Target Healthcare REIT plc Annual Report and Financial Statements 2024
Target Healthcare REIT plc
Annual Report and Financial Statements 2024
Investing
in care.
Delivering
returns.
5.05
6.00
6.13
2022
2023
2024
112.3
104.5
110.7
2022
2023
2024
Adjusted EPRA earnings
per share (pence)
2
6.13 +2.2%
ABOUT US
Responsible
investment
with a clear
purpose –
improving
the UK’s
care home
real estate.
Key financial metrics for the
year to, or as at, 30 June 2024
EPRA NTA per share (pence)
110.7 +5.9%
1Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
8.1
-1.2
11.8
2022
2023
2024
6.760
6.180
5.712
2022
2023
2024
72
97
107
2022
2023
2024
49.1
-6.6
73.0
2022
2023
2024
Accounting total return (per cent)
1
11.8%
Portfolio value (£ million)
908.5 +4.6%
Adjusted EPRA cost ratio (per cent)
4
19.1% +40 bps
Dividend cover (per cent)
2
107%
Net loan-to-value (per cent)
5
22.5%
Dividend per share (pence)
5.712 -7.6%
Average cost of debt
3
(per cent)
3.91 +21 bps
Strategic Report IFC-25
About Us IFC
Chair’s Statement 4
Our Market 6
Business Model 8
Our Strategy 10
Investment Manager’s Report 20
Principal and Emerging Risks
and Risk Management 22
Section 172 Statement 24
Corporate Governance 26-56
Board of Directors 26
Investment Manager 28
Directors’ Report 30
Statement of Directors’ Responsibilities 37
Corporate Governance Statement 38
Report of the Audit Committee 43
Directors’ Remuneration Report 48
Independent Auditor’s Report 51
Financial Statements 57-88
Consolidated Statement of
Comprehensive Income 57
Consolidated Statement of Financial Position 58
Consolidated Statement of Changes in Equity 59
Consolidated Statement of Cash Flows 60
Notes to the Consolidated
Financial Statements 61
Company Statement of Financial Position 79
Company Statement of Changes in Equity 80
Notes to the Company
Financial Statements 81
Additional Information 89-102
Notice of Annual General Meeting 89
Shareholder Information 92
Alternative Performance Measures 95
EPRA Performance Measures 96
Data Centre 98
Glossary of Terms and Definitions 99
Corporate Information 102
911.6
868.7
908.5
2022
2023
2024
3.31
3.70
3.91
2022
2023
2024
27.1
18.7
19.1
2022
2023
2024
22.0
24.7
22.5
2022
2023
2024
1 Based on EPRA NTA movement and dividends paid, see alternative performance measures on page 95.
2 Based on adjusted EPRA earnings, see note 8 to the consolidated financial statements and alternative
performance measures on page 95.
3 Weighted average cost of drawn debt, inclusive of amortisation of arrangement costs.
4 See EPRA performance measures on page 97.
5 See Glossary of terms and definitions on pages 99 to 101.
In this report...
IFRS profit (£ million)
73.0
This document is important and requires your immediate attention.
If you are in any doubt about the action you should take, you are recommended to seek your own independent financial advice from your stockbroker, bank
manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United
Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in Target Healthcare
REIT plc, please forward this document, together with the accompanying documents immediately to the purchaser or transferee, or to the stockbroker, bank or
agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.
2 Target Healthcare REIT plc
60%
50%
40%
20%
30%
10%
0%
2014 2015 2016 2017 2018 2019 2020 2021 2 022 2023
ABOUT US CONTINUED
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.
1 The Index is published annually and covers calendar years. There were 37 constituents in the Index for the year to 31 December 2023 and 10 for the 10-years to the same date.
Like-for-like rental growth
3.8%
Five-year average 2.8%
Rank of portfolio total return performance in MSCI UK
Annual Healthcare Property Index
#1/37
Year to 31 December 2023 (latest annual index)
Inflation-linked rental growth
• Our leases have annual, upwards-only rent reviews, linked
to inflation with collars and caps averaging around 1.5%
and 4.0%.
• We aim to pass the associated earnings growth on by way
of a progressive dividend.
Secure rental income
Our portfolio continued to demonstrate its durable
characteristics during the year:
• Nil vacancy
• Rent covers, profitability at home level, at record levels (1.9x)
• Private pay bias supporting resident average weekly fee
increases of 10%
• Near-full rent collection at 99%
These metrics strongly support long-term and growing
sustainable financial returns.
MSCI INDEX
MSCI UK Annual Healthcare Property Index Total Return THRL Property Portfolio Total Return (ungeared standing assets)
THRL Cumulative Compounded Outperformance
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 IPO in 2013, was the top performer in 2023, and is ranked second over the
10-year period to 31 December 2023.
1901
1951
1971
1991
2002
2004
2006
2008
2010
2012
2016
2020
2024
2028
2032
2036
2040
2044
2048
2052
2056
2014
2018
2022
2026
2030
2034
2038
2042
2046
2050
2054
2058
2060
0
5
10
15
20
25
Today
65-74 75-84 85+
2050
c.2x over 85s
Number of people (m)
3Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
C
(69-80)
B
(81-91)
A
(92-100)
F
(21-38)
G
(1-20)
E
(39-54)
D
(55-68)
*
1
nil
nil
nil
nil
88
11
Our approach
to responsible investment.
Our care homes are modern, purpose-built and are future-proofed for social
and environmental trends, supporting demand and financial performance.
2 This is not a profit forecast. Assumes rental growth is passed on via dividend growth, and investment yields remain constant or tighten.
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 1.8m to 3.6m by 2050 (Source: LaingBuisson, Care homes for older
people, 34th edition)
• 1 in 8 people aged over 85 will require residential care (Source: LaingBuisson, Care homes for older people, 34th edition)
T R E N D 3 :
Future-proofed modern real estate in
what is an overall poor-quality market
80% of UK care home real estate is either converted or, if
purpose-built, over 24 years old. Our portfolio is 100% purpose-
built with 84% of homes less than 14 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 11. The sector is moving at pace to these
higher real estate standards, with 33% of rooms now compliant
relative to 14% in 2014. Poorer quality homes will become obsolete.
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
has reached practical completion and is scheduled to open
in the Autumn
• More details on our Net Zero Pathway (NZP) are shown on
pages 17 to 19
Commercial real estate owners with older/converted properties
face a significant financial and operating burden by way of
remedial capital expenditure.
* Anticipated minimum legislative requirement
T R E N D 4 :
Long-term investment with
compounding returns profile
• Consistent shareholder total returns through dividend and
capital appreciation², 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 26 years
PORTFOLIO EPC RATINGS
4 Target Healthcare REIT plc Target Healthcare REIT plc
Investing
in care.
Delivering
returns.
CHAIR’S STATEMENT
Dear Shareholder,
I am pleased to report that Target
Healthcare REIT has provided
another year of solid portfolio and
financial performance. Accounting
total return was 11.8%, reflecting the
continued resilience of our business
model and informed investment
approach. Our predictable and
robust rental stream provides annual
growth with its inflation-linkage,
and the valuations of our prime,
modern care home assets remain
stable given institutional investment
demand. Along with long-term
returns for shareholders, we firmly
believe our approach benefits our
wider stakeholder group, most
particularly our tenants and their
residents, and this will remain critical
to our approach.
1. Reflections
Listed property companies continue to largely
trade at a discount to EPRA NTA as investors’
capital allocations are directed elsewhere.
However, a more positive outlook for property
markets is perhaps being noticed as the trend
to lower inflation and interest rates solidifies.
In contrast to the share price discount,
property portfolios invested in modern assets
with strong environmental credentials and
solid underlying user demand fundamentals
have performed well. The main questions
being posed by participants in the listed
market to those running property companies
right now are:
Earnings – where is growth
coming from?
Our leases have contractual annual uplifts
linked to inflation and our operators’ improving
rent cover is evidence of their ability to pay
these growing rents on a sustainable basis.
This helps underpin our confidence in the
outlook for the Group’s earnings growth,
which should feed through to progressive
growth in dividends as we control operating
and finance costs.
Valuations – are they reliable?
The prevailing mismatch between market
evidence of direct investment in our
sector and stock market valuations has
attracted comment. Whilst we can’t answer
for all property, we have clear evidence
that transactions in prime care home real
estate such as ours are supportive of our
valuations. We have transacted on
£71 million of asset disposals since late 2022,
all at or above book value and with positive
return metrics. Our disposal of four assets in
June 2024 was at an implied net initial yield
of 5.6% and comprised some of our older
and less spacious properties. Reliability of
5Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
our valuations is further supported by their
lack of volatility. During the macro-driven
sector-wide yield shift seen in late 2022
the initial reaction was an outward yield
shift of 40-50bps in our assets which then
stabilised relatively quickly at only 30-40 bps
as evidence from transactional activity and
the strong underlying trading performance
across our portfolio provided reliable data
points for valuers. We have seen valuation
growth for six consecutive quarters since.
Debt – is it serviceable at higher rates?
Our debt levels are amongst the lowest in
the REIT universe at 22.5% net LTV and a net
debt to EBITDA ratio of 4.6x. We have greater
than 60% of our drawn debt on long-term,
low fixed rate facilities with remaining terms
of 8-13 years and we have executed value-
adding hedging strategies on our shorter-
term bank debt. Our ability to generate
capital from asset disposals has allowed us
to finance our development commitments
efficiently and manage debt levels.
Our forecasting has long anticipated higher
interest rate levels on the refinancing of
our shorter-term bank debt as our existing
hedged facilities mature, with this having
been reflected in all our material decision-
making. We have obtained terms to refinance
our shorter-term bank facilities (£170 million)
which we are currently assessing. The
structure of these revised facilities will be
aligned with our current capital requirements
and will provide the flexibility we need
to respond proactively to investment
opportunities as they are identified.
Assets and long-term fundamentals
– are they suitable for the changed
investment environment?
In short, we remain confident that our assets
and investment approach have the necessary
characteristics to support sustainable long-
term returns. Our portfolio is comprised of
high-quality care home real estate, which
is highly desired by operators for its well-
designed modern properties from which
they can provide profitable care, and by
institutional investors for its growing rental
income and low volatility of returns.
Our approach benefits from, but does
not rely upon, the widely understood
demographic changes from an ageing
population. We believe the future of care
home provision is in modern real estate
with en suite wet-rooms for all residents and
adequate social and outdoor space, of which
there is a chronic under-supply. Investing
capital in such property now may well be
lower-yielding given the high cost of land
and construction, however, the longevity
of our hold period and the compounding
effect of rents growing annually will provide
attractive returns. We further believe that
our approach helps mitigate the risk from
any issues that might arise with the public
funding of care. There are clear trends to
suggest that residents and their families
choose to live in a higher quality physical
environment where available, with significant
net wealth in those aged over 65 to support
this demand and the private fee bias of our
model. Our environmental credentials are
market leading within commercial real estate,
at 99% A & B EPC ratings, and will not require
the significant remedial capital expenditure
that many other portfolios will.
Further detail on the care home sector is
included in the Investment Manager’s Report
on pages 20 to 21.
2. Performance
Our accounting total return performance
was 11.8% for the year, driven by an EPRA
NTA increase of 5.9% (110.7 pence from
104.5 pence) and dividends paid in the year.
Adjusted EPRA earnings per share increased
by 2.2% to 6.13 pence translating to 107%
dividend cover for the year. Under the
widely-used EPRA earnings metric the
dividend was 133% covered. The quarterly
dividend paid in respect of the year was
2.0% higher than that at June 2023, as we
returned to a progressive dividend, though
the total dividend per share for the year
shows a reduction of 7.6% as the higher rate
for the first two quarters of the prior year are
still reflected in the annual change.
Our earnings outlook is robust, with rent
collection near full and supported by record
levels of rent cover for the portfolio. The
Investment Manager’s Report covers the
portfolio in more detail on pages 20 to 21.
We have minimised the impact of the higher
interest rate environment on our finance
costs through our existing long-term fixed
rate facilities, our hedging programme and
by using the proceeds from asset disposals
to reduce drawn debt.
The positive portfolio valuation movement
has been driven by market movements, our
disposals programme, and then the impact
of rental uplifts providing an overall increase
of 4.6% and a like-for-like increase of 3.7%.
Contracted rent has increased by 4.0% to £58.8
million, including 3.8% on a like-for-like basis.
3. ESG considerations
Target has a strong commitment to being a
responsible business, and our business model
is one which prioritises a positive social impact.
Through the year, we have been focussed on
finalising plans for our portfolio’s transition to
net zero carbon through our Net Zero Pathway
(NZP) plan.
Our starting point, measured by the carbon
intensity of our portfolio as calculated by
external experts, shows us to be in a very
strong position, one which is currently ahead
of where we need to be in order to meet
science-based target levels to restrict global
temperature increases to 1.5°C. We are
therefore in an excellent position relative to
other property companies. There is more detail
in our sustainability reporting and on page 17.
EPRA NTA per share movement
+5.9%
Dividend cover
107%
4. Annual General Meeting (‘AGM’)
The AGM will be held in London on
9 December 2024. 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.
5. Looking ahead
Our investment thesis is a simple one: we
invest in high-quality care home assets. This
approach has produced strong long-term
returns with low volatility of performance
as well as achieving our social purpose to
improve the standard of care homes real
estate. We encourage regular shareholder
engagement, which has been positive and
supportive of our patient and disciplined
strategy to grow the portfolio and further
our social purpose. We are open to, and
regularly assess, alternative approaches
and opportunities that fall outside our core
strategy and continue to consider where best
to invest shareholder capital. We remain firmly
committed to our investment approach and
therefore set the following priorities:
• Manage our portfolio to ensure its
performance is consistent with its
inherent quality and trading advantages;
• Be opportunistic and nimble with respect
to market conditions and all potential
uses of capital, supported by a stable yet
flexible funding platform; and
• Provide a growing dividend
complemented by attractive total returns
over the long-term.
In the absence of unforeseen circumstances,
the Board intends to increase the quarterly
dividend in respect of the year ending June
2025 by 3.0% to 1.471 pence per share,
providing an annual total dividend of 5.884
pence. This increase represents a modest
premium to RPI of 2.9% for the year ended
30 June 2024. The quality of our rental
stream and its guaranteed growth allow
us to grow our dividends to shareholders
with confidence.
Our portfolio consists of premium quality
assets in a defensive investment class with
compelling demand tailwinds, representing
a great foundation for our future.
Alison Fyfe
Chair
16 September 2024
6 Target Healthcare REIT plc
OUR MARKET
Principled
investment
exclusively in
well-designed,
purpose-built
care homes.
HIGH QUALITY
REAL ESTATE
94
homes
Portfolio
£909m
market value
£59m
contracted rent
DIVERSIFIED
INCOME
34
tenants
Fee sources
1
74%
private
26%
public
LONG-TERM
FOCUS
26.4 years
WAULT
Upwards only rent reviews
2
99%
inflation-linked
1%
fixed/other
Portfolio at 30 June 2024
1 52% privately paid, 22% topped up privately paid and 26% publicly funded.
2 99% of assets in the portfolio are subject to annual uplifts linked to inflation. The remaining home has a fixed annual uplift.
3 A further 126 beds will be added to the portfolio on completion of the two development sites held at 30 June 2024.
Scale
6,331
Beds
3
Track record
7.4% since launch
Accounting total return
(annualised)
Prudent
22.5%
Net loan-to-value
Business
7Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
2
1
18
22
7
13
5
5
13
8
84%
Purpose-built 2010 onward
16%
6%
6%
5%
5%
5%
4%
4%
4%
8%
37%
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.
