September 10, 2018 Property

Latest Acquisitions for Target Healthcare REIT

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Target Healthcare, a UK listed specialist investor in modern, purpose-built care homes, announces that it has completed the acquisition of a development site in Wetherby, West Yorkshire and exchanged contracts to acquire a pre-let care home in Newtown, the largest town in Powys in mid-Wales. The total value of the two transactions is £17.1 million (including costs):
· The Group has acquired a development site and entered into a forward funding agreement in Wetherby, West Yorkshire. Having received planning consent, the development will be funded under a capped development contract to create a 66-bed, residential care home. The property will be completed to a high standard, with the inclusion of full en-suite wetroom facilities, large public spaces and a high-quality fit-out. The investment is underpinned by the strong wealth characteristics and positive underlying demographics of the local area.
The development, which is due to complete in early 2019, will be undertaken by specialist elderly care home contractor, LNT Construction Limited (“LNT Construction”). Upon the home reaching practical completion, the property will be let on a full repairing and insuring basis to LNT Construction’s sister company, Ideal Carehomes Limited (“Ideal”). Ideal represents the Group’s largest tenant by income and this property will represent the eleventh collaboration between the two parties.
The 35-year occupational lease will include annual, upwards-only RPI-linked increases, subject to a cap and collar. The yield is slightly lower than the Group’s overall average for the portfolio, reflecting in part the tenant’s presence in the sector and underlying financial covenant.
· The Group has also exchanged contracts to acquire a pre-let, purpose-built care home in Newtown, Powys. The acquisition is expected to complete in the second half of 2019 once the development has been completed and the home has been fitted-out to the Group’s specifications.

The home, which marks the Group’s first transaction in Wales, will be constructed to a very high standard and will offer 73 bedrooms over three floors all with en-suite wetrooms. All floors will have large lounge / dining areas and quiet rooms, and residents will have easy access to secure, outdoor space owing to the provision of a large, landscaped garden at ground floor level and resident balconies on both the first and second floors.

On completion, the property will be leased to a new tenant, Caresolve Operations Limited (“Caresolve”), for 35 years on a full repairing and insuring lease. The Caresolve management team has extensive experience of the care sector and a proven track record of providing support, advisory and management services to a broad range of operators within the sector. The rent payable is subject to annual, upwards-only, RPI-linked uplifts, incorporating a cap and collar. The net initial yield on the transaction is consistent with the Group’s current portfolio average.
John Flannelly, Head of Investment at Target Fund Managers, commented on the acquisition:
“We are very pleased to announce completion of these two transactions, enabling us to add additional high-quality, purpose-built homes to the portfolio. The Ideal transaction sees the Group further extend its relationship with this long-standing tenant, whilst the Caresolve transaction welcomes an additional operator into the portfolio. This transaction will mark our first investment in Wales and is in an area where there are currently no modern, purpose-built care homes with en-suite wetroom provision, once again demonstrating the Group’s ongoing commitment to improving the standard of elderly care homes in both the self-funded and local authority markets.
“We continue to progress other opportunities within our strong pipeline of potential acquisitions and expect to make more announcements in the near future.”

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