Target boosts care home portfolio to 98 assets
Care home investor Target Healthcare has completed the acquisition of a portfolio of 18 operational modern care homes as part of a £173m investment push over the past three months.
Alongside the 18 care homes, which together provide more than 1,200 beds, the firm has also bought a site in Weymouth, Dorset, which is being developed by LNT Group. The development, scheduled for completion in the summer, will be operated by Chanctonbury Healthcare, on a 35-year, full repairing and insuring lease.
The acquisitions, which formed part of the pipeline of acquisitions announced as part of the company’s recent £125m equity fund raise, will take the group’s portfolio to 98 assets and 32 tenants once the development site becomes operational in June 2022.
Care home investor Target Healthcare has completed the acquisition of a portfolio of 18 operational modern care homes as part of a £173m investment push over the past three months.
Alongside the 18 care homes, which together provide more than 1,200 beds, the firm has also bought a site in Weymouth, Dorset, which is being developed by LNT Group. The development, scheduled for completion in the summer, will be operated by Chanctonbury Healthcare, on a 35-year, full repairing and insuring lease.
The acquisitions, which formed part of the pipeline of acquisitions announced as part of the company’s recent £125m equity fund raise, will take the group’s portfolio to 98 assets and 32 tenants once the development site becomes operational in June 2022.
The newly acquired portfolio of 18 homes generates an annual contracted rent of £9.2m, all of which has been collected throughout the pandemic, said Target Healthcare. The properties are held on long-term occupational leases with RPI-linked caps and collars, with a weighted average unexpired lease term of approximately 22 years.
Target Healthcare has also completed a £63m committed term loan facility with one of its existing lenders, Phoenix Group. The facility carries an aggregate fixed rate of interest of 3.138% per annum on a 15-year term, maturing in January 2037.
Following the drawdown of the loan, which is being used to finance the acquisitions and temporarily repay a portion of the group’s revolving credit facilities, Target Healthcare said it would have a net LTV of 21%; a weighted average term to maturity of its debt facilities of 7.5 years; and a weighted average cost of drawn debt, inclusive of amortisation of arrangement costs, of 3.08%.
The group has undrawn flexible debt facilities of £97m, which it said would be used to fund portfolio commitments and the acquisition pipeline. Its total borrowing capacity stands at £320m, comprising the new Phoenix facility, an existing £87m Phoenix facility repayable in 2032, and existing facilities with Royal Bank of Scotland (£70m repayable in 2025) and HSBC (£100m repayable towards the end of 2024).
John Flannelly, head of investment at Target Fund Managers, said: “We are pleased to have deployed the proceeds of the recent equity issuance so quickly, while agreement of the new 15-year term facility, the longest duration yet, will support us in our objective to provide stable returns to shareholders with long-term fixed interest costs matched against the inflation-linked long income that is generated from our portfolio.
“The acquisition of the 18-care home portfolio increases the size of the group’s existing portfolio by approximately 20% and demonstrates the group’s ability to undertake transactions of scale. The quality of the real estate, combined with the diversified nature of the tenant base and the attractive pricing, underpins our investment thesis for this acquisition.”
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