Target Healthcare REIT is “cautiously” re-entering the investment market as it eyes an upturn in deal activity.
Chairman Malcolm Naish said the care home investor is preparing for competition to increase for assets in the coming months, but added that Target Healthcare will walk away from deals that others are willing to overpay for.
“There continues to be a number of buyers active in the investment market, though perhaps less generalist activity currently, given other distractions,” he said. “We would anticipate competition from this cohort to quickly return given the low yields on government and corporate bonds at present, and their forecast curves. While this provides challenges to us in identifying and securing new assets, it can only be positive for the sector and for returns on our existing portfolio.”
He added: “We continue to identify pipeline assets and believe we can grow and enhance the portfolio. We will not compromise on our strict investment criteria, with a particular focus on setting sustainable rent levels – we will lose out on assets if others are willing to pay higher capital values based on higher rents, thereby accepting more risk from lower rent cover. We don’t believe this to be a prudent long-term strategy for us, nor for tenants.”
Target Healthcare secured £80m in an equity issuance in September 2019 and has taken on new debt during recent months.
Naish’s comments came as the company published its results for the 12 months to 30 June. The company posted EPRA NAV per share of 108.1p, up 0.6%, NAV total return of 7%, down from 2019’s 8.1%, and a profit of £31.6m, up almost 6%.
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