Target Healthcare REIT H2 2026 Earnings Report

Target Healthcare REIT EPS Results

• Actual EPS: GBX 13.32
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Target Healthcare REIT Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Target Healthcare REIT Announcement Details

• Quarter: H2 2026
• Date: 9/23/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, September 22, 2026
• Conference Call Time: 3:30AM ET

Our investment objective is to provide shareholders with an attractive level of income together with the potential for capital and income growth, from a portfolio of UK care homes, diversified by tenant, geography, and resident payment profile. We only invest in modern, purpose-built homes.

Target Healthcare REIT H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong financial performance: Adjusted EPRA earnings per share rose 7.6% to £0.0654, EPRA NTA per share increased 6.5% to £1.221, and the company reported a 12% total accounting return. The dividend increased 2.5% to £0.0603, with 109% dividend cover.
• Positive Sentiment: The portfolio remained defensive and high quality, comprising 87 modern care homes with £61.1 million of contracted rent, a 26-year weighted average lease term, inflation-linked rent reviews, and 100% EPC A or B and en-suite wet-room coverage. Mature-home rent cover held at a strong 1.9x, while rent collection returned to 100%.
• Positive Sentiment: Management sees substantial long-term growth potential from demographic demand and a shortage of fit-for-purpose care beds. The pipeline exceeds available capital, with opportunities generating net initial yields above 6%, and the company has £75 million of committed capital plus debt, equity, and recycling options to fund expansion.
• Neutral Sentiment: Capital recycling and tenant diversification remain priorities, with 11 assets sold at an average 11% premium and exposure to the largest tenant reduced from 16% to 8.7%. However, management remains cautious about deployment timing and plans to keep leverage conservative, targeting an LTV of roughly 25%–30% rather than materially exceeding 30%.

Presentation

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Good morning, everybody. Thank you for coming to this morning call, and welcome to our presentation of our results for the year ended 30th June 2026. My name is Kenneth MacKenzie. I am the Founder and Chief Executive of Target, and I am delighted to be making this presentation with some colleagues. There has actually been a little bit of a change in our presentation team compared to this time last year. James, fortunately, is still here with us, but he is now in the role of Managing Director, which we announced over the last few days. We also have with us, though he is not going to be speaking so much today, Calum Bruce, who has come into the role of being Head of Investor Relations.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

It is actually quite interesting having Calum here with me, because way back in 2008, when I was coming up with the idea of creating funds to invest in modern purpose-built care homes, the first person I met was Calum Bruce, who introduced me to the head of Scottish Widows. It is quite interesting to see that long connection. As you know, our CFO resigned a few months ago, Alastair. I am glad to say that we are making good progress, and we expect to have an announcement soon in terms of our new CFO. Today you are having Kenneth presenting the numbers to you. I am glad that I am still a chartered accountant. These are a good set of results for us to present to you all. I look forward to taking you through them today.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

It is all based on the compelling investment case, which you can see on the next slide. We have a robust defensive portfolio. As you know, it is made up of modern purpose-built care homes that are underlying inflation-linked rental increases. It is also based on a team creating these results. We have proven asset management. We are a specialist team. We are a pretty unique team. When I speak about team, I am going to say everything from the investors, the investment team, the asset management team, the finance team, and all of you guys yourselves, investors in us, who enable us to do this together with our advisors. The sector tailwinds that we anticipated back in 2008 are the tailwinds that we are reaping the fruit of today, and we have another 25 years of growth to go. We have a wonderful opportunity.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

With all of that, we have market-leading long-term returns. Since launch in 2013, as you will see in that box on the right-hand side, this is the highest total accounting return of 12% in this year under review. In the 13 or 14 years we have been doing this, I remember saying that I thought we could do 7.5% when I did the IPO back in 2013. If this would not humble you, here is 7.8% annualized over the whole period. What are the, next slide, financial highlights for the year to 30th June 2026? The annualized contractual rent went up by 3.7%, like-for-like growth, and that resulted in adjusted EPRA earnings per share increasing by 7.6% to GBP 0.0654, and the dividend per share that we paid, which had risen by 2.5% to GBP 0.0603.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

The EPRA NTA per share rose 6.5% also to GBP 1.221, and all of that created this quite remarkable total accounting return of 12%. Next slide. It is all predicated on the results. No, not the results, the assets. The care homes that we buy performing well and how they create income and how the value increases. You will see on this slide that for the MSCI UK Annual Healthcare Property Index, we have outperformed it every one of the last 10 years. In fact, we are first out of 33 over three years, second out of 12 over 10 years, and the annualized return on standing assets of just around about 10.5% versus 7.6% from the index. I am sure you will agree that these are quite compelling.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

