Target Healthcare REIT invests in modern, purpose-built residential care homes in the UK let on long leases to high-quality care providers. It selects assets according to local demographics and intends to pay increasing dividends underpinned by structural growth in demand for care.
Continuing the consistent trend of positive returns, in the three months to 31 March (Q321) EPRA NAV per share increased 0.8% to 109.1p and including DPS paid the quarterly NAV total return was 2.5%. Inflation-indexed like-for-like rent growth continued to support income and capital returns and property valuation yields tightened further. With the care home vaccination programme well advanced, COVID cases remained low (<1% of beds) and occupancy within the homes was stable, with strong enquiries a positive indicator for recovery. Rent collection has remained robust and progress has been made with the small number of underperforming homes; with one re-tenanted on favourable terms that immediately enhance its value. The company expects to announce acquisitions in the near term as due diligence approaches completion.
Care home demand is driven by demographics and care needs with a shortage of quality care homes suggesting a strong investment demand in years to come. The pandemic has presented a significant near-term challenge to the sector but does not change the underlying demographic-driven fundamentals while highlighting its critical role in supporting the NHS and the importance of long-term investment.