Continuing DPS and positive total returns

Target Healthcare REIT 14 August 2020 Update
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Target Healthcare REIT

Continuing DPS and positive total returns

Q420 NAV and business update

Real estate

14 August 2020

Price

112p

Market cap

£512m

Net debt (£m) at 30 June 2020

115.6

Net LTV (%) at 30 June 2020

18.7

Shares in issue

457.5m

Free float

100%

Code

THRL

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.3

13.9

(4.0)

Rel (local)

3.6

7.2

10.4

52-week high/low

123.5p

73.2p

Business description

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.

Next events

Q420 DPS paid

28 August 2020

FY20 results

Sept. 2020

Analyst

Martyn King

+44 (0)20 3077 5745

Target Healthcare REIT is a research client of Edison Investment Research Limited

Target’s portfolio of high-quality, purpose-built care homes continued to generate positive returns during Q420, driven by RPI-linked rental uplifts, with quarterly dividend payments maintained. The COVID-19 pandemic has presented a significant challenge to tenant operators; however, it does not change the underlying demographic-driven fundamentals that drive the sector and highlights the critical role that it plays in supporting the NHS.

Year end

Revenue (£m)

Adjusted net
earnings** (£m)

Adjusted
EPS*(p)

EPRA NAV/
share (p)

DPS
(p)

P/NAV/
share (x)

Yield
(%)

06/18

28.4

15.7

5.54

105.7

6.45

1.06

5.8

06/19

34.3

20.1

5.45

107.5

6.58

1.04

5.9

06/20e*

43.8

24.9

5.65

108.9

6.68

1.03

6.0

06/21e*

47.6

28.6

6.25

111.9

6.68

1.00

6.0

Note: *Not updated for Q420 data. **EPRA earnings adjusted for development interest under forward fund agreements.

Q420 NAV total return of 1.6%

Q420 EPRA NAV total return, including DPS paid, was 1.6%, taking the FY20 total to 6.8%. A Q420 DPS of 1.67p has been declared, and the FY20 aggregate DPS of 6.68p was 1.5% up on FY19. Across the portfolio of properties, confirmed or suspected cases of COVID-19 have fallen to very low levels and tenants are now seeking to rebuild occupancy. Of rents payable in respect of recent rent quarter dates, 96% has been received after allowing for agreements in respect of a limited proportion of homes to pay monthly in advance, and excluding two immature care homes on which agreements were in place prior to the pandemic. We will review our estimates with the detailed FY20 results in September although the unaudited quarterly data suggest that adjusted earnings were lower than we forecast (c £23.4m vs £24.9m forecast, see page 4) driving a slightly lower (108.1p) EPRA NAV, perhaps including higher non-cash provisioning against rent receivables. Positively, the recent return to acquisitions is not anticipated in our FY21 forecast.

Strong focus on asset quality

The care home sector is driven by demographics rather than the economy, and a growing elderly population, combined with a shortage of quality homes, suggests a strong demand in years to come. Target puts a very strong focus on the quality and location of the assets as well as the operational capabilities and financial performance of tenants. It believes that modern, purpose-built homes with flexible layouts and high-quality residential facilities, including single-occupancy bedrooms complete with en-suite wet rooms, are more likely to provide sustainable, long-duration rental income, appealing to residents and allowing tenants to provide better and more effective care.

Valuation: Indexed, long-term income

Target’s visible, indexed rental growth supports long-term dividend growth. Aggregate DPS of 6.68p for FY20 represents a yield of 6.0% while the shares trade at only a small premium to NAV. Continued robust rent collection and DPS payments through the pandemic indicate the potential for a re-rating.

Investment summary

COVID-19 update

Target continues to work closely with tenants and, assisted by the wider availability of COVID-19 testing across the sector, says that just a handful of the 71 operational homes in its portfolio are reporting confirmed or suspected cases. These represent less than 0.3% of the 4,925 beds, down from a peak in the third week of April of 3.2% (162 beds).

In its 6 July trading update Target reported that 96% of the rent payable in respect of the recent quarter dates (24 June in England, Wales and Northern Ireland and 28 May in Scotland) had been collected, after allowing for agreements in respect of a limited proportion of the 71 operational homes to pay monthly in advance, and excluding two immature care homes on which agreements were in place prior to the pandemic. The 4% of rent currently outstanding relates to care homes where active asset management initiatives have been put in place which Target says provides it with strong visibility of value recovery in the near term.

Consistently positive quarterly returns continued in Q420

RPI rental uplifts continued to support growth in the rent roll and increasing property valuations in Q420, as it has throughout the year. The unaudited Q4 EPRA NAV per share increased slightly to 108.1p (Q320: 108.0p) and including the 1.67p Q320 DPS paid the NAV total return in the quarter was 1.6%. A Q420 DPS of 1.67p has been declared for payment on 28 August, bringing the total for the year to 6.68p as expected, up 1.5% compared with FY19.

Exhibit 1: Quarterly NAV total return (unaudited)

Sep-19

Dec-19

Mar-20

Jun-20

Cumulative

(p)

Q120

Q220

Q320

Q420

Q1–Q420

Opening EPRA NAV per share

107.5

107.9

108.1

108.0

107.5

Closing EPRA NAV per share

107.9

108.1

108.0

108.1

108.1

DPS paid

1.64475

1.6700

1.6700

1.6700

6.65475

NAV total return (%)

1.9%

1.7%

1.5%

1.6%

6.8%

Source: Target Healthcare REIT

The quarterly data indicate a full year NAV total return of 6.8%, with a positive return in each period, and takes the cumulative total return since IPO to 55.8% or an annual average compound return (dividends added back but not reinvested) of 6.1%. More than 80% of the total return has been in the form of dividend distributions.

Exhibit 2: NAV total return since IPO

(p)

FY14*

FY15

FY16

FY17

FY18

FY19

FY20

Cumulative

Opening NAV per share

98.0**

94.7

97.9

100.6

101.9

105.7

107.5

98.0

Closing NAV per share

94.7

97.9

100.6

101.9

105.7

107.5

108.1

108.1

DPS paid

6.5

6.1

6.2

6.3

6.4

6.5

6.65

44.6

NAV total return (%)

3.3%

9.7%

9.0%

7.5%

10.1%

7.8%

6.8%

55.8%

Compound annual average return (%)

6.1%

Source: Target Healthcare REIT. Note: **22 January 2013 to 30 June 2014. **Adjusted for IPO costs.

Also consistently positive throughout the quarters were the recurring income returns, shown in the quarterly data and in Exhibit 3 as the ‘movement in the revenue reserve’, and the capital returns (property revaluation less acquisition costs).

Exhibit 3: Summary of FY20 quarterly data

(pence per share)

Q120

Q220

Q320

Q420

Q1–Q420

Opening EPRA NAV per share

107.5

107.9

108.1

108

107.5

Property revaluation

0.6

1.3

0.7

0.6

3.2

Property acquisition costs & other capital items

(0.1)

(0.6)

(0.1)

0.0

(0.8)

Net gains/(losses) on investment property revaluation

0.5

0.7

0.6

0.6

2.4

Net effect of early repayment of debt facilities/swap

0.1

0.0

0.0

0.0

0.1

Cost of corporate restructure

0.0

0.0

(0.3)

0.0

(0.0)

Movement in revenue reserve

1.2

1.2

1.3

1.2

4.9

Dividend paid

(1.4)

(1.7)

(1.7)

(1.7)

(6.5)

Closing EPRA NAV per share

107.9

108.1

108.0

108.1

108.1

Source: Target Healthcare REIT data

Exhibit 4 shows a bridge of the unaudited EPRA NAV movement during the year with dividend payments exceeding recurring income and the difference made up by net positive capital movements (net property revaluation less refinance costs).

Exhibit 4: Unaudited FY20 EPRA NAV per share bridge

Source: Target Healthcare REIT data

Target’s last equity fund-raising was in September 2019 (Q120) when it raised £80m (gross) in an oversubscribed issue of 72.4m shares. The equity proceeds were quickly deployed in Q220 and acquisitions continued into Q320. However, the COVID-19 pandemic then slowed further deployment of available debt capital, with two potential acquisitions postponed at a late stage of negotiation, until a clearer picture of the impact of the pandemic could be assessed. As a result, the balance sheet remained liquid with modest gearing (loan to value or LTV) through Q420. The relatively modest growth in the portfolio valuation during the quarter reflected positive revaluation (driven by RPI-linked rental growth), as has been the case throughout the year, and continuing investment in forward funded pre-let development assets.

Exhibit 5: Summary of quarterly balance sheet development

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

(£m)

Q419

Q120

Q220

Q320

Q420

Investment properties at market value

500.9

511.4

589.9

613.4

617.6

Cash

26.9

116.4

31.8

31.1

36.4

Net current assets/(liabilities)

(6.0)

(4.1)

7.9

(8.3)

(7.7)

Bank loan

(108.0)

(130.0)

(135.0)

(142.0)

(152.0)

Net assets

413.8

493.7

494.6

494.2

494.3

Net debt

(81.1)

(13.6)

(103.2)

(110.9)

(115.6)

Gross LTV (%)

21.6%

25.4%

22.9%

23.1%

24.6%

Net LTV (%)

16.2%

2.7%

17.5%

18.1%

18.7%

Source: Target Healthcare REIT

Target has £180m of committed banking facilities comprising £80m of fully drawn fixed rate term loan facilities and £100m of more flexible variable rate revolving credit facilities £72m drawn). Adjusting the drawn debt of £152m for £36.4m of cash, the Q420 net LTV was 18.7%. The weighted average cost of the drawn debt, including amortisation of loan arrangement fees, was 2.87% with a weighted average term to expiry of 4.24 years.

Exhibit 6: Summary of debt portfolio

Lender

Facility type

Facility

Maturity

Margin

RBS

Term loan and revolving credit facility

£50m**

September 2021*

Libor + 1.5%

HSBC

Revolving credit facility

£80m

January 2022***

Libor + 1.7%

ReAssure

Term loan

£50m

January 2032

Fixed 3.28%

Source: Target Healthcare REIT data. Note: *RBS facility includes the option of two one-year extensions subject to RBS approval. **The RBS facility comprises a £30m term loan and £20m revolving credit facility. ***HSBC facility includes the option of a one-year extension subject to HSBC approval.

With visibility improving, acquisitions have now resumed

With continuing robust rent collection (see below), falling infection rates reported at properties within the portfolio, and a generally improving operational environment for the tenant operators, in early July Target resumed its portfolio growth with the acquisition of a new-build care home in Bicester, Oxfordshire for a consideration of £15m (including the costs of acquisition), funded from existing cash resources. The high quality 66-bed, purpose-built home is let to Ideal Carehomes, Target’s largest existing tenant, and increases the number of homes leased by it to 12. With the 6 July announcement of the acquisition, Target reported that the financial position of the group remained robust with remaining uncommitted capital resources of £26m and a still modest LTV of 20.6%.

The investment manager is analysing and performing due diligence on a number of investment opportunities, both near-term and early stage, but notes that any decision on future acquisitions will take into account both market conditions and the funds available to the group.

Also since end-Q420, practical completion has been reached on the forward funded development of an 80-bed home in Burscough, Lancashire. The home is pre-let to existing tenant, Athena, and opened to tenants in July 2020. The currently remaining forward funded development is at Rudheath, Cheshire, acquired for £9.7m (including transaction costs) in Q320. The home is pre-let at completion to an existing tenant of the group, L&M Healthcare. Planning consent was received in October 2019 with the development phase expected to take 16 months.

Financials and valuation

We expect Target to report audited full-year results in mid-September and we will reassess our financial forecasts at that time with the detail that will become available. Our analysis of the quarterly data suggests that EPRA and adjusted earnings are likely to be lower than our current forecasts, which explains the unaudited end-Q420 EPRA NAV per share of 108.1p being slightly below our forecast 108.9p.

Applied to the average shares in issue, the unaudited quarterly data suggest EPRA earnings, excluding the non-cash IFRS adjustment for fixed or guaranteed rent uplifts (recognised as income on a straight line basis over the length of the lease), of around £22m, compared with our forecast £23.6m on this same basis. Reported EPRA earnings includes the non-cash IFRS adjustments and will be closer to £30m. Given recent bank debt drawings to maintain a liquid balance sheet while continuing investment in the forward funding assets, net interest expense may be slightly higher than we have allowed for. However, we suspect that the main difference with our forecasts is likely to be related to prudential non-cash provisioning against the rent receivables, both COVID-19 related and other, and in part related to IFRS accounting rules. H120 included c £0.3m of provisioning, relating to recently established homes rather than COVID-19, and in our forecasts we had allowed c £0.5m in H220.

Adjusted earnings, on which dividend decisions are made and against which dividend cover is measured, also includes the coupon accrued under forward funding agreements, and we also add back the non-recurring net refinancing costs that we estimate at £0.4m. Our £24.9m forecast for Adjusted earnings includes £0.8m accrued forward funding coupon but the slight delay in completions during the pandemic suggest this may be higher, at perhaps £1.0m. This suggests that adjusted earnings are likely to be c £23.4m for the year compared with dividends paid of c £29.4m (cover of c 80%).

Positively, in FY21 we would expect the provisioning to fall away, in part or in full, while our existing forecasts do not yet allow for Target’s return to acquisitions which we expect to have a positive impact.

Based on the FY20 aggregate annual DPS of 6.68p, the shares trade with a yield of 6.0% and a slight premium to NAV.

In Exhibit 7 we show a comparison of Target with its nearest competitors. With investors attracted by secure, long-term yield, the group has performed relatively well over the past 12 months. However, compared with the primary healthcare investors and the social housing investors, the share price performance of the care home investors has lagged the peer group average. We believe this is because rents for primary healthcare and social housing are ultimately funded by government, representing a strong covenant, while the care home sector has inevitably been more challenged by the COVID-19 pandemic. With rent collection to support dividends remaining robust, while benefitting from similar positive demographic trends compared with the peer group, there is good potential for Target’s yield differential to narrow versus the peer group average of 4.6%.

Exhibit 7: Peer group comparison

Price (p)

Market cap. (£m)

P/NAV (x)

Yield (%)

Share price performance

1
month

3
months

12 months

From 12M high

Assura

81

2156

1.50

3.5

6%

12%

23%

-8%

Civitas Social Housing

111

688

1.03

4.8

0%

12%

33%

-4%

Impact Healthcare

103

327

0.96

6.1

5%

16%

-8%

-10%

Primary Health Properties

152

1992

1.39

3.8

2%

1%

17%

-10%

Triple Point Social Housing

104

363

0.98

4.9

0%

7%

30%

-5%

Average

1.17

4.6

2%

10%

19%

-7%

Target Healthcare

112

513

1.04

6.0

7%

23%

-4%

-10%

UK property index

1,484

8.6

1%

14%

-5%

-25%

FTSE All-Share Index

3,380

3.4

-1%

7%

-13%

-21%

Source: Historical company data, Refinitiv. Note: *Based on last published EPRA NAV per share. **Based on trailing 12-month DPS declared. Refinitiv price data at 14 August 2020.

Exhibit 8: Financial summary

Year to 30 June (£000s)

2016

2017

2018

2019

2020e*

2021e

INCOME STATEMENT

Rent revenue

12,677

17,760

22,029

27,923

36,097

39,883

Movement in lease incentive/fixed rent review adjustment

4,136

5,127

6,334

6,354

7,710

7,710

Rental income

16,813

22,887

28,363

34,277

43,807

47,593

Other income

61

671

3

0

10

0

Total revenue

16,874

23,558

28,366

34,277

43,817

47,593

Gains/(losses) on revaluation

(573)

1,585

6,434

6,155

3,876

7,843

Realised gains/(losses) on disposal

0

0

0

0

642

0

Total income

16,301

25,143

34,800

40,432

48,335

55,437

Management fee

(2,654)

(3,758)

(3,734)

(4,702)

(5,261)

(5,522)

Other expenses

(992)

(1,236)

(1,458)

(2,742)

(2,783)

(1,523)

Total expenditure

(3,646)

(4,994)

(5,192)

(7,444)

(8,044)

(7,045)

Profit before finance and tax

12,655

20,149

29,608

32,988

40,291

48,391

Net finance cost

(929)

(808)

(2,010)

(3,104)

(4,496)

(4,240)

Profit before taxation

11,726

19,341

27,598

29,884

35,796

44,151

Tax

(24)

(219)

11

0

3

0

Profit for the year

11,702

19,122

27,609

29,884

35,799

44,151

Average number of shares in issue (m)

171.7

252.2

282.5

368.8

440.4

457.5

IFRS earnings

11,702

19,122

27,609

29,884

35,799

44,151

Adjust for valuation changes

(425)

(2,211)

(6,434)

(6,155)

(3,013)

(7,843)

Other EPRA adjustments

998

420

1

729

(1,458)

0

EPRA earnings

12,275

17,331

21,176

24,458

31,328

36,308

Adjust for fixed/guaranteed rent reviews

(4,136)

(5,127)

(6,334)

(6,354)

(7,710)

(7,710)

Adjust for development interest under forward fund agreements

261

2011

849

0

Adjust for performance fee

871

997

550

0

0

0

Adjust for debt early repayment fee

0

0

0

0

400

0

Group adjusted earnings

9,010

13,201

15,653

20,115

24,866

28,598

IFRS EPS (p)

6.81

7.58

9.77

8.10

8.13

9.65

Adjusted EPS (p)

5.25

5.23

5.54

5.45

5.65

6.25

EPRA EPS (p)

7.15

6.87

7.50

6.63

7.11

7.94

Dividend per share (declared) (p)

6.18

6.28

6.45

6.58

6.68

6.68

Dividend cover

1.08

0.83

0.82

0.82

0.81

0.94

BALANCE SHEET

Investment properties

200,720

266,219

362,918

469,596

572,995

586,992

Other non-current assets

3,742

3,988

27,139

37,573

45,504

53,509

Non-current assets

204,462

270,207

390,057

507,169

618,498

640,501

Cash and equivalents

65,107

10,410

41,400

26,946

31,783

25,111

Other current assets

13,222

25,629

3,365

4,264

9,957

9,957

Current assets

78,329

36,039

44,765

31,210

41,740

35,068

Bank loan

(20,449)

(39,331)

(64,182)

(106,420)

(140,684)

(141,484)

Other non-current liabilities

(4,058)

(3,997)

(4,673)

(7,068)

(7,940)

(8,316)

Non-current liabilities

(24,507)

(43,328)

(68,855)

(113,488)

(148,624)

(149,800)

Trade and other payables

(5,002)

(5,981)

(7,360)

(11,802)

(13,788)

(14,352)

Current Liabilities

(5,002)

(5,981)

(7,360)

(11,802)

(13,788)

(14,352)

Net assets

253,282

256,937

358,607

413,089

497,826

511,417

Adjust for derivative financial liability

316

9

115

707

290

290

EPRA net assets

253,598

256,946

358,722

413,796

498,116

511,707

Period end shares (m)

252.2

252.2

339.2

385.1

457.5

457.5

IFRS NAV per ordinary share (p)

100.4

101.9

105.7

107.3

108.8

111.8

EPRA NAV per share (p)

100.6

101.9

105.7

107.5

108.9

111.9

CASH FLOW

Cash flow from operations

8,906

4,394

23,627

20,476

31,199

33,483

Net interest paid

(681)

(615)

(1,366)

(2,313)

(3,130)

(3,440)

Tax paid

(164)

(543)

(122)

1

(73)

0

Net cash flow from operating activities

8,061

3,236

22,139

18,164

27,997

30,043

Purchase of investment properties

(61,924)

(63,250)

(89,981)

(99,615)

(120,104)

(6,154)

Disposal of investment properties

0

0

0

0

14,402

0

Net cash flow from investing activities

(61,924)

(63,250)

(89,981)

(99,615)

(105,702)

(6,154)

Issue of ordinary share capital (net of expenses)

97,501

0

91,729

48,925

78,176

0

(Repayment)/drawdown of loans

(12,808)

20,906

26,000

42,000

34,000

0

Dividends paid

(9,681)

(15,589)

(17,353)

(23,628)

(29,117)

(30,560)

Other

14,799

0

(1,544)

(300)

(117)

0

Net cash flow from financing activities

89,811

5,317

98,832

66,997

82,942

(30,560)

Net change in cash and equivalents

35,948

(54,697)

30,990

(14,454)

5,237

(6,671)

Opening cash and equivalents

29,159

65,107

10,410

41,400

26,946

32,183

Closing cash and equivalents

65,107

10,410

41,400

26,946

32,183

25,511

Balance sheet debt

(20,449)

(39,331)

(64,182)

(106,420)

(140,684)

(141,484)

Unamortised loan arrangement costs

(551)

(669)

(1,818)

(1,580)

(1,316)

(516)

Net cash/(debt)

44,107

(29,590)

(24,600)

(81,054)

(109,817)

(116,489)

Gross LTV

10.5%

14.2%

17.1%

21.6%

23.2%

22.4%

Net LTV

0.0%

10.5%

6.4%

16.2%

18.0%

18.4%

Source: Target Healthcare REIT historical data, Edison Investment Research forecasts. Note: *Not updated for unaudited Q420 data.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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United Kingdom

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United States of America

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NSW 2000, Australia

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This report has been commissioned by Target Healthcare REIT and prepared and issued by Edison, in consideration of a fee payable by Target Healthcare REIT. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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