I think it is really important for us, as we consider the company, to stay focused on the simple and important things and the fundamentals of this business, and that is what your management team is doing. I will now hand over to James, who is going to take you through some of the results highlights.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Thanks, Kenneth. I will update you regarding the composition of the portfolio at the year-end, and then talk through some of the highlights of the year. You have a portfolio of scale with robust rental income stream differentiated by quality, modernity, and stability. As at the year-end, the portfolio has 87 homes and contracted rental income of GBP 61.1 million, with a total value of GBP 924 million and 6.21% EPRA topped-up net initial yield. It is let to 31 tenants, giving you a diversified income stream, and as I will talk about more in the presentation, your portfolio is differentiated by its quality. 100% have en suite wet rooms. 100% have EPC ratings of A or B. 100% have annual inflation-linked rental increases. Your income stream is long-term. The weighted average unexpired lease term is 26 years for this portfolio.

[James MacKenzie, Managing Director at Target Healthcare REIT]

2026 has been a strong year, and as manager, we have been very busy. We disposed of 11 assets over the year for, in total, GBP 97 million, representing an average premium of 11% and an implied net initial yield of 5.5%. These disposals, which facilitated a reduction in the group's exposure to its largest tenant whilst adding GBP 0.016 per share to the EPRA NTA, primarily resulted from the sale of nine assets in late October last year. We also acquired four standing assets for GBP 45 million. A forward commitment to acquire a fifth home for GBP 13 million once built, which we expect to complete in the next few days. A forward-funded development which will total GBP 15 million over the build period. One of our assets in development reached practical completion during the year. This deployment has improved the overall diversification of the portfolio.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Additionally, the funding of new developments provides the group with access to new high-quality assets and maintains the average lease length. This also has the benefit of increasing the quantum of quality real estate available to this important sector. We have also been busy in the day-to-day asset management side, too. We secured the recovery of agreed rent arrears of GBP 1.9 million, contributing a non-recurring GBP 0.0018 per share to the group's adjusted EPS. We completed the retenanting of a total of six assets in the year, all at unchanged or improved rental levels, and received a GBP 1.4 million surrender premium from one of these retenantings.

[James MacKenzie, Managing Director at Target Healthcare REIT]

This activity, during which there was 100% tenancy continuity, plus the crystallization of a performance-linked rental uplift incorporated in the lease as part of a retenanting in a prior year, has resulted in an increase in capital values of 6.5% for the retenanted homes, with the potential for further yield tightening should the relevant homes evidence the expected operational improvement. The portfolio has returned to 100% rent collection by the year-end. I will now hand back to Kenneth to talk through the financial performance of the group.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Okay, so let us go to the slide with the profit and loss accounts, which as you can see, show some strong results. The rental income for the year is GBP 400,000 less than the prior year. As James made reference just now, we made some significant disposals, which actually took place in the first half of the year. So there is a small fall in the total rental income and indeed a little fall from the development funding. But the costs have been reduced a little bit. As you can see, the operating costs are slightly lower, and it is pleasing to see that in terms of what is called here credit loss allowance, I was actually suggesting to the guys we should be saying it is a credit loss credits or some kind of thing, because with the recovery of the provision from the previous year, we are in credit on that.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

So the total expenditure, as you can see, has a pleasing reduction, down from GBP 13.3 million in the prior year to GBP 11.1 million. The net financing costs have also reduced as we have had lower gearing levels. All of that has resulted in adjusted EPRA earnings improving from GBP 37.7 million to GBP 40.6 million, and adjusted earnings, EPRA earnings per share, have increased from GBP 0.0608 to GBP 0.0654, a 7% increase. With all of that, the EPRA cost ratio has also dropped a little, returning to historic levels if non-recurring rent arrear recovery is excluded. The dividend declared for the period was, as you know, GBP 0.0603, and the dividend cover for the year under review, 109% compared to 103% last year. So I am sure you will agree that these are encouraging figures.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

On the next slide, we take you through a bridge to see the movement in annualized contracted rent. Opening rent at GBP 61.2 million, like-for-like increases of 2.3%. Development added a little bit of rent. With the disposals, of course, we lost some rent, but we made some acquisitions, so at the end of the year, the rental level is almost the same. You will note that there was a 3.7% increase in the rent like for like for the assets that we held. On the next slide, we can speak to the balance sheet. I remember my previous CFOs all saying that it is a pretty simple balance sheet. So this Highland accountant will also tell you that it is indeed a pretty simple balance sheet. There is the valuation of the portfolio.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

It is valued quarterly, and you will see that at the end of June, it is valued at GBP 924.1 million, a like-for-like movement of 4.9%. We have some cash in the balance sheet. We have some net current liabilities. Of course, the rent is paid in advance. With the debt level, EPRA Net Tangible Assets of GBP 757 million and EPRA NTA per share GBP 1.221, being a 6.4% increase in the EPRA NTA per share compared to this time last year. All of this with a net loan to value at the end of June 2026, down 5.7% from 21.8% in June 2025 to 16.1%. The next slide gives you a portfolio valuation bridge. It follows very similar to what I said previously. Opening value of just under GBP 930 million, like-for-like increase from rent reviews from a tiny bit of market yield shift, and from disposals and asset management gains.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