MSCI Region
Contracted
Rent (£m)
Market Value
(£m)
Yorkshire & The Humber 11.5 176.2
South East
11.2 185.1
North West
10.3 155.9
East Midlands
7.2 105.9
South West
4.8 70.1
Scotland
4.4 66.1
West Midlands
4.1 69.8
Eastern
3.6 52.8
North East
1.2 18.4
Wales
0.5 8.2
Total 58.8 908.5
= Number of properties in region
1
Our portfolio
Group
The first ten blocks represent our ten largest
operators, with the eleventh representing the
remaining 24 operators, each below 3.3%.
Year Vacancy Rate
2022 nil
2023 nil
2024 nil
Operator diversification by contracted rent
VACANCY LEVELS
Properties by date of construction Diversification
84%
13%
3%
Purpose-built 2010 onwards
Purpose-built 2000 – 2009
Purpose-built 1990 – 1999
8 Target Healthcare REIT plc
BUSINESS MODEL
Simple approach:
Best-in-class real estate
managed by a dedicated team.
We are a responsible investor in ESG-compliant, purpose-built care home
real estate which is commensurate with modern living and care standards.
Why we do it Strategic pillars How we do it 2024 highlights
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.
1. Build high-quality portfolio
Acquire high quality real estate via a mix of
new developments, recently completed builds,
and modern assets at mature trading.
• Clearly defined “house standard” on
acceptable investment quality
• Specialist Investment Manager whose senior
team has spent 15 continuous years together in
the sector establishing a strong reputation and
enviable track record
Ensuring portfolio quality, with £43m completed developments
replacing £44m disposals
New build homes supported
5
Contractual rent
£58.8m
Disposals (net of costs)
£44.3m
Like-for-like valuation growth
3.7%
2. Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships
and our influence within a complex sector.
• Prominent and respected sector presence,
tenant selection based on shared values
• Frequent and regular monitoring and contact
with tenants:
– Home visits performed intelligently and
sensitively
– Monthly financial data collected and analysed
• Sharing of knowledge, insight, and best
practice with tenants supports their business
Strong rent collection supported by record portfolio rent cover
Portfolio occupancy
100%
Rent collection
99%
Mature portfolio rent cover
1.9x
Tenant experience positive
10/10
3. Deliver returns
Convert portfolio income and capital returns
into sustainable returns to shareholders through
disciplined financial and risk management.
• Annual rental growth from long-term
inflation-linked leases
• Stable cost base
• Conservative approach to debt with LTV at
22.5% and substantially fixed or hedged
interest costs
Earnings growth; NTA growth; dividend covered 107% by earnings
Adjusted EPRA EPS
6.13pence
NAV total return
11.8%
Like-for-like rental growth
3.8%
Adjusted EPRA cost ratio
19.1%
4. Social purpose
To adhere to our responsible investment
fundamentals, delivering positive social impact
allied with a firm commitment to environmental
sustainability and good governance.
• 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
Upgraded 59 beds to private wet-rooms; near-full coverage of
energy usage data obtained, reliably informing Net Zero Pathway
Purpose built homes
100%
Wet-rooms
99%
A and B EPC ratings
99%
Energy usage data collection
94%
9Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Our key strengths
The key strengths of our approach are:
1. Our premium quality real estate is attractive to both operators and investors, in that:
a. it is future-proofed against 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.
Why we do it Strategic pillars How we do it 2024 highlights
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.
1. Build high-quality portfolio
Acquire high quality real estate via a mix of
new developments, recently completed builds,
and modern assets at mature trading.
• Clearly defined “house standard” on
acceptable investment quality
• Specialist Investment Manager whose senior
team has spent 15 continuous years together in
the sector establishing a strong reputation and
enviable track record
Ensuring portfolio quality, with £43m completed developments
replacing £44m disposals
New build homes supported
5
Contractual rent
£58.8m
Disposals (net of costs)
£44.3m
Like-for-like valuation growth
3.7%
2. Trusted landlord
Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships
and our influence within a complex sector.
• Prominent and respected sector presence,
tenant selection based on shared values
• Frequent and regular monitoring and contact
with tenants:
– Home visits performed intelligently and
sensitively
– Monthly financial data collected and analysed
• Sharing of knowledge, insight, and best
practice with tenants supports their business
Strong rent collection supported by record portfolio rent cover
Portfolio occupancy
100%
Rent collection
99%
Mature portfolio rent cover
1.9x
Tenant experience positive
10/10
3. Deliver returns
Convert portfolio income and capital returns
into sustainable returns to shareholders through
disciplined financial and risk management.
• Annual rental growth from long-term
inflation-linked leases
• Stable cost base
• Conservative approach to debt with LTV at
22.5% and substantially fixed or hedged
interest costs
Earnings growth; NTA growth; dividend covered 107% by earnings
Adjusted EPRA EPS
6.13pence
NAV total return
11.8%
Like-for-like rental growth
3.8%
Adjusted EPRA cost ratio
19.1%
4. Social purpose
To adhere to our responsible investment
fundamentals, delivering positive social impact
allied with a firm commitment to environmental
sustainability and good governance.
• 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
Upgraded 59 beds to private wet-rooms; near-full coverage of
energy usage data obtained, reliably informing Net Zero Pathway
Purpose built homes
100%
Wet-rooms
99%
A and B EPC ratings
99%
Energy usage data collection
94%
10 Target Healthcare REIT plc
These initiatives further enhance the
portfolio’s modernity and longevity.
The positive impact can be seen
through the progression in key portfolio
metrics relative to the start of the year:
PORTFOLIO MODERNITY
2024 2023
Purpose-built
2010 onwards 84% 80%
WAULT (years) 26.4 26.5
EPC A&B 99% 94%
OUR STRATEGY
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.
Better care home real estate
is critical to our purpose:
to improve the standard
of living for older people
in the UK.
STRATEGIC PILLAR #1
BUILD HIGH–QUALITY PORTFOLIO
Focus on enhancing modernity
and quality metrics
Consistent with the prior year, the
negative spread between our marginal cost
of capital and available investment yields
have seen us pause new investment and
focus on enhancing the existing portfolio.
We have continued to dispose of assets
where their returns outlook is less
favourable and/or where they sit at the
lower end of our quality rankings. Disposal
proceeds have been applied to fund the
committed development of new-build
assets rather than drawing debt with an
expensive marginal cost.
Disposals of four assets this year follow last
year’s five disposals. All have been made at
or above carrying value, and at attractive
return metrics. We have been active on five
development sites during the year, with three
homes reaching practical completion, adding
203 beds and £2.5m of contractual rent to
the portfolio, including our first operationally
carbon zero home. We remain active on
two sites at year-end, which will add a
further 126 beds and £1.5m of contractual
rent at practical completion, expected in
Autumn 2024.
11Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
£50m
(£42m)
£1m
£31m
£869m
£909m
30 June 2023 Market yield shiftDisposals Rent reviews 30 June 2024Acquisitions and
developments
£750m
£800m
£850m
£900m
£950m
41%
97%
Listed Peers average
Company
29%
99%
Listed Peers average
Company
40m
2
48m
2
Listed Peers average
Company
£183
£195
Listed Peers average
Company
6.5%
6.2%
Listed Peers average
Company
£2.6k
£3.0k
Listed Peers average
Company
VALUATION ANALYSIS (£ MILLIONS)
Increase Decrease Total
Stable valuations growing with
rental income
The portfolio value increased by 4.6%
during the year, driven by an increase of
£50.3 million from capital expenditure
under the Group’s development and asset
improvement programmes, offset by
disposals of £42.4 million. On a like-for-like
basis, the valuation increased by 3.7%
largely reflecting the positive impact of
the Group’s rental growth on valuations
as well as yield stability.
Valuation certificates are received quarterly
by the Group from CBRE (from March 2024,
previously Colliers) 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 portfolio level on page 2.
PREMIUM, PURPOSE-BUILT PORTFOLIO
We are significantly ahead of listed peers
1
across a range of key quality metrics
Purpose built since 2000
Average rent per m
2
Space per resident
% En suite wet-rooms
Average value per m
2
Portfolio Topped-up NIY
Best-in-class care home real estate
Our investment thesis remains that
modern, purpose-built care homes will
outperform poorer real estate assets and
provide compelling returns.
Wet-rooms (99%): These are essential for
private and dignified personal hygiene, with
a clear trend to this being the minimum
expected standard for care home beds.
Carbon reduction (99% EPC A or B;
100% C or better): Energy efficiency of
real estate is critical, with legislative change
and public opinion demanding higher
standards. Our portfolio is compliant with
anticipated incoming legislation.
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.
Financials: Our metrics reflecting capital
values and rental levels compare
favourably with peers, despite significantly
better real estate, demonstrating
sustainability and longevity.
1 Listed Peers Average is comprised of publicly available information available or disclosed by Impact
Healthcare REIT and Aedifica (in relation to their UK portfolio).
Diversification
We continue to ensure the portfolio remains
diversified, by leasing our homes to a range
of high-quality regional operators. The
Group has 34 tenants, up from 32 due to the
completed developments and a re-tenanting,
and offset by the disposals in the year. The
largest tenant remains unchanged with Ideal
Carehomes (“Ideal”) operating 18 of the
Group’s homes and accounting for 16% of
contracted rent as at 30 June 2024. Ideal’s
care provision is performed exclusively from
modern, purpose-built homes, often brand-
new builds, and is one we have supported
for a number of years. During the year Ideal
was acquired by the UK’s largest care home
operator, HC-One. Overall, our top five
tenants account for 41% and top ten, 63%
of our contracted rents.
Underlying resident fees are balanced
between private and public sources, with
a deliberate bias towards private. There is
long-term evidence and strong current
anecdotal evidence that these residents are
more accepting of higher fees, particularly
for the quality real estate and care services
our properties and their operators provide.
Census data from our tenants show that
74% of residents are privately-funded,
with 52% being fully private and 22% from
“top up” payments where residents pay
over and above that which the Local
Authority funds for them. 26% of residents
are wholly publicly funded.
Geographically, following the disposals in
the year, the South East is now the Group’s
largest region by asset value, at 20%, with
Yorkshire and the Humber accounting
for 19%.
12 Target Healthcare REIT plc
SPOT RESIDENT OCCUPANCY RATES
MATURE HOMES: RENT COVER
65%
70%
75%
80%
90%
85%
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
Q2
2024
1.0x
1.2x
1.4x
1.6x
2.0x
1.8x
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
Q2
2024
Rent cover: spot Rent cover: rolling last 12 months
Total occupancy Mature homes occupancy
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 87%, consistent with the 86% 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. Staffing shortages have
eased, having been an operational challenge
limiting occupancy growth in previous years.
Rent covers have responded to this
approach. Having improved to a quarterly
1.9x for mature homes at the start of the
year, they have remained at these levels,
with the last 12 months returning cover
of 1.9x. These profitability levels support
rental payments and financial resilience,
and incentivise care providers to invest in
their businesses and people.
Clearly, should operators increase resident
occupancy levels towards 90% there
is potential for further growth in their
underlying profitability.
Rent collection was near-full at 99%
(2023: 97%) for the year, with no exclusions
for non-performing or turnaround homes.
OUR STRATEGY CONTINUED
STRATEGIC PILLAR #2
TRUSTED LANDLORD
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 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.
13Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
MOVEMENT IN CONTRACTED RENT (£ MILLIONS)
£2.1m
£2.8m
(£2.7m)
£56.6m
£58.8m
30 June 2023 DisposalsAcquisitions and
developments
30 June 2024Rent reviews
£54.0m
£56.0m
£58.0m
£60.0m
£62.0m
Increase Decrease Total
Growing and compounding
rental income
The portfolio’s contractual rent roll was
£58.8 million at year-end (2023: £56.6
million). The 4.0% increase was driven
by positive contribution from capex and
our developments offset by our disposals
programme. Like-for-like rental growth,
which reflects the Group’s annual rent
reviews, is the Key Performance Indicator
used by management in assessing recurring
rental growth, with this being 3.8% for
the year.
Rent from the Group’s leases increase annually,
linked to inflation. Collars on this (typically
1.5%) ensure the Group receives guaranteed
growth, while caps (at a typical 4%) ensure
assets do not become over-rented, risking
rents becoming unaffordable, in periods of
higher inflation as we have seen recently.
This is an important aspect in providing
long-term security to our tenants, and in
achieving sustainable investment returns.
OUR TENANTS
Agreed that working with Target
was a positive experience
10/10
Previous survey (2022): 9/10
Agreed that Target provides real estate
that is a great working environment and
helps deliver dignified care to residents
9/10
Previous survey (2022): 9/10
Agreed that Target participates in sector
events and appropriately shares knowledge
10/10
Previous survey (2022): 10/10
OUR RESIDENTS
Our resident portfolio’s current
average rating is
9.4/10
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.
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.
Tenant and resident satisfaction
We remain committed to our role as an
effective, supportive and engaged landlord.
We once again 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.
14 Target Healthcare REIT plc
Earnings
Earnings increased by 2.2%, as measured
by adjusted EPRA EPS; the Group’s primary
performance measure. Rental income has
increased by 4.0%, with reduced income
from prior year disposals countered by
inflation-linked rental growth and new leases
entered as the Group’s development assets
reach practical completion. Provisioning/
credit loss allowance (for doubtful debts)
was significantly reduced from the prior
year as the portfolio continues to perform
well from a rent collection and rent cover
perspective, though the reported movement
has increased on a net basis given the prior
year also benefitted from the recovery of a
substantial arrears balance.
The impact of inflation on the Group’s
operating expenses was controlled, with a
1.1% increase for the year.
Net finance costs increased to £10.8 million
from £9.4 million, driven by the increase in
drawn debt through the year and the higher
interest rate environment. The Group’s
interest costs are fixed/hedged on £230
million of drawn debt until November 2025.
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 slightly
to 19.1% from 18.7% with the £698k net
increase in the credit loss allowance and bad
debts in the year having a proportionately
larger numerator effect on the expenses
than the £3.0 million growth in the gross
rental income denominator. The Ongoing
Charges Figure, which provides a measure
of recurring operating expenses was fairly
stable at 1.51% (2023: 1.53%), the marginal
decrease being driven by reductions in the
Group’s recurring cost base such as the
outcome of the valuation tender conducted
during the year.
Total Returns
Accounting total return, using EPRA NTA
movement and dividends paid, was a healthy
11.8% for the year ended June 2024 and an
annualised 7.4% since launch. Our portfolio
has returned like-for-like valuation growth for
each of the six quarters since the December
2022 macro-driven response to the higher
OUR STRATEGY CONTINUED
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 20), 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
for the same six-quarter period, has seen
EPRA NTA grow by 5.9% over the year, and
7.5% since the market nadir, and contribute
to total returns.
The consistency of Group level accounting
total 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.
2024
(£m) Movement
2023
(£m)
Rental income (excluding guaranteed uplift) 58.6 +4% 56.4
Administrative expenses (including management
fee and credit loss allowance) (11.6) +8% (10.7)
Net financing costs (10.8) +15% (9.4)
Interest from development funding 1.8 +100% 0.9
Adjusted EPRA earnings 38.0 +2% 37.2
Adjusted EPRA EPS (pence) 6.13 +2% 6.00
EPRA EPS (pence) 7.61 -1% 7.67
Adjusted EPRA cost ratio 19.1% +40 bps 18.7%
EPRA cost ratio 16.6% +80 bps 15.8%
Ongoing Charges Figure (‘OCF’) 1.51% -2 bps 1.53%
EARNINGS SUMMARY
STRATEGIC PILLAR #3
DELIVER RETURNS
Regular dividends for shareholders.
The Group has achieved earnings growth; NTA growth; and a dividend
fully covered by earnings from its disciplined financial and risk management.
15Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
5.9x
4.8x
4.6x
2022
2023
2024
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 5.2 years (30 June 2023:
6.2 years), with drawn debt of £243 million
incurring a weighted average cost, inclusive
of amortisation of loan arrangement costs,
of 3.9% (3.7% on a cash only basis with
costs excluded).
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 Facility Size Debt Type Drawn at 30 June 2024 Maturity
Phoenix Group £150m Term debt £150m (fixed rate) Jan 2037 – £63m
Jan 2032 – £87m
RBS £70m £30m Term debt
£40m Revolving credit facility
£30m (hedged)
£13m (floating rate)
Nov 2025
HSBC £100m Revolving credit facility £50m (hedged) Nov 2025
Total £320m £243m
DEBT ANALYSIS
Net LTV was 22.5%, with the Group’s
revolving credit facilities allowing flexible
drawdowns/repayments in line with
capital requirements.
Ahead of the earliest refinancing point in
November 2025, the Group has (i) obtained
refinancing terms from its existing bank
lenders and (ii) presented to a number of
lenders in the private placement markets.
Both avenues have yielded commercially
attractive refinancing terms and options,
and evidenced appetite/demand. These are
being carefully assessed with respect to the
Group’s preferred financing structure and
capital requirements.
EPRA NTA PER SHARE (PENCE)
(0.1)
0.3
5.8
5.9
(5.7)
104.5
110.7
30 June 2023 Property revaluationsDisposal Adjusted EPRA earnings Dividends paid 30 June 2024Acquisition costs
80.0
95.0
105.0
115.0
90.0
85.0
100.0
110.0
120.0
Increase Decrease Total
Net debt to EBITDA ratio
4.6x
16 Target Healthcare REIT plc
OUR STRATEGY CONTINUED
STRATEGIC PILLAR #4
SOCIAL PURPOSE
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 commitment.
Responsible
partnerships
Engage with tenants to ensure real estate is meeting their operational and staff needs,
allowing effective care for residents.
Use energy data obtained from tenants to positively influence behaviours where possible.
Be a responsible landlord to our tenants and their communities through significant
challenges, such as pandemics.
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.
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.
Partially met
Met
17Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
We’ll continue to perform diligence to
ensure we are educated and informed.
Our NZP will have meaningful and
realistic targets, and will include
stakeholder value as an objective
when considering how best to
deliver a zero-carbon portfolio.
Annual Carbon Intensity (kgCO
2
/m
2
)
70
60
50
40
30
20
10
0
2022
2023
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
ESG Commitments in focus:
Net Zero Pathway (NZP).
Quality of input data
Achieving a 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 have collaborated with our tenants and
are now collecting their energy usage data to
an extent (94% coverage) which our external
technical experts inform us compares
strongly to sector averages. This rich data
allows a reliable analysis of our starting
position and of the impacts of initiatives.
Any such output would be significantly
diminished without the quality of input
data we have.
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, required to achieve net zero in
an appropriate timeframe
• Suggested energy efficiency and carbon
reduction initiatives relevant to our properties
• Cost estimates and impact assessments
on carbon intensity
Next steps
We are carefully considering this information
with respect to:
• How likely is grid decarbonisation and
how much reliance should we place on
this versus prioritising on-site renewables?
• How effective are on-site electrification
initiatives? (the most relevant question is
the relationship between heat pumps and
existing heat distribution systems within
a property)
• What are our views on the value of
offsetting initiatives, and the future
outlook for that market?
Certainties
• Our portfolio’s modernity provides an
excellent starting point (see “Baseline –
no action” on chart to the right where
we benchmark significantly ahead of
the CRREM and SBTi current required
minimum level of intensity)
• There are a number of interventions we
can pursue to reduce carbon intensity,
which appear to be effective from a cost
perspective. We are currently focussed on
increasing our understanding of these to
rank our preferred initiatives.
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.
18 Target Healthcare REIT plc
Environmental
EPC ratings
1
99%
A-B ratings
100%
A-C ratings
Important measure of energy efficiency and
legislative rating
BREEAM In-Use certificates
12% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2023 calendar year
(2022: 46%).
Responsible investment
• Increased coverage of portfolio
with green lease provisions to
49% from 22%.
• Supported installation of photovoltaic
systems on two properties with five
more post year-end. Average carbon
savings of 20%.
• Pilot study on thermal insulation in
one property completed. Average
carbon savings of 3%.
OUR STRATEGY CONTINUED
Social
Wet-rooms
99%
Defining proxy for real estate quality and
social impact. National Comparative: 33%*
*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
• Pleasing feedback received from
tenant survey (see page 13).
Governance
& transparency
ESG committee
Met at least quarterly.
£1m
Approved budget for energy
efficiency initiatives.
GRESB
60
2022’s score of 60 was our inaugural
published submission and was in line with
our peer group. We anticipate an improved
score and peer group position when the
2023 results are released shortly.
Board diversity
40%
Board composition remains at 40% female,
in-line with the ‘Women in Leadership’
2025 target set by the FTSE Women
Leaders Review.
Responsible business
• Significant progress made in journey
to net zero carbon, with positive
benchmark position confirmed
(see page 17).
2024 activity and highlights.
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.
19Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Environmental
EPC ratings
1
99%
A-B ratings
100%
A-C ratings
Important measure of energy efficiency and
legislative rating
BREEAM In-Use certificates
12% coverage
Commitment met to ensure minimum 10%
portfolio certified on an ongoing basis.
Energy consumption data
94%
coverage obtained for 2023 calendar year
(2022: 46%).
Responsible investment
• Increased coverage of portfolio
with green lease provisions to
49% from 22%.
• Supported installation of photovoltaic
systems on two properties with five
more post year-end. Average carbon
savings of 20%.
• Pilot study on thermal insulation in
one property completed. Average
carbon savings of 3%.
Social
Wet-rooms
99%
Defining proxy for real estate quality and
social impact. National Comparative: 33%*
*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
• Pleasing feedback received from
tenant survey (see page 13).
Governance
& transparency
ESG committee
Met at least quarterly.
£1m
Approved budget for energy
efficiency initiatives.
GRESB
60
2022’s score of 60 was our inaugural
published submission and was in line with
our peer group. We anticipate an improved
score and peer group position when the
2023 results are released shortly.
Board diversity
40%
Board composition remains at 40% female,
in-line with the ‘Women in Leadership’
2025 target set by the FTSE Women
Leaders Review.
Responsible business
• Significant progress made in journey
to net zero carbon, with positive
benchmark position confirmed
(see page 17).
20 Target Healthcare REIT plc
Portfolio performance
Two key portfolio metrics are presented on
page 2 of this report which are reflective of
the investment grade characteristics of our
prime, modern UK care home portfolio.
Firstly, rental growth was 3.8% on a like-
for-like basis (2023: 3.8%) and has been
supported by a quality rental stream from
34 tenants with robust rent covers of
1.9x (2023: 1.6x). Underlying demand for
places in our homes remains high at 87%
mature home occupancy (2023: 85%) with
scope for further profitability growth as
occupancy trends further towards the 90%
long-term average.
Secondly, portfolio-level total returns
continue to impress. We are delighted to
have been the top performer in the MSCI
UK Annual Healthcare Property Index for
the calendar year 2023, coming first of
37 contributors at 9.7% total return. More
importantly, this is sustained performance
as we rank second over the 10-year period
ending 2023. Investment demand in an
active market supports valuations, with the
like-for-like valuation growth for the year of
INVESTMENT MANAGER’S REPORT
Portfolio
performance
and UK care home
investment market.
3.7% largely driven by the growth in rents
as valuation yield volatility remains low for
prime care homes.
Our portfolio metrics are strong. 90% of
homes are mature in their trading, 84%
are younger than 2010-build date, and the
WAULT remains long at over 26 years. These
characteristics and the bias towards private-
fee payments of our tenants’ revenue (74%)
all support the quality of our rental stream
and its annual and compounding long-term
growth. We continue to be able to re-tenant
assets to alternative operators where it
benefits the overall portfolio. We transitioned
a home in the North-East of Scotland to an
operator with a core focus in that region,
and consistent with previous tenant changes,
this was achieved at no change to the
prevailing, sustainable rent level and with
no Group-funded incentives required. The
portfolio metrics have also benefitted from
our disposal programme. The £44.3 million
transaction for four care homes prior to the
year-end was (i) at an implied NIY of 5.6%,
ahead of the portfolio average of 6.2%, (ii)
for four of the oldest assets in the portfolio;
and (iii) for four of the shortest remaining
lease terms. The proceeds have been used
to reduce drawn debt levels and to fund
construction of the Group’s development
assets, providing brand new, purpose-built
beds on 35-year leases to replace the older
assets subject to disposal.
Care home trading
Our typical investment appraisal is based on
a home’s ability to achieve earnings at least
1.6x the home’s rent, to provide headroom
and financial resilience. The portfolio has
achieved 1.9x rent cover this year, endorsing
our investment case on the trading potential
of prime care home real estate, particularly
given resident occupancy is not at capacity.
We continue to believe this is at least partly
due to tenants’ reluctance to fill beds ‘at any
cost’, with many being resistant to accepting
financially unviable fees from publicly-
funded sources. Profitability follows growing
revenue in a well-run business, and we
believe this trend will continue for those who
have chosen to follow a ‘quality first’ ethos
with regard to building suitability. There is
increasing evidence that post Covid the flight
to quality is accelerating with families willing
and prepared to pay for better facilities for
their loved ones.
Average weekly fees for residents have
increased by c.9%-10% as a result of the
above approach and inflationary cost
increases are largely being passed on. Staff
costs are the largest and potentially most
volatile expense item for a home and are
therefore the bellwether for the sustainability
of home profitability. Staff costs per resident
per week have increased by a similar
percentage as fees, whilst agency usage
and costs have reduced as operators
manage costs.
8.00%
7.00%
6.00%
5.00%
2.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2024
4.0 0%
3.00%
2023
Company topped-up NIY MSCI monthly index – all property NIY
COMPANY TOPPED-UP NIYS AND MSCI MONTHLY INDEX – ALL PROPERTY NIYS
21Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Investment market
Low volatility of valuation continues
The UK care home investment market
remained muted relative to the pre-2022
average. Some of the major investors paused
activity, with availability of capital and the
yield available relative to the risk-free rate
being constraining factors. Scarcity of
quality product in the market has also been
a key theme with sales activity in the main
driven by investment holders requiring
to re-balance their asset weightings and
to generate liquidity. There has been
competitive tension for prime assets, with
lower demand for sub-prime where pricing
has moved out towards net initial yields
of 10%. Care homes with strong ESG
credentials remain attractive targets for
investment activity.
On pricing, the reaction to the 2022
mini budget was an initial outward
yield movement of 40-50 bps which
then softened marginally to 30-40 bps.
This reflects what we observed in the
transactional market for deals completing,
and also in the portfolio EPRA topped-up NIY
of 6.20% compared to that of two years ago
at 30 June 2022 of 5.82%. Prime care homes
have once again proven to be less volatile
than All Property whilst still providing returns
at an attractive spread to the risk-free rate.
Health and social care update
We note below a number of areas which
are prominent in our minds and those of
our tenants:
Change of Government and the future
of social care
During the July 2024 General Election
campaign, the Conservatives chose to
promote their multi-year funding settlement
to Local Authorities as well as their
commitment to implement the previously
postponed ‘Dilnot’ cap on social care costs
from October 2025. Labour mirrored the
same care cap proposal along with the
creation of a National Care Service, and an
intention to establish a fair pay agreement
across the sector.
Subsequent to its win the new Labour
government cancelled the proposed ‘Dilnot’
cap on care costs and proposed instead
a much broader rethink of policy, likely
including a Royal Commission on the matter.
Private operators may be encouraged by
pre-election comments of Wes Streeting,
(now) Secretary of State for Health and Social
Care, who said he was ‘pragmatic’ about
the use of private health in support of the
NHS going forward. Also, it is recognised by
Government that care homes and the wider
social care sector are an essential aide to
the smooth running of the NHS. The Labour
Government has set a priority on improving
the flow through NHS hospitals – including
by allowing earlier discharges and the likely
consequence of this will be to increase
demand for care home provision.
Staffing and inflationary pressures
Recruitment has eased considerably over the
course of the year, and while concerns have
been raised recently about the fall in health
and social care worker visa applications,
many operators are reporting stable staffing,
with the use of expensive agency support
reduced back to more historical low levels
and used mainly for routine gaps in staffing,
brought about by unplanned shortages such
as sickness cover. Operators are however
watching applications with some disquiet,
as the previous Government’s decision to
restrict accompanying dependants from
applicants (while not doing the same for
NHS applicants) has created a nervousness
that future applicants may choose other
geographies over the UK and worry that
come reapplication time for existing visa
holders, unknown numbers may not choose
to stay.
The minimum wage rise, while putting
pressure on organisations who rely on lower
publicly funded fee rates, is widely supported
by the sector, who value the dedication
of those who choose the sector as much
from a vocational perspective as simply
just routine employment. Most operators
will however be watching with interest the
new Government’s intention to introduce
collective and fair pay agreements across
adult social care, which will push costs up
going forward with a resultant pressure on
fee inflation.
Demographics of those of working age
may become more of a challenge for the
sector. The 150,000 vacancy volume across
the sector has recently been reduced to
130,000, according to the organisation ’Skills
for care’, but the same organisation notes
if the workforce need grows in line with
demographic changes an extra 440,000
roles will be required by 2035. There are
currently 440,000 posts filled by people who
will reach retirement age in the next 10 years.
Regulation
English operators who have suffered
some frustration with the Care Quality
Commission (CQC), since the introduction
of the regulator’s new ‘single assessment
framework’ last autumn, feel slightly
vindicated in the Government’s ‘Dash’ report,
which highlights some serious concerns
in the methodology for inspections and
ratings. Wes Streeting, the Secretary of State
for Health and Social Care, went as far as to
say it was clear to him that the CQC was ‘not
fit for purpose’. While this is a relief to many
operators, in that they too found difficulty in
understanding what was expected of them,
it potentially causes further frustration in
the delay of inspections for homes deemed
‘Required Improvement’, where operators
are delayed in communicating a clean bill
of health to potential clientele. It is too early
to say whether the CQC will be subject to
tinkering reform, or whether more sweeping
change will take place.
Target Fund Managers Limited
16 September 2024
22 Target Healthcare REIT plc
RISK REPORT
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.
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. The gradual fall in the RPI inflation
rate since October 2022 means that, at 30 June
2024, the rate of inflation was below the level 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 and,
although net gearing is anticipated to increase as the
Group nears full investment, this reduced following the
property disposals in June 2024. Loan covenants and
liquidity levels are closely monitored for compliance
and headroom. The Group has fixed interest costs on
£230 million of its total borrowings of £243 million as
at 30 June 2024.
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.
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 broker 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, discussions with existing and
potential lenders indicate sufficient appetite to enable
a refinancing on acceptable terms of the Group’s loan
facilities due to expire in November 2025.
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
Principal and emerging risks
and risk management.
23Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
STRATEGIC OBJECTIVES RISK TREND
To grow a robust
portfolio
Risk
increased
Risk
unchanged
Risk
decreased
Dividend focus Specialist, engaged
manager
Responsible
investment
Risk
Description of risk and factors affecting
risk rating
Mitigation
Risk rating
& change
Reduced availability
of carers, nurses and
other care home
staff
The combined impacts of the pandemic and
increased employment and wage inflation in
competing sectors has reduced the availability
of key staff in the care sector which may result in
a reduction in the quality of care for underlying
residents, 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 2024, the Group held only two
remaining developments.
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, broker, 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
service providers, is subject to regular performance
appraisal by the Board. The Investment Manager has
retained 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 44. 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 32 and 33.
24 Target Healthcare REIT plc
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 26.4 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 Manager, which runs
the Group’s operations and portfolio within parameters set by the Board and subject to appropriate
oversight. The 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 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 broker and/or 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:
Dividends paid
The Board recognised the importance of
dividends to its shareholders and, after
careful analysis of the Group’s forecast net
revenue concluded that, having reduced
the quarterly dividend in January 2023, it
was in the interests of all stakeholders to
increase the Company’s dividends in relation
to the year ended 30 June 2024 to reflect
underlying rental growth whilst remaining at
a level which is expected to be fully covered
with the potential for further growth. As set
out in more detail in the Chair’s Statement,
the Board intends to increase the quarterly
dividends for 2024/25 by a further 3%.
Ongoing investment and asset
management activity
The Group acquired a new development
site in July 2023. The new, high-quality beds
brought to the market by completion of this
operationally net carbon zero home in June
2024, combined with the Group’s other
developments and its asset management
activities to increase the percentage of wet
rooms in the property portfolio to 99%,
illustrate the Group’s intent of improving the
overall level of care home real estate in the
UK. This approach targets attractive long-
term returns to shareholders by focusing on
a sustainable and ‘future proofed’ sector of
the care home market.
The overall quality of the Group’s portfolio
was also improved by the disposal of four
homes from the portfolio which were in the
lower quartile of the portfolio with respect
to age, lease length and overall building
quality. The disposal at an implied net initial
yield of 5.64%, demonstrated to the market
the institutional grade quality and demand
for both the Group’s prime care home real
estate portfolio and for the wider sector.
The Group has particularly considered the
level of carbon emissions from its property
portfolio, significantly improving the level of
data collection and significantly advancing
its determination of a plan to reach net zero
carbon in line with the science-based target
to limit warming to 1.5°C.
The Group completed the re-tenanting of
a property with the rental level remaining
unchanged and green provisions being
included in the revised lease.
Capital financing
The Board continued to minimise the
Group’s exposure to rising interest rates on its
borrowings by allocating the proceeds from
the disposal above to reduce the Group’s
more expensive unhedged debt and fund the
remaining development pipeline. The Board
has encouraged the Investment Manager to
progress the exploration of options available
to refinance the Group’s shortest dated debt
facilities which expire in November 2025.
Director appointments
With the completion in the prior year of the
Board’s succession plan for the medium
term, Dr Thompsell took on the role of
chair of the Nomination Committee, in
addition to her existing role as chair of the
Remuneration Committee, to ensure the
ongoing effectiveness of the Board and
continue the process of planning for the
longer term. In addition, subsequent to
the year-end, Mr Cotton has been
appointed as chair of the Management
Engagement Committee.
25Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 Broker 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 12 and 13, 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 Note 13 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. The Company has commenced
discussions with both existing and potential new lenders in relation to refinancing the proportion of its debt facilities
which will 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 2024 are contained on page 39.
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, broker, 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 identifying and commencing work on a straightforward hierarchy of initiatives to maximise the
Group’s impact over both the short and longer term; and progressing the formation of a longer term portfolio strategy
in relation to setting and meeting the Group’s net zero carbon target.
On behalf of the Board
Alison Fyfe
Chair
16 September 2024
26 Target Healthcare REIT plc
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 35 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 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 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 and
chairman 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 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
BOARD OF DIRECTORS
Our experienced
and knowledgeable
Board are responsible
for the effective
stewardship of
the Company.
27Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 35 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 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 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 and
chairman 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 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
28 Target Healthcare REIT plc
Experts in
strategic,
responsible
investment.
INVESTMENT MANAGER
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 in the operation of and investment in healthcare property assets.
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.
Key personnel of the Investment Manager
The key personnel who are responsible for managing the Group’s activities are set out on the following page.
29Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Kenneth MacKenzie MA CA
Kenneth MacKenzie is the founder and
Chief Executive of Target. He is a Chartered
Accountant with over 40 years of business
leadership experience with the last 18 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 BAcc FCA
John Flannelly is Head of Investment at
Target. He is a Chartered Accountant with
over 20 years’ experience, the last eighteen
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
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 MA
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.
Gordon Bland BAcc CA
Gordon Bland is Finance Director at
Target. He is a Chartered Accountant with
extensive experience of financial reporting
within the asset management industry. He
provides financial input to the strategic and
commercial activities of the senior 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. Gordon previously worked
at PricewaterhouseCoopers for almost
ten years, serving asset management and
financial services clients in the UK, Canada
and Australia.
Donald Cameron BCom CA
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 and
administration services.
30 Target Healthcare REIT plc
DIRECTORS’ REPORT
The Directors present their report, along with the financial statements of the Group and Company on pages 57 to 88, for the year ended
30 June 2024.
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 4 and 5 and the Investment
Manager’s Report on pages 20 and 21. Principal and emerging risks and uncertainties can be found on pages 22 and 23 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 5.712 pence per share, to shareholders in relation to the year ended 30 June 2024. 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 (‘PID’s’)
and Ordinary Dividends are provided on page 93.
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
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.
31Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 approximately 25 per cent of the Group’s gross
assets at the time of drawdown. However, it is expected that Group borrowings will 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 26 and 27. As explained in more detail in the Corporate
Governance Statement on page 39, 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 elected/re-elected at the AGM held on 29 November 2023 and, in line with the Company’s stated policy, will seek
annual re-election at the AGM to be held on 9 December 2024.
The Directors 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. Whilst remaining cognisant of the need for regular refreshment of
the Board membership and the ‘comply or explain’ listing rules requirement in relation to the diversity of the Board, the Board does not intend
to make any further Director appointments in the medium term.
The Board confirms that, following the evaluation process set out in the Corporate Governance Statement on pages 41 and 42, 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.
Substantial Interests in Share Capital
As at 30 June 2024, 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*
Blackrock, Inc 61,874,747 10.0**
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
Investec Wealth & Investment Limited 23,385,150 3.8
CCLA Investment Management Limited 17,918,605 2.9
Rathbone Investment Management Limited 17,462,203 2.8
* Based on 620,237,346 ordinary shares in issue as at 30 June 2024.
** The Company is not aware, nor has it been notified, of any individual corporate shareholder(s), as germane to the Group’s compliance with the REIT regulations,
which were beneficially entitled to 10% or more of the Company’s share capital or which controlled 10% or more of the voting power in the Company.
As at 16 September 2024, the Company has not received notification of any changes in the holdings of voting rights (under the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules) compared with those above.
32 Target Healthcare REIT plc
DIRECTORS’ REPORT CONTINUED
Share Issuance and Share Buy Backs
At the Annual General Meeting held on 29 November 2023, 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% of the shares in issue at the time of passing of the resolution. As at
16 September 2024, the Company has not issued any shares under this authority. The authority will expire on the earlier of the conclusion of
the forthcoming Annual General Meeting, which is expected to be held on 9 December 2024. It is expected that the Company will continue
to seek this authority on an annual basis.
At the Annual General Meeting held on 29 November 2023, 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% 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 and 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. The Group has agreements relating to its borrowing
facilities with which it has complied during the year and the Board has considered the ability of the Group to fully draw, repay, refinance or
increase these facilities on, or before, their expected maturity date. The Directors also considered the Group’s exposure to rising interest rates,
with the interest rate on 95% of the Group’s drawn debt at 30 June 2024, and 93% of its drawn debt at 16 September 2024, being fixed until the
expiry of the relevant loan facility. 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 30 September 2025, which is
a period of at least twelve months from the date of approval of the financial statements. For this reason, the Board continue 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.
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 2024, the Group had a property portfolio which has long leases and a weighted
average unexpired lease term of 26.4 years. The Group had drawn borrowings of £243.0 million on which the interest rate had been fixed,
either directly or through the use of interest rate derivatives, on £230.0 million at a maximum weighted interest rate of 3.52 per cent per
annum (excluding the amortisation of arrangement costs) and the remaining £13.0 million carries interest at SONIA plus a weighted average
margin of 2.18 per cent per annum (excluding the amortisation of arrangement costs). The Group had access to a further £77.0 million of
available debt under committed loan facilities which, if drawn, would carry interest at a variable rate equal to SONIA plus 2.21%. The Group’s
committed loan facilities have staggered expiry dates with £170.0 million being committed to 5 November 2025, £87.3 million to 12 January
2032 and £62.7 million to 12 January 2037. Discussions with existing and/or new potential lenders do not indicate any issues with re-financing
these loans on acceptable terms in due course.
The Directors’ assessment of the Group’s principal risks are highlighted on pages 22 and 23. 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 2024
33Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
(which was applied to both the Group’s current uncapped debt and to the assumed rate of refinancing of the Group’s hedged loan facilities
which expire in November 2025), a reduction in the capital value of the property portfolio of 20% and a significant default on rental receipts
from the Group’s tenants equating to an aggregate of c.12% 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 post refinancing. Under
the stressed scenario, the Group’s net LTV was forecast to reach a peak of 29% 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 29 November 2023.
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 48 to 50, provide detailed
information on the remuneration arrangements for the Directors of the Company. Included is the Directors’ Remuneration Policy, which
shareholders approved at the AGM in December 2022, and which is expected to next be put to shareholders at the AGM in 2025 or, if earlier,
when any amendments to the policy are proposed. Shareholders are requested to approve the Directors’ Annual Report on Directors’
Remuneration for the year ended 30 June 2024 (resolution 2).
As detailed in the Directors’ Annual Report on Directors’ Remuneration, the present limit on Directors’ fees is an aggregate of £250,000 per
annum. Whilst there is no intention to increase the Directors’ fees in the current year, in order to provide headroom for unexpected events,
such as the appointment of an additional Director, it is proposed that the limit on Directors’ fees is increased to an aggregate of £300,000
(resolution 3).
Dividend policy
The Company’s dividend policy is set out on page 31. 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 4). 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 51 to 56. 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 2025 (resolution 5). A separate resolution
will be proposed to authorise the Directors to determine the Auditor’s remuneration (resolution 6).
Election of Directors
As explained in more detail on page 31, 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 7 to 11 therefore propose each of
the relevant Directors for election/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 26 and 27. Having considered the
knowledge, experience and contribution of each Director putting themselves forward, the Board has no hesitation in recommending their
election/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 12 will,
if passed, authorise the Directors to allot new shares of £0.01 each up to an aggregate nominal amount representing 10% of the issued shares
at the date of the passing of resolution 12. Based on the shares in issue at 16 September 2024, 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 13, 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% of the issued ordinary share capital of the Company at the date of the passing of resolution 13.
The authorities granted under resolutions 12 and 13 will expire at the conclusion of the next AGM of the Company after the passing of the
resolutions, expected to be held in December 2025, 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 12 and 13 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.
34 Target Healthcare REIT plc
DIRECTORS’ REPORT CONTINUED
Resolutions to be Proposed at the AGM continued
Authority to Buy Back Ordinary Shares
Subject to market conditions and available capital, it is unlikely that the Directors will buy back any ordinary shares in the near term. Thereafter
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 14 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% of the Company’s ordinary shares in issue at the date of the passing
of resolution 14. 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% 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 15 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 15 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.
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 2024, the fees paid totalled £212,000
(2023: £195,000).
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 39, 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.
35Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 4 and 5 and the Investment Manager’s Report on pages 20 and 21.
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 16 to 19 and in the Corporate Governance Statement on page 42.
The Company published its annual Sustainability Report in July 2024, 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 below).
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 sBPR Silver Award following the
publication of its inaugural report, and has reflected the feedback received as well as the significant improvement in data collection on the
underlying property portfolio in its latest Sustainabilty Report for the year ended 31 December 2023, as published in July 2024.
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 22
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 60 in relation to the year ended 31 December 2022 resulting in the award of a
green star. This helped to demonstrate the Group’s tangible progress in ESG reporting and the underlying quality of the property portfolio
by comparing well to the peer group average score of 61, many of whom have been reporting under GRESB for a number of years. Further
progress is anticipated when the GRESB results for the year ended 31 December 2023 are published in October 2024.
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 significant service providers. 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.
36 Target Healthcare REIT plc
DIRECTORS’ REPORT CONTINUED
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 9 December 2024 at 4.00 p.m. The Notice of Annual General Meeting is set out on pages 89 to 91.
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
16 September 2024
37Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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
16 September 2024
38 Target Healthcare REIT plc
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
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 2024 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 seven 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 2 2
Vince Niblett 5 5 3 3 4 4 4 4 4 4 3 3 2 2
Amanda Thompsell 5 5 3 3 4 4 4 4 4 4 3 3 2 2
Richard Cotton 5 5 3 3 4 4 4 4 4 4 3 3 2 2
Michael Brodtman 5 5 3 3 4 4 4 4 4 4 3 3 2 2
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.
39Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 and concluded that:
• the Investment Manager’s investment performance remained satisfactory, considering, amongst other matters, the continued
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 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 during the course of the prior year, which were designed to identify a
diverse range of potential candidates, with a number of female candidates and at least one candidate from a minority ethnic background
being interviewed. The subsequent appointments were based on merit and objective criteria in order to ensure 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 FCA has introduced ‘comply or explain’ targets that at least 40% 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% 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 2024.
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 – – –
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 – – –
40 Target Healthcare REIT plc
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. However, given the relatively recent completion of the
refreshment of the Board and having regards to the conclusions of the externally facilitated Board Performance Review, which concluded
that Board was operating effectively as currently constituted, the Directors are not anticipating any further appointments to the Board in the
immediate future.
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 30 and 31. A 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 43 to 47.
Remuneration Committee
The Board has established a Remuneration Committee, the role and responsibilities of which are set out in the report on page 48.
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 attended the Group’s annual strategy meeting at which they discussed the progress of the intended
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Net Zero Pathway, having received a presentation from the first stage of output from the appointed external technical expert. The ESG
Committee discussed the presentation’s findings with both the external technical expert and the Investment Manager in order to further
their own understanding and to aid in the guidance of the following stages which the Investment Manager is progressing. The Committee
also monitored progress in relation to the annual GRESB submission for the year ended 31 December 2023 and reviewed and approved
the Group’s annual Sustainability Report which was subsequently published in July 2024. 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 capital expenditure having started to be incurred within the initial
budget of £1 million approved by the ESG Committee in the prior year.
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 was chaired throughout the year
by Ms Fyfe. On 4 September 2024, Mr Cotton was appointed as chair of the Committee. 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 39. The Management
Engagement Committee also monitored the tender of the provision of external valuation services. This tender was completed during the year,
in advance of the anticipated introduction of new rules prescribing the mandatory rotation of external valuers, and resulted in the appointment
of CBRE Limited with effect from the quarterly valuation at 31 March 2024 onwards.
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 Committee’s decision to approve or decline each of the investment recommendations proposed.
Nomination Committee
The Board has established a Nomination Committee which comprises all the Directors and which, with effect from 6 March 2024, has
been chaired by Dr Thompsell. It was previously chaired by Ms Fyfe. 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.
In addition to discharging the responsibilities above, the Nomination Committee met formally on three occasions throughout the year to
consider the appointment and scope of the externally facilitated Board performance review (as set out in more detail below) and the findings
and recommendations arising from it.
Assessment of the Board and Committees
During the year, the performance of the Board, Committees and individual Directors was evaluated through an externally facilitated
assessment process led by an external reviewer, Fletcher Jones Limited, based on a scope determined by the Board and Nomination
Committee. This process was tailored to the specific environment, operating style and strategic goals and challenges faced by the Company
and involved each Director completing a confidential survey, followed by private one-to-one conversations between the external reviewer
and each Director and with representatives of the Company’s Investment Manager, broker and legal adviser. The external reviewer also
physically attended one of the scheduled quarterly meetings of the Board and Committees in order to observe the Board’s processes and
Director contributions and interactions in practice. Fletcher Jones was paid a fee in relation to this engagement. Fletcher Jones was also paid
a separate fee for undertaking an independent review of the Directors’ remuneration, as described on page 49 and has previously provided
recruitment services to the Company. Fletcher Jones has no other connection or conflict of interest with the Company.
The external reviewer provided a formal report of their findings to, and this was considered by, the Nomination Committee. This report
presented an objective view on the current working of the Board as a whole as well as the quality of the contributions made by individual
Directors. The intention of the appraisal process was to strengthen further the working of the Board by providing an opportunity for
the objective consideration of the Board’s strengths and current skills, any areas for further development, and any potential gaps in its
composition. The report also considered the challenges, opportunities and strategic direction of travel anticipated over the near to
medium-term.
42 Target Healthcare REIT plc
The performance review process conducted in relation to the year ended 30 June 2024 found that the Board and each Committee was
operating effectively, with an appropriate and sufficient balance of experience and skills on all the areas of importance, resulting in a
well-managed, well run, and effective Board. Some minor points for development were noted which will be actioned. These included the
suggestions that:
• the Directors meet more frequently in private sessions in order to focus the agenda for future discussion; and
• consideration be given to spreading the chairmanship of other Committees that were chaired by the Chair of the Board.
Noting the latter point, and as it was considered an effective use of Mr Cotton’s skills and experience, Mr Cotton was appointed as Chair of the
Management Engagement Committee with effect from 4 September 2024.
Overall, the reviewer commented that the main theme coming through this performance assessment was that of a respectful Board faced
with a number of challenges and with a strong desire to consider all appropriate options for the benefit of shareholders. The reviewer
considered that significant topics, such as discount management, future strategy, performance, risk profile and growth of the Company,
were being discussed proactively.
The Board anticipates having an externally facilitated Board performance review conducted at least every three years.
Relations with shareholders
The Group proactively seeks the views of its shareholders and places great importance on communication with them. The Board receives
regular reports from the Investment Manager and Broker 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. 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 89 to 91. It is intended that the AGM will be held physically at the offices
of Dickson Minto, Dashwood House, 69 Old Broad Street, London EC2M 1QS. However, as set out on page 36, 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 16 to 19. The Group has also published a separate Sustainability Report for the year to 31 December 2023.
• 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
health 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.
• 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 lay-out 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 visit 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 Group is currently undertaking a home-by-home review of its portfolio 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 is available on its website at
www.targetfundmanagers.com.
On behalf of the Board
Alison Fyfe
Chair
16 September 2024
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“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 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
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 Committee is chaired by Mr Niblett. The Audit Committee currently comprises all Directors. 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.
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 or other disclosure requirements and any significant financial reporting judgements
and key assumptions expected to apply at the Group’s year end; and
• review the contents of the Annual Report.
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 46 and
47. 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 2023, the reporting timetable for
the year ended 30 June 2024 and the internal financing structure of the Group, including the
settlement of intercompany loans and the payment of intragroup dividends.
As described in more detail on pages 45 and 46, the Committee also considered the outcome of
the FRC’s review of the Group’s Annual Report 2023 and the FRC’s inspection of EY’s audit of the
Group financial statements for the year ended 30 June 2023.
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.
44 Target Healthcare REIT plc
Responsibilities of the Audit Committee How they have been discharged
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 also 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 period to 30 June 2024. 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.
Consideration of the narrative
elements of the annual financial
report, including whether the annual
financial report taken as a whole is
fair, balanced and understandable and
provides the necessary information
for shareholders to assess the Group’s
position, performance, business model
and strategy.
The Committee has reviewed the content and presentation of the Annual Report and ensured
that it achieves the three criteria opposite. 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.
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 and the methodology
followed in the determination of 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 pages 45 and 46.
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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’ below.
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 22 and 23.
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 44, the Audit Committee’s review of the Investment Manager’s ISAE-3402 report, which was unqualified and contained no
exceptions, did not identify any significant issues or concerns over the control environment, including information technology systems.
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 also 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.
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 June 2024, the Audit Committee received notification that the FRC’s Audit Quality Review (‘AQR’) team had completed an inspection of
EY’s audit of the Group’s financial statements for the year ended 30 June 2023. This inspection focused primarily on the key audit matters of
‘incomplete or inaccurate recognition of rental income’ and ‘incorrect valuation or ownership of investment properties’, and the other audit
areas of ‘contingent liabilities’ and ‘carrying value of Parent company investments in subsidiaries’. The Audit Committee was delighted to hear
that the audit had been assessed as “Good”, the highest of the four possible ratings, and that there were no key or other findings arising from
the inspection.
46 Target Healthcare REIT plc
In its own evaluation of EY’s performance, the Audit Committee has also 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 2024 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 2024 constitutes the second 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
undertake 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 2024 163
Statutory audit of the Company’s subsidiaries for the year ended 30 June 2024 277
Review of interim financial information for the six months ended 31 December 2023 16
Total (inclusive of irrecoverable VAT) 456
In addition to the fees stated above, the Company agreed to pay an additional fee relating to the statutory audit for the year ended 30 June
2023 of £18,000 (inclusive of irrecoverable VAT). This arose from additional audit work undertaken in relation to ISA 315, the audit of a new
subsidiary acquired during the course of that year and increased audit requirements in relation to certain of the Group’s other subsidiaries,
particularly in relation to the mandatory consideration of potential indicators of impairment following the increase in market interest rates
and the decline in property values in late 2022.
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.
In April 2024, the Audit Committee received confirmation that the FRC’s Corporate Reporting Review (‘CRR’) team had reviewed the Group’s
Annual Report for the year ended 30 June 2023 in accordance with Part 2 of the FRC Corporate Reporting Review Operating Procedures. The
FRC were pleased to confirm that there were no questions or queries arising from their review. The Audit Committee has reviewed the minor
comments raised by the FRC to highlight areas where they believed that users of the accounts may benefit from improvements to the Group’s
existing reporting to ensure that, where material and relevant, they were addressed in this year’s Annual Report.
The extent of the FRC review was limited and provides no assurance that the annual report and accounts were correct in all material respects.
The FRC’s role is not to verify the information provided to it but to consider compliance with reporting requirements. The FRC accepts no
liability for any reliance placed on its review.
The Audit Committee has also considered certain significant issues during the year. 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, and any bad debts written
off, 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.
REPORT OF THE AUDIT COMMITTEE CONTINUED
47Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Matter Audit Committee action
Valuation and ownership of the investment
property portfolio
The Group’s property portfolio accounted for 86.0 per
cent of its total assets as at 30 June 2024. 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.
Following the completion of a tender for the provision of the external valuation
services, undertaken to reflect best practice and in advance of the introduction
of mandatory rotation, the quarterly valuations in relation to 31 March 2024
onwards have been prepared by CBRE Limited. The Committee note that there
was no material difference between the aggregate portfolio valuation of the
previous valuer, Colliers International Healthcare Property Consultants Limited,
at 31 December 2023 and the shadow valuation produced by CBRE 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 two independent firms of valuers.
The Committee discussed the valuation as at 30 June 2024 directly with CBRE to
ensure that they understood the assumptions underlying the valuation and the
sensitivities inherent in the valuation and any particular areas of judgement.
The Committee also 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.
Internal controls
Incomplete design or ineffective operation of internal
controls may result in a loss of the Group’s assets, a
misstatement of the financial statements or a breach of
legal, tax or other regulations.
The Audit Committee reviewed the Group’s internal control environment,
considering its completeness and efficiency and identifying any areas where the
Board, or Committees, did not have direct means of ensuring that the internal
controls in place within the Investment Manager were operating as designed.
This included a review of the Investment Manager’s ISAE 3402 Report. There
were no material control deficiencies or weaknesses identified through this work.
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 2024, 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
16 September 2024
48 Target Healthcare REIT plc
DIRECTORS’ REMUNERATION REPORT
“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 this Report.”
Dr Amanda Thompsell
Chair of the Remuneration Committee
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. Prior to her appointment as chair of the Committee, the Board concluded that Dr Thompsell had
relevant experience and understanding of the Company.
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 shall be reviewed by the Committee at least annually to ensure its ongoing appropriateness
and relevance.
The Committee shall recommend 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 2024 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 fifteen 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.
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. It is currently intended that
the above policy will continue for a three-year period and will therefore next be considered at the AGM to be held in 2025.
49Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Directors’ Fees
The Board considers the level of Directors’ fees at least annually. At the end of the current year, an external consultant was appointed to
provide advice on the level of Directors’ remuneration for the forthcoming year in order to ensure that this remained in line with the market
level necessary to attract, retain and motivate non-executive Directors of the quality required to govern the Company successfully. This review
was undertaken by Fletcher Jones Limited, a firm which was also appointed to undertake the external Board Performance Review as reported
in more detail on page 41. In relation to the advice on remuneration, Fletcher Jones received a fee of £5,000 (plus VAT). It is expected that
external advice in relation to the level of Directors’ remuneration will continue to be sought every three years.
The independent external review concluded that the current level of Directors’ remuneration was reasonable, albeit 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. The independent external review also recommended that consideration be given to increasing the current limit on the Directors’
aggregate remuneration in order to provide flexibilty for any future remuneration uplifts, unexpected changes in the Board composition
(particularly should a period of overlap between an incoming and outgoing Director be required), or if future growth in the size or complexity
of the Group made it advisable to appoint an additional Director to the Board.
The Committee considered the findings of the independent external review, whilst also remaining mindful of both the Group’s 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 ending 30 June 2025.
Year ending
30 June 2025
£’s
Year ended
30 June 2024
£’s
Year ended
30 June 2023
£’s
Change
in year ended
30 June 2024
%
Chair 58,500 58,500 54,000 +8.3
Audit Committee Chair 47,250 47,250 45,500 +3.8
Director 40,500 40,500 39,000 +3.8
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 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 +0.0 +8.3 +8.0 +13.6 +0.0
Audit Committee Chair +0.0 +3.8 +3.4 +12.8 +0.0
Director +0.0 +3.8 +4.0 +14.5 +0.0
The present limit on Directors’ fees is an aggregate of £250,000 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 recommendation of the
independent external review, an ordinary resolution will be put to shareholders at the forthcoming Annual General Meeting to increase this
limit to £300,000.
Annual Report on Directors’ Remuneration
Directors’ emoluments for the year (audited)
The Directors who served during the year received the following emoluments in the form of fees. Directors receive no additional fees for
serving as the chair of any of the Board’s committees, 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. No other forms of remuneration or taxable benefits were paid during the year.
Year ended
30 June 2024
£’s
Change in
year ended
30 June 2024
1
%
Year ended
30 June 2023
£’s
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 +22.9² 47,602 +26.9² +14.5 +600.0²
Vince Niblett 47,250 +3.8 45,500 +27.3³ n/a n/a
Amanda Thompsell 40,500 +3.8 39,000 +149.6⁴ n/a n/a
Richard Cotton (appointed 1 November 2022) 40,500 +55.8⁵ 26,000 n/a n/a n/a
Michael Brodtman (appointed 1 January 2023) 40,500 +107.7 ⁶ 19,500 n/a n/a n/a
Malcolm Naish (retired 6 December 2022) – n/a 23,390 -53.2 +13.6 +0.0
Gordon Coull (retired 6 December 2022) – n/a 16,893 -58.4 +4.2 +0.0
Total 227,250 +4.3 217,885 +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. This annual percentage change will continue to be published cumulatively until 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 above showing the remuneration per role for recent years).
2 Ms Fyfe was appointed as a Director on 1 May 2020 and as Chair, succeeding Mr Naish, on 6 December 2022.
3 Mr Niblett was appointed as a Director on 25 August 2021 and as Chair of the Audit Committee, succeeding Mr Coull, 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.
50 Target Healthcare REIT plc
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 2024
£’000
Year ended
30 June 2023
£’000
Change in
year ended
30 June 2024
%
Aggregate Directors’ remuneration 227 218 +4.3
Management fee and other revenue expenses* 11,554 10,738 +7.6
Distributions paid to shareholders in respect of the year 35,428 38,330 -7.6
* 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.
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 2024 were as follows:
Ordinary shares
30 June 2024
Ordinary shares
30 June 2023
Alison Fyfe 10,000 10,000
Vince Niblett 24,052 –
Amanda Thompsell – –
Richard Cotton 30,000 30,000
Michael Brodtman 24,210 24,210
Total 88,262 64,210
There have not been any changes in the Directors’ interests between 30 June 2024 and 16 September 2024. No Director had an interest in any
contracts with the Company during the year or subsequently. Representatives of the Investment Manager have an interest in the shares of the
Company totalling, in aggregate, 81,731 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 28.
The graph below compares, for the ten years to 30 June 2024, 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.
SHARE PRICE TOTAL RETURN AND THE FTSE EPRA NAREIT UK INDEX TOTAL RETURN PERFORMANCE
GRAPH (REBASED TO 100 AT 30 JUNE 2014)
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 29 November 2023, shareholders approved the Directors’ Remuneration Report in respect of the
year ended 30 June 2023. 99.2 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 9 December 2024.
On behalf of the Board
Amanda Thompsell
Director
16 September 2024
30/6/14 30/6/15 30/6/16 30/6/17 30/6/18 30/6/19 30/6/20 30/6/22 30/6/23
30/6/24
30/6/21
200
160
170
180
150
190
140
130
120
100
110
FTSE EPRA Nareit UK Index Total Return
Share Price Total Return Sources: EPRA, Target Fund Managers Limited
DIRECTORS’ REMUNERATION REPORT CONTINUED
51Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TARGET HEALTHCARE REIT PLC
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 2024 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 2024 which comprise:
Group Parent Company
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2024
Statement of Financial Position for the year ended 30 June 2024
Consolidated Statement of Financial Position for the year ended
30 June 2024
Statement of Changes in Equity for the year ended 30 June 2024
Consolidated Statement of Changes in Equity for the year ended
30 June 2024
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 2024
Related notes 1 to 22 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 30 September 2025,
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
30 September 2025, which is at least 12 months from the date the financial statements have been authorised for issue.
52 Target Healthcare REIT plc
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 or ownership of investment properties
• Incomplete or inaccurate recognition of rental income, including accounting for rental uplifts and
lease incentives
Materiality • Overall Group materiality of £6.89m 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 22 to 23 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.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TARGET HEALTHCARE REIT PLC CONTINUED
53Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Risk Our response to the risk
Key observations
communicated to the
Audit Committee
Incorrect valuation or ownership of
investment properties
(Refer to Report of the Audit Committee (page 47);
Accounting policies (pages 63 and 64); and Note 9
to the Consolidated Financial Statements (pages 69
to 71).
At 30 June 2024, the Group’s investment portfolio
consisted of UK healthcare properties, with a market
value of £908.53 (2023: £868.71m) and carrying
value of £831.57m (2023: £800.20m), which is net of
a deduction of £79.96m (2023: £68.55m) 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 £7.71m (2023: £7.52m) and a carrying value
of £7.54m (2023: £7.43m) which is net of a deduction
of £0.17m (2023: £0.09m) 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 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 56.
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.
We agreed the value of all the properties held at the
year end to the open market valuations included in the
valuation report provided by CBRE.
We agreed a sample of inputs used by CBRE in the
valuation to source data.
We used our property valuation specialists to perform a
review of the property valuations, which included:
• Evaluating the competency, capability, objectivity and
work performed by CBRE;
• Reviewing the assumptions used by CBRE in
undertaking their valuation and an assessment of the
valuation methodology adopted;
• Reviewing a sample of the individual property
valuations as at 30 June 2024 and examining key
valuation inputs; and
• Analysing key changes in the property valuation as a
whole including a review of the reasonableness of the
income yields for the properties.
We reviewed the accounting policy and recalculated the
adjustments made to the CBRE fair value in respect of
lease incentives, guaranteed rent reviews and accrued
performance payments, to validate the carrying value of
investment property.
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’.
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 2024.
We agreed a sample of key transaction details
(e.g. property and trade date) of purchases and sales
recorded by the Administrator to legal agreements,
completion statements and bank statements.
We recalculated the unrealised gains/losses on
investment properties as at the year-end using the
book cost reconciliation.
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.
54 Target Healthcare REIT plc
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 46)
and Accounting Policies (page 62))
During the year ended 30 June 2024, £69.54m (2023:
£67.66m) has been recognised by the Group as rental
income. Of this £58.61m (2023: £56.35m) has been
recorded as revenue in the Consolidated Statement
of Comprehensive Income and £10.93m (2023:
£11.31m) 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 56.
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.
We have reviewed the Group’s accounting policies in
respect of rental income recognition, including events
relating to re-tenanting, and ensured they have been
consistently applied throughout the year and are in
accordance with applicable accounting standards.
We have verified 100% of the rental rates to lease
agreements (including rent reviews, re-tenanted assets
and completed forward funds) and recalculated 100% of
the rental income recognised.
We reperformed the calculations of the rental
adjustments required for rental uplifts and lease incentives
under IFRS 16 for all tenants and tested the allocation of
returns between revenue and capital.
We agreed a sample of rental income recorded as
received to bank statements.
We tested that a sample of expected rent receipts
had been recorded with reference to executed lease
agreements to ensure completeness.
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.
In the prior year, our auditor’s report included a key audit matter in relation to expected credit losses. In the current year, expected credit
losses have not been included as a key audit matter as the gross receivable and associated credit loss provision are below our performance
materiality. Expected credit losses have been classified as another area of audit focus rather than a key audit matter.
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 £6.89m (2023: £6.55m), which is 1% (2023: 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 £7.19 million (2023: £6.94 million), which is 1% (2023: 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% (2023: 75%) of our planning materiality, namely £5.17m (2023: £4.91m). 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.
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 £0.34m (2023: £0.33m), which
is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TARGET HEALTHCARE REIT PLC CONTINUED
55Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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;
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared.
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 page 32;
• 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 32 and 33;
• 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 33;
• Directors’ statement on fair, balanced and understandable set out on page 30;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 23;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 45; and;
• The section describing the work of the audit committee set out on page 43 to 47.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 37, 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.
56 Target Healthcare REIT plc
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. 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 five years,
covering the years ending 30 June 2020 to 30 June 2024.
• 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.
Matthew Price (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
16 September 2024
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TARGET HEALTHCARE REIT PLC CONTINUED
57Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
Year ended 30 June 2024 | Year ended 30 June 2023 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Revenue | |||||||
Rental income | |||||||
Other income | |||||||
Total revenue | |||||||
Gains/(losses) 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/(loss) before finance costs | |||||||
and taxation | ( | ||||||
| Net finance costs | |||||||
Interest income | 4 | ||||||
Finance costs | 5 | ( | ( | ( | ( | ( | ( |
Net finance costs | ( | ( | ( | ( | ( | ( | |
Profit/(loss) before taxation | ( | ( | |||||
Taxation | 6 | ||||||
Profit/(loss) 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.
58 Target Healthcare REIT plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
| As at 30 June | As at 30 June | ||
| 2024 | 2023 | ||
| 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 | ||
Cash and cash equivalents | 12 | ||
Total assets | |||
| Non-current liabilities | |||
Loans | 13 | ( | ( |
Trade and other payables | 14 | ( | ( |
| Current liabilities | ( | ( | |
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.
59Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
FOR THE YEAR ENDED 30 JUNE 2023
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Notes | £’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 |
| Share | Share | Merger | Distributable | Hedging | Capital | Revenue | |||
| capital | premium | reserve | reserve | reserve | reserve | reserve | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 30 June 2022 | |||||||||
(Loss)/profit for the year | ( | ( | |||||||
Other comprehensive income | |||||||||
Total comprehensive income | ( | ( | |||||||
| Transactions with owners | |||||||||
| recognised in equity: | |||||||||
Dividends paid | 7 | ( | ( | ( | |||||
At 30 June 2023 |
60 Target Healthcare REIT plc
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
| Year ended | Year ended | ||
| 30 June 2024 | 30 June 2023 | ||
| Notes | £’000 | £’000 | |
| Cash flows from operating activities | |||
Profit/(loss) before tax | ( | ||
| Adjustments for: | |||
Interest income | ( | ( | |
Finance costs | |||
Revaluation (gains)/losses on investment properties and movements in lease incentives, net of acquisition costs written off | 9 | ( | |
Gains on investment properties realised | ( | ( | |
Decrease/(increase) in trade and other receivables | ( | ||
Increase/(decrease) in trade and other payables | ( | ||
Interest paid | ( | ( | |
Premium paid on interest rate cap | ( | ||
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 inflow/(outflow) from investing activities | ( | ||
| Cash flows from financing activities | |||
Drawdown of bank loan facilities | 13 | ||
Repayment of bank loan facilities | 13 | ( | ( |
Expenses of arrangement of bank loan facilities | 13 | ( | |
Dividends paid | ( | ( | |
Net cash outflow from financing activities | ( | ( | |
Net increase/(decrease) 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 and lease incentives | |||
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | ( | ( | |
Total |
The accompanying notes are an integral part of these financial statements.
61Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
62 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
63Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
64 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
(h) Investment properties continued
65Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
2. Fee paid to the Investment Manager
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Investment management fee | 7,518 | 7,428 |
Total | 7,518 | 7,428 |
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 £156,000 per annum (plus VAT), increasing annually in line with inflation, in relation
to their 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.
66 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Total movement in credit loss allowance | 962 | (4,991) |
Bad debts written off | – | 5,255 |
Credit loss allowance charge | 962 | 264 |
Valuation and other professional fees | 1,107 | 1,131 |
| Auditor’s remuneration for: | ||
– statutory audit of the Company | 181 | 131 |
– statutory audit of the Company’s subsidiaries | 277 | 221 |
– review of interim financial information | 16 | 16 |
Other taxation compliance and advisory* | 271 | 258 |
Secretarial and administration fees | 229 | 208 |
Directors’ fees | 227 | 218 |
Direct property costs | 199 | 182 |
Public relations and marketing | 179 | 229 |
Listing and Registrar fees | 115 | 114 |
Printing, postage and website | 100 | 95 |
Other | 173 | 243 |
Total other expenses | 3,074 | 3,046 |
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Deposit interest | 66 | 134 |
Total | 66 | 134 |
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Interest paid on loans | 10,245 | 8,949 |
Amortisation of loan costs | 621 | 623 |
Finance and transaction costs relating to the interest rate cap | 800 | 698 |
Total | 11,666 | 10,270 |
6. Taxation
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Current tax | – | – |
Adjustment to tax charge for prior years | – | – |
Total tax charge | – | – |
67Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Profit/(loss) before tax | 73,024 | (6,572) |
Tax at 25% (2023: 20.5%) | 18,256 | (1,347) |
| Effects of: | ||
REIT exempt profits | (8,964) | (8,665) |
REIT exempt (gains)/losses | (6,215) | 11,152 |
Capital allowances | (2,476) | (1,577) |
Excess management expenses carried forward | – | 286 |
Utilisation of excess management expenses brought forward | (809) | – |
Expenses not deductible for tax purposes | 208 | 151 |
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 £9.4 million at 30 June 2024 (2023: £12.5 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.
| 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 |
| Dividend rate | Year ended | |
| (pence per | 30 June 2023 | |
| share) | £’000 | |
Fourth interim dividend for the year ended 30 June 2022 | 1.69 | 10,482 |
First interim dividend for the year ended 30 June 2023 | 1.69 | 10,482 |
Second interim dividend for the year ended 30 June 2023 | 1.69 | 10,482 |
Third interim dividend for the year ended 30 June 2023 | 1.40 | 8,683 |
Total | 40,129 |
Year ended 30 June 2024 | Year ended 30 June 2023 | |||
£’000 | Pence per share | £’000 | Pence per share | |
Revenue earnings | 36,270 | 5.85 | 36,264 | 5.85 |
Capital earnings | 36,754 | 5.92 | (42,836) | (6.91) |
Total earnings | 73,024 | 11.77 | (6,572) | (1.06) |
Average number of shares in issue | 620,237,346 | 620,237,346 |
68 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8. Earnings per share and Net Asset Value per share continued
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Earnings per IFRS Consolidated Statement of Comprehensive Income | 73,024 | (6,572) |
Adjusted for gains on investment properties realised | (1,934) | (575) |
Adjusted for revaluations of investment properties | (24,693) | 54,021 |
Adjusted for finance and transaction costs on the interest rate cap and other capital items | 800 | 698 |
EPRA earnings | 47,197 | 47,572 |
Adjusted for rental income arising from recognising guaranteed rent review uplifts | (10,927) | (11,308) |
Adjusted for development interest under forward fund agreements | 1,767 | 952 |
Group specific adjusted EPRA earnings | 38,037 | 37,216 |
| Earnings per share (‘EPS’) (pence per share) | ||
EPS per IFRS Consolidated Statement of Comprehensive Income | 11.77 | (1.06) |
EPRA EPS | 7.61 | 7.67 |
Group specific adjusted EPRA EPS | 6.13 | 6.00 |
| 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | ||
| EPRA NRV | EPRA NTA | EPRA NDV | EPRA NRV | EPRA NTA | EPRA NDV | ||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
IFRS NAV per financial statements | 689,293 | 689,293 | 689,293 | 654,808 | 654,808 | 654,808 | |
Fair value of interest rate derivatives | (2,820) | (2,820) | – | (6,905) | (6,905) | – | |
Fair value of loans | – | – | 29,780 | – | – | 39,672 | |
Estimated purchasers’ costs | 60,026 | – | – | 57,461 | – | – | |
EPRA net assets | 746,499 | 686,473 | 719,073 | 705,364 | 6 | 47,903 | 694,480 |
EPRA net assets (pence per share) | 120.4 | 110.7 | 115.9 | 113.7 | 104.5 | 112.0 |
69Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
9. Investment properties
Freehold and leasehold properties
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Opening market value | 868,705 | 911,596 |
Opening fixed or guaranteed rent reviews | (59,378) | (48,802) |
Opening lease incentives | (9,172) | (7,903) |
Opening performance payments | – | 2,800 |
Opening carrying value | 800,155 | 857,691 |
Disposals – proceeds | (44,344) | (26,728) |
– gain on sale | 1,382 | 6,088 |
Purchases and performance payments | 45,444 | 23,494 |
Acquisition costs capitalised | 332 | 273 |
Acquisition costs written off | (332) | (273) |
Unrealised loss/(gain) realised during the year | 552 | (5,513) |
Revaluation movement – gains | 45,496 | 3,645 |
Revaluation movement – losses | (8,705) | (43,877) |
Movement in market value | 39,825 | (42,891) |
Fixed or guaranteed rent reviews derecognised on disposal or re-tenanting | 1,449 | 732 |
Lease incentives derecognised on disposal or re-tenanting | – | 939 |
Movement in fixed or guaranteed rent reviews | (10,927) | (11,308) |
Movement in lease incentives | (839) | (2,208) |
Movement in performance payments | 1,910 | (2,800) |
Movement in carrying value | 31,418 | (57,536) |
Closing market value | 908,530 | 868,705 |
Closing fixed or guaranteed rent reviews | (68,856) | (59,378) |
Closing lease incentives | (10,011) | (9,172) |
Closing performance payments (see Note 18) | 1,910 | – |
Closing carrying value | 831,573 | 800,155 |
Changes in the valuation of investment properties
| Year ended | Year ended | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Gain on sale of investment properties | 1,382 | 6,088 |
Unrealised loss/(gain) realised during the year | 552 | (5,513) |
Gain on sale of investment properties realised | 1,934 | 575 |
Revaluation movement | 36,791 | (40,232) |
Acquisition costs written off | (332) | (273) |
Movement in fixed or guaranteed rent reviews | (10,927) | (11,308) |
Movement in lease incentives | (839) | (2,208) |
Gains/(losses) on revaluation of investment properties | 26,627 | (53,446) |
The investment properties can be analysed as follows:
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Standing assets | 889,255 | 851,305 |
Developments under forward fund agreements | 19,275 | 17,400 |
Closing market value | 908,530 | 868,705 |
At 30 June 2024, the properties were valued at £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, incorporating the International Valuation Standards (the ‘Red Book
Global’, 31 January 2022) 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. At 30 June 2023, the properties had been valued at £868,705,000 by Colliers International Healthcare Property
Consultants Limited (‘Colliers’) on the same basis.
70 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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 £831,573,000 (2023: £800,155,000).
The adjustment consisted of £68,856,000 (2023: £59,378,000) relating to fixed or guaranteed rent reviews and £10,011,000 (2023: £9,172,000)
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 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 2024, inclusive of the performance payments recognised in the year, were £47,354,000 (2023: £20,694,000).
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.
Following their appointment, with effect from 31 March 2024 onwards, 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 historic land use. CBRE are currently gathering and
analysing data around the four key areas that have the most potential to impact on the value of an asset:
• Energy Performance
• Green Certification
• Sources of Fuel and Renewable Energy Sources
• Physical Risk/Climate Risk
The external valuations reflect CBRE’s understanding of how market participants include sustainability factors in their decisions and the
consequential impact on market valuations.
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 (2023: 6.2 per cent). The yield on the majority of the individual assets ranges
from 5.5 per cent to 8.9 per cent (2023: 5.5 per cent to 8.7 per cent). The average annual contracted rent per bed is £9,292 (2023: £8,933) with the
annual contracted rent per bed on individual assets ranging between £4,919 and £20,481 (2023: between £4,730 and £19,693). There have been no
changes to the valuation technique used through the period, nor have there been any transfers between levels.
71Annual Report and Financial Statements 2024
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STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 £9,085,000 (2023: £8,687,000);
an equal and opposite movement would have decreased net assets and decreased the Group’s income by the same amount.
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
£37,901,000 (2023: £37,940,000), 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 £34,982,000 (2023: £35,025,000) and
reduce the Group’s income.
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| Non-current trade and other receivables | £’000 | £’000 |
Fixed rent reviews | 68,856 | 59,378 |
Rental deposits held in escrow for tenants | 9,893 | 8,093 |
Lease incentives | 9,677 | 8,902 |
Total | 88,426 | 76,373 |
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| Current trade and other receivables | £’000 | £’000 |
Cash held in escrow for property purchases | – | 4,295 |
Lease incentives | 334 | 270 |
VAT recoverable | 1,624 | 667 |
Accrued income – rent receivable | 890 | 1,088 |
Accrued development interest under forward fund agreements | 1,076 | 1,010 |
Other debtors and prepayments | 1,743 | 2,129 |
Total | 5,667 | 9,459 |
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 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Cash at bank and in hand | 15,813 | 12,745 |
Short-term deposits | 23,071 | 2,621 |
Total | 38,884 | 15,366 |
The cash on deposit at 30 June 2024 included £22,989,000 (2023: £2,526,000) 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 2024, 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 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Principal amount outstanding | 243,000 | 230,000 |
Set-up costs | (4,520) | (4,520) |
Amortisation of set-up costs | 2,192 | 1,571 |
Total | 240,672 | 227,051 |
72 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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 | |
| 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Opening balance | 15,366 | (227,051) | (211,685) | 34,483 | (231,383) | (196,900) |
Cash flows | 23,518 | (13,000) | 10,518 | (19,117) | 4,955 | (14,162) |
Non-cash flows | – | (621) | (621) | – | (623) | (623) |
Closing balance as at 30 June | 38,884 | (240,672) | (201,788) | 15,366 | (227,051) | (211,685) |
73Annual Report and Financial Statements 2024
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| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| Non-current trade and other payables | £’000 | £’000 |
Rental deposits | 9,893 | 8,093 |
Total | 9,893 | 8,093 |
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| Current trade and other payables | £’000 | £’000 |
Rental income received in advance | 10,146 | 8,239 |
Property acquisition and development costs accrued | 8,790 | 3,875 |
Interest payable | 2,275 | 1,992 |
Investment Manager’s fees payable | 1,927 | 1,835 |
Performance payments | 1,910 | – |
Other payables | 2,464 | 2,365 |
Total | 27,512 | 18,306 |
| Number of | ||
| Allotted, called-up and fully paid ordinary shares of £0.01 each | shares | £’000 |
Balance as at 30 June 2023 and 30 June 2024 | 620,237,346 | 6,202 |
74 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 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 assets as at 30 June 2023 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cash and cash equivalents | 15,366 | – | – | – | – | 15,366 |
Rental deposits held in escrow for tenants | – | – | – | – | 8,093 | 8,093 |
Cash held in escrow for property purchases | 4,295 | – | – | – | – | 4,295 |
Other debtors | 3,856 | – | – | – | – | 3,856 |
Total | 23,517 | – | – | – | 8,093 | 31,610 |
75Annual Report and Financial Statements 2024
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ADDITIONAL
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STRATEGIC
REPORT
| 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 |
| 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 2023 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Loans and interest rate derivatives | 2,269 | 6,757 | 9,001 | 95,821 | 176,747 | 290,595 |
Rental deposits | – | – | – | – | 8,093 | 8,093 |
Other payables | 10,067 | – | – | – | – | 10,067 |
Total | 12,336 | 6,757 | 9,001 | 95,821 | 184,840 | 308,755 |
76 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
16. Financial instruments continued
As at 30 June 2024 | As at 30 June 2023 | |||
| Fixed rate | Variable rate | Fixed rate | Variable rate | |
| £’000 | £’000 | £’000 | £’000 | |
Cash and cash equivalents | – | 38,884 | – | 15,366 |
Interest rate derivatives | 2,820 | – | 6,905 | – |
Loans | (230,000) | (13,000) | (230,000) | – |
(227,180) | 25,884 | (223,095) | 15,366 |
17. Lease length
| As at | As at | |
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Less than one year | 59,001 | 56,010 |
Between one and two years | 60,180 | 58,013 |
Between two and three years | 61,126 | 58,912 |
Between three and four years | 62,087 | 59,826 |
Between four and five years | 63,066 | 60,591 |
Over five years | 1,623,709 | 1,570,251 |
Total | 1,929,169 | 1,863,603 |
77Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
| 30 June 2024 | 30 June 2023 | |
| £’000 | £’000 | |
Amounts due to complete forward fund developments | 4,723 | 31,066 |
Other capital expenditure commitments | 394 | 2,160 |
Total | 5,117 | 33,226 |
21. 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.
78 Target Healthcare REIT plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
| Gross | Commitment | |
| Leverage exposure | method | method |
Maximum limit | 3.00 | 3.00 |
Actual | 1.79 | 1.85 |
79Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Notes
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Non-current assets
Investment in subsidiary undertakings 3 791,304 699,223
Investment properties 4 8,450 7,433
Trade and other receivables 5 287 197
800,041 706,853
Current assets
Trade and other receivables 5 2,641 8,161
Cash and cash equivalents 6 753 139
3,394 8,300
Total assets 803,435 715,153
Non-current liabilities
Trade and other payables 7 (117) (110)
Current liabilities
Trade and other payables 7 (84,245) (20,563)
Total liabilities (84,362) (20,673)
Net assets 719,073 694,480
Share capital and reserves
Share capital 8 6,202 6,202
Share premium 8 256,633 256,633
Merger reserve 47,751 47,751
Distributable reserve 231,896 249,436
Capital reserve 150,179 93,334
Revenue reserve 26,412 41,124
Equity shareholders’ funds 719,073 694,480
Net asset value per ordinary share (pence) 9 115.9 112.0
Company number: 11990238
The Company made a profit for the year ended 30 June 2024 of £59,847,000 (2023: £13,585,000).
The financial statements on pages 79 to 88 were approved by the Board of Directors and authorised for issue on 16 September 2024
and were signed on its behalf by:
Alison Fyfe
Chair
The accompanying notes are an integral part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
80 Target Healthcare REIT plc
Notes
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
Notes
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 30 June 2022 6,202 256,633 47,751 288,010 120,873 1,555 721,024
(Loss)/profit for the year – – – – (27,539) 41,124 13,585
Transactions with owners recognised in equity:
Dividends paid 2 – – – (38,574) – (1,555) (40,129)
At 30 June 2023 6,202 256,633 47,751 249,436 93,334 41,124 694,480
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
FOR THE YEAR ENDED 30 JUNE 2023
81Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 57 to 78. 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 30 September 2025 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 2024.
Further explanation of the assessment undertaken is provided in the Consolidated Financial Statements on page 62.
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. The
profit after tax for the year was £59,847,000 (2023: £13,585,000).
The Company does not have any employees (2023: 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 2024 (2023: £218,000).
Audit fees in relation to the parent company were £183,000 (2023: £139,000), including irrecoverable VAT. This included £2,000 payable by
the Company on behalf of certain subsidiaries (2023: £8,000) and £18,000 relating to additional audit work undertaken in relation to the prior
year financial statements, mainly in relation to the revised requirements of ISA 315. The fee for assurance related services, being the review of
the Company’s Interim Report, was £16,000 (2023: £16,000). There were no other non-audit fees paid to EY by the Company during the year
(2023: £nil).
NOTES TO THE COMPANY FINANCIAL STATEMENTS
82 Target Healthcare REIT plc
2. Dividends
Amounts paid as distributions to equity holders.
Dividend rate
(pence per
share)
Year ended
30 June 2024
£’000
Dividend rate
(pence per
share)
Year ended
30 June 2023
£’000
Fourth interim dividend for the prior year 1.400 8,683 1.69 10,482
First interim dividend 1.428 8,857 1.69 10,482
Second interim dividend 1.428 8,857 1.69 10,482
Third interim dividend 1.428 8,857 1.40 8,683
Total 5.684 35,254 6.47 40,129
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 2024, of 1.428 pence per share, was paid on 30 August 2024 to shareholders
on the register on 16 August 2024 and amounted to £8,857,000. 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 2024, 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 100 100 432,841 428,935
THR Number 12 plc England & Wales Ordinary 100 100 103,336 158,981
THR Number 37 Limited England & Wales Ordinary 100 100 6,655 7,753
THR Number 39 Limited England & Wales Ordinary 100 100 11,461 9,999
THR Number 40 Limited England & Wales Ordinary 100 100 12,959 12,061
THR Number 41 Limited England & Wales Ordinary 100 100 14,086 12,623
THR Number 42 Limited England & Wales Ordinary 100 100 13,309 11,853
THR Number 43 plc England & Wales Ordinary 100 100 94,861 121,936
THR Number 45 Limited England & Wales Ordinary 100 100 14,858 13,781
THR Number 46 Limited England & Wales Ordinary 100 100 7,147 6,330
THR Number 47 Limited England & Wales Ordinary 100 100 6,197 7,052
Total 717,710 791,304
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 2024
£’000
Year ended
30 June 2023
£’000
Opening fair value 699,223 698,341
Additions 35,427 27,878
Movement in fair value 56,654 (26,996)
Closing fair value 791,304 699,223
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.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
83Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
As at 30 June 2024, 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.
84 Target Healthcare REIT plc
4. Investment properties
Freehold property
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Opening market value 7,520 7,630
Opening fixed or guaranteed rent reviews (87) (4)
Opening carrying value 7,433 7,626
Purchases – 400
Acquisition costs capitalised – 33
Acquisition costs written off – (33)
Revaluation movement – gain/(loss) 190 (510)
Movement in market value 190 (110)
Movement in fixed or guaranteed rent reviews (83) (83)
Movement in performance payment 910 –
Movement in carrying value 1,017 (193)
Closing market value 7,710 7,520
Closing fixed or guaranteed rent reviews (170) (87)
Closing performance payment 910 –
Closing carrying value 8,450 7,433
At 30 June 2024, the property was valued at £7,710,000 (2023: £7,520,000) by CBRE Limited (‘CBRE’) in their capacity as external valuers.
The valuation was undertaken in accordance with the RICS Valuation Global Standards, incorporating the International Valuation Standards
(the ‘Red Book Global’, 31 January 2022) 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. At 30 June 2023, the property had been valued at £7,520,000 by Colliers International Healthcare
Property Consultants Limited (‘Colliers’) on the same basis.
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 £8,450,000 (2023: £7,433,000). The
adjustment consisted of £170,000 (2023: £87,000) 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 2024, inclusive of the performance payment recognised
in the year, were £910,000 (2023: £400,000).
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 (2023: 5.7 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 £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 £77,000 (2023: £75,000); 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 £350,000 (2023: £345,000), 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 £321,000 (2023: £316,000) and reduce the Company’s income.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
85Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
5. Trade and other receivables
Non-current trade and other receivables
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Fixed rent reviews 170 87
Rental deposits held in escrow for tenants 117 110
Total 287 197
Current trade and other receivables
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Balances due from group undertakings 2,462 7,948
Other debtors and prepayments 179 213
Total 2,641 8,161
At the year-end, trade and other receivables include a fixed rent review debtor of £170,000 (2023: £87,000) 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 6.7 per cent (2023: 5.7 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 2024
£’000
As at
30 June 2023
£’000
Cash at bank and in hand 753 139
Total 753 139
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 2024
£’000
As at
30 June 2023
£’000
Rental deposits 117 110
Total 117 110
Current trade and other payables
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Balances due to group undertakings 81,248 18,402
Rental income received in advance 109 106
Income tax payable 932 922
Performance payments 910 –
Investment Manager’s fees payable 104 181
Other payables 942 952
Total 84,245 20,563
The balances due to group undertakings are unsecured and interest is payable at a fixed rate of 6.7 per cent (2023: 5.7 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.
86 Target Healthcare REIT plc
8. Share capital
Allotted, called-up and fully paid ordinary shares of £0.01 each
Number of
shares £’000
Balance as at 30 June 2023 and 30 June 2024 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 2024, the Company did not issue any ordinary shares (2023: nil). The Company did not repurchase any ordinary
shares into treasury (2023: nil) or resell any ordinary shares from treasury (2023: nil). At 30 June 2024, the Company did not hold any shares
in treasury (2023: 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 73.
9. Net Asset Value
The Company’s net asset value per ordinary share of 115.9 pence (2023: 112.0 pence) is based on equity shareholders’ funds of £719,073,000
(2023: £694,480,000) and on 620,237,346 (2023: 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 £3,226,000 (2023: £8,098,000) consisting of
balances due from group undertakings of £2,462,000 (2023: £7,948,000), cash balances of £753,000 (2023: £139,000) and other debtors
of £11,000 (2023: £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 2024
(2023: 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 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
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
87Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Financial assets as at 30 June 2023
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 139 – – – – 139
Rental deposits held in escrow for tenants – – – – 110 110
Balances due from group undertakings 7,948 – – – – 7,948
Other debtors 11 – – – – 11
Total 8,098 – – – 110 8,208
At the reporting date, the contractual maturity of the financial liabilities was:
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
Financial liabilities as at 30 June 2023
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 – – – – 110 110
Balances due to group undertakings 18,402 – – – – 18,402
Other payables 2,055 – – – – 2,055
Total 20,457 – – – 110 20,567
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 2024 (2023: 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 2024 As at 30 June 2023
Fixed rate
£’000
Variable rate
£’000
Fixed rate
£’000
Variable rate
£’000
Cash and cash equivalents – 753 – 139
Balances due from group undertakings 2,462 – 7,948 –
Balances due to group undertakings (81,248) – (18,402) –
Total (78,786) 753 (10,454) 139
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 £2,000 (2023: £nil), a decrease in interest rates would have an equal and
opposite effect. These movements are calculated based on balances as at 30 June 2024 (30 June 2023) 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.
88 Target Healthcare REIT plc
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 2024
£’000
As at
30 June 2023
£’000
Less than one year 473 458
Between one and two years 478 464
Between two and three years 482 468
Between three and four years 487 473
Between four and five years 492 476
Over five years 15,934 16,097
Total 18,346 18,436
The largest single tenant at the year-end accounted for 100 per cent (2023: 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 33 years (2023: 34 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 (2023: £910,000) may be 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.
It is highlighted that any performance payment subsequently paid will result in an increase in the rental income due from the tenant of the
property. As the net initial yield used to calculate the additional rental which would be payable is not significantly different from the investment
yield used to arrive at the valuation of the property, any performance payment made would be expected to result in a commensurate increase
in the value of the Company’s investment property.
Having assessed the clause, the Group has determined that the contracted performance conditions were highly likely to have been met in
relation to the property and therefore at 30 June 2024 an amount of £910,000 (2023: £nil) has been recognised as a liability (see Note 7).
An equal but opposite amount has been recognised as an asset in ‘investment properties’ in Note 4 to reflect the increase in the investment
property value that would be expected to arise from the payment of the performance payment and the resulting increase in the contracted
rental income.
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
(2023: £218,000) of which £nil (2023: £nil) remained payable at the year-end.
The Investment Manager received management fees of £527,000 (inclusive of irrecoverable VAT) from the Company in relation to the year
ended 30 June 2024 (2023: £714,000). Of this amount £104,000 (2023: £181,000) remained payable at the year-end.
The Investment Manager received a further £187,000 (inclusive of irrecoverable VAT) during the year ended 30 June 2024 (2023: £169,000) in
relation to its appointment as Company Secretary and Administrator. Of this amount £47,000 (2023: £42,000) remained payable at the year-end.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
89Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
NOTICE IS HEREBY GIVEN that the sixth Annual General Meeting (‘AGM’) of Target Healthcare REIT plc (the ‘Company’) will be held on
Monday 9 December 2024 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 12 inclusive will be
proposed as ordinary resolutions and resolutions 13 to 15 inclusive will be proposed as special resolutions:
Ordinary resolutions
1. That the Annual Report and Accounts for the year ended 30 June 2024 be received.
2. That the Directors’ Annual Report on Remuneration for the year ended 30 June 2024 be approved.
3. That the maximum limit on aggregate Directors’ fees be increased to £300,000.
4. That the Company’s dividend policy be approved.
5. That Ernst & Young LLP be re-appointed as the Company’s Auditor until the conclusion of the next Annual General Meeting.
6. That the Directors be authorised to determine the Auditor’s remuneration.
7. To re-elect Michael Brodtman as a Director.
8. To re-elect Richard Cotton as a Director.
9. To re-elect Alison Fyfe as a Director.
10. To re-elect Vince Niblett as a Director.
11. To re-elect Amanda Thompsell as a Director.
12. 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
13. That, in addition to any existing authority and subject to the passing of resolution 12, 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 12 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 12” were omitted.
14. 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.
15. 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
16 September 2024
NOTICE OF ANNUAL GENERAL MEETING
90 Target Healthcare REIT plc
Notes:
1. Only those shareholders registered in the Company’s register of members at 6.00 p.m. on 5 December 2024 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
5 December 2024 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 5 December 2024 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 5 December 2024 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 13 September 2024, 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 13 September 2024 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 below 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.
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
91Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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
28 October 2024. 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 90 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.
92 Target Healthcare REIT plc
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 2024/25 (£1,000 per annum for tax year 2023/24) 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.
UK ISAs and SIPPS
It is expected that the Company’s shares will be eligible for inclusion in ISAs and Investment-Regulated Pension Schemes.
SHAREHOLDER INFORMATION
93Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
The statements on taxation on pages 92 and 93 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 2024
Fourth interim dividend 15/08/24 30/08/24 1.4280 – 1.4280
Third interim dividend 16/05/24 31/05/24 1.4280 – 1.4280
Second interim dividend 08/02/24 23/02/24 1.4280 – 1.4280
First interim dividend 09/11/23 24/11/23 1.4280 – 1.4280
Total 5.7120 – 5.7120
In relation to the year ended 30 June 2023
Fourth interim dividend 10/08/23 25/08/23 1.1900 0.2100 1.4000
Third interim dividend 11/05/23 26/05/23 1.4000 – 1.4000
Second interim dividend 09/02/23 24/02/23 1.6900 – 1.6900
First interim dividend 10/11/22 25/11/22 1.6900 – 1.6900
Total 5.9700 0.2100 6.1800
In relation to the year ended 30 June 2022
Fourth interim dividend 11/08/22 26/08/22 – 1.6900 1.6900
Third interim dividend 12/05/22 27/05/22 1.6900 – 1.6900
Second interim dividend 10/02/22 25/02/22 1.6900 – 1.6900
First interim dividend 11/11/21 26/11/21 1.6900 – 1.6900
Total 5.0700 1.6900 6.7600
In relation to the year ended 30 June 2021
Fourth interim dividend 12/08/21 27/08/21 0.1680 1.5120 1.6800
Third interim dividend 13/05/21 28/05/21 1.6800 – 1.6800
Second interim dividend 11/02/21 26/02/21 1.6800 – 1.6800
First interim dividend 12/11/20 27/11/20 1.6800 – 1.6800
Total 5.2080 1.5120 6.7200
In relation to the year ended 30 June 2020
Fourth interim dividend 13/08/20 28/08/20 0.0835 1.5865 1.6700
Third interim dividend 07/05/20 29/05/20 1.6700 – 1.6700
Second interim dividend 13/02/20 28/02/20 1.6700 – 1.6700
First interim dividend 14/11/19 29/11/19 1.6700 – 1.6700
Total 5.0935 1.5865 6.6800
94 Target Healthcare REIT plc
Historical Record
Assets
At 30 June 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total assets (£’000) 176,310 282,791 306,246 434,822 538,379 663,772 718,394 963,658 908,258 967,370
Market value of property
portfolio (£’000) 143,748 210,666 281,951 385,542 500,884 617,584 684,845 911,596 868,705 908,530
Shareholders’ funds (£’000) 139,292 253,282 256,937 358,607 413,089 494,113 565,185 698,767 654,808 689,293
Performance
At 30 June 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
EPRA NTA per share 97.9p 100.6p 101.9p 105.7p 107.5p 108.1p 110.4p 112.3p 104.5p 110.7p
Share price 106.9p 109.0p 117.8p 110.5p 115.6p 110.0p 115.4p 108.4p 71.8p 78.5p
Premium/(discount) 9.2% 8.3% 15.6% 4.5% 7.5% 1.8% 4.5% (3.5)% (31.3)% (29.1)%
IFRS EPS 8.02p 6.81p 7.58p 9.77p 8.10p 7.18p 9.23p 8.20p (1.06)p 11.77p
Adjusted EPRA EPS 6.10p 5.25p 5.23p 5.54p 5.45p 5.27p 5.46p 5.05p 6.00p 6.13p
Dividends per share 6.12p 6.18p 6.28p 6.45p 6.58p 6.68p 6.72p 6.76p 6.18p 5.71p
Ongoing charges 1.58% 1.42% 1.48% 1.48% 1.52% 1.51% 1.55% 1.51% 1.53% 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.
SHAREHOLDER INFORMATION CONTINUED
95Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 99 to 101, with detailed calculations, including reconciliation to the IFRS figures where appropriate, being set out below
and within the EPRA Performance Measures.
Discount or Premium – the amount by which the market price per share is lower or higher than the net asset value per share.
2024
pence
2023
pence
EPRA Net Tangible Assets per share (see Note 8 to the Consolidated Financial Statements) (a) 110.7 104.5
Share price (b) 78.5 71.8
(Discount)/premium = (b-a)/a (29.1)% (31.3)%
Dividend Cover – the percentage by which Group specific adjusted EPRA earnings for the year cover the dividend paid.
2024
£’000
2023
£’000
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) (a) 38,037 37,216
First interim dividend 8,857 10,482
Second interim dividend 8,857 10,482
Third interim dividend 8,857 8,683
Fourth interim dividend 8,857 8,683
Dividends paid in relation to the year (b) 35,428 38,330
Dividend cover = (a/b) 107% 97%
Net Debt to EBITDA ratio – a leverage ratio that measures the net earnings available to address debt obligations.
2024
£’000
2023
£’000
Net debt (see page 97) (a) 224,385 223,751
Group-specific EPRA earnings for the year (see Note 8 to the Consolidated Financial Statements) 38,037 37,216
Net finance costs 10,800 9,438
EBITDA (b) 48,837 46,654
Net debt to EBITDA ratio = (a/b) 4.6 times 4.8 times
Ongoing Charges – a measure of all operating costs incurred, calculated as a percentage of average net assets in that year.
2024
£’000
2023
£’000
Investment management fee 7,518 7,428
Other expenses 3,074 3,046
Less direct property costs and other non-recurring items (405) (292)
Adjustment to management fee arrangements and irrecoverable VAT* (8) (35)
Total (a) 10,179 10,147
Average net assets (b) 673,625 661,231
Ongoing charges = (a/b) 1.51% 1.53%
* Based on the Group’s net asset value as at 30 June 2024, the management fee is expected to be paid at a weighted average rate of 1.02% (2023: 1.03%) of the Group’s
average net asset plus an effective irrecoverable VAT rate of approximately 9% (2023: 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% (2023: 1.12%).
The Group is also required to publish a cost figure in its Key Information Document which follows the methodology prescribed by UK law
and regulations applicable to PRIIPs. Under this methodology the reported ‘portfolio transaction costs’ at 30 June 2024 would be 0.51%
(2023: 0.65%). At the same date, ‘other ongoing costs’ would be 3.45% (2023: 3.18%), which includes finance costs of 1.73% (2023: 1.55%).
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.
2024 2023
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
EPRA NTA
(pence)
IFRS NAV
(pence)
Share price
(pence)
Value at start of year (a) 104.5 105.6 71.8 112.3 112.7 108.4
Value at end of year (b) 110.7 111.1 78.5 104.5 105.6 71.8
Change in value during the year (b-a) (c) 6.2 5.5 6.7 ( 7.8) (7.1) (36.6)
Dividends paid (d) 5.7 5.7 5.7 6.2 6.2 6.2
Additional impact of dividend reinvestment (e) 0.4 0.4 – 0.3 0.4 –
Total gain/(loss) in year (c+d+e) (f) 12.3 11.6 12.4 (1.3) (0.5) (30.4)
Total return for the year = (f/a) 11.8% 11.0% 17.2% (1.2)% (0.5)% (28.1)%
ALTERNATIVE PERFORMANCE MEASURES
96 Target Healthcare REIT plc
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 February 2022.
2024 2023
EPRA Net Reinstatement Value (£’000) 746,499 705,364
EPRA Net Tangible Assets (£’000) 686,473 647,903
EPRA Net Disposal Value (£’000) 719,073 694,480
EPRA Net Reinstatement Value per share (pence) 120.4 113.7
EPRA Net Tangible Assets per share (pence) 110.7 104.5
EPRA Net Disposal Value per share (pence) 115.9 112.0
EPRA Earnings (£’000) 47,197 47,572
Group specific adjusted EPRA earnings (£’000) 38,037 37,216
EPRA Earnings per share (pence) 7.61 7.67
Group specific adjusted EPRA earnings per share (pence) 6.13 6.00
EPRA Net Initial Yield 6.05% 6.05%
EPRA Topped-up Net Initial Yield 6.20% 6.22%
EPRA Vacancy Rate – –
EPRA Cost Ratio (including direct vacancy costs) 16.6% 15.8%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) 19.1% 18.7%
EPRA Cost Ratio (excluding direct vacancy costs) 16.6% 15.8%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) 19.1% 18.7%
EPRA Loan-to-Value 24.7% 25.8%
Capital Expenditure (£’000) 45,776 23,767
Like-for-like Rental Growth 3.8% 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 67 and 68.
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 2024
£’000
As at
30 June 2023
£’000
Annualised passing rental income based on cash rents (a) 57,462 55,003
Notional rent expiration of rent-free periods or other lease incentives 1,363 1,554
Topped-up net annualised rent (b) 58,825 56,557
Standing assets (see page 69) 889,255 851,305
Allowance for estimated purchasers’ costs 60,026 57,461
Grossed-up completed property portfolio valuation (c) 949,281 908,766
EPRA Net Initial Yield = (a/c) 6.05% 6.05%
EPRA Topped-up Net Initial Yield = (b/c) 6.20% 6.22%
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 2024
£’000
As at
30 June 2023
£’000
Annualised potential rental value of vacant premises* (a) – –
Annualised potential rental value of the property portfolio (including vacant properties) (b) 58,825 56,557
EPRA Vacancy Rate = (a/b) – –
* As detailed in Note 17 to the Consolidated Financial Statements, there were no unoccupied properties at either 30 June 2023 or 30 June 2024.
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.
EPRA PERFORMANCE MEASURES
97Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Investment management fee 7,518 7,428
Credit loss allowance and bad debts 962 264
Other expenses 3,074 3,046
EPRA costs (including direct vacancy costs) (a) 11,554 10,738
Specific cost adjustments, if applicable – –
Group specific adjusted EPRA costs (including direct vacancy costs) (b) 11,554 10,738
Direct vacancy costs (c) – –
Gross rental income per IFRS (d) 69,551 67,748
Adjusted for rental income arising from recognising guaranteed rent review uplifts (10,927) (11,308)
Adjusted for development interest under forward fund arrangements 1,767 952
Group specific adjusted gross rental income (e) 60,391 57, 392
EPRA Cost Ratio (including direct vacancy costs) = (a/d) 16.6% 15.8%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs) = (b/e) 19.1% 18.7%
EPRA Cost Ratio (excluding direct vacancy costs) = ((a-c)/d) 16.6% 15.8%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) = ((b-c)/e) 19.1% 18.7%
EPRA Loan-to-Value
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Borrowings 243,000 230,000
Net payables 20,269 9,117
Cash and cash equivalents (38,884) (15,366)
Net debt (a) 224,385 223,751
Investment properties at market value 908,530 868,705
Total property value (b) 908,530 868,705
EPRA Loan-to-Value = (a/b) 24.7% 25.8%
EPRA Capital Expenditure
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Acquisitions (including acquisition costs) 332 234
Forward fund developments 40,368 17,385
Like-for-like portfolio 5,076 6,148
Total capital expenditure 45,776 23,767
Conversion from accrual to cash basis (4,849) 5,575
Total capital expenditure on a cash basis 40,927 29,342
Like-for-like Rental Growth
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Opening contractual rent (a) 56,557 55,476
Rent reviews 2,125 2,080
Re-tenanting of properties – 39
Like-for-like rental growth (b) 2,125 2,119
Acquisitions and developments 2,819 1,019
Disposals (2,676) (2,057)
Total movement (c) 2,268 1,081
Closing contractual rent = (a+c) 58,825 56,557
Like-for-like rental growth = (b/a) 3.8% 3.8%
98 Target Healthcare REIT plc
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%
33%
2014
2024
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.
DATA CENTRE
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
residental care.
• Societal shift means less elderly
care provided within families.
2. Real estate standards
• Resident and family expectations
on accommodation quality
are increasing.
• Only 33% 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
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.
441k
beds
400k
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 2024.
Supply and demand
15
10
5
0
0
5 10 15 20 25
Total Return (per annum) %
< Reduced risk Risk (standard deviation) Increased risk >
Industrial
THRL Portfolio
Office
Primary Healthcare
Retail
Gilts
Residential
All property
Healthcare
Equities
Real Estate Equities
Source: MSCI, based on annual index to 31 December 2023.
Ten year total return vs standard deviation 2014-2023
254k
shortage
146k
beds
Total supply Total demand Fit-for-
purpose
supply
99Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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 95.
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 95.
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 pages 96 and 97.
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 97.
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 Note
8 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 96.
GLOSSARY OF TERMS AND DEFINITIONS
100 Target Healthcare REIT plc
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.
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 96.
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 28 and 29 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.
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 95.
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.
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 92 and 93.
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 95.
* Alternative Performance Measure.
GLOSSARY OF TERMS AND DEFINITIONS CONTINUED
Corporate Terms continued
101Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
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. All
EPCs 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 80 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 2024, closing at 82 homes on 30 June 2024.
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 at 30 June 2024 was 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.
102 Target Healthcare REIT plc
Directors
Alison Fyfe (Chair)
Michael Brodtman
Richard Cotton*
Vince Niblett**
Amanda Thompsell
Registered Office
AIFM and Investment Manager,
Company Secretary and Administrator
Target Fund Managers Limited
Glendevon House
Castle Business Park
Stirling FK9 4TZ
Legal Adviser
Dickson Minto
Level 4 Dashwood House
69 Old Broad Street
London EC2M 1QS
Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
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
CORPORATE INFORMATION
103Annual Report and Financial Statements 2024
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CORPORATE
GOVERNANCE
STRATEGIC
REPORT
NOTES
104 Target Healthcare REIT plc
NOTES
Target Healthcare REIT plc Annual Report and Financial Statements 2024
Target Healthcare REIT plc
Level 4 Dashwood House
69 Old Broad Street
London EC2M 1QS
www.targethealthcarereit.co.uk