Target Healthcare buys Cheshire development site for £9.7m

Specialist care homes investor Target Healthcare has completed the acquisition of a new development site in Cheshire for £9.7m, including transaction costs, as it continues to deploy the proceeds from its recent oversubscribed capital raise, it announced on Monday.

The London-listed company also confirmed that it had now completed on the three previously-announced acquisitions located in Yorkshire and Wales.

In addition, it said the construction of its care home development in Merseyside had reached practical completion.

Looking at the Cheshire acquisition, Target said it acquired a development site and entered into a forward-funding agreement for the development of a new elderly care home in Rudheath.

The completed care home would be let to an existing tenant, L&M Healthcare, on a 30-year lease.

Target said the net initial yield on the transaction was consistent with its current portfolio average.

Planning consent was received in October, with the development phase expected to take 16 months.

The property would provide full en-suite wetroom facilities, in line with Target Healthcare's strict investment criteria, together with large public spaces and a high-quality fit-out.

The development was to be undertaken on the basis of a fixed-price contract with the developer, a sister company of L&M Healthcare.

Target said the completed property would benefit from the “favourable” underlying demographic and wealth characteristics of the local area, and had been pre-let on a full repairing and insuring lease with annual RPI-linked rent increases, subject to a cap and collar.

Consistent with its previous forward funding opportunities, the group said it would earn interest through the construction phase.

It noted that L&M Healthcare currently operates five high-quality care homes across the North West of England, including Hulton Hall - a 74-bed care home in Preston, Lancashire owned by Target, which opened late in the summer of 2019.

Meanwhile, Target said it also completed the acquisitions of two care homes in Yorkshire and a third home in Wales.

The two separate acquisitions were previously announced on the exchange of contracts in November 2019 and September 2018, respectively.

It said the Yorkshire homes in Scarborough and Pudsey would be leased to a subsidiary of Burlington Care - an existing tenant which operates care homes in Yorkshire, North Lincolnshire and the North East of England.

The home in Newtown, Wales would be operated by Sandstone Care - a new tenant of the group - thus adding further diversification to the portfolio with its portfolio of homes now being operated by 28 different tenants.

Finally, Target said it had reached practical completion on the development of a 55-bed care home in Birkdale, Merseyside, under a forward funding agreement.

The home, which is due to open this month, would be operated by Athena Healthcare Group - an existing tenant.

“We continue to identify and invest in modern, purpose-built care homes to grow the portfolio, leveraging our experience and proprietary research capabilities and at yields underpinning our ability to consistently deliver attractive returns for shareholders,” said John Flannelly, head of investment at Target Fund Managers.

“The Cheshire development follows the £81.3m of acquisitions announced in November, meaning we have now completed on the pipeline transactions identified at the time of the September fundraise.”

Flannelly said the transactions demonstrated the firm’s ongoing commitment to support the development of high-quality care homes across the country, further strengthen its relationships with existing tenants, while allowing it to support a new operator with proven expertise in the care sector to enter the care home market.

“We are working on a number of other opportunities that, subject to terms being agreed and diligence successfully completed, would see the remaining available capital being deployed in the first quarter of 2020.”

At 0916 GMT, shares in Target Healthcare were down 0.82% at 121.5p.