That is quite a significant figure. You can see this year, GBP 12 million. We made some disposals and had some surrender premium proceeds and the acquisitions and developments resulting in a year-end figure of GBP 924.1 million. On the next slide to the debt summary. We have a very good debt book. We have a long-term debt provider with Phoenix, two facilities for a total of GBP 150 million, maturity 2032 for GBP 87 million of it and 2037 for GBP 63 million of it, interest rate of GBP 3.2 million. Then facilities with both The Royal Bank of Scotland and HSBC, term loans with each of them of GBP 20 million and GBP 30 million. These are hedged for five years, and they are currently out to 2029 with one year to go. So the weighted average term to maturity of our drawn debt at June 2026 were 5.1 years.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Actually, since then, we have extended the term of the two bank facilities, and it is now 5.6 years after extending. The total weighted average cost of drawn debt at June 2026, 3.89%. Let me take you through a bridge on the next slide for the growing net tangible assets per share. You will see, as we started the year that we were at GBP 1.148. Revaluations of property added GBP 0.049, tiny bit added for market yield shift. Disposals and lease surrender premium added GBP 0.017. Then, of course, whenever we buy things, we write off the acquisition costs, some property revaluation coming, and the earnings of the business created GBP 0.065, and we paid out GBP 0.06 to you, our investors, resulting in end of year NTA per share of GBP 1.221.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

With that presentation of the finance results from an old Highland accountant, I will pass back over to James to take you through the portfolio performance.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. Thanks, Kenneth. Firstly, let me share some insights into the portfolio and how the operators are performing. Here is a busy table of portfolio metrics. I will discuss the position regarding rent cover and average weekly fee increases in more detail in the following slides. Overall, the group's property portfolio continues to perform well. Our operators are delivering great care for residents at appropriate fees. The private pay proportion has remained high at 78% or 79% in the last two years. Staff costs as a percentage of total fees have remained stable, and agency costs have reduced further again this year. The key measure of the performance of operators of the portfolio is rent cover.

[James MacKenzie, Managing Director at Target Healthcare REIT]

The group's average rent cover for the last 12 months for the mature homes in the portfolio, that is homes which have been trading for greater than three years, has remained stable at a high of 1.9x, the level it has been at now since the start of 2024. This level of rent cover is driven by the increases in average weekly fees that operators have been able to make, which covers the impact of inflation on their costs, a significant proportion of which are staff costs. It is also driven by good levels of resident occupancy and by the sustainable rental levels. This level of rent cover enables operators to invest in the home and to keep it up to standard and invest in the care that they provide. It maintains stability in the portfolio.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Turning to consider average weekly fees which operators charge their residents, average weekly fees have continued to increase. As you can see on this slide, over the last six years, the cumulative increase in average weekly fees is 60%, compared to the cumulative increase in RPI of 42%, showing that operators have been able to pass on the increase in their costs to residents. Remember, our operators are providing needs-based care, and there is GBP 6 trillion of net wealth in the over 65s to fund these weekly fees. While these average weekly fees have been increasing, resident occupancy has remained stable over the last couple of years at around 86% for our mature homes. This aligns with the NHS Capacity Tracker occupancy data for England based on total beds in the market, which is currently at 86.8%. Of course, the group's portfolio has always been fully let since IPO.

[James MacKenzie, Managing Director at Target Healthcare REIT]

This is just resident occupancy that we are talking about here. How does your portfolio compare to the total market of 470,000 beds in terms of the underlying real estate? Well, for a stable long income, you want your portfolio to be modern and fit for purpose, and you have a significantly more modern portfolio than the market. This is a premium portfolio. The average group home has significantly more space per resident than the market at 49 sq m. 100% have en suite wet rooms enabling our seniors to be cared for with the dignity and respect we would want for ourselves. 100% have EPC ratings of A or B. In terms of the performance of our operators, the average Tripadvisor style rating on carehome.co.uk is 9.5 out of 10 compared to 9.2 for the market.

[James MacKenzie, Managing Director at Target Healthcare REIT]

In summary, you have a great portfolio as a result of our active management, buying and funding prime real estate and improving the assets you hold. Your income comes from 31 different sources, and the diversification amongst our tenants has improved since 30 June last year with our exposure to our previous largest tenant reducing from 16% to 8.7%. This pie chart shows the exposure we have to the Top 10 tenants and that the other 21 tenants make up 36% of your income. Turning now to the group's opportunity, ambition, pipeline, and platform. Firstