or timeliness of the Company’s financial reporting.
The Committee considered the appropriateness of the accounting policies, judgements and key
assumptions in relation to the property re-tenantings, surrender premiums received and disposals
completed in the context of the particular circumstances of each transaction, including giving
particular consideration to any potential impact on the valuations at 30 June 2025 for those
properties in relation to which an agreement to sell was contracted after the balance sheet date.
As part of this review, the Committee considered the characteristics of good corporate reporting
set out in the FRC’s Annual Review of Corporate Reporting.
I am pleased to present my
report as the Chair of the
Audit Committee
This report sets out the role, responsibilities and
actions taken by the Audit Committee to ensure
that the suitable controls continue to operate
effectively and that appropriate financial information
continues to be issued on a timely basis to the
Company’s stakeholders.
Vince Niblett, Chair of the Audit Committee
Report of the Audit Committee
Target Healthcare REIT plc
50
Report of the Audit Committee continued
Responsibilities of the Audit Committee How they have been discharged
Assessment of the prospects of the
Company, taking account of the
Company’s position and principal risks,
and consideration of the period of
time over which such evaluation
can be made.
The Committee has reviewed the assessment described in more detail under the section ‘Viability
Statement’ within the Directors’ Report, and the underlying data on which such assessment was
based, to ensure that the work undertaken, the conclusions reached and the disclosures included
within the Annual Report were appropriate.
Evaluation of the effectiveness of the
internal controls and risk management
systems and procedures.
The Investment Manager maintains a risk matrix which summarises the Group’s key risks. The risk
matrix is considered by the Directors at least semi-annually, with key principal and emerging risks
also being discussed at the Group’s annual two-day strategy meeting.
The Committee reviewed the Investment Manager’s internal controls report over its own processes,
prepared under ISAE 3402 “Assurance Reports on Controls at a Service Organization” and covering
the year to 30 June 2025. The Committee noted that this report was a Type II report, which
documented the operation of the controls over a period of time. Following consideration and
review, the Committee concluded that this provided sufficient information to adequately assess the
Investment Manager’s control environment, as far as it was relevant to the Group.
The Committee also considered the internal control reports for other significant service providers,
where available, including the Company’s registrar.
From a review of the risk matrix, the ISAE 3402 report on the Investment Manager, and the regular
management information received by the Board and Committees, combined with discussion
with the Investment Manager and Company Secretary, the Committee has satisfied itself on the
effectiveness of the risk and control procedures.
Consideration of dividend calculations
both in relation to PID/non-PID
payments made by the Company and
other dividends paid internally within
the Group.
The Committee has reviewed the calculation of the split of distributions between PID and non-PID,
including consideration of the suitability of the allocation of the costs of the Group between its
property rental business and its residual business.
The Committee has reviewed the methodology followed by the Investment Manager, and directors
of the subsidiaries, in determining and recommending the level of other dividends paid internally
within the Group.
Monitoring developments in
accounting and reporting requirements
that impact on the Group’s compliance
with relevant statutory and listing
requirements.
The Committee ensures, through its Legal Adviser, Investment Manager, Company Secretary
and Auditor, that any developments impacting on the Company’s responsibilities are tabled for
discussion at Committee or Board meetings. The Committee ensured that the Company was fully
compliant with the AIC Code.
Evaluation of reports received from
the Auditor with respect to the annual
financial statements and assessment of
quality of the audit.
The Auditor’s planning report, timetable and fee proposal were discussed with the Auditor in advance
of work commencing, together with the areas of audit focus, the level of materiality and the audit
work proposed to be undertaken. The Committee paid particular attention to any changes in
accounting standards or in the nature of activities undertaken by the Group and ensured that the
audit plan appropriately addressed these areas. The Committee specifically challenged the Auditors,
at both the planning and reporting stage, in relation to the audit work undertaken on any particular
areas of judgement or estimation; including the valuation of the property portfolio, any accounting or
disclosure implications in relation to the significant property transaction which completed subsequent
to the balance sheet date, and the methodology followed to determine the credit loss allowance.
The Committee specifically considered the external valuation of the Group’s property portfolio,
with the external valuers attending the meeting at which the annual results were discussed in order
to present directly to the Committee a summary of their valuation process and any significant
matters they wished to highlight either in relation to the valuation methodology generally or to
specific properties or tenants.
At the conclusion of the audit, the Committee discussed the audit results report with the Auditor,
Company Secretary and Investment Manager. This review considered the quality of the audit
through ensuring that the audit risks identified and the audit work undertaken did, in the opinion of
the Audit Committee, capture and appropriately consider those matters which gave rise to the risk
of material misstatement to the financial statements and disclosures.
Further detail on the assessment of the quality of the audit is included in the section entitled ‘The
Auditor’ on page 52.
Annual Report and Financial Statements 2025
51
Corporate Governance
Strategic Report Financial Statements Additional Information
Responsibilities of the Audit Committee How they have been discharged
Management of the relationship with
the external Auditor, including their
appointment and the evaluation of
scope, effectiveness, independence
and objectivity of their audit.
The Auditor attended the meetings of the Committee at which the Company’s audit plan, half-yearly
report and year end accounts were reviewed and also communicated separately with the Chairman
of the Committee on two occasions, firstly, to discuss the findings of their interim review and the
audit plan for the year ahead and, secondly, to provide an update on the findings of their annual
audit. The scope of the audit was discussed at the planning stage along with the staffing and timing
of audit procedures to ensure that an effective audit could be undertaken. The Committee has also
reviewed the independence and objectivity of the Auditor and has considered the effectiveness of
the audit, as set out in more detail in the section entitled ‘The Auditor’ on the following page.
To conduct the tender process and
make recommendations to the Board
for it to put to the shareholders for their
approval in general meeting, about
the appointment, reappointment and
removal of the external auditor.
The Audit Committee does not anticipate undertaking a further tender of the Group’s external audit
during the forthcoming year.
Risk management and internal controls
The principal and emerging risks faced by the Group together with the procedures employed to manage them are described in the Strategic
Report on pages 26 and 27.
Internal controls
The Board is responsible for the internal financial control systems of the Group and for reviewing their effectiveness. It has contractually
delegated to external agencies the services the Group requires, but the Directors are fully informed of the internal control framework
established by the Investment Manager to provide reasonable assurance on the effectiveness of internal financial control in the following areas:
• Income flows, including rental income, the assessment of the financial position of tenants and the appropriateness of credit loss impairments;
• Expenditure, including operating and finance costs;
• Raising finance, including debt facilities and equity fund-raising;
• Capital expenditure, including pre-acquisition diligence and authorisation procedures;
• Dividend payments, including the calculation of Property Income Distributions;
• Monitoring of covenants on loan facilities;
• Data security;
• The maintenance of proper accounting records; and
• The reliability of the financial information upon which business decisions are made and which is used for publication, whether to report
Net Asset Values or used as the basis for a prospectus, a circular to Shareholders or the annual report.
As the Group has evolved, the Investment Manager has developed a system of internal controls covering the processes listed above. As referred
to on page 50, the Audit Committee’s review of the Investment Manager’s ISAE-3402 report, which was unqualified and contained no material
exceptions, did not identify any significant issues or concerns over the control environment, including information technology systems.
The Audit Committee also requested and reviewed further information in relation to the Investment Manager’s cyber fraud and resilience
procedures and controls and noted no significant issues or concerns insofar as these related to the Group.
Committee members receive and consider quarterly reports from the Investment Manager, giving full details of the portfolio and all
transactions and of all aspects of the financial position of the Group. Additional ad hoc reports are received as required and Directors have
access at all times to the advice and services of the Company Secretary, which is responsible to the Board for ensuring that Board procedures
are followed and that applicable rules and regulations are complied with. In addition, the Board keeps under its own direct control, through
the Investment Committee, all property transactions including any significant capital expenditure. The Board retains direct control over any
decisions regarding the Group’s long-term borrowings.
The review procedures detailed above have been in place throughout the year and up to the date of this report and the Board is satisfied with
their effectiveness and that they are in accordance with guidance issued by the FRC in so far as applicable given the Group’s size and structure.
There were no significant weaknesses or failings to report. The procedures are designed to manage rather than eliminate risk and, by their
nature, can only provide reasonable, but not absolute, assurance against material misstatement or loss.
The Board has reviewed the need for an internal audit function, taking into consideration the internal financial controls systems set out above
and, in particular, any matters arising in relation to the Investment Manager’s ISAE-3402 report. It has decided that the systems and procedures
employed by the Investment Manager and the Administrator, and the work carried out by the Investment Manager’s Independent Service
Auditor, provide sufficient assurance that a sound system of internal control, which safeguards the Group’s assets, is maintained. An internal
audit function specific to the Group is therefore considered unnecessary.
Target Healthcare REIT plc
52
Report of the Audit Committee continued
The Auditor
As part of the review of auditor independence and effectiveness, EY has confirmed that they are independent of the Group and have complied
with relevant auditing standards. In reviewing EY’s independence, the Committee noted that EY did not provide any non-audit services to the
Group other than the review of the Group’s Interim Report.
In its evaluation of EY’s performance, the Audit Committee has taken into consideration the standing, skills and experience of the firm and
of the audit team, along with their robustness and perceptiveness in their identification, consideration and reporting of the key accounting
and audit judgements. The Committee assessed the effectiveness of the audit process through the quality of the formal reports, both verbal
and written, it received from EY at the planning and conclusion of the audit, including the reasons for any variation from the original audit
plan, together with the contribution which EY made to the discussion and challenge of any matters raised in these reports or by Committee
members. In addition to the outcome of the FRC’s inspection of the audit of the Group detailed previously, the Committee also reviewed the
FRC’s Audit Quality Inspection Report on Ernst & Young LLP published in July 2025 and took into account any relevant observations made by
the Investment Manager and Company Secretary. The Committee is satisfied that EY provides an effective independent challenge in carrying
out its responsibilities.
EY has been the auditor to the Group since its launch in 2013. Following professional guidelines, the audit principal rotates after five years. The
current audit principal is Matthew Price and the audit for the year ended 30 June 2025 constitutes the third year of his term. Having considered
the effectiveness of the audit, the Audit Committee has recommended to the Board the continuing appointment of EY as the Group’s
auditor. The performance of the Auditor will continue to be reviewed annually taking into account all relevant guidance and best practice. The
Company is in compliance with the requirements of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. This order relates to the frequency and governance of
tenders for the appointment of the external auditor and the setting of the policy on the provision of non-audit services. The Group will require
to undertake an audit tender, with mandatory rotation of the audit firm, before 30 June 2032.
In relation to the provision of non-audit services by the auditor, it has been agreed that all non-audit work to be carried out by the auditor
must be approved in advance by the Audit Committee and any special projects must also be approved in advance so as not to endanger
the independence of EY as auditor. In this respect it considers that the provision of the non-audit service shown in the table below does
not constitute such a threat.
Other than the review of the interim financial information, the auditors were not engaged to undertake any non-audit services either during
the year or over the prior three-year rolling period. Different accountancy firms were engaged to provide tax advice and compliance and to
act as the review of the internal controls within the Investment Manager.
Service provided (inclusive of irrecoverable VAT) Fee (£’000)
Statutory audit of the Company for the year ended 30 June 2025 167
Statutory audit of the Company’s subsidiaries for the year ended 30 June 2025 291
Review of interim financial information for the six months ended 31 December 2024 17
Total (inclusive of irrecoverable VAT) 475
Annual Report and Financial Statements
The Board of Directors is responsible for preparing the Annual Report and financial statements. The Audit Committee advises the Board on the
form and content of the Annual Report and financial statements, any issues which may arise and any specific areas which require judgement.
The Audit Committee has also considered certain significant issues during the year in addition to its work on internal controls described above.
These are noted in the table below.
Matter Audit Committee action
Income recognition
Incomplete or inaccurate income recognition could have
an adverse effect on the Group’s net asset value, earnings
per share, its level of dividend cover and compliance with
REIT regulations.
The Audit Committee reviewed the Investment Manager’s processes and controls
around the recording of investment income. It also compared the final level of
net income received for the year to forecasts.
The Audit Committee considered the basis of calculation of the Group’s
estimated credit losses by reviewing the scenario analysis prepared by the
Investment Manager and ensured that this allowance was prepared on a basis
consistent with the Directors’ understanding of the financial position of each
relevant tenant.
The Audit Committee assessed the appropriateness of the accounting treatment
of the fixed rental uplifts and other lease incentives and how this impacted the
Property Income component of dividends paid or payable by the Company.
Annual Report and Financial Statements 2025
53
Corporate Governance
Strategic Report Financial Statements Additional Information
Matter Audit Committee action
Valuation and ownership of the investment
property portfolio
The Group’s property portfolio accounted for 85.2 per
cent of its total assets as at 30 June 2025. Although
valued by an independent firm of valuers, the valuation of
the investment property portfolio is inherently subjective,
requiring judgement by the valuers. Errors in the valuation
could have a material impact on the Group’s net asset
value. Further information about the property portfolio
and inputs to the valuations is set out in Note 9 to the
Consolidated Financial Statements.
The Investment Manager liaises with the valuers on a regular basis and meets
with them prior to the production of each quarterly valuation. The Audit
Committee reviewed the results of the valuation process throughout the year and
the Directors had the opportunity to discuss the detail of each of the quarterly
valuations with the Investment Manager.
The quarterly valuations have been prepared by CBRE Limited (‘CBRE’). The
Committee noted that, as part of the Group’s refinancing of its external loan
facilities, the two proposed lenders had each instructed separate firms of valuers
to complete external valuations on approximately 36 per cent by value of the
Group’s property portfolio as at 30 June 2025. This Committee noted that the
aggregate valuation on each of these sub-portfolios was not significantly different
from CBRE’s quarterly valuations of the same properties at the same date. This
provided the Committee with comfort that despite the inherently subjective
nature of the valuation process, a similar conclusion had been reached by
different independent firms of valuers on a representative sample of the Group’s
property portfolio. The Board also noted the property disposals completed both
during the year and subsequent to the year end, and compared the proceeds
received to the quarterly valuation of the relevant properties immediately prior to
each such transaction.
The Committee discussed the valuation as at 30 June 2025 directly with
representatives of CBRE to ensure that the Directors understood the assumptions
underlying the valuation and the sensitivities inherent in the valuation and any
particular areas of judgement. The Committee also considered whether the
property transaction(s) entered into subsequent to the balance sheet date
represented an adjusting or non-adjusting event under IAS 10: Events after
the Reporting Period, and whether this had any implications in relation to the
valuation of the relevant properties at the balance sheet date.
The Committee discussed with the Auditor the work performed to assess the
valuation and confirm ownership of the properties in the portfolio and noted
the report of the Depositary, particularly the sections regarding the Depositary’s
responsibilities and work in relation to asset verification. The Committee
considered the significant estimates and judgements inherent in the valuation
process and considered how the auditors had challenged these by discussing
the outcome of the review of the property valuations directly with the Auditor’s
valuation specialists; focussing particularly on any areas of difference between
the judgement of the external valuers and the auditors.
The Audit Committee noted that the Auditors had not reported any significant indications of systemic weaknesses in the Group’s internal
controls or financial reporting processes and that no material adjustments had been required to the financial statements as presented.
Conclusion with respect to the Annual Report and Financial Statements
The Audit Committee has concluded that the report and financial statements for the year ended 30 June 2025, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business
model and strategy.
The Audit Committee has reported its conclusions to the Board of Directors. The Audit Committee reached this conclusion through a process
of review of the document, discussion, and enquiries of the various parties involved in the preparation of the report and financial statements.
Vince Niblett
Chair of the Audit Committee
13 October 2025
Target Healthcare REIT plc
54
Composition and Role of the Remuneration Committee
The Company has established a Remuneration Committee chaired by Dr Thompsell. The Committee works to written terms of reference
which are reviewed at each meeting and which are available on request. The Remuneration Committee is currently comprised of all Directors
which is considered appropriate given the Group’s size and as the Board comprises only independent non-executive Directors. The Company
has no executive Directors or employees.
The role of the Remuneration Committee is to design a remuneration policy and remuneration practices to support the Group’s strategy
and to promote its long-term sustainable success. The objective of such policy is to attract, retain and motivate non-executive Directors
of the quality required to govern the Company successfully without paying more than is necessary, having regard to any views volunteered
by shareholders or other stakeholders. The policy is reviewed by the Committee at least annually to ensure its ongoing appropriateness
and relevance.
The Committee recommends a level of remuneration for each of the Directors to the Board, within the limits set in the Articles of Association
or as otherwise approved by the Company’s shareholders.
Full details of the Group’s policy with regards to Directors’ fees, the fees paid to each Director during the year ended 30 June 2025 and the
intended fees to be paid in relation to the forthcoming year are shown on the following page.
Remuneration policy
The Company’s policy is that the remuneration of the Directors should reflect the experience of the Board as a whole, the time commitment
required and be fair and comparable with that of other similar companies. Furthermore, the level of remuneration should be sufficient to
attract and retain the Directors needed to oversee the Group properly and to reflect its specific circumstances. The policy also provides for
the Company’s reimbursement of all out of pocket approved expenses incurred wholly and exclusively in fulfilling their duties in relation to
the Group, such as reasonable travel and associated expenses incurred by the Directors in attending Board and Committee meetings.
The fees for the Directors are determined within the limit set out in the Company’s Articles of Association and this limit may not be changed
without seeking shareholder approval at a general meeting. The fees are fixed and are payable in cash, quarterly in arrears. Directors are not
eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. The Company may periodically choose
to benchmark Directors’ fees with an independent review, to ensure they remain fair and reasonable.
It is the Board’s policy that Directors do not have service contracts, but each new Director is provided with a letter of appointment setting out
the terms and conditions of his or her appointment. The Directors’ letters of appointment are available on request at the Company’s registered
office during business hours and will be available for 15 minutes prior to and during the forthcoming Annual General Meeting.
The terms of Directors’ appointments provide that Directors should retire and be subject to election at the first Annual General Meeting after
his or her appointment and, in accordance with the recommendations of the AIC Code, the Board has agreed that all Directors will retire
annually and, if they wish, to offer themselves for re-election. There is no notice period and no provision for compensation upon termination
of appointment.
The Remuneration Policy must be approved by shareholders at least every three years or, if earlier, when any changes to the policy are
proposed by the Company.
Welcome to the Directors’
Remuneration Report
The aim of this report is to set out the policy used by
the Company in setting the Directors’ remuneration,
as well as declaring the actual fees paid during the year
and expectations for the following twelve months.
Shareholders will be provided with an opportunity
at the forthcoming AGM to vote in relation to both
the Company’s policy and this Report.
Dr Amanda Thompsell, Chair of the Remuneration Committee
Directors’ Remuneration Report
Annual Report and Financial Statements 2025
55
Corporate Governance
Strategic Report Financial Statements Additional Information
Voting at Annual General Meeting on the Directors’ Remuneration Policy
The Company has not received any direct communications from its shareholders in respect of the levels of Directors’ remuneration.
Shareholders last approved the Directors’ Remuneration Policy at the Company’s AGM held on 6 December 2022. 100 per cent of the votes
cast were in favour of the resolution and votes withheld represented less than 2.7 per cent of the shares in issue. An ordinary resolution for
the approval of the Directors’ Remuneration Policy will be put to shareholders at the forthcoming AGM to be held on 4 December 2025 and,
if approved, it is intended that this policy will continue for the three-year period ending at the AGM in 2028.
Directors’ Fees
The Board considers the level of Directors’ fees at least annually, and intends to appoint an external consultant at least every three years to
provide advice on the level of Directors’ Remuneration in order to ensure that the level of remuneration remains in line with the market level
necessary to attract, retain and motivate non-executive Directors of the quality required to govern the Company successfully.
As reported last year, the most recent external review was conducted in August 2024 and concluded that there would be some merit in
continuing to increase the level of the fee paid in relation to the role of Chair given this remained below that paid by other similar companies.
However, the Committee also remained mindful of both the Group’s share price performance and the overall economic environment,
particularly in relation to the healthcare and property sectors, and concluded that the Directors’ remuneration should remain unchanged for
the year ended 30 June 2025.
The Remuneration Committee conducted a review of the level of Directors’ fees at the end of the year ended 30 June 2025, which also included:
• consideration of the cumulative level of wage and price inflation since the Directors’ fees were last increased;
• an assessment of the ongoing workload and responsibilities, taking into account increasingly complex legal and regulatory requirements and
the active asset management particularly required in the care home property sub-sector;
• consideration of the Group’s performance;
• consultation with various of the Group’s advisers in relation to their experiences of current market practice; and
• consideration of the level of fees paid by the Group’s peer group.
The Committee concluded that the level of Directors’ fees paid by the Company were below those paid by other similar companies.
Therefore, in order to ensure that the level of Directors’ fees remained at market levels and in line with the Group’s remuneration policy, it was
considered appropriate to increase the level of Directors’ fees for the forthcoming year as set out in the table below.
Year ending
30 June 2026
£’s
Year ended
30 June 2025
£’s
Year ended
30 June 2024
£’s
Change
in year ended
30 June 2025
%
Chair 64,350 58,500 58,500 +0.0
Audit Committee Chair 52,000 47,250 47,250 +0.0
Director 42,550 40,500 40,500 +0.0
In order to keep competitive with the practices of other similar Boards, it is also intended that, with effect from 1 January 2026, an additional
fee of £5,000 per annum is paid to each of the Senior Independent Director and the chair of the ESG Committee in order to recognise the
additional workload and responsibilites of those roles.
The annual percentage change in remuneration paid in relation to each role for recent years is shown in the table below:
Change in
year ending
30 June 2026
%
Change in
year ended
30 June 2025
%
Change in
year ended
30 June 2024
%
Change in
year ended
30 June 2023
%
Change in
year ended
30 June 2022
%
Change in
year ended
30 June 2021
%
Chair +10.0 +0.0 +8.3 +8.0 +13.6 +0.0
Audit Committee Chair +10.0 +0.0 +3.8 +3.4 +12.8 +0.0
Director +5.1 +0.0 +3.8 +4.0 +14.5 +0.0
The present limit on Directors’ fees is an aggregate of £300,000 per annum. This limit may be amended by changing the Company’s Articles
of Association, or by the passing of an ordinary resolution at a general meeting. Taking into consideration the expectation of the appointment
of a sixth Director to the Board and the fee increases noted above, an ordinary resolution will be put to shareholders at the forthcoming
Annual General Meeting proposing to increase this limit to £350,000.
Annual Report on Directors’ Remuneration
Relative importance of spend on pay
The table below compares the change in the level of Directors’ remuneration compared to other expenses and distributions to shareholders.
Year ended
30 June 2025
£’000
Year ended
30 June 2024
£’000
Change in
year ended
30 June 2025
%
Aggregate Directors’ remuneration 227 227 +0.0
Management fee and other revenue expenses 13,335 11,554 +15.4
Distributions paid to shareholders in respect of the year 36,495 35,428 +3.0
As an investment company with an external manager, the Group does not have any employees other than the Directors. The Directors
therefore deem the level of the management fee and other revenue expenses, calculated in accordance with the Group’s usual accounting
policies, to be an appropriate measure to assist in understanding the relative importance of the Group’s spend on Directors’ pay.
Target Healthcare REIT plc
56
Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
Directors’ emoluments for the year (audited)
The Directors who served during the year received the following emoluments in the form of fees. The Directors received no additional fees
for serving as the chair of any of the Board’s committees for the year ended 30 June 2025, save that the chair of the audit committee is paid
at a higher rate than other directors in view of the additional responsibilities attached to that role. As highlighted on page 55, it is proposed that
additional fees are introduced with effect from 1 January 2026 in relation to fulfilling the role of Senior Independent Director and the role of
chair of the ESG Committee. No other forms of remuneration or taxable benefits were paid during the year.
Year ended
30 June 2025
£’s
Change in
year ended
30 June
2025
1
%
Year ended
30 June 2024
£’s
Change in
year ended
30 June
2024
1
%
Change in
year ended
30 June
2023
1
%
Change in
year ended
30 June
2022
1
%
Change in
year ended
30 June
2021
1
%
Alison Fyfe 58,500 +0.0 58,500 +22.9² +26.9² +14.5 +600.0²
Vince Niblett 47,250 +0.0 47,250 +3.8 +27.3³ n/a n/a
Amanda Thompsell 40,500 +0.0 40,500 +3.8 +149.6⁴ n/a n/a
Richard Cotton 40,500 +0.0 40,500 +55.8⁵ n/a n/a n/a
Michael Brodtman 40,500 +0.0 40,500 +107.7 ⁶ n/a n/a n/a
Total 227,250 +0.0 227,250 +4.3 +2.0 +17.9 +13.4
1 In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, these columns show the annual percentage
change over the preceding financial year by comparison to the current financial year in respect of each Director that has served in their relevant role for a minimum
of two financial years. A history of the previous five financial years is presented. The percentage increases shown reflect both: (i) any changes in remuneration arising
if a director served for less than a year, or changed roles, during one of the years being compared; and (ii) increases in rates of remuneration (as per the table on page 55
showing the remuneration per role for recent years).
2 Ms Fyfe was appointed as a Director on 1 May 2020 and as Chair on 6 December 2022.
3 Mr Niblett was appointed as a Director on 25 August 2021 and as Chair of the Audit Committee on 14 December 2021.
4 Dr Thompsell was appointed as a Director on 1 February 2022.
5 Mr Cotton was appointed as a Director on 1 November 2022.
6 Mr Brodtman was appointed as a Director on 1 January 2023.
Directors’ shareholdings (audited)
The Directors who held office at the year-end and their interests (all of which were beneficially held) in the ordinary shares of the Company as
at 30 June 2025 were as follows:
Ordinary shares
30 June 2025
Ordinary shares
30 June 2024
Alison Fyfe 10,000 10,000
Vince Niblett 24,052 24,052
Amanda Thompsell – –
Richard Cotton 30,000 30,000
Michael Brodtman 24,210 24,210
Total 88,262 88,262
There have not been any changes in the Directors’ interests between 30 June 2025 and 13 October 2025. No Director had an interest in any
contracts with the Company during the year or subsequently. Senior representatives of the Investment Manager, including persons closely
associated with them, have an interest in the shares of the Company totalling, in aggregate, 286,317 Ordinary shares.
Group performance
The Board is responsible for the Group’s investment strategy and performance, although the management of the Group’s investment portfolio
is delegated to the Investment Manager through the investment management agreement, as referred to on page 34.
The graph on the following page compares, for the ten years to 30 June 2025, the share price total return (assuming all dividends are
reinvested) to ordinary shareholders compared to the total return on the FTSE EPRA Nareit UK Index. The index was chosen for comparative
purposes as it represents the performance of real estate companies and REITs listed on the London Stock Exchange; however, it should be
noted that this index will contain types of property assets that may perform significantly differently from the care home properties within the
Group’s investment remit.
Annual Report and Financial Statements 2025
57
Corporate Governance
Strategic Report Financial Statements Additional Information
SHARE PRICE TOTAL RETURN AND THE FTSE EPRA NAREIT UK INDEX TOTAL RETURN PERFORMANCE
GRAPH (REBASED TO 100 AT 30 JUNE 2015)
The share price total return performance included in the above graph is based on the listed share price of Target Healthcare REIT Limited to
7 August 2019 and, following the reconstruction of the Group to introduce a new listed parent company, Target Healthcare REIT plc thereafter.
Voting at Annual General Meeting on the Annual Directors’ Remuneration Report
At the Company’s previous AGM, held on 9 December 2024, shareholders approved the Directors’ Remuneration Report in respect of the year
ended 30 June 2024. 99.9 per cent of the votes cast were in favour of the resolution and votes withheld represented less than 2.7 per cent of
the shares in issue.
An ordinary resolution for the approval of this Annual Report on Directors’ Remuneration will be put to shareholders at the forthcoming
Annual General Meeting to be held on 4 December 2025.
On behalf of the Board
Amanda Thompsell
Director
13 October 2025
30/6/15 30/6/16 30/6/17 30/6/18 30/6/19 30/6/20 30/6/21 30/6/23 30/6/24
30/6/25
30/6/22
200
160
170
180
150
190
140
130
120
100
110
90
70
80
FTSE EPRA Nareit UK Index Total Return
Share Price Total Return Sources: EPRA, Target Fund Managers Limited
Target Healthcare REIT plc
58
Opinion
In our opinion:
• Target Healthcare REIT plc’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true
and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2025 and of the Group’s profit for the year
then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Target Healthcare REIT plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 30 June 2025 which comprise:
Group Parent Company
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2025
Statement of Financial Position as at 30 June 2025
Consolidated Statement of Financial Position as at 30 June 2025 Statement of Changes in Equity for the year ended 30 June 2025
Consolidated Statement of Changes in Equity for the year ended
30 June 2025
Related notes 1 to 13 to the financial statements, including material
accounting policy information
Consolidated Statement of Cash Flows for the year ended
30 June 2025
Related notes 1 to 23 to the financial statements, including material
accounting policy information
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted
international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’
(United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Group and the Parent Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
• Confirming our understanding of the Group and Parent Company’s going concern assessment process and engaging with the directors
and the Company Secretary to determine if all key factors have been included in their assessment.
• Inspecting the directors’ assessment of going concern, including the revenue and expenses forecast for the period to 31 December 2026,
which is at least 12 months from the date the financial statements have been authorised for issue. In preparing the revenue and expenses
forecast, the Group and Parent Company have concluded that it is able to continue to meet its costs as they fall due.
• Reviewing the factors and assumptions, including the impact of external market factors, as applied to the revenue and expenses forecast.
We considered the appropriateness of the methods used to calculate the revenue and expenses forecast, and determined, through
testing of the methodology and calculations, that the methods, inputs and assumptions utilised were appropriate to be able to make an
assessment for the Group and Parent Company.
• In relation to the Group’s borrowing arrangements, inspecting the directors’ assessment of the risk of breaching the debt covenants as a
result of a reduction in the value of the Group’s portfolio. We recalculated the Group’s compliance with debt covenants in the scenarios
assessed by the directors and performed reverse stress testing in order to identify what factors would lead to the Group breaching the
financial covenants.
• Considering the mitigating factors included in the revenue forecasts and covenant calculations that are within the control of the Group.
• Reviewing the Group’s going concern disclosures included in the annual report in order to assess that the disclosures were appropriate
and in conformity with UK adopted international accounting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern for a period to
31 December 2026, which is at least 12 months from the date the financial statements have been authorised for issue.
Independent Auditor’s Report to the Members of Target Healthcare REIT plc
Annual Report and Financial Statements 2025
59
Corporate Governance
Strategic Report Financial Statements Additional Information
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
Overview of our audit approach
Key audit matters • Incorrect valuation and ownership of investment properties
• Incomplete or inaccurate recognition of rental income, including accounting for rental uplifts and
lease incentives
Materiality • Overall Group materiality of £7.12m which represents 1% of Group net assets.
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
Company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
the risk profile, account size, the organisation of the Group and changes in the business environment when assessing the level of work to be
performed at each Company. All audit work performed for the purposes of the audit was undertaken by the Group audit team which includes
our real estate valuation specialists.
Climate change
Stakeholders are increasingly interested in how climate change will impact Target Healthcare REIT plc. The Group and Parent Company has
determined that the most significant future impacts from climate change on their operations will be on the valuation of investment properties,
and potentially shareholder returns. These are explained on pages 26 to 27 in the principal risks and uncertainties. These disclosures form part
of the “Other information”, rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential
material impact on its financial statements.
Our audit effort in considering climate change was focused on the adequacy of the Group and Parent Company’s disclosures in the financial
statements as set out in note 1(a) which concludes that there was no further material impact of climate change to be taken into account
other than the potential impact on investment properties. Investment properties are valued at fair value based on open market valuations as
described in Note 1(h). The open market valuation assessment includes consideration of environmental matters and the condition of each
property with detail on the fair value of properties provided within the notes to the financial statements.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and associated disclosures.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key
audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
our opinion thereon, and we do not provide a separate opinion on these matters.
Target Healthcare REIT plc
60
Independent Auditor’s Report to the Members of Target Healthcare REIT plc continued
Risk Our response to the risk
Key observations
communicated to the
Audit Committee
Incorrect valuation and ownership of
investment properties
(Refer to Report of the Audit Committee (page 53);
Accounting policies (pages 72 and 73); and Note 9
to the Consolidated Financial Statements (pages 78
and 79).
At 30 June 2025, the Group’s investment portfolio
consisted of UK healthcare properties, with a market
value of £929.94m (2024: £908.53m) and carrying
value of £840.43m (2024: £831.57m), which is net of
a deduction of £89.51m (2024: £76.96m) to account
for lease incentives, rent reviews and performance
payments accrued as payable to tenants where
performance conditions have been met as at year
end. The Parent Company investment portfolio
consisted of UK healthcare properties, with a market
value of £8.86m (2024: £7.71m) and a carrying value
of £8.61m (2024: £7.54m) which is net of a deduction
of £0.25m (2024: £0.17m) to account for rent reviews.
The valuation of the properties held in the investment
portfolio, and unrealised gain/(losses) on the
investment portfolio are the key drivers of the
Group’s net asset value and total return. Incorrect
investment pricing, including the judgement involved
in the valuation of property investments could have
an impact on the portfolio valuation and the return
generated for shareholders.
The valuation of investment property requires
judgement and estimates by the Manager and
the external valuers. Any input inaccuracies or
unreasonable bases used in these judgements and
estimates (such as in respect of estimated rental value
and yield profile applied) could result in a material
misstatement of the Statement of Financial Position
and in the Statement of Comprehensive Income.
The properties are valued externally on behalf of
the Group by CBRE and recorded in the Consolidated
Financial Statements at their carrying value, being
the CBRE open market valuation adjusted for
the impact of lease incentives, rental uplifts, and
performance payments.
Failure to maintain proper legal title of the Group’s
investment properties could result in assets being
incorrectly recognised within the Statement of
Financial Position.
The valuation of investment properties and the
resultant impact on unrealised gains/(losses) is the
area requiring the most judgement and estimation in
the preparation of the financial statements and has
been classified as an area of fraud risk as highlighted
below on page 63.
We performed the following procedures:
We obtained an understanding of the processes and controls
surrounding investment valuation and unrealised gains and
losses by performing walkthrough procedures to evaluate the
design and implementation of controls.
We agreed the value of all the properties in the investment
portfolio held at the year end to the open market valuations
included in the valuation report provided by CBRE.
We agreed the key inputs used by CBRE in the valuation to
source data including lease terms and CQC ratings.
We used our property valuation specialists to perform a
review of the property valuations, which included:
• Evaluating the work performed, competency, capability,
and objectivity of CBRE;
• Reviewing the assumptions used by CBRE in undertaking
their valuation and an assessment of the valuation
methodology adopted;
• Holding discussions with CBRE including an overview of
the portfolio, covenant strength of the tenants within the
portfolio and occupancy and historical rent cover for a
sample of properties;
• Reviewing a sample of the individual property valuations
as at 30 June 2025 and examining key valuation inputs;
• Analysing key changes in the property valuation as a
whole including a review of the reasonableness of the
income yields for the properties; and
• Reviewing the management information and the expected
credit loss models for any indicators or trends that may be
relevant to the valuation of the properties.
For all properties not included in the sample for the valuation
specialists we have reviewed the movement in property
values to the MSCI benchmark.
We reviewed the accounting policy and recalculated the
adjustments made to the CBRE fair value in respect of lease
incentives and rental smoothing to validate the carrying value
of investment properties.
We recalculated the unrealised gains/(losses) on all
investment properties as at the year-end using the book
cost reconciliation.
We ensured the consolidated financial statements
contain adequate disclosures regarding the methods and
assumptions used in the valuation, including the required
sensitivity analysis under IFRS 13 ‘Fair value measurement’
and reviewed the fair value hierarchy disclosures.
We reviewed the prior year estimate with reference to
any disposals made in the year to confirm the estimate
was reasonable.
We obtained direct confirmation from the Group’s legal
adviser regarding legal title to investment properties and
forward funding development sites held as at 30 June 2025.
We agreed a sample of key transaction details (e.g. property
and trade date) of purchases and sales recorded by Target
Fund Managers Limited to legal agreements, completion
statements and bank statements.
The results of
our procedures
identified no material
misstatement in
relation to the risk of
incorrect valuation,
calculation of
unrealised gains/
(losses) or ownership
of investment
properties.
Annual Report and Financial Statements 2025
61
Corporate Governance
Strategic Report Financial Statements Additional Information
Risk Our response to the risk
Key observations
communicated to the
Audit Committee
Incomplete or inaccurate recognition of rental
income including accounting for rental uplifts
and lease incentives
(Refer to Report of the Audit Committee (page 52)
and Accounting Policies (page 71)).
During the year ended 30 June 2025, £71.21m (2024:
£69.54m) has been recognised by the Group as rental
income. Of this £60.37m (2024: £58.61m) has been
recorded as revenue in the Consolidated Statement
of Comprehensive Income and £10.84m (2024:
£10.93m) as capital relating to accrued rent review
uplifts and lease incentives not yet received.
The rental income receivable by the Group during the
period is a significant factor in the Group’s decision
to make a dividend payment to shareholders. Rental
income from the investment properties is recognised
on an accrual basis with the exception of contingent
rents which are recognised on a receipt basis. The
lease agreements tend to have durations of multiple
years and minimum and maximum annual rental
increase clauses. Leases may also include lease
incentives such as rent-free periods. IFRS 16 ‘Leases’
requires that lessors recognise lease payments as
income on either a straight-line basis or another
systematic basis if that basis is more representative of
the pattern in which benefit derived from the use of
the underlying asset is diminished.
There is a risk of incomplete or inaccurate
recognition of rental income including rental uplifts
and lease incentives through the failure to recognise
the proper entitlements or applying the appropriate
accounting treatment and has been classified as an
area of fraud risk as highlighted below on page 63.
We performed the following procedures:
We obtained an understanding of the processes and controls
surrounding rental income recognition including accounting
for rental uplifts and lease incentives by performing
walkthrough procedures to evaluate the design and
implementation of controls.
We have verified 100% of the rental rates to lease agreements
(including rent reviews, completed forward funds and
re-tenanted assets) and recalculated 100% of the rental
income recognised.
We reperformed the rental adjustment calculations for
rental uplifts under IFRS 16 for all tenants and considered the
allocation between revenue and capital.
We have assessed the appropriateness of all contingent rent
with reference to agreements and confirmed that there was
no contingent rent recognised in the period.
We have agreed a sample of rental income recorded as
received to bank statements to ensure completeness of
payments received.
We have tested that a sample of expected rent receipts have
been recorded with reference to executed lease agreements
to ensure completeness.
We reviewed the Group’s accounting policies in respect of
the significant terms of the tenancy agreements (for example
rental uplifts, rent free periods and lease incentives) to
confirm that the accounting treatment is in line with UK
adopted international accounting standards and consider the
capital and revenue allocation to be appropriate.
We reviewed management’s workings for the minimum lease
payment disclosure with reference to audit work performed
on the Group’s operating leases.
The results of our
procedures identified
no material
misstatement in
relation to the risk
of incomplete
or inaccurate
recognition
of rental income
including accounting
for rental uplifts and
lease incentives.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and
in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £7.12m (2024: £6.89m), which is 1% (2024: 1%) of net assets. We believe that net assets provides
us with materiality aligned to a key measurement of the Group’s performance.
We determined materiality for the Parent Company to be £7.40 million (2024: £7.19 million), which is 1% (2024: 1%) of net assets.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 75% (2024: 75%) of our planning materiality, namely £5.34m (2024: £5.17m). We have set performance materiality at
this percentage due to our past experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.
Target Healthcare REIT plc
62
Independent Auditor’s Report to the Members of Target Healthcare REIT plc continued
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.36m (2024: £0.34m), which
is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review by the UK Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on pages 38;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 38 and 39;
• Directors’ statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities
set out on page 39;
• Directors’ statement on fair, balanced and understandable set out on page 36;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 27;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 51; and;
• The section describing the work of the audit committee set out on pages 49 to 53.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 43, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Annual Report and Financial Statements 2025
63
Corporate Governance
Strategic Report Financial Statements Additional Information
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company
and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant
are the Companies Act 2006, the UK Listing Rules, the UK Corporate Governance Code, the Association of Investment Companies’ Code of
Corporate Governance and Statement of Recommended Practice, Part 12 of the Corporation Tax Act 2010, the Companies (Miscellaneous
Reporting) Regulations 2018 and, for the Group, UK adopted international accounting standards, and for the Parent Company, FRS 101
“Reduced Disclosure Framework”.
• We understood how the Group is complying with those frameworks through discussions with the Audit Committee and Company
Secretary and review of documented policies and procedures.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
considering the key risks impacting the financial statements. We identified fraud risks with respect to the incomplete or inaccurate
recognition of rental income including accounting for rental uplifts and lease incentives; and incorrect valuation and the calculation of
unrealised gains/(losses) of investment properties. Our audit procedures in response to the identified fraud risks included testing of specific
accounting journal entries and focused testing on the valuation of the investment properties and revenue recognition. We also considered
management’s incentives around improving the performance of the Group, the opportunities available to execute any such actions
through management override as well as the controls established to address any such risks identified, including to prevent, deter and
detect fraud and the monitoring of such controls by management. Further discussion of our approach is set out in the section on key audit
matters above.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved substantive audit procedures including a review of legal expenses incurred, review of the reporting to the directors
with respect to the application of the documented policies and procedures and review of the financial statements to ensure compliance
with the reporting requirements of the Group and Parent Company.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the audit committee we were appointed as auditors of the Group, whose Parent Company at that
time was Target Healthcare REIT Limited, on 10 September 2013. Following a Group reconstruction in August 2019, Target Healthcare REIT
plc became the Parent Company of the Group and re-appointed us as auditor of the Group on 4 September 2019.
• The period of total uninterrupted engagement following reconstruction and including previous renewals and reappointments is six years,
covering the years ending 30 June 2020 to 30 June 2025.
• The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of Ernst & Young LLP , Statutory Auditor
London
13 October 2025
Target Healthcare REIT plc
64
In this section…
Financial
Statements
64 – 97
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 Statement of Financial Position 88
Company Statement of Changes in Equity 89
Notes to the Company Financial Statements 90
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Additional Information
Target Healthcare REIT plc
66
Year ended 30 June 2025 | Year ended 30 June 2024 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Revenue | |||||||
Rental income | |||||||
Other rental income | |||||||
Other income | |||||||
Total revenue | |||||||
Gains on revaluation of investment properties | 9 | ||||||
Gains on investment properties realised | 9 | ||||||
Total income | |||||||
| Expenditure | |||||||
Investment management fee | 2 | ( | ( | ( | ( | ||
Credit loss allowance and bad debts | 3 | ( | ( | ( | ( | ||
Other expenses | 3 | ( | ( | ( | ( | ||
Total expenditure | ( | ( | ( | ( | |||
| Profit before finance costs | |||||||
and taxation | |||||||
| Net finance costs | |||||||
Interest income | 4 | ||||||
Finance costs | 5 | ( | ( | ( | ( | ( | ( |
Net finance costs | ( | ( | ( | ( | ( | ( | |
Profit before taxation | |||||||
Taxation | 6 | ||||||
Profit for the year | |||||||
| Other comprehensive income: | |||||||
| Items that are or may be reclassified | |||||||
| subsequently to profit or loss | |||||||
| Movement in fair value of interest | |||||||
rate derivatives designated as cash flow hedges | 13 | ( | ( | ( | ( | ||
| Total comprehensive income | |||||||
for the year | |||||||
Earnings per share (pence) | 8 |
The total column of this statement represents the Group’s Consolidated Statement of Comprehensive Income, prepared in accordance
with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statement are derived from continuing operations. No operations were discontinued in the year.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2025
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Additional Information
| As at | As at | ||
| 30 June 2025 | 30 June 2024 | ||
| Notes | £’000 | £’000 | |
| Non-current assets | |||
Investment properties | 9 | ||
Trade and other receivables | 10 | ||
Interest rate derivatives | 13 | ||
| Current assets | |||
Trade and other receivables | 10 | ||
Interest rate derivatives | 13 | ||
Cash and cash equivalents | 12 | ||
Total assets | |||
| Non-current liabilities | |||
Loans | 13 | ( | ( |
Trade and other payables | 14 | ( | ( |
| Current liabilities | ( | ( | |
Loans | 13 | ( | |
Trade and other payables | 14 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
| Share capital and reserves | |||
Share capital | 15 | ||
Share premium | |||
Merger reserve | |||
Distributable reserve | |||
Hedging reserve | |||
Capital reserve | |||
Revenue reserve | |||
Equity shareholders’ funds | |||
Net asset value per ordinary share (pence) | 8 |
Company number: 11990238.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position
As at 30 June 2025
Target Healthcare REIT plc
68
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 30 June 2024 | |||||||||
Profit for the year | |||||||||
Other comprehensive income | ( | ( | |||||||
Total comprehensive income | ( | ||||||||
| Transactions with owners | |||||||||
| recognised in equity: | |||||||||
Dividends paid | 7 | ( | ( | ( | |||||
At |
For the year ended 30 June 2024
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 30 June 2023 | |||||||||
Profit for the year | |||||||||
Other comprehensive income | ( | ( | |||||||
Total comprehensive income | ( | ||||||||
| Transactions with owners | |||||||||
| recognised in equity: | |||||||||
Dividends paid | 7 | ( | ( | ( | |||||
At 30 June 2024 |
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2025
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Additional Information
| Year ended | Year ended | ||
| 30 June 2025 | 30 June 2024 | ||
| Notes | £’000 | £’000 | |
| Cash flows from operating activities | |||
Profit before tax | |||
| Adjustments for: | |||
Interest income | ( | ( | |
Finance costs | |||
Revaluation gain on investment properties and movements in lease incentives, net of acquisition costs written off | 9 | ( | ( |
Gain on investment properties realised | 9 | ( | ( |
Decrease in trade and other receivables | |||
Increase in trade and other payables | |||
Interest paid | ( | ( | |
Interest received | |||
( | ( | ||
Net cash inflow from operating activities | |||
| Cash flows from investing activities | |||
Purchase of investment properties, including acquisition costs | ( | ( | |
Disposal of investment properties, net of lease incentives | |||
Net cash (outflow)/inflow from investing activities | ( | ||
| Cash flows from financing activities | |||
Drawdown of bank loan facilities | 13 | ||
Repayment of bank loan facilities | 13 | ( | ( |
Dividends paid | ( | ( | |
Net cash outflow from financing activities | ( | ( | |
Net increase in cash and cash equivalents | |||
Opening cash and cash equivalents | |||
Closing cash and cash equivalents | 12 | ||
| Transactions which do not require the use of cash | |||
Movement in fixed or guaranteed rent reviews | 9 | ||
Movement in lease incentives | 9 | ||
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | 9 | ( | ( |
Total |
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 30 June 2025
Target Healthcare REIT plc
70
1. Accounting policies
Notes to the Consolidated Financial Statements
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Additional Information
1. Accounting policies continued
(a) Basis of preparation continued
Target Healthcare REIT plc
72
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
(c) Revenue recognition continued
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1. Accounting policies continued
(h) Investment properties continued
Target Healthcare REIT plc
74
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
(m) Reserves continued
2. Fee paid to the Investment Manager
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Investment management fee | 7,816 | 7,518 |
Total | 7,816 | 7,518 |
The Group’s Investment Manager and Alternative Investment Fund Manager (‘AIFM’) is Target Fund Managers Limited. The Investment Manager
is entitled to an annual management fee calculated on a tiered basis based on the net assets of the Group as set out below. Where applicable,
VAT is payable in addition.
| Management fee | |
| Net assets of the Group | percentage |
Up to and including £500 million | 1.05 |
Above £500 million and up to and including £750 million | 0.95 |
Above £750 million and up to and including £1 billion | 0.85 |
Above £1 billion and up to and including £1.5 billion | 0.75 |
Above £1.5 billion | 0.65 |
The Investment Manager is entitled to an additional fee of £160,000 per annum (plus VAT), increasing annually in line with inflation, in relation
to its appointment as Company Secretary and Administrator to the Group.
The Investment Management Agreement can be terminated by either party on 24 months’ written notice. Should the Company terminate the
Investment Management Agreement earlier then compensation in lieu of notice will be payable to the Investment Manager. The Investment
Management Agreement may be terminated immediately without compensation if the Investment Manager: is in material breach of the
agreement; is guilty of negligence, wilful default or fraud; is the subject of insolvency proceedings; or there occurs a change of Key Managers
to which the Board has not given its prior consent.
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Additional Information
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Total movement in credit loss allowance | 1,612 | 962 |
Bad debts written off | – | – |
Credit loss allowance charge | 1,612 | 962 |
Valuation and other professional fees | 1,601 | 1,107 |
| Auditor’s remuneration for: | ||
– statutory audit of the Company | 167 | 181 |
– statutory audit of the Company’s subsidiaries | 286 | 277 |
– review of interim financial information | 17 | 16 |
Other taxation compliance and advisory* | 382 | 271 |
Direct property costs | 267 | 199 |
Secretarial and administration fees | 229 | 229 |
Directors’ fees | 227 | 227 |
Public relations and marketing | 185 | 179 |
Printing, postage and website | 146 | 100 |
Listing and Registrar fees | 134 | 115 |
Abortive costs | 81 | 9 |
Other | 185 | 164 |
Total other expenses | 3,907 | 3,074 |
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Deposit interest | 426 | 66 |
Total | 426 | 66 |
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Interest paid on loans | 10,040 | 10,245 |
Amortisation of loan costs | 619 | 621 |
Finance and transaction costs relating to the interest rate cap | 798 | 800 |
Total | 11,457 | 11,666 |
6. Taxation
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Current tax | – | – |
Adjustment to tax charge for prior years | – | – |
Total tax charge | – | – |
Target Healthcare REIT plc
76
Notes to the Consolidated Financial Statements continued
6. Taxation continued
A reconciliation of the corporation tax charge applicable to the results at the statutory corporation tax rate to the charge for the year is as follows:
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Profit before tax | 60,845 | 73,024 |
Tax at 25% (2024: 25%) | 15,211 | 18,256 |
| Effects of: | ||
REIT exempt profits | (10,101) | (8,964) |
REIT exempt (gains)/losses | (2,890) | (6,215) |
Capital allowances | (2,286) | (2,476) |
Utilisation of excess management expenses brought forward | (162) | (809) |
Expenses not deductible for tax purposes | 228 | 208 |
Total tax charge | – | – |
The Directors intend to conduct the Company’s affairs such that management and control is exercised in the United Kingdom and so that the
Company carries on any trade in the United Kingdom.
Subject to continuing relevant UK-REIT criteria being met, the profits from the Group’s property rental business, arising from both income and
capital gains, are exempt from corporation tax.
The Group has unutilised tax losses carried forward in its residual business of £10.5 million at 30 June 2025 (2024: £11.2 million). No deferred
tax asset has been recognised on this amount as the Group cannot be certain that there will be taxable profits arising within its residual
business from which the future reversal of the deferred tax asset could be deducted.
7. Dividends
Amounts paid as distributions to equity holders during the year to 30 June 2025.
| Dividend rate | Year ended | |
| (pence per | 30 June 2025 | |
| share) | £’000 | |
Fourth interim dividend for the year ended 30 June 2024 | 1.428 | 8,857 |
First interim dividend for the year ended 30 June 2025 | 1.471 | 9,123 |
Second interim dividend for the year ended 30 June 2025 | 1.471 | 9,124 |
Third interim dividend for the year ended 30 June 2025 | 1.471 | 9,124 |
Total | 36,228 |
Amounts paid as distributions to equity holders during the year to 30 June 2024.
| Dividend rate | Year ended | |
| (pence per | 30 June 2024 | |
| share) | £’000 | |
Fourth interim dividend for the year ended 30 June 2023 | 1.400 | 8,683 |
First interim dividend for the year ended 30 June 2024 | 1.428 | 8,857 |
Second interim dividend for the year ended 30 June 2024 | 1.428 | 8,857 |
Third interim dividend for the year ended 30 June 2024 | 1.428 | 8,857 |
Total | 35,254 |
It is the policy of the Directors to declare and pay dividends as interim dividends. The Directors do not therefore recommend a final dividend.
The fourth interim dividend in respect of the year ended 30 June 2025, of 1.471 pence per share, was paid on 29 August 2025 to shareholders
on the register on 15 August 2025 and amounted to £9,124,000. It is the intention of the Directors that the Group will continue to pay
dividends quarterly.
Year ended 30 June 2025 | Year ended 30 June 2024 | |||
£’000 | Pence per share | £’000 | Pence per share | |
Revenue earnings | 37,014 | 5.97 | 36,270 | 5.85 |
Capital earnings | 23,831 | 3.84 | 36,754 | 5.92 |
Total earnings | 60,845 | 9.81 | 73,024 | 11.77 |
Average number of shares in issue | 620,237,346 | 620,237,346 |
Annual Report and Financial Statements 2025
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8. Earnings per share and Net Asset Value per share continued
Earnings per share continued
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Earnings per IFRS Consolidated Statement of Comprehensive Income | 60,845 | 73,024 |
Adjusted for gains on investment properties realised | (39) | (1,934) |
Adjusted for revaluations of investment properties | (12,244) | (24,693) |
Adjusted for finance and transaction costs on the interest rate cap | 798 | 800 |
Adjusted for other capital items | (1,505) | – |
EPRA earnings | 47,855 | 47,197 |
Adjusted for rental income arising from recognising guaranteed rent review uplifts | (10,841) | (10,927) |
Adjusted for development interest under forward fund agreements | 725 | 1,767 |
Group specific adjusted EPRA earnings | 37,739 | 38,037 |
| Earnings per share (‘EPS’) (pence per share) | ||
EPS per IFRS Consolidated Statement of Comprehensive Income | 9.81 | 11.77 |
EPRA EPS | 7.72 | 7.61 |
Group specific adjusted EPRA EPS | 6.08 | 6.13 |
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | |
| EPRA NRV | EPRA NTA | EPRA NDV | EPRA NRV | EPRA NTA | EPRA NDV | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
IFRS NAV per financial statements | 712,460 | 712,460 | 712,460 | 689,293 | 689,293 | 689,293 |
Fair value of interest rate derivatives | (572) | (572) | – | (2,820) | (2,820) | – |
Fair value adjustment to loans | – | – | 27,929 | – | – | 29,780 |
Estimated purchasers’ costs | 62,175 | – | – | 60,026 | – | – |
EPRA net assets | 774,063 | 711,888 | 740,389 | 746,499 | 686,473 | 719,073 |
EPRA net assets (pence per share) | 124.8 | 114.8 | 119.4 | 120.4 | 110.7 | 115.9 |
Target Healthcare REIT plc
78
Notes to the Consolidated Financial Statements continued
9. Investment properties
Freehold and leasehold properties
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Opening market value | 908,530 | 868,705 |
Opening fixed or guaranteed rent reviews | (68,856) | (59,378) |
Opening lease incentives | (10,011) | (9,172) |
Opening performance payments (see Note 18) | 1,910 | – |
Opening carrying value | 831,573 | 800,155 |
Disposals – proceeds | (9,753) | (44,344) |
– (loss)/gain on sale | (542) | 1,382 |
Purchases and performance payments | 7,650 | 45,444 |
Acquisition costs capitalised | 30 | 332 |
Acquisition costs written off | (30) | (332) |
Unrealised loss realised during the year | 581 | 552 |
Revaluation movement – gains | 25,484 | 45,496 |
Revaluation movement – losses | (2,010) | (8,705) |
Movement in market value | 21,410 | 39,825 |
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | 559 | 1,449 |
Movement in fixed or guaranteed rent reviews | (10,841) | (10,927) |
Movement in lease incentives | (359) | (839) |
Movement in performance payments (see Note 18) | (1,910) | 1,910 |
Movement in carrying value | 8,859 | 31,418 |
Closing market value | 929,940 | 908,530 |
Closing fixed or guaranteed rent reviews | (79,138) | (68,856) |
Closing lease incentives | (10,370) | (10,011) |
Closing performance payments (see Note 18) | – | 1,910 |
Closing carrying value | 840,432 | 831,573 |
Changes in the valuation of investment properties
| Year ended | Year ended | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
(Loss)/gain on sale of investment properties | (542) | 1,382 |
Unrealised loss realised during the year | 581 | 552 |
Gain on investment properties realised | 39 | 1,934 |
Revaluation movement | 23,474 | 36,791 |
Acquisition costs written off | (30) | (332) |
Movement in fixed or guaranteed rent reviews | (10,841) | (10,927) |
Movement in lease incentives | (359) | (839) |
Gain on revaluation of investment properties | 12,244 | 24,693 |
The investment properties can be analysed as follows:
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Standing assets | 921,080 | 889,255 |
Developments under forward fund agreements | 8,860 | 19,275 |
Closing market value | 929,940 | 908,530 |
At 30 June 2025, the properties were valued at £929,940,000 (2024: £908,530,000) by CBRE Limited (‘CBRE’) in their capacity as external
valuers. The valuation was undertaken in accordance with the RICS Valuation – Global Standards, issued by the Royal Institution of Chartered
Surveyors (‘RICS’) on the basis of Market Value, supported by reference to market evidence of transaction prices for similar properties. CBRE
has recent experience in the location and category of the investment properties being valued.
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Additional Information
9. Investment properties continued
Market Value represents the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and
a willing seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without
compulsion. The quarterly property valuations are reviewed by the Board at each Board meeting. The fair value of the properties after adjusting
for the movement in the fixed or guaranteed rent reviews, lease incentives and performance payments was £840,432,000 (2024: £831,573,000).
The adjustment consisted of £79,138,000 (2024: £68,856,000) relating to fixed or guaranteed rent reviews and £10,370,000 (2024: £10,011,000)
of accrued income relating to the recognition of rental income over rent free periods subsequently amortised over the life of the lease, which
are both separately recorded in the accounts as non-current or current assets within ‘trade and other receivables’ (see Note 10). An adjustment
is also made, where applicable, to reflect the amount by which the portfolio value is expected to increase if the performance payments
recognised in ‘trade and other payables’ are paid and the passing rent at the relevant property increased accordingly (see Notes 14 and 18).
The total purchases in the year to 30 June 2025, inclusive of the performance payments recognised in the year and/or exclusive of those
recognised in the prior year, were £5,740,000 (2024: £47,354,000).
All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are therefore
applied to leasehold as freehold properties. Other than one property where the leasehold expires in 2265, all leasehold properties have more
than 800 years remaining on the lease term.
The Group’s investment properties have been valued by CBRE on a quarterly basis. The valuation methodology used is the yield model, which
is a consistent basis for the valuation of investment properties within the healthcare industry. This model has regard to the current investment
market and evidence of investor interest in properties with income streams secured on healthcare businesses. On an asset-specific basis,
the valuer makes an assessment of: the quality of the asset; recent and current performance of the asset; and the financial position and
performance of the tenant operator. This asset specific information is used alongside a review of comparable transactions in the market and a
yield is applied to the asset which, along with the contracted rental level, is used to derive a market value.
The real estate investment and occupier markets are currently in a state of transition as they begin to align themselves with the sustainable
development goals of government and the new generation of real estate users. For the purposes of the valuation, CBRE have made enquiries
to ascertain any sustainability factors which are likely to impact on property values and have considered the guidance provided by the RICS
and VPGA 8 of the Red Book. Sustainability encompasses a wide range of physical, social, environmental, and economic factors that can
affect the value of an asset, even if not explicitly recognised. This includes key environmental risks, such as flooding, energy efficiency and
climate, as well as design, legislation and management considerations – and current and historical land use.
The external valuations reflect CBRE’s understanding of how market participants include sustainability factors in their decisions and the
consequential impact on market valuations, although there is still a gap in the exact knowledge of valuation of sustainability features of a green
premium or brown discount. Green building certifications, and reducing energy consumption and carbon emissions, are factors considered
likely to impact on real estate decisions and property values.
The Group is required to classify fair value measurements of its investment properties using a fair value hierarchy, in accordance with IFRS 13
‘Fair Value Measurement’. This hierarchy reflects the subjectivity of the inputs used, and has the following levels:
• Level 1: unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2: observable inputs other than quoted prices included within level 1;
• Level 3: use of inputs that are not based on observable market data.
In determining what level of the fair value hierarchy to classify the Group’s investments within, the Directors have considered the content and
conclusion of the position paper on IFRS 13 prepared by the European Public Real Estate Association (‘EPRA’), the representative body of the
publicly listed real estate industry in Europe. This paper concludes that, even in the most transparent and liquid markets, it is likely that valuers
of investment property will use one or more significant unobservable inputs or make at least one significant adjustment to an observable
input, resulting in the vast majority of investment properties being classified as level 3.
Observable market data is considered to be that which is readily available, regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively involved in the relevant market. In arriving at the valuation the external
valuers make adjustments to observable data of similar properties and transactions to determine the fair value of a property and this involves
the use of judgement. Considering the Group’s specific valuation process, industry guidance, and the level of judgement required in the
valuation process, the Directors believe it appropriate to classify the Group’s investment properties within level 3 of the fair value hierarchy.
The key unobservable inputs made in determining the fair values are:
• Contracted rental level: the rent payable under the lease agreement at the date of valuation or, where applicable, on expiry of the rent free
period; and
• Yield: the yield is defined as the initial net income from a property at the date of valuation, expressed as a percentage of the gross purchase
price including the costs of purchase.
The contracted rental level and yield are not directly correlated although they may be influenced by similar factors. Rent is set at a long-term,
supportable level and is likely to be influenced by property-specific matters. The yield also reflects market sentiment and the strength of the
covenant provided by the tenant with a stronger covenant attracting a lower yield.
The Group’s investment properties, which are all care homes, are considered to be a single class of assets. The weighted average net initial yield (‘NIY’)
on these assets, as measured by the EPRA topped up NIY, is 6.2 per cent (2024: 6.2 per cent). The yield on the majority of the individual assets ranges
from 5.6 per cent to 8.9 per cent (2024: 5.5 per cent to 8.9 per cent). The average annual contracted rent per bed is £9,696 (2024: £9,292) with the
annual contracted rent per bed on individual assets ranging between £5,093 and £21,033 (2024: between £4,919 and £20,481). There have been no
changes to the valuation technique used through the period, nor have there been any transfers between levels.
The lease agreements on the properties held within the Group’s property portfolio generally allow for annual increases in the contracted
rental level in line with inflation, within a cap and a collar. An increase of 1.0 per cent in the contracted rental level will increase the fair value
of the portfolio, and consequently the Group’s reported income from unrealised gains on investments, by £9,299,000 (2024: £9,085,000);
an equal and opposite movement would have decreased net assets and decreased the Group’s income by the same amount.
Target Healthcare REIT plc
80
Notes to the Consolidated Financial Statements continued
9. Investment properties continued
A decrease of 0.25 per cent in the weighted average net initial yield applied to the portfolio will increase the fair value of the portfolio by
£38,690,000 (2024: £37,901,000), and consequently increase the Group’s reported income from unrealised gains on investments. An increase
of 0.25 per cent in the weighted average net initial yield will decrease the fair value of the portfolio by £35,718,000 (2024: £34,982,000) and
reduce the Group’s income.
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Non-current trade and other receivables | £’000 | £’000 |
Fixed rent reviews | 79,138 | 68,856 |
Rental deposits held in escrow for tenants | 12,695 | 9,893 |
Lease incentives | 10,028 | 9,677 |
Total | 101,861 | 88,426 |
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Current trade and other receivables | £’000 | £’000 |
Lease incentives | 342 | 334 |
VAT recoverable | 47 | 1,624 |
Accrued income – rent receivable | 1,089 | 890 |
Accrued development interest under forward fund agreements | 809 | 1,076 |
Other debtors and prepayments | 1,395 | 1,743 |
Total | 3,682 | 5,667 |
12. Cash and cash equivalents
All cash balances at the year-end were held in cash, current accounts or deposit accounts.
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Cash at bank and in hand | 11,302 | 15,813 |
Short-term deposits | 28,337 | 23,071 |
Total | 39,639 | 38,884 |
The cash on deposit at 30 June 2025 included £28,226,000 (2024: £22,989,000) held in a secured account in relation to the loan from
Phoenix Group following disposals made by the Group. The use of this cash is restricted until the Group either partially repays the loan or
pledges replacement assets as security. As at 30 June 2025, the Group had sufficient unencumbered assets which could be pledged as
additional security in order to release these funds.
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Non-current loans | £’000 | £’000 |
Principal amount outstanding | 150,000 | 243,000 |
Set-up costs | (2,413) | (4,520) |
Amortisation of set-up costs | 852 | 2,192 |
Total | 148,439 | 240,672 |
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Current loans | £’000 | £’000 |
Principal amount outstanding | 92,000 | – |
Set-up costs | (2,107) | – |
Amortisation of set-up costs | 1,959 | – |
Total | 91,852 | – |
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13. Loans continued
Notional Value | Starting Date | Ending Date | Interest paid | Interest received | Counterparty |
30,000,000 | 5 November 2020 | 5 November 2025 | 0.30% | Daily compounded SONIA (floor at -0.08%) | RBS |
50,000,000 | 1 November 2022 | 5 November 2025 | nil | Daily compounded SONIA above 3.0% cap | HSBC |
| Cash and cash | Cash and cash | |||||
| equivalents | Borrowing | Net debt | equivalents | Borrowing | Net debt | |
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Opening balance | 38,884 | (240,672) | (201,788) | 15,366 | (227,051) | (211,685) |
Cash flows | 755 | 1,000 | 1,755 | 23,518 | (13,000) | 10,518 |
Non-cash flows | – | (619) | (619) | – | (621) | (621) |
Closing balance as at 30 June | 39,639 | (240,291) | (200,652) | 38,884 | (240,672) | (201,788) |
Target Healthcare REIT plc
82
Notes to the Consolidated Financial Statements continued
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Non-current trade and other payables | £’000 | £’000 |
Rental deposits | 12,695 | 9,893 |
Total | 12,695 | 9,893 |
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| Current trade and other payables | £’000 | £’000 |
Rental income received in advance | 10,463 | 10,146 |
Property acquisition and development costs accrued | 3,218 | 8,790 |
Interest payable | 2,225 | 2,275 |
Investment Manager’s fees payable | 1,979 | 1,927 |
Performance payments | – | 1,910 |
Other payables | 2,855 | 2,464 |
Total | 20,740 | 27,512 |
| Number of | ||
| Allotted, called-up and fully paid ordinary shares of £0.01 each | shares | £’000 |
Balance as at 30 June 2024 and 30 June 2025 | 620,237,346 | 6,202 |
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84
Notes to the Consolidated Financial Statements continued
16. Financial instruments continued
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial assets as at 30 June 2025 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cash and cash equivalents | 39,639 | – | – | – | – | 39,639 |
Rental deposits held in escrow for tenants | – | – | – | – | 12,695 | 12,695 |
Other debtors | 2,483 | – | – | – | – | 2,483 |
Total | 42,122 | – | – | – | 12,695 | 54,817 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial assets as at 30 June 2024 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cash and cash equivalents | 38,884 | – | – | – | – | 38,884 |
Rental deposits held in escrow for tenants | – | – | – | – | 9,893 | 9,893 |
Other debtors | 4,276 | – | – | – | – | 4,276 |
Total | 43,160 | – | – | – | 9,893 | 53,053 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial liabilities as at 30 June 2025 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Loans and interest rate derivatives | 2,432 | 96,052 | 4,775 | 14,340 | 167,196 | 284,795 |
Rental deposits | – | – | – | – | 12,695 | 12,695 |
Other payables | 10,277 | – | – | – | – | 10,277 |
Total | 12,709 | 96,052 | 4,775 | 14,340 | 179,891 | 307,767 |
| More than three | ||||||
| Three months | months but less | More than | ||||
| or less | than one year | 1-2 years | 2-5 years | five years | Total | |
| Financial liabilities as at 30 June 2024 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Loans and interest rate derivatives | 2,476 | 7,347 | 99,546 | 14,340 | 171,972 | 295,681 |
Rental deposits | – | – | – | – | 9,893 | 9,893 |
Other payables | 17,366 | – | – | – | – | 17,366 |
Total | 19,842 | 7,347 | 99,546 | 14,340 | 181,865 | 322,940 |
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16. Financial instruments continued
As at 30 June 2025 | As at 30 June 2024 | |||
| Fixed rate | Variable rate | Fixed rate | Variable rate | |
| £’000 | £’000 | £’000 | £’000 | |
Cash and cash equivalents | – | 39,639 | – | 38,884 |
Interest rate derivatives | 572 | – | 2,820 | – |
Loans | (230,000) | (12,000) | (230,000) | (13,000) |
(229,428) | 27,639 | (227,180) | 25,884 |
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Notes to the Consolidated Financial Statements continued
| As at | As at | |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Less than one year | 61,162 | 59,001 |
Between one and two years | 62,547 | 60,180 |
Between two and three years | 63,529 | 61,126 |
Between three and four years | 64,528 | 62,087 |
Between four and five years | 65,545 | 63,066 |
Over five years | 1,638,302 | 1,623,709 |
Total | 1,955,613 | 1,929,169 |
| 30 June 2025 | 30 June 2024 | |
| £’000 | £’000 | |
Amounts due to complete forward fund developments | 912 | 4,723 |
Other capital expenditure commitments | 1,113 | 394 |
Total | 2,025 | 5,117 |
20. Post balance sheet events
On 23 September 2025, the Group entered into a £20,000,000 committed term loan and £30,000,000 revolving credit facility with RBS which
is repayable in September 2028, with the option of two one-year extensions thereafter subject to the consent of RBS. The facility also includes
an accordion option that, subject to the consent of RBS, would increase the total quantum of the facility to £80,000,000. Interest accrues on
the drawn element of the bank loan at a variable rate, based on SONIA plus margin and mandatory lending costs, and is payable quarterly. The
margin on the facility is 1.50 per cent per annum for the duration of the loan. A non-utilisation fee of 0.75 per cent per annum is payable on
any undrawn element of the facility. As at 13 October 2025, the Group has drawn £47,575,000 under this facility. The Group has entered into
a five year swap which fixes the interest rate on the £20,000,000 term loan, including the margin, at 5.26 per cent per annum.
On 23 September 2025, the Group entered into a £30,000,000 committed term loan and £50,000,000 revolving credit facility with HSBC which
is repayable in September 2028, with the option of two one-year extensions thereafter subject to the consent of HSBC. The facility also includes
an accordion option that, subject to the consent of HSBC, would increase the total quantum of the facility to £120,000,000. Interest accrues
on the drawn element of the bank loan at a variable rate, based on SONIA plus margin and mandatory lending costs, and is payable quarterly.
The margin on the facility is 1.50 per cent per annum for the duration of the loan. A non-utilisation fee of 0.60 per cent per annum is payable
on any undrawn element of the facility. As at 13 October 2025, the Group has drawn £50,000,000 under this facility. The Group has entered
into a five year interest rate swap which fixes the interest rate on the £30,000,000 term loan, including the margin, at 5.32 per cent per annum.
On 24 September 2025, the Group exchanged contracts in relation to the disposal of nine care homes for proceeds of £85.9 million. This
represents a premium of 11.6 per cent to the aggregate holding value of the properties as at 30 June 2025, and an implied net initial yield
of 5.24 per cent. The transaction is unconditional and is expected to complete on 22 October 2025.
With effect from 21 August 2025, the Group has an agreement to dispose of a further property for £8.0 million, a premium of c.13 per cent
to its holding value at 30 June 2025. This disposal is expected to complete in November 2025.
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22. Operating segments
The Board has considered the requirements of IFRS 8 ‘Operating Segments’. The Board is of the view that the Group is engaged in a single
segment of business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has only
a single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the
Group. The key measure of performance used by the Board to assess the Group’s performance is the EPRA NTA. The reconciliation between
the NAV, as calculated under IFRS, and the EPRA NTA is detailed in Note 8.
The view that the Group is engaged in a single segment of business is based on the following considerations:
• One of the key financial indicators received and reviewed by the Board is the total return from the property portfolio taken as a whole;
• There is no active allocation of resources to particular types or groups of properties in order to try to match the asset allocation of the
benchmark; and
• The management of the portfolio is ultimately delegated to a single property manager, Target.
23. Alternative Investment Fund Managers (‘AIFM’) Directive
With effect from 22 July 2014, the Company’s Investment Manager was authorised as an AIFM by the FCA under the AIFMD regulations.
In accordance with the AIFM Directive, information in relation to the Group’s leverage and the remuneration of the Company’s AIFM,
Target Fund Managers Limited, is required to be made available to investors. The Manager has provided disclosures on its website,
www.targetfundmanagers.com, incorporating the requirements of the AIFMD regulations regarding remuneration.
The Group’s maximum and average actual leverage levels are shown below:
30 June 2025 | 30 June 2024 | |||
| Gross | Commitment | Gross | Commitment | |
| Leverage exposure | method | method | method | method |
Maximum limit | 3.00 | 3.00 | 3.00 | 3.00 |
Actual | 1.76 | 1.81 | 1.79 | 1.85 |
For the purposes of the AIFM Directive, leverage is any method which increases the Group’s exposure, including the borrowing of cash and
the use of derivatives. It is expressed as a percentage of the Group’s exposure to its net asset value and is calculated on both a gross and
commitment method.
Under the gross method, exposure represents the sum of the Group’s positions after deduction of cash balances, without taking account of
any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and
after certain hedging and netting positions are offset against each other. Both methods include the Group’s interest rate derivatives measured
at notional value.
The leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted in the Company’s
Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.
Detailed regulatory disclosures to investors in accordance with the AIFM Directive are contained in the Investor Disclosure Document which is
made available on the Group’s website at www.targethealthcarereit.co.uk.
Target Healthcare REIT plc
88
Company Statement of Financial Position
As at 30 June 2025
Notes
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Non-current assets
Investment in subsidiary undertakings 3 801,714 791,304
Investment properties 4 8,608 8,450
Trade and other receivables 5 387 287
810,709 800,041
Current assets
Trade and other receivables 5 1,125 2,641
Cash and cash equivalents 6 311 753
1,436 3,394
Total assets 812,145 803,435
Non-current liabilities
Trade and other payables 7 (135) (117)
Current liabilities
Trade and other payables 7 (71,622) (84,245)
Total liabilities (71,757) (84,362)
Net assets 740,388 719,073
Share capital and reserves
Share capital 8 6,202 6,202
Share premium 256,633 256,633
Merger reserve 47,751 47,751
Distributable reserve 222,080 231,896
Capital reserve 153,013 150,179
Revenue reserve 54,709 26,412
Equity shareholders’ funds 740,388 719,073
Net asset value per ordinary share (pence) 9 119.4 115.9
Company number: 11990238
The Company made a profit for the year ended 30 June 2025 of £57 , 543,0 00 (2024: £59,847,000).
The financial statements on pages 88 to 97 were approved by the Board of Directors and authorised for issue on 13 October 2025
and were signed on its behalf by:
Alison Fyfe
Chair
The accompanying notes are an integral part of these financial statements.
Company Financial Statements
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Company Statement of Changes in Equity
For the year ended 30 June 2025
Note
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 30 June 2024 6,202 256,633 47,751 231,896 150,179 26,412 719,073
Profit for the year – – – – 2,834 54,709 57,543
Transactions with owners recognised in equity:
Dividends paid 2 – – – (9,816) – (26,412) (36,228)
At 30 June 2025 6,202 256,633 47,751 222,080 153,013 54,709 740,388
For the year ended 30 June 2024
Note
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 30 June 2023 6,202 256,633 47,751 249,436 93,334 41,124 694,480
Profit for the year – – – – 56,845 3,002 59,847
Transactions with owners recognised in equity:
Dividends paid 2 – – – (17,540) – (17,714) (35,254)
At 30 June 2024 6,202 256,633 47,751 231,896 150,179 26,412 719,073
The accompanying notes are an integral part of these financial statements.
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Notes to the Company Financial Statements
1. Accounting policies
(a) Basis of preparation
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below.
Basis of accounting
The Company Financial Statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework and applicable legal and
regulatory requirements of the Companies Act 2006.
Where presentational guidance set out in the Statement of Recommended Practice (‘SORP’) for investment trust companies issued by the
Association of Investment Companies (‘AIC’) in July 2022 is consistent with the requirements of FRS 101, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the SORP.
The notes and financial statements are presented in pounds sterling (being the functional currency and presentation currency for the
Company) and are rounded to the nearest thousand except where otherwise indicated.
The results of the Company have been included in the Consolidated Financial Statements as presented on pages 66 to 87. The accounting
policies adopted are consistent with those adopted by the Group as stated in Note 1 to the Consolidated Financial Statements. The only
additional policies applied are in relation to investments in subsidiary undertakings and dividends received and these are set out below.
The Company has taken advantage of the following exemptions permitted under FRS 101:
• an exemption from preparing the Company cash flow statement and related notes;
• an exemption from listing any new or revised standards that have not been adopted or providing information about their likely impact; and
• an exemption from disclosing transactions between the Company and its wholly-owned subsidiaries.
Going concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council.
After making enquiries, and bearing in mind the nature of the Group’s business and assets, the Directors consider that the Group has adequate
resources to continue in operational existence to 31 December 2026 which is at least twelve months from the date of issuance of this report.
For this reason, they continue to adopt the going concern basis in preparing the financial statements for the year ended 30 June 2025.
Further explanation of the assessment undertaken is provided in the Consolidated Financial Statements on page 71.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at fair value with changes in fair value recognised in profit or loss. Investments in subsidiaries
are initially recognised at fair value at the date at which control is acquired, with subsequent gains or losses arising from changes in fair value
being recognised in net profit or loss for the period as a capital item and transferred to the Capital Reserve. Investments in subsidiaries are
derecognised at the date on which the Company transfers control and substantially all the risks and rewards of ownership to another party.
Dividends received
Dividends received are recognised on the date on which entitlement to receive payment is established. Where dividends are received by way
of an in-specie transfer of assets from a subsidiary undertaking, the dividend is recognised at the fair value of the assets received through profit
or loss as a capital item and transferred to the Capital Reserve.
Company Profit for the financial year
Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Theprofit after tax for the year was £57,543,000 (2024: £59,847,000).
The Company does not have any employees (2024: nil). Details of the Directors’ fees paid during the year are disclosed in the Group’s
Remuneration Report and in Note 3 to the Consolidated Financial Statements. The Company has paid the Directors’ fees which equated to
£227,000 during the year ended 30 June 2025 (2024: £227,000).
Audit fees in relation to the parent company were £170,000 (2024: £183,000), including irrecoverable VAT. This included £3,000 payable by
the Company on behalf of certain subsidiaries (2024: £2,000) and £nil relating to additional audit work undertaken in relation to the prior year
financial statements (2024: £18,000). The fee for assurance related services, being the review of the Company’s Interim Report, was £17,000
(2024: £16,000). There were no other non-audit fees paid to EY by the Company during the year (2024: £nil).
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Additional Information
2. Dividends
Amounts paid as distributions to equity holders.
Dividend rate
(pence per
share)
Year ended
30 June 2025
£’000
Dividend rate
(pence per
share)
Year ended
30 June 2024
£’000
Fourth interim dividend for the prior year 1.428 8,857 1.400 8,683
First interim dividend 1.471 9,123 1.428 8,857
Second interim dividend 1.471 9,124 1.428 8,857
Third interim dividend 1.471 9,124 1.428 8,857
Total 5.841 36,228 5.684 35,254
It is the policy of the Directors to declare and pay dividends as interim dividends. The Directors do not therefore recommend a final dividend.
The fourth interim dividend in respect of the year ended 30 June 2025, of 1.471 pence per share, was paid on 29 August 2025 to shareholders
on the register on 15 August 2025 and amounted to £9,124,000. It is the intention of the Directors that the Company will continue to pay
dividends quarterly.
3. Investments in subsidiary undertakings
As at 30 June 2025, the Company’s directly held subsidiary undertakings were:
Name
Country of
incorporation
Class of
Capital
% of class
held
% of equity
held
Book Cost
£’000
Fair Value
£’000
Target Healthcare REIT Limited Jersey Ordinary 100 100 432,841 430,723
THR Number 12 plc England & Wales Ordinary 100 100 103,336 155,963
THR Number 37 Limited England & Wales Ordinary 100 100 7,521 9,123
THR Number 39 Limited England & Wales Ordinary 100 100 14,635 14,332
THR Number 40 Limited England & Wales Ordinary 100 100 13,696 13,795
THR Number 41 Limited England & Wales Ordinary 100 100 14,086 11,341
THR Number 42 Limited England & Wales Ordinary 100 100 14,903 14,557
THR Number 43 plc England & Wales Ordinary 100 100 94,861 121,414
THR Number 44 Limited England & Wales Ordinary 100 100 – (81)
THR Number 45 Limited England & Wales Ordinary 100 100 14,858 15,001
THR Number 46 Limited England & Wales Ordinary 100 100 8,591 8,295
THR Number 47 Limited England & Wales Ordinary 100 100 6,197 7,251
Total 725,525 801,714
The registered office of the companies incorporated in England & Wales is: Level 4 Dashwood House, 69 Old Broad Street, London EC2M 1QS.
The registered office of Target Healthcare REIT Limited is: 3rd Floor, 44 Esplanade, St Helier, Jersey JE4 9WG.
The movement in the fair value of the Company’s investments in subsidiary undertakings during the year was:
Year ended
30 June 2025
£’000
Year ended
30 June 2024
£’000
Opening fair value 791,304 699,223
Additions 7,816 35,427
Movement in fair value 2,594 56,654
Closing fair value 801,714 791,304
The Company’s investments in subsidiary undertakings are classified within level 3 of the fair value hierarchy. See Note 9 to the Consolidated
Financial Statements for the definitions of the levels of the fair value hierarchy.
The fair value of the Company’s subsidiaries is primarily dependent on the fair value of the properties and loans that they hold. See Notes 9,
13 and 16 to the Consolidated Financial Statements for an explanation of the Group’s valuation processes, the significant inputs, and the
sensitivities of the fair value of these assets and liabilities to these significant inputs.
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Notes to the Company Financial Statements continued
3. Investments in subsidiary undertakings continued
As at 30 June 2025, the Company’s indirectly held subsidiary undertakings were:
Name Country of incorporation Class of Capital % of class held % of equity held
THR Number One plc England & Wales Ordinary 100 100
THR Number Two Limited England & Wales Ordinary 100 100
THR Number 3 Limited England & Wales Ordinary 100 100
THR Number 4 Limited England & Wales Ordinary 100 100
THR Number 5 Limited England & Wales Ordinary 100 100
THR Number 6 Limited England & Wales Ordinary 100 100
THR Number 7 Limited Gibraltar Ordinary 100 100
THR Number 8 Limited Gibraltar Ordinary 100 100
THR Number 9 Limited England & Wales Ordinary 100 100
THR Number 10 Limited England & Wales Ordinary 100 100
THR Number 11 Limited Scotland Ordinary 100 100
THR Number 13 Limited England & Wales Ordinary 100 100
THR Number 14 Limited England & Wales Ordinary 100 100
THR Number 15 plc England & Wales Ordinary 100 100
THR Number 16 Limited England & Wales Ordinary 100 100
THR Number 17 (Holdings) Limited England & Wales Ordinary 100 100
THR Number 17 Limited England & Wales Ordinary 100 100
THR Number 18 Limited England & Wales Ordinary 100 100
THR Number 19 Limited England & Wales Ordinary 100 100
THR Number 20 Limited England & Wales Ordinary 100 100
THR Number 21 Limited England & Wales Ordinary 100 100
THR Number 22 Limited England & Wales Ordinary 100 100
THR Number 23 Limited England & Wales Ordinary 100 100
THR Number 24 Limited England & Wales Ordinary 100 100
THR Number 25 S.à r.l. Luxembourg Ordinary 100 100
THR Number 26 S.à r.l. Luxembourg Ordinary 100 100
THR Number 27 Limited England & Wales Ordinary 100 100
THR Number 28 Limited England & Wales Ordinary 100 100
THR Number 29 Limited England & Wales Ordinary 100 100
THR Number 30 Limited England & Wales Ordinary 100 100
THR Number 31 Limited England & Wales Ordinary 100 100
THR Number 32 Limited England & Wales Ordinary 100 100
THR Number 33 Limited England & Wales Ordinary 100 100
THR Number 34 Limited England & Wales Ordinary 100 100
THR Number 35 Limited England & Wales Ordinary 100 100
THR Number 36 Limited England & Wales Ordinary 100 100
THR Number 38 Limited England & Wales Ordinary 100 100
THR Number 48 Limited England & Wales Ordinary 100 100
The registered office of the companies incorporated in England & Wales is: Level 4 Dashwood House, 69 Old Broad Street, London EC2M 1QS.
The registered office of the companies incorporated in Luxembourg is: 25A Boulevard Royal, L – 2449, Luxembourg.
The registered office of the companies incorporated in Gibraltar is: Suite 23, Portland House, Glacis Road, GX11 1AA, Gibraltar.
The registered office of the company incorporated in Scotland is: Glendevon House, Castle Business Park, Stirling FK9 4TZ.
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4. Investment properties
Freehold property
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Opening market value 7,710 7,520
Opening fixed or guaranteed rent reviews (170) (87)
Opening performance payment (see Note 12) 910 –
Opening carrying value 8,450 7,433
Purchases 910 –
Revaluation movement – gain/(loss) 240 190
Movement in market value 1,150 190
Movement in fixed or guaranteed rent reviews (82) (83)
Movement in performance payment (see Note 12) (910) 910
Movement in carrying value 158 1,017
Closing market value 8,860 7,710
Closing fixed or guaranteed rent reviews (252) (170)
Closing performance payment (see Note 12) – 910
Closing carrying value 8,608 8,450
At 30 June 2025, the property was valued at £8,860,000 (2024: £7,710,000) by CBRE Limited (‘CBRE’) in their capacity as external valuers.
The valuation was undertaken in accordance with the RICS Valuation Global Standards, issued by the Royal Institution of Chartered Surveyors
(‘RICS’) on the basis of Market Value, supported by reference to market evidence of transaction prices for similar properties. CBRE has recent
experience in the location and category of the investment properties being valued.
Market Value represents the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer
and a willing seller in an arm’s length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and
without compulsion. The quarterly property valuation is reviewed by the Board at each Board meeting. The fair value of the property after
adjusting for the movement in the fixed or guaranteed rent reviews and performance payment was £8,608,000 (2024: £8,450,000). The
adjustment consisted of £252,000 (2024: £170,000) relating to fixed or guaranteed rent reviews, which is separately recorded in the accounts
as a non-current asset within ‘trade and other receivables’ (see Note 5). An adjustment is also made to reflect the amount by which the
portfolio value is expected to increase if the performance payment recognised in ‘trade and other payables’ is paid and the passing rent at the
property increased accordingly (see Notes 7 and 12). The total purchases in the year to 30 June 2025, inclusive of any performance payment
recognised in the year and/or exclusive of that recognised in a prior year, were £nil (2024: £910,000).
Considering the Company’s specific valuation process, industry guidance, and the level of judgement required in the valuation process, the
Directors believe it appropriate to classify the Company’s investment property within level 3 of the fair value hierarchy. See Note 9 to the
Consolidated Financial Statements for further details on the valuation process, methodology and classification.
The Company’s investment property portfolio, which consisted of a single care home, is considered to be a single class of assets. The weighted
average net initial yield on the property, as measured by the EPRA topped up NIY, is 5.8 per cent (2024: 5.8 per cent). There have been no
changes to the valuation technique used through the period, nor have there been any transfers between levels. The annual contracted rent
per bed is £8,235 (2024: £7,160).
The lease agreement on the property held by the Company allows for an annual increase in the contracted rental level in line with inflation,
within a cap and a collar. An increase of 1.0 per cent in the contracted rental level will increase the fair value of the property, and consequently
the Company’s reported income from unrealised gains on investments, by £89,000 (2024: £77,000); an equal and opposite movement would
have decreased net assets and reduced the Company’s income by the same amount.
A decrease of 0.25 per cent in the yield applied to the property will increase the fair value of the property by £402,000 (2024: £350,000), and
consequently increase the Company’s reported income from unrealised gains on investments. An increase of 0.25 per cent in the net initial
yield will decrease the fair value of the property by £369,000 (2024: £321,000) and reduce the Company’s income.
Target Healthcare REIT plc
94
Notes to the Company Financial Statements continued
5. Trade and other receivables
Non-current trade and other receivables
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Fixed rent reviews 252 170
Rental deposits held in escrow for tenants 135 117
Total 387 287
Current trade and other receivables
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Balances due from group undertakings 1,003 2,462
Other debtors and prepayments 122 179
Total 1,125 2,641
At the year-end, trade and other receivables include a fixed rent review debtor of £252,000 (2024: £170,000) which represents the effect of
recognising guaranteed rental uplifts on a straight line basis over the lease term.
The balances due from group undertakings are unsecured and interest is receivable at a fixed rate of 5.7 per cent (2024: 6.7 per cent) per
annum or such other interest rate that may be agreed from time to time between the Company and the relevant counterparty. The balances
are repayable on demand.
6. Cash and cash equivalents
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Cash at bank and in hand 311 753
Total 311 753
All cash balances at the year-end were held in cash, current accounts or deposit accounts.
7. Trade and other payables
Non-current trade and other payables
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Rental deposits 135 117
Total 135 117
Current trade and other payables
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Balances due to group undertakings 69,494 81,248
Income tax payable 1,046 932
Investment Manager’s fees payable 171 104
Rental income received in advance 126 109
Performance payments – 910
Other payables 785 942
Total 71,622 84,245
The balances due to group undertakings are unsecured and interest is payable at a fixed rate of 5.7 per cent (2024: 6.7 per cent) per annum or
such other interest rate that may be agreed from time to time between the Company and the relevant counterparty. The balances are repayable
on demand.
The Group’s payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
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Additional Information
8. Share capital
Allotted, called-up and fully paid ordinary shares of £0.01 each
Number of
shares £’000
Balance as at 30 June 2024 and 30 June 2025 620,237,346 6,202
Under the Company’s Articles of Association, the Company may issue an unlimited number of ordinary shares. Ordinary shareholders are
entitled to all dividends declared by the Company and to all of the Company’s assets after repayment of its borrowings and ordinary creditors.
Ordinary shareholders have the right to vote at meetings of the Company. All ordinary shares carry equal voting rights.
During the year to 30 June 2025, the Company did not issue any ordinary shares (2024: nil). The Company did not repurchase any ordinary
shares into treasury (2024: nil) or resell any ordinary shares from treasury (2024: nil). At 30 June 2025, the Company did not hold any shares
in treasury (2024: nil).
Capital Management
The Company’s capital is represented by the share capital, share premium, merger reserve, distributable reserve, capital reserve and revenue
reserve and is managed in line with the policies set out for the Group on page 82.
9. Net Asset Value
The Company’s net asset value per ordinary share of 119.4 pence (2024: 115.9 pence) is based on equity shareholders’ funds of £740,388,000
(2024: £719,073,000) and on 620,237,346 (2024: 620,237,346) ordinary shares, being the number of shares in issue at the year end.
10. Financial instruments
Consistent with its objective, the Company holds an investment in a UK care home property. In addition, the Company’s financial instruments
comprise investments in subsidiaries, cash and receivables and payables that arise directly from its operations. The Company has no direct
exposure to derivative instruments.
The Company is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk,
liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Company are maintained
in pounds sterling.
The Board reviews and agrees policies for managing the Group’s overall risk exposure. These policies are summarised in Note 16 to the
Consolidated Financial Statements and have remained unchanged for the year under review. The following disclosures include, where
appropriate, consideration of the Company’s investment property which, whilst not constituting a financial instrument as defined by FRS 101,
is considered by the Board to be integral to the Company’s overall risk exposure.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.
At the reporting date, the Company’s financial assets exposed to credit risk amounted to £1,323,000 (2024: £3,226,000) consisting of balances
due from group undertakings of £1,003,000 (2024: £2,462,000), cash balances of £311,000 (2024: £753,000) and other debtors of £9,000
(2024: £11,000).
There have been no historical losses from intercompany loans and any resulting provision from the estimated credit loss allowance is considered
to be immaterial. The Company has no financial assets which were either past due or considered impaired at 30 June 2025 (2024: nil).
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments.
The Company’s investments comprise UK care homes and holdings in subsidiary undertakings which, in turn, invest in UK care homes. Property
and property-related assets in which the Company invests are not traded in an organised public market and may be illiquid. As a result, the
Company may not be able to liquidate quickly its investments in these properties or subsidiary undertakings at an amount close to their fair
value in order to meet its liquidity requirements.
At the reporting date, the maturity of the financial assets was:
Financial assets as at 30 June 2025
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Cash and cash equivalents 311 – – – – 311
Rental deposits held in escrow for tenants – – – – 135 135
Balances due from group undertakings 1,003 – – – – 1,003
Other debtors 9 – – – – 9
Total 1,323 – – – 135 1,458
Target Healthcare REIT plc
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Notes to the Company Financial Statements continued
10. Financial instruments continued
Financial assets as at 30 June 2024
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Cash and cash equivalents 753 – – – – 753
Rental deposits held in escrow for tenants – – – – 117 117
Balances due from Group undertakings 2,462 – – – – 2,462
Other debtors 11 – – – – 11
Total 3,226 – – – 117 3,343
At the reporting date, the contractual maturity of the financial liabilities was:
Financial liabilities as at 30 June 2025
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Rental deposits – – – – 135 135
Balances due to group undertakings 69,494 – – – – 69,494
Other payables 2,002 – – – – 2,002
Total 71,496 – – – 135 71,631
Financial liabilities as at 30 June 2024
Three months
or less
£’000
More than three
months but less
than one year
£’000
1-2 years
£’000
2-5 years
£’000
More than
five years
£’000
Total
£’000
Rental deposits – – – – 117 117
Balances due to group undertakings 81,248 – – – – 81,248
Other payables 2,888 – – – – 2,888
Total 84,136 – – – 117 84,253
Interest rate risk
Some of the Company’s financial instruments are interest-bearing. Interest-rate risk is the risk that future cash flows will change adversely as a
result of changes in market interest rates. The Company’s policy is to hold cash in variable rate or short-term fixed rate bank accounts. Interest
is received on cash at a weighted average variable rate which was nil at 30 June 2025 (2024: nil).
The following table sets out the carrying amount of the Company’s financial instruments that are exposed to cash flow interest rate risk:
As at 30 June 2025 As at 30 June 2024
Fixed rate
£’000
Variable rate
£’000
Fixed rate
£’000
Variable rate
£’000
Cash and cash equivalents – 311 – 753
Balances due from group undertakings 1,003 – 2,462 –
Balances due to group undertakings (69,494) – (81,248) –
Total (68,491) 311 (78,786) 753
Based on the Company’s exposure to cash flow interest rate risk, an increase of 0.25 per cent in interest rates would have increased the
reported profit for the year and the net assets at the year end by £1,000 (2024: £2,000), a decrease in interest rates would have an equal and
opposite effect. These movements are calculated based on balances as at 30 June 2025 (30 June 2024) and may not be reflective of actual
future conditions.
Market price risk
The management of market price risk is part of the investment management process and is typical of a property investment company.
The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with
an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value
due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the
estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date.
Such risk is minimised through the appointment of external property valuers. The Company’s subsidiaries are held at fair value which, in turn,
reflects the external valuations of the underlying properties they hold. The Company’s overall market price risk is therefore the same as that
for the Group as set out in Note 16 to the Consolidated Financial Statements.
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Additional Information
11. Lease length
The Company leases out its investment properties under operating leases.
The minimum lease payments based on the unexpired lessor lease length at the year-end were as follows (based on annual rentals):
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Less than one year 544 473
Between one and two years 549 478
Between two and three years 555 482
Between three and four years 560 487
Between four and five years 566 492
Over five years 17,577 15,934
Total 20,351 18,346
The largest single tenant at the year-end accounted for 100 per cent (2024: 100 per cent) of the current annual rental income. There were no
unoccupied properties at the year-end.
The Company has entered into a commercial property lease on its investment property. This property, held under an operating lease, is
measured under the fair value model as the property is held to earn rentals. The lease is a non-cancellable lease with a lease term remaining
of 32 years (2024: 33 years).
12. Contingent assets and liabilities
As at 30 June 2024, the Company’s investment property contained a performance payment clause meaning that, subject to contracted
performance conditions being met, a further capital payment totalling £910,000 may have been payable by the Company to the vendor/
tenant of this property. The potential timing of this payment was also conditional on the date(s) at which the contracted performance
conditions were met and was therefore uncertain.
Having assessed the clause, the Group had determined that the contracted performance conditions in relation to the property were highly
likely to have been met at 30 June 2024 and therefore an amount of £910,000 had been recognised as a liability (see Note 7). An equal but
opposite amount had been recognised as an asset in ‘investment properties’ (see Note 4). This reflect the increase in the investment property
value that would have been expected to arise from the payment of the performance payment and the resulting increase in the contracted
rental income.
The performance payment of £910,000 was paid during the year ended 30 June 2025 (see Note 4). There are no performance payment
clauses remaining outstanding at 30 June 2025.
13. Related party transactions
The Board of Directors is considered to be a related party. No Director has an interest in any transactions which are, or were, unusual in their
nature or significant to the nature of the Company.
The Directors of the Company received fees for their services. Total fees paid by the Company in relation to the year were £227,000
(2024: £227,000) of which £nil (2024: £nil) remained payable at the year-end.
The Investment Manager received management fees of £632,000 (inclusive of irrecoverable VAT) from the Company in relation to the year
ended 30 June 2025 (2024: £527,000). Of this amount £171,000 (2024: £104,000) remained payable at the year-end.
The Investment Manager received a further £193,000 (inclusive of irrecoverable VAT) during the year ended 30 June 2025 (2024: £187,000) in
relation to its appointment as Company Secretary and Administrator. Of this amount £48,000 (2024: £47,000) remained payable at the year-end.
Target Healthcare REIT plc
98
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the seventh Annual General Meeting (‘AGM’) of Target Healthcare REIT plc (the ‘Company’) will be held on
Thursday 4 December 2025 at 4.00 p.m. at the offices of Dickson Minto LLP, Level 4, Dashwood House, 69 Old Broad Street, London EC2M 1QS
for the purposes of considering and, if thought fit, passing the following resolutions, of which resolutions 1 to 13 inclusive will be proposed as
ordinary resolutions and resolutions 14 to 16 inclusive will be proposed as special resolutions:
Ordinary resolutions
1. That the Annual Report and Accounts for the year ended 30 June 2025 be received.
2. That the Directors’ Remuneration Policy be approved.
3. That the Directors’ Annual Report on Remuneration for the year ended 30 June 2025 be approved.
4. That the maximum limit on aggregate Directors’ fees be increased to £350,000.
5. That the Company’s dividend policy be approved.
6. That Ernst & Young LLP be re-appointed as the Company’s Auditor until the conclusion of the next Annual General Meeting.
7. That the Directors be authorised to determine the Auditor’s remuneration.
8. To re-elect Michael Brodtman as a Director.
9. To re-elect Richard Cotton as a Director.
10. To re-elect Alison Fyfe as a Director.
11. To re-elect Vince Niblett as a Director.
12. To re-elect Amanda Thompsell as a Director.
13. That, in addition to any existing authority, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally
authorised to exercise all powers of the Company to allot ordinary shares of £0.01 each (or of such other nominal value as the Directors may
resolve) in the capital of the Company and to grant rights to subscribe for or to convert any security into shares in the Company (‘Securities’)
up to an aggregate nominal amount of £620,237 (being approximately 10% of the Company’s issued share capital immediately prior to the passing
of this resolution), provided that this authority shall, unless renewed, varied or revoked by the Company, expire at the conclusion of the next Annual
General Meeting of the Company or on 15 months from the passing of this resolution, whichever is the earlier, save that the Company may, before
such expiry, make offers or enter into agreements which would or might require shares to be allotted or Securities to be granted and the Directors
may allot shares or grant Securities in pursuance of such offer or agreement as if the authority conferred by this resolution had not expired.
Special resolutions
14. That, in addition to any existing authority and subject to the passing of resolution 13, the Directors be given the general power, pursuant
to section 570 of the Companies Act 2006 (the ‘Act’), to allot equity securities (as defined in section 560 of the Act) for cash pursuant to
the authority under section 551 of the Act either conferred by resolution 13 or by way of a sale of treasury shares as if section 561 of the Act
did not apply to any such allotment or sale, provided that this power:
(a) expires at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on expiry of 15
months from the passing of this resolution, whichever is the earlier, unless renewed, varied or revoked by the Company prior to or
on such date, and save that the Company may, before such expiry, make offers or agreements which would or might require equity
securities to be allotted after such expiry and the Directors may allot equity securities or sell treasury shares in pursuance of any such
offer or agreement as if the power conferred by this resolution had not expired; and
(b) shall be limited to the allotment of equity securities for cash up to an aggregate nominal amount of £620,237 (being approximately
equal to 10% of the nominal value of the issued share capital of the Company immediately prior to the passing of this resolution).
This power applies in relation to the sale of treasury shares as if in the opening paragraph of this resolution the words ‘and subject to the
passing of resolution 13’ were omitted.
15. To authorise the Company generally and unconditionally, pursuant to and in accordance with section 701 of the Companies Act 2006, to
make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of ordinary shares of £0.01 each (or of such other
nominal value as the Directors of the Company shall resolve) either for retention as treasury shares for future reissue, resale or transfer or
cancellation provided that:
(a) the maximum aggregate number of ordinary shares that may be purchased is 92,973,578 ordinary shares or, if less, 14.99% of the issued
ordinary share capital of the Company immediately prior to the passing of this resolution (excluding treasury shares);
(b) the minimum price (excluding expenses) which may be paid for each ordinary share is the nominal value at the time of purchase;
(c) the maximum price (excluding expenses) which may be paid for each ordinary share is the higher of:
(i) 105% of the average market value of an ordinary share in the Company for the five business days prior to the day the purchase is made; and
(ii) the higher of the last independent trade and the highest current independent bid on the London Stock Exchange; and
(d) unless previously varied, revoked or renewed, the authority hereby conferred shall expire at the conclusion of the Company’s next
Annual General Meeting or on 15 months from the passing of this resolution, whichever is the earlier, save that the Company may,
before the expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or may be
executed wholly or partly after the expiry of such authority and may make a purchase of shares pursuant to any such contract.
16. That, the Company be and is hereby generally and unconditionally authorised to hold general meetings (other than Annual General Meetings)
on 14 clear days’ notice, such authority to expire at the conclusion of the next Annual General Meeting of the Company or 15 months from
the passing of this resolution, whichever is the earlier.
By order of the Board
Target Fund Managers Limited
Company Secretary
Registered office:
Level 4, Dashwood House
69 Old Broad Street
London
EC2M 1QS
13 October 2025
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Additional Information
Notes:
1. Only those shareholders registered in the Company’s register of members at 6.00 p.m. on 2 December 2025 or, if the meeting is adjourned,
6.00 p.m. on the day two working days prior to the adjourned meeting, shall be entitled to attend and vote at the meeting. Changes to the
register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
2. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006 (the ‘Act’), can be found
at www.targethealthcarereit.co.uk.
3. As a member you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the meeting and you
should have received a proxy form with this notice of meeting. A proxy does not need to be a shareholder of the Company but must
attend the meeting to represent you. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached
to different shares. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. You may not
use any electronic address provided either in this notice or any related documents (including the financial statements and proxy form) to
communicate with the Company for any purpose other than those expressly stated.
4. Shareholders can: (a) appoint a proxy and give proxy instructions by returning the enclosed proxy form by post (see Note 5); or (b) if a
CREST member, register their proxy appointment by utilising the CREST electronic proxy appointment service (see Note 6); or (c) via
the Proxymity platform (see Note 7). Appointment of a proxy does not preclude you from attending the meeting and voting in person.
If you have appointed a proxy and attend the meeting and vote in person, your proxy appointment will automatically be terminated.
5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy
using the proxy form, the form must be: (a) completed and signed; (b) sent or delivered to Computershare Investor Services PLC at
The Pavilions, Bridgwater Road, Bristol BS99 6ZY; and (c) received by Computershare Investor Services PLC no later than 4.00 p.m. on
2 December 2025 or, in the event of an adjournment of the meeting, 48 hours before the adjourned meeting. In the case of a shareholder
which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an
attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of
such power or authority) must be included with the proxy form. If you have not received a proxy form and believe that you should have one,
or if you require additional proxy forms, please contact Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol
BS99 6ZY (Telephone: 0370 703 0013).
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the
meeting and any adjournment(s) of it by using the procedures described in the CREST manual (available via www.euroclear.com). CREST
personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order
for a proxy appointment made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be
properly authenticated in accordance with Euroclear UK & International Limited’s (EUI) specifications and must contain the information
required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of
a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as
to be received by Computershare Investor Services PLC (ID 3RA50) no later than 4.00 p.m. on 2 December 2025 or, in the event of an
adjournment of the meeting, 48 hours before the adjourned meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST applications host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors
or voting service providers should note that EUI does not make available special procedures in CREST for any particular message. Normal
system timings and limitations will therefore apply in relation to the input of CREST proxy instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member or sponsored member, or has appointed a voting
service provider(s), to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings. The Company may treat as invalid a CREST proxy instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
7. Proxymity Voting – if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform,
a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please
go to www.proxymity.io. Your proxy must be lodged by 4.00 p.m. on 2 December 2025 in order to be considered valid. Before you can
appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will govern the electronic appointment of your proxy.
8. A corporation which is a shareholder can appoint one or more corporate representatives who may exercise, on its behalf, all its powers
as a member provided that no more than one corporate representative exercises powers over the same share.
9. As at 6.00 p.m. on 10 October 2025, the Company’s issued share capital comprised 620,237,346 Ordinary Shares of £0.01 each. Each
Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the
Company as at 6.00 p.m. on 10 October 2025 is 620,237,346. The website referred to in Note 2 will include information on the number of
shares and voting rights.
10. Under section 319A of the Act, any member attending the meeting has a right to ask questions. The Company must answer any question
you ask relating to the business being dealt with at the meeting unless: (a) answering the question would interfere unduly with the
preparation for the meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the
form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question
be answered.
11. Under section 338 of the Act, a member or members meeting the qualification criteria set out in Note 14 on page 100 may, subject to
certain conditions, require the Company to circulate to members notice of a resolution which may properly be moved and is intended to
be moved at that meeting. The conditions are that: (a) the resolution must not, if passed, be ineffective (whether by reason of inconsistency
with any enactment or the Company’s constitution or otherwise); (b) the resolution must not be defamatory of any person, frivolous or
vexatious; and (c) the request: (i) may be in hard copy form or in electronic form; (ii) must identify the resolution of which notice is to be
given by either setting out the resolution in full or, if supporting a resolution sent by another member, clearly identifying the resolution
which is being supported; (iii) must be authenticated by the person or persons making it; and (iv) must be received by the Company not
later than six weeks before the meeting to which the request relates.
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100
12. Under section 338A of the Act 2006, a member or members meeting the qualification criteria set out at Note 14 below may require the
Company to include in the business to be dealt with at the Annual General Meeting a matter (other than a proposed resolution) which
may properly be included in the business (a matter of business). The request must have been received by the Company not later than
23 October 2025. The conditions are that the matter of business must not be defamatory of any person, frivolous or vexatious. The
request must identify the matter of business by either setting it out in full or, if supporting a statement sent by another member, clearly
identify the matter of business which is being supported. The request must be accompanied by a statement setting out the grounds for
the request. Members seeking to do this should write to the Company providing their full name and address.
13. Under section 527 of the Act, a member or members meeting the qualification criteria set out at Note 14 below may have the right to
request the Company to publish on its website a statement setting out any matter that such members propose to raise at the meeting
relating to the audit of the Company’s accounts (including the Auditor’s Report and the conduct of the audit) that are to be laid before the
meeting. Where the Company is required to publish such a statement on its website: (a) it may not require the shareholders making the
request to pay any expenses incurred by the Company in complying with the request; (b) it must forward the statement to the Company’s
auditors no later than the time the statement is made available on the Company’s website; and (c) the statement may be dealt with as part
of the business of the meeting. The request must: (a) be in writing to Target Fund Managers Limited at Glendevon House, Castle Business
Park, Stirling FK9 4TZ; (b) either set out the statement in full or, if supporting a statement sent by another shareholder, clearly identify the
statement which is being supported; (c) be authenticated by the person or persons making it; and (d) be received by the Company at least
one week before the meeting.
14. In order to be able to exercise the members’ rights in Notes 11 to 13, the relevant request must be made by: (a) a member or members
having a right to vote at the meeting and holding at least 5% of total voting rights of the Company; or (b) at least 100 members having
a right to vote at the meeting and holding, on average, at least £100 of paid-up share capital.
15. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights (Nominated
Person), you may have a right under an agreement between you and the shareholder of the Company who has nominated you to have
information rights (Relevant Shareholder) to be appointed or to have someone else appointed as a proxy for the meeting. If you either do
not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an agreement between you and
the Relevant Shareholder to give instructions to the Relevant Shareholder as to the exercise of voting rights. Your main point of contact
in terms of your investment in the Company remains the Relevant Shareholder (or, perhaps, your custodian or broker) and you should
continue to contact them (and not the Company) regarding any changes or queries relating to your personal details and your interest in
the Company (including any administrative matters). The only exception to this is where the Company expressly requests a response from
you. The statement of the rights of members in relation to the appointment of proxies in Notes 3 and 4 on page 99 does not apply to a
Nominated Person.
16. Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chair of the meeting as
his or her proxy will need to ensure that both he/she and his or her proxy comply with their respective disclosure obligations under the
UK Disclosure Guidance and Transparency Rules.
17. Copies of the Directors’ letters of appointment are available for inspection at the Company’s registered office during normal business hours
and at the place of the meeting from at least 15 minutes prior to the meeting until the end of the meeting.
Notice of Annual General Meeting continued
Annual Report and Financial Statements 2025
101
Corporate GovernanceStrategic Report Financial Statements
Additional Information
Shareholder Information
Tax Summary for Real Estate Investment Trusts
Target Healthcare REIT plc is a Real Estate Investment Trust (REIT) and is tax resident in the UK under Part 12 of the Corporation Tax Act 2010,
subject to continuing compliance with the REIT rules and regulations. The main REIT rules with which the Group must comply in order to
retain its REIT status are summarised as follows:
• at the start of each accounting period, the assets of the tax-exempt business must be at least 75% of the total value of the Group’s assets;
• at least 75% of the Group’s total profits must arise from the tax-exempt business;
• at least 90% of the tax-exempt rental business profits must be distributed in the form of a Property Income Distribution; and
• the Group must carry on a ‘property rental business’ throughout each accounting period and must hold a minimum of either a single
commercial property worth at least £20 million or three properties with none exceeding 40% of the total value of the properties.
A REIT does not suffer UK corporation tax on the profits (income and capital gains) derived from its qualifying property rental businesses in the
UK and elsewhere (the ‘Tax-Exempt Business’), provided that certain conditions are satisfied. Instead, distributions in respect of the Tax-Exempt
Business will be treated for UK tax purposes as UK property income in the hands of shareholders (see further below for details on the UK tax
treatment of shareholders in a REIT). A dividend paid by the Company relating to profits or gains of the Tax-Exempt Business is referred to in
this section as a Property Income Distribution (‘PID’).
UK corporation tax remains payable in the normal way in respect of income and gains from the Company’s other business, generally including
any property trading business, not included in the Tax-Exempt Business (the ‘Residual Business’). Dividends relating to the Residual Business
are treated for UK tax purposes as normal dividends. Any normal dividend paid by the Company is referred to as a Non-Property Income
Distribution (‘Non-PID’).
A REIT may become subject to an additional corporation tax charge if it pays a distribution to corporate shareholders that hold 10 per cent
or more of share capital or voting rights and/or are entitled to 10 per cent or more of distributions. This tax charge will not be incurred if the
REIT has taken reasonable steps to avoid making distributions to such a shareholder in line with HMRC guidance and has been relaxed for
shareholders who are entitled to receive gross PIDs effective from 1 April 2022.
UK Taxation of PIDs
A PID is, together with any property income distribution from any other REIT company, treated as taxable income from a single UK property
business. The basic rate of income tax (currently 20%) will be withheld by the Company (where required) on the PID unless the shareholder
is entitled to receive PIDs without income tax being deducted at source (‘Gross PIDs’). This is dependant on the shareholder notifying the
Company’s registrar of this entitlement sufficiently in advance of a PID being paid and the Company being satisfied that the shareholder
concerned is entitled to that treatment.
Shareholders entitled to elect to receive gross distributions may complete the declaration form which is available on request from the
Company through the contact details provided on its website, www.targethealthcarereit.co.uk, or from the Company’s registrar. Shareholders
who qualify for gross payments are, principally, UK resident companies, certain UK public bodies, UK charities, UK pension schemes and the
managers of ISAs, PEPs and Child Trust Funds, in each case subject to certain conditions. Individuals and non-UK residents do not qualify for
gross payments of distributions and should not complete the declaration form.
Shareholders who are individuals may, depending on their particular circumstances, either be liable to further UK income tax on their PID
at their applicable marginal income tax rate, incur no further UK tax liability on their PID, or be entitled to claim repayment of some or all
of the UK income tax withheld on their PID with potential offsets against tax payable in another jurisdiction under a Double Tax Treaty. The
£1,000 property income allowance does not apply to PIDs.
Corporate shareholders who are within the charge to UK corporation tax will generally be liable to pay corporation tax on their PID and,
if income tax is withheld at source, the tax withheld can be set against the company’s liability to UK corporation tax or against any income
tax which it is required to withhold in the accounting period in which the PID is received.
UK Taxation of Non-PIDs
Under current UK legislation, most individual shareholders who are resident in the UK for taxation purposes receive a tax-free dividend
allowance of £500 per annum for tax year 2025/26 (£500 per annum for tax year 2024/25) and any dividend income (including Non-PIDs)
in excess of this allowance is subject to income tax.
UK resident corporate shareholders (other than dealers and certain insurance companies) are not liable to corporation tax or income tax
in respect of dividends provided that the dividends are exempt under Part 9A of the Corporation Tax Act 2009.
UK Taxation of Chargeable Gains in Respect of Ordinary Shares in the Company
Any gain on disposal (by sale, transfer, redemption or otherwise) of the Company’s ordinary shares by shareholders resident in the UK for
taxation purposes will be subject to capital gains tax in the case of an individual shareholder, or UK corporation tax on chargeable gains in
the case of a corporate shareholder.
Target Healthcare REIT plc
102
UK ISAs and SIPPS
It is expected that the Company’s shares will be eligible for inclusion in ISAs and Investment-Regulated Pension Schemes.
The statements on taxation on pages 101 and 102 are intended to be a general outline of certain tax consequences that may arise in relation
to the Company and shareholders. This is not a comprehensive summary of all technical aspects of the taxation of the Company and its
shareholders and is not intended to constitute legal or tax advice to investors.
The statements relate to the UK tax implications of a UK resident individual investing in the Company (unless expressly stated otherwise).
The statements relate to investors acquiring the Company’s ordinary shares for investment purposes only, and not for the purposes of any
trade. The tax consequences for each investor of investing in the Company may depend upon the investor’s own tax position and upon the
relevant laws of any jurisdiction to which the investor is subject. The statements are based on current tax legislation and HMRC practice, both
of which are subject to change at any time, possibly with retrospective effect, and there can be no guarantee that the tax position or proposed
tax position prevailing at the time an investment in the Company is made will endure indefinitely.
Prospective investors should familiarise themselves with, and where appropriate should consult their own professional advisers on, the overall
tax consequences of investing in the Company.
Historical Distributions
Distributions to shareholders may potentially include both PID and Non-PID Dividends as calculated in accordance with specific attribution
rules. The Company provides shareholders with a certificate setting out how much of their dividend is a PID and how much, if any, is a Non-PID.
A breakdown of the dividends paid in relation to the previous five financial years is set out below and details of all the dividends paid since the
Group’s launch are available at www.targethealthcarereit.co.uk
Distribution Ex-dividend date Payment date
PID
(pence per share)
Non-PID
(pence per share)
Total distribution
(pence per share)
In relation to the year ended 30 June 2025
Fourth interim dividend 14/08/25 29/08/25 – 1.471 1.471
Third interim dividend 15/05/25 30/05/25 1.471 – 1.471
Second interim dividend 13/02/25 28/02/25 1.471 – 1.471
First interim dividend 14/11/24 29/11/24 1.471 – 1.471
Total 4.413 1.471 5.884
In relation to the year ended 30 June 2024
Fourth interim dividend 15/08/24 30/08/24 1.428 – 1.428
Third interim dividend 16/05/24 31/05/24 1.428 – 1.428
Second interim dividend 08/02/24 23/02/24 1.428 – 1.428
First interim dividend 09/11/23 24/11/23 1.428 – 1.428
Total 5.712 – 5.712
In relation to the year ended 30 June 2023
Fourth interim dividend 10/08/23 25/08/23 1.190 0.210 1.400
Third interim dividend 11/05/23 26/05/23 1.400 – 1.400
Second interim dividend 09/02/23 24/02/23 1.690 – 1.690
First interim dividend 10/11/22 25/11/22 1.690 – 1.690
Total 5.970 0.210 6.180
In relation to the year ended 30 June 2022
Fourth interim dividend 11/08/22 26/08/22 – 1.690 1.690
Third interim dividend 12/05/22 27/05/22 1.690 – 1.690
Second interim dividend 10/02/22 25/02/22 1.690 – 1.690
First interim dividend 11/11/21 26/11/21 1.690 – 1.690
Total 5.070 1.690 6.760
In relation to the year ended 30 June 2021
Fourth interim dividend 12/08/21 27/08/21 0.168 1.512 1.680
Third interim dividend 13/05/21 28/05/21 1.680 – 1.680
Second interim dividend 11/02/21 26/02/21 1.680 – 1.680
First interim dividend 12/11/20 27/11/20 1.680 – 1.680
Total 5.208 1.512 6.720
Shareholder Information continued
Annual Report and Financial Statements 2025
103
Corporate GovernanceStrategic Report Financial Statements
Additional Information
Historical Record
Assets
At 30 June 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total assets (£’000) 282,791 306,246 434,822 538,379 663,772 718,394 963,658 908,258 967,370 986,186
Market value of property
portfolio (£’000) 210,666 281,951 385,542 500,884 617,584 684,845 911,596 868,705 908,530 929,940
Shareholders’ funds (£’000) 253,282 256,937 358,607 413,089 494,113 565,185 698,767 654,808 689,293 712,460
Performance
At 30 June 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
EPRA NTA per share 100.6p 101.9p 105.7p 107.5p 108.1p 110.4p 112.3p 104.5p 110.7p 114.8p
Share price 109.0p 117.8p 110.5p 115.6p 110.0p 115.4p 108.4p 71.8p 78.5p 104.2p
Premium/(discount) 8.3% 15.6% 4.5% 7.5% 1.8% 4.5% (3.5)% (31.3)% (29.1)% (9.2)%
IFRS EPS 6.81p 7.58p 9.77p 8.10p 7.18p 9.23p 8.20p (1.06)p 11.77p 9.81p
Adjusted EPRA EPS 5.25p 5.23p 5.54p 5.45p 5.27p 5.46p 5.05p 6.00p 6.13p 6.08p
Dividends per share 6.18p 6.28p 6.45p 6.58p 6.68p 6.72p 6.76p 6.18p 5.71p 5.88p
Ongoing charges 1.42% 1.48% 1.48% 1.52% 1.51% 1.55% 1.51% 1.53% 1.51% 1.51%
Contact Information
Investor relations
Information on Target Healthcare REIT plc can be found on its website at www.targethealthcarereit.co.uk including details on the
Company’s share price history, historical dividends and regulatory reports, including the Group’s Annual Reports, Interim Reports,
Sustainability Reports and Quarterly Investor Reports.
Registrar:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: +44 (0)370 702 0000
E: www.investorcentre.co.uk/contactus
Enquiries about the following administrative matters should be addressed to the Company’s registrar:
• Change of address notification.
• Lost share certificates.
• Dividend payment enquiries.
• Dividend mandate instructions. Shareholders may have their dividends paid directly into their bank or building society accounts by
completing a dividend mandate form. Dividend confirmations, where applicable, are sent directly to shareholders’ registered addresses.
• Amalgamation of shareholdings. Shareholders who receive more than one copy of the Annual Report are invited to amalgamate their
accounts on the share register.
Shareholders can view and manage their shareholdings online at www.investorcentre.co.uk, including updating address records, making dividend
payment enquiries, updating dividend mandates, viewing any outstanding payments and viewing the latest share price. Shareholders will need
their Shareholder Reference Number, which can be found on their share certificate or a recent dividend confirmation, to access this site.
Warning to shareholders – Boiler Room Scams
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be
worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment.
If you receive unsolicited investment advice or requests:
• Check the Financial Services Register from www.fca.org.uk to see if the person or firm contacting you is authorised by the Financial
Conduct Authority (‘FCA’);
• Check the investment opportunity you have been offered at www.fca.org.uk/scamsmart;
• Call the FCA on 0800 111 6768 if the firm does not have contact details on the Register or you are told they are out of date;
• Check the list of unauthorised firms to avoid at www.fca.org.uk;
• Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or
Financial Services Compensation Scheme; and
• Think about getting independent financial and professional advice.
If you are approached by fraudsters please tell the FCA by using the reporting details at www.fca.org.uk/consumers/report-scam where
you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have already paid
money to share fraudsters you should contact Action Fraud on 0300 123 2040 or via their website at www.actionfraud.police.uk.
Target Healthcare REIT plc
104
The Company uses Alternative Performance Measures (‘APMs’). APMs do not have a standard meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other entities. The definitions of all APMs used by the Company are highlighted in the
glossary on pages 108 to 110, with detailed calculations, including reconciliation to the IFRS figures where appropriate, being set out below
and within the EPRA Performance Measures on pages 105 and 106.
Discount or Premium – the amount by which the market price per share is lower or higher than the net asset value per share.
2025
pence
2024
pence
EPRA Net Tangible Assets per share (see Note 8 to the Consolidated Financial Statements) (a) 114.8 110.7
Share price (b) 104.2 78.5
(Discount)/premium = (b-a)/a (9.2)% (29.1)%
Dividend Cover – the percentage by which Group specific adjusted EPRA earnings for the year cover the dividend paid.
2025
£’000
2024
£’000
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) (a) 37,739 38,037
First interim dividend 9,123 8,857
Second interim dividend 9,124 8,857
Third interim dividend 9,124 8,857
Fourth interim dividend 9,124 8,857
Dividends paid in relation to the year (b) 36,495 35,428
Dividend cover = (a/b) 103% 107%
Net Debt to EBITDA ratio – a leverage ratio that measures the net earnings available to address debt obligations.
2025
£’000
2024
£’000
Net debt (see page 106) (a) 219,761 224,385
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) 37,739 38,037
Net finance costs 10,233 10,800
EBITDA (b) 47,972 48,837
Net debt to EBITDA ratio = (a/b) 4.6 times 4.6 times
Ongoing Charges – a measure of all operating costs incurred, calculated as a percentage of average net assets in that year.
2025
£’000
2024
£’000
Investment management fee 7,816 7,518
Other expenses 3,907 3,074
Less direct property costs and other non-recurring items* (1,129) (405)
Adjustment to management fee arrangements and irrecoverable VAT** 9 (8)
Total (a) 10,603 10,179
Average net assets (b) 702,441 673,625
Ongoing charges = (a/b) 1.51% 1.51%
* Excludes, amongst other items, the one-off costs related to the administration of the tenant entity at one of the Group’s care home properties. Further details are
provided in the case study on page 19.
** Based on the Group’s net asset value as at 30 June 2025, the management fee is expected to be paid at a weighted average rate of 1.02% (2024: 1.02%) of the Group’s
average net asset plus an effective irrecoverable VAT rate of approximately 9% (2024: 9%). The management fee has therefore been amended so that the Ongoing Charges
figure includes the expected all-in management fee rate of 1.11% (2024: 1.11%).
The Group has also published a cost figure in its Key Information Document which follows the methodology previously prescribed by UK law
and regulations applicable to PRIIPs. Under this methodology the reported ‘portfolio transaction costs’ at 30 June 2025 would be 0.06%
(2024: 0.51%). At the same date, ‘other ongoing costs’ would be 3.53% (2024: 3.45%), which includes finance costs of 1.63% (2024: 1.73%).
The Company’s Key Information Document is available on its website at: www.targethealthcarereit.co.uk.
Total Return – the return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease
in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets.
2025 2024
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
Value at start of year (a) 110.7 111.1 78.5 104.5 105.6 71.8
Value at end of year (b) 114.8 114.9 104.2 110.7 111.1 78.5
Change in value during the year (b-a) (c) 4.1 3.8 25.7 6.2 5.5 6.7
Dividends paid (d) 5.9 5.9 5.9 5.7 5.7 5.7
Additional impact of dividend reinvestment (e) 0.3 0.2 0.9 0.4 0.4 –
Total gain in year (c+d+e) (f) 10.3 9.9 32.5 12.3 11.6 12.4
Total return for the year = (f/a) 9.3% 8.9% 41.4% 11.8% 11.0% 17.2%
Alternative Performance Measures
Annual Report and Financial Statements 2025
105
Corporate GovernanceStrategic Report Financial Statements
Additional Information
EPRA Performance Measures
The European Public Real Estate Association is the industry body representing listed companies in the real estate sector. EPRA publishes
Best Practice Recommendations (‘BPR’) to establish consistent reporting by European property companies. Further information on the
EPRA BPR can be found at www.epra.com.
The figures below are calculated and presented in line with the BPR Guidelines published by EPRA in September 2024.
2025 2024
EPRA Net Reinstatement Value (£’000) 774,063 746,499
EPRA Net Tangible Assets (£’000) 711,888 686,473
EPRA Net Disposal Value (£’000) 740,389 719,073
EPRA Net Reinstatement Value per share (pence) 124.8 120.4
EPRA Net Tangible Assets per share (pence) 114.8 110.7
EPRA Net Disposal Value per share (pence) 119.4 115.9
EPRA Earnings (£’000) 47,855 47,197
Group specific adjusted EPRA earnings (£’000) 37,739 38,037
EPRA Earnings per share (pence) 7.72 7.61
Group specific adjusted EPRA earnings per share (pence) 6.08 6.13
EPRA Net Initial Yield 6.04% 6.05%
EPRA Topped-up Net Initial Yield 6.22% 6.20%
EPRA Vacancy Rate – –
EPRA Cost Ratio (including direct vacancy costs) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) 21.8% 19.1%
EPRA Cost Ratio (excluding direct vacancy costs) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) 21.8% 19.1%
EPRA Loan-to-Value 23.6% 24.7%
Capital Expenditure (£’000) 7,680 45,776
Like-for-like Rental Growth 3.3% 3.8%
EPRA NAV metrics and EPRA Earnings
Full details of these calculations, including reconciliations of each to the IFRS measures, are detailed in Note 8 to the Consolidated Financial
Statements on pages 76 and 77.
EPRA Net Initial Yield and EPRA Topped-up Net Initial Yield
EPRA Net Initial Yield is calculated as annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the property, increased with (estimated) purchasers’ costs. The EPRA Topped-up
Net Initial Yield incorporates an adjustment in respect of the expiration of rent-free periods (or other unexpired lease incentives).
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Annualised passing rental income based on cash rents (a) 59,369 57,462
Notional rent expiration of rent-free periods or other lease incentives 1,800 1,363
Topped-up net annualised rent (b) 61,169 58,825
Standing assets (see page 78) 921,080 889,255
Allowance for estimated purchasers’ costs 62,175 60,026
Grossed-up completed property portfolio valuation (c) 983,255 949,281
EPRA Net Initial Yield = (a/c) 6.04% 6.05%
EPRA Topped-up Net Initial Yield = (b/c) 6.22% 6.20%
EPRA Vacancy Rate
EPRA Vacancy Rate is the estimated rental value (ERV) of vacant space (excluding forward fund developments) divided by the contractual rent
of the investment property portfolio, expressed as a percentage.
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Annualised potential rental value of vacant premises* (a) – –
Annualised potential rental value of the property portfolio (including vacant properties) (b) 61,169 58,825
EPRA Vacancy Rate = (a/b) – –
* As detailed in Note 17 to the Consolidated Financial Statements, there were no unoccupied properties at either 30 June 2024 or 30 June 2025.
Target Healthcare REIT plc
106
EPRA Cost Ratio
The EPRA cost ratios are produced using EPRA methodology, which aims to provide a consistent base-line from which companies can provide
additional information, and include all property expenses and management fees. Consistent with the Group specific adjusted EPRA earnings
detailed in Note 8 to the Consolidated Financial Statements, similar adjustments have been made to also present the adjusted Cost Ratio
which is thought more appropriate for the Group’s business model.
Year ended
30 June 2025
£’000
Year ended
30 June 2024
£’000
Investment management fee 7,816 7,518
Credit loss allowance and bad debts 1,612 962
Other expenses 3,907 3,074
EPRA costs (including direct vacancy costs) (a) 13,335 11,554
Specific cost adjustments, if applicable – –
Group specific adjusted EPRA costs (including direct vacancy costs) (b) 13,335 11,554
Direct vacancy costs (c) – –
Gross rental income per IFRS (d) 72,928 69,551
Adjusted for rental income arising from recognising guaranteed rent review uplifts (10,841) (10,927)
Adjusted for surrender premiums recognised in capital (1,505) –
Adjusted for development interest under forward fund arrangements 725 1,767
Group specific adjusted gross rental income (e) 61,307 60,391
EPRA Cost Ratio (including direct vacancy costs) = (a/d) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) = (b/e) 21.8% 19.1%
EPRA Cost Ratio (excluding direct vacancy costs) = ((a-c)/d) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) = ((b-c)/e) 21.8% 19.1%
EPRA Loan-to-Value
As at
30 June 2025
£’000
As at
30 June 2024
£’000
Borrowings 242,000 243,000
Net payables 17,400 20,269
Cash and cash equivalents (39,639) (38,884)
Net debt (a) 219,761 224,385
Investment properties at market value 929,940 908,530
Total property value (b) 929,940 908,530
EPRA Loan-to-Value = (a/b) 23.6% 24.7%
EPRA Capital Expenditure
Year ended
30 June 2025
£’000
Year ended
30 June 2024
£’000
Acquisitions (including acquisition costs) 30 332
Forward fund developments 3,085 40,368
Like-for-like portfolio 4,565 5,076
Total capital expenditure 7,680 45,776
Conversion from accrual to cash basis 5,305 (4,849)
Total capital expenditure on a cash basis 12,985 40,927
Like-for-like Rental Growth
Year ended
30 June 2025
£’000
Year ended
30 June 2024
£’000
Opening contractual rent (a) 58,825 56,557
Rent reviews 1,939 2,125
Re-tenanting of properties and performance linked increases 15 –
Like-for-like rental growth (b) 1,954 2,125
Acquisitions and developments 1,148 2,819
Disposals (758) (2,676)
Total movement (c) 2,344 2,268
Closing contractual rent = (a+c) 61,169 58,825
Like-for-like rental growth = (b/a) 3.3% 3.8%
EPRA Performance Measures continued
Annual Report and Financial Statements 2025
107
Corporate GovernanceStrategic Report Financial Statements
Additional Information
0
5
10
15
20
25
1901
1951
1971
1991
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
Number of people (million)
65–74 75–84 85+
2050
c.2x over 85s
Today
14%
34%
2014
2025
1. Demographics
• Number of over 85s forecast
to double to 3.6m by 2050.
• It is forecast that 1 in 8 people
aged over 85 will require
residential care.
• Societal shift means less elderly
care provided within families.
2. Real estate standards
• Resident and family expectations
on accommodation quality
are increasing.
• Only 34% of rooms in UK have
the en suite wet-rooms which are
vital for hygiene, privacy & dignity.
• Purpose-built homes offer
advantages for residents and care
providers, and better social space
for communities.
3. Long-term investment,
stable returns
• Lease structures are long-term
(typically 30-35 years) and
inflation-linked.
• Portfolio track record of strong
returns and low volatility
(defensive, non-cyclical).
• Long-term capital appropriate for
vital UK social care infrastructure.
People aged 64 and over: Trend and projections
443k
beds
408k
residents
Total en suite wet-room provision
Proportion of the market is increasing as
older homes close and new homes are built
Sources: Carterwood, analysis covers Great Britain
as at September 2025.
Supply and demand
15
10
5
0
0
5 10 15 20 30
-5
25
Total Return (per annum) %
< Reduced risk Risk (standard deviation) Increased risk >
Retail
Gilts
Office
Industrial
Equities
Real Estate Equities
THRL Portfolio
Primary Healthcare
Healthcare
Residential
All property
Eleven year total return vs standard deviation 2014-2024
257k
shortage
151k
beds
Total supply Total demand Fit-for-
purpose
supply
Data Centre
As the age of the UK population increases along with the care needs
of older people, there is a clear requirement for investment that
will modernise and grow the supply of fit-for-purpose care homes.
Much of the UK’s existing care home real estate is sub-standard for
residents and their care professionals.
Responsible investment, applying specialist knowledge to a complex and sensitive sector, can deliver stable, long-term returns
and provide positive social and community impact.
Source: MSCI, based on annual index to 31 December 2024.
Sources: 1901–2001, Census data; Following 2001, successive principal national projections (the latest being
2021-based) from the Office for National Statistics and (formerly) the Government Actuary’s Department.
Target Healthcare REIT plc
108
Glossary of Terms and Definitions
Corporate Terms
AIC
Association of Investment Companies. This is the trade body for Closed-end Investment Companies
(www.theaic.co.uk).
AIFMD
The UK version of the Alternative Investment Fund Managers Directive and all delegated legislation
thereunder as it forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as
amended. Issued by the European Parliament in 2012 and 2013, the Directive requires that all investment
vehicles, including Closed-end Investment Companies, must have appointed a Depositary and an
Alternative Investment Fund Manager. The Board of Directors of a Closed-end Investment Company,
nevertheless, remains fully responsible for all aspects of the company’s strategy, operations and
compliance with regulations.
Closed-end Investment Company
A company with a fixed issued ordinary share capital which is traded on an exchange at a price not
necessarily related to the Net Asset Value of the company and where shares can only be issued or
bought back by the company in certain circumstances. This contrasts with an open-ended investment
company, which has units not traded on an exchange but issued or bought back from investors at a price
directly related to the Net Asset Value.
CQC
Care Quality Commission. The independent regulator of all health and social care services in England.
Depositary
Under AIFMD rules, the Company must appoint a Depositary, whose duties in respect of investments,
cash and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring.
The Depositary’s oversight duties include, but are not limited to, oversight of share buy backs, dividend
payments and adherence to investment limits. The Company’s Depositary is IQ EQ Depositary Company
(UK) Limited.
Discount/Premium*
The amount by which the market price per share of a Closed-end Investment Company is lower or
higher than the net asset value per share. The share price of an Investment Company is derived from
buyers and sellers trading their shares on the stock market. This price is not identical to the NAV. If the
share price is lower than the NAV per share, the shares are trading at a discount and, if the share price is
higher than the NAV per share, are said to be at a premium. The figure is calculated at a point in time and,
unless stated otherwise, the Company measures its discount or premium relative to the EPRA NTA per
share. The detailed method of calculation is shown on page 104.
Dividend
The income from an investment. The Company currently pays interim dividends to shareholders quarterly.
Dividend Cover*
The absolute value of Group specific adjusted EPRA Earnings divided by the absolute value of dividends
relating to the period of calculation. The detailed method of calculation is shown on page 104.
Dividend Yield*
The annual Dividend expressed as a percentage of the share price at the date of calculation.
EBITDA
Earnings before interest, taxes, depreciation and amortisation costs. Generally considered to be a
measure of a company’s operational performance excluding non-operational expenses.
EPRA Best Practice
European Public Real Estate Association. A not-for-profit organisation which aims to foster trust for,
and encourage greater investment in, listed real estate in Europe (www.epra.com). EPRA also issue
best practice recommendations to enhance the financial reporting of listed property companies.
EPRA Cost Ratio
Reflects the relevant overhead and operating costs of the business. It is calculated by expressing the
sum of property expenses (net of service charge recoveries and third-party asset management fees)
and administration expenses (excluding exceptional items) as a percentage of gross rental income.
The detailed method of calculation is shown on page 106.
EPRA Earnings per Share*
Recurring earnings from core operational activities. A key measure of a company’s underlying operating
results from its property rental business and an indication of the extent to which current dividend
payments are supported by earnings. A reconciliation of the earnings per IFRS and the EPRA earnings,
including any items specific to the Group, is contained in Note 8 to the Consolidated Financial Statements.
EPRA Group specific adjusted
Cost Ratio*
The EPRA Cost Ratio adjusted for items thought appropriate for the Group’s specific business model.
The adjustments made are consistent with those made to the Group specific adjusted EPRA earnings
as detailed in Note 8 to the Consolidated Financial Statements.
EPRA Loan-to-Value (‘LTV’)*
A shareholder-gearing measure to determine the percentage of debt comparing to the appraised value
of the properties. EPRA LTV is calculated as total gross debt (adding net trade payables and less cash)
as a proportion of gross property value. The detailed method of calculation is shown on page 106.
EPRA Net Disposal Value (‘NDV’)*
A measure of Net Asset Value which represents the shareholders’ value under a disposal scenario, where
deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their
liability, net of any resulting tax. A reconciliation of the NAV per IFRS and the EPRA NDV is contained in
Note8 to the Consolidated Financial Statements.
EPRA Net Initial Yield*
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the property, increased with (estimated)
purchasers’ costs. EPRA’s purpose is to provide a comparable measure around Europe for portfolio
valuations. The detailed method of calculation is shown on page 105.
EPRA Net Reinstatement Value
(‘NRV’)*
A measure of Net Asset Value which assumes that entities never sell assets and aims to represent the
value required to rebuild the entity. The objective is to highlight the value of net assets on a long-term
basis. Assets and liabilities that are not expected to crystallise in normal circumstances, such as the fair
value movements on financial derivatives, are excluded and the costs of recreating the Group through
investment markets, such as property acquisition costs and taxes, are included. A reconciliation of the
NAV per IFRS and the EPRA NRV is contained in Note 8 to the Consolidated Financial Statements.
Annual Report and Financial Statements 2025
109
Corporate GovernanceStrategic Report Financial Statements
Additional Information
EPRA Net Tangible Assets (‘NTA’)*
A measure of Net Asset Value which assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax. A reconciliation of the NAV per IFRS and the EPRA NTA is contained in
Note 8 to the Consolidated Financial Statements.
EPRA Topped-up Net Initial Yield*
Incorporates an adjustment to the EPRA Net Initial Yield in respect of the expiration of rent-free periods
(or other unexpired lease incentives). The detailed method of calculation is shown on page 105.
GAAP
Generally Accepted Accounting Practice. This includes UK GAAP and International GAAP (IFRS or
International Financial Reporting Standards). The Group’s Consolidated Financial Statements are prepared
in accordance with UK-adopted IFRS.
Gearing
Unlike open-ended investment companies, Closed-end Investment Companies have the ability to
borrow to invest. This term is used to describe the level of borrowings that an Investment Company has
undertaken. The higher the level of borrowings, the higher the gearing ratio. The gross gearing figure is
calculated as debt divided by the market value of the properties held. The net gearing figure is calculated
as debt less cash divided by the market value of the properties held.
Investment Manager
The Company’s Investment Manager is Target Fund Managers Limited. Further details are set out on
pages 34 and 35 and in Note 2 to the Consolidated Financial Statements.
IRR (or Internal Rate of Return)*
A metric used in financial analysis to estimate the profitability of potential investments. The IRR is the
discount rate that makes the net present value of all cash flows equal to zero in a discounted cash
flow analysis.
Leverage
As defined under AIFMD rules, leverage is any method by which the exposure of an AIF is increased
through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is
broadly equivalent to Gearing, but is expressed as a ratio between the assets (excluding borrowings)
and the net assets (after taking account of borrowing). Under the gross method, exposure represents the
sum of the Group’s positions after deduction of cash balances, without taking account of any hedging or
netting arrangements. Under the commitment method, exposure is calculated without the deduction of
cash balances and after certain hedging and netting positions are offset against each other.
Loan-to-Value*
A measure of the Group’s Gearing level. Gross LTV is calculated as total gross debt as a proportion of gross
property value. Net LTV is calculated as total gross debt less cash as a proportion of gross property value.
Market Capitalisation
The stock market value of the Company as determined by multiplying the number of Ordinary Shares
in issue, excluding any shares held in treasury, by the Share Price of the Ordinary Shares.
MSCI
Produces indexes for both privately-held real estate portfolios, as well as publicly-listed organisations
which provides a long performance history and which are mostly appraised quarterly.
NAV per Ordinary Share
This is calculated as the Net Asset Value (NAV) divided by the number of shares in issue.
Net Asset Value
(or Shareholders’ Funds)
The value of total assets less liabilities. Liabilities for this purpose include current and long-term liabilities.
It represents the underlying value of an Investment Company at a point in time.
Non-Property Income
Distribution (‘Non-PID’)
(or Ordinary Dividend)
The Dividends paid by the Company relating to profits or gains of the Tax-Exempt Business. Further details
on the categorisation of Dividends paid by a REIT are included in the Tax Summary on pages 101 and 102.
Ongoing Charges Ratio*
A measure of all operating costs incurred in the reporting period, calculated as a percentage of average
net assets in that year. Operating costs exclude costs of buying and selling investments, interest costs,
taxation, non-recurring costs and the costs of buying back or issuing ordinary shares. In calculating this
figure, the Group follows the methodology and guidance published by the AIC. The detailed method of
calculation is shown on page 104.
Ordinary Shares
The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled
to their share of both income, in the form of dividends paid by the Investment Company, and any capital
growth. The Company has only Ordinary Shares in issue.
Property Income Distribution
(‘PID’)
The Dividends paid by the Company relating to profits or gains of the Residual Business. Further details
on the categorisation of Dividends paid by a REIT are included in the Tax Summary on pages 101 and 102.
Real Estate Investment Trust
(or REIT)
A tax regime which in the UK exempts participants from corporation tax both on UK rental income
and gains arising on UK investment property sales, subject to certain requirements. Further details
are provided on pages 101 and 102.
Share Price
The value of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares
are traded on the Main Market of the London Stock Exchange.
SORP
Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture
Capital Trusts’ issued by the AIC.
Total Return*
The return to shareholders calculated on a per share basis by adding dividends paid in the period to the
increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the
form of Ordinary Shares or Net Assets. The detailed method of calculation is shown on page 104.
Total Accounting Return*
The Total Accounting Return is calculated based on the dividends paid in the period and the increase or
decrease in the EPRA NTA. The detailed method of calculation is shown on page 104.
* Alternative Performance Measure.
Target Healthcare REIT plc
110
Property and ESG Terms
Break Option
A clause in a lease which provides the landlord or tenant with an ability to terminate the lease before
its contractual expiry date.
Building Research Establishment
Environmental Assessment
Method (‘BREEAM’)
BREEAM is the world’s leading science-based suite of validation and certification systems for sustainable
built environment. The BREEAM in-use standards provide a framework to enable property investors,
owners, managers and occupiers to determine and drive sustainable improvements in the operational
performance of their assets, leading to benchmarking, assurance and validation of operational asset data.
Contractual Rent
The annual rental income receivable on a property as at the balance sheet date, adjusted for the inclusion
of rent currently subject to a rent free period.
Covenant Strength
This refers to the quality of a tenant’s financial status and its ability to perform the covenants in the lease.
Deed of Surrender
A legal document which allows the early termination of a lease upon the agreement of both parties. It will
list the obligations that need to be fulfilled by both parties before the rights and interests under the lease
are extinguished. Depending on the circumstances a surrender premium may be payable from the Group
to the tenant, or receivable by the Group from the tenant.
Energy Performance Certificate
(‘EPC’)
An Energy Performance Certificate (EPC) rates how energy efficient a building is using grades from A
to G (with ‘A’ the most efficient grade). All commercial properties leased to a tenant must have an EPC.
AllEPCs are valid for 10 years.
Estimated Rental Value (‘ERV’)
The estimated annual market rental value of a property as determined by the Company’s External Valuer.
This will normally be different from the actual rent being paid.
Fixed and Minimum Guaranteed
Rental Uplifts
Rents subject to fixed uplifts at an agreed level on agreed dates stipulated within the lease, or rents subject
to contracted minimum uplifts at specified review dates.
Forward Fund/Commitment
A contract pertaining to the future purchase of a property. Forward Funding relates to the acquisition
of a property which hasn’t yet been built, with the Group providing the developer with the funding for the
development, usually in staged payments throughout the contract.
GRESB
GRESB is a mission-driven and investor-led organisation that provides actionable and transparent ESG data
to financial markets. GRESB collects, validates, scores and benchmarks ESG data using a standardised,
globally recognised framework so that both investors and Investment Managers can act on ESG data
and insights.
Lease
A legally binding contract between a landlord and a tenant which sets out the basis on which the tenant is
permitted to occupy a property, including the lease length.
Lease Incentive
A payment used to encourage a tenant to take on a new lease, for example by a landlord paying a tenant a
sum of money to contribute to the cost of a tenant’s fit-out of a property or by allowing a rent free period.
Lease Renewal
The renegotiation of a lease with the existing tenant at its contractual expiry.
Mature Homes
Care homes which have been in operation for more than three years. There were 81 homes in the
Group’s portfolio which both met this definition and were held by the Group for the entire duration of the
year ended 30 June 2025, closing at 86 homes on 30 June 2025.
Occupancy Rate or
Resident Occupancy Rate
The occupancy rate calculates the number of occupied rooms as a percentage of the overall capacity of
the care home. This is an important measure in determining the quality of the property held, the strength
of the tenant and the sustainability of the rental income received.
Photovoltaic (‘PV’) Panels
Panels which are used to generate renewable electricity by capturing solar energy.
Portfolio or Passing Rent*
The annual rental income currently receivable on a property as at the balance sheet date, excluding rental
income where a rent-free period is in operation. The gross rent payable by a tenant at a point in time.
Rent Cover*
A measure of the tenant’s ability to meet its rental liability from the profit generated by their underlying
operations. Generally calculated as the tenant’s EBITDARM (earnings before interest, taxes, depreciation,
amortisation, rent and management fees) divided by the contracted rent. Unless otherwise stated, rent
cover is calculated based on Mature Homes only.
Rent Review
A periodic review of rent during the term of a lease, as provided for within a lease agreement.
Science Based Targets initiative
(‘SBTi’)
A corporate climate action organisation that enables companies and financial institutions worldwide to
play their part in combating the climate crisis.
Surrender Premium
A sum of monies that may be paid from the tenant to the landlord, or from the landlord to a tenant,
in order to extinguish a lease prior to the termination date originally set out in the lease agreement.
Valuer
An independent external valuer of a property. The Group’s Valuer is CBRE Limited and detailed
information regarding the valuation of the Group’s properties is included in Note 9 to the Consolidated
Financial Statements.
Wet-room
A private, en-suite shower and toilet room, fully tiled and drained, providing the practical living space for
personal hygiene to be applied in a dignified manner and with assistance as required.
WAULT*
Weighted average unexpired lease term. The average lease term remaining to expiry across the portfolio
weighted by contracted rental income.
* Alternative Performance Measure.
Glossary of Terms and Definitions continued
Annual Report and Financial Statements 2025
111
Corporate GovernanceStrategic Report Financial Statements
Additional Information
Corporate Information
Directors
Alison Fyfe (Chair)
Michael Brodtman
Richard Cotton*
Vince Niblett**
Amanda Thompsell
Registered Office
Level 4 Dashwood House
69 Old Broad Street
London EC2M 1QS
AIFM and Investment Manager,
Company Secretary and Administrator
Target Fund Managers Limited
Glendevon House
Castle Business Park
Stirling FK9 4TZ
Legal Adviser
Dickson Minto LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Brokers
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Panmure Liberum Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
Valuers
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Auditors
Ernst & Young LLP
Atria One
144 Morrison Street
Edinburgh EH3 8EX
Tax Adviser
Deloitte LLP
Athene Place
66 Shoe Lane
London EC4A 3BQ
Tax Compliance
Alvarez & Marsal Tax LLP
1 West Regent Street
Glasgow G2 1RW
Depositary
IQ EQ Depositary Company (UK) Limited
Two London Bridge
London SE1 9RA
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Website
www.targethealthcarereit.co.uk
* Senior Independent Director
** Chairman of Audit Committee
Target Healthcare REIT plc
112
Notes
CBP033126
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Target Healthcare REIT plc Annual Report and Financial Statements 2025
Target Healthcare REIT plc
Level 4 Dashwood House
69 Old Broad Street
London EC2M 1QS
www.targethealthcarereit.co.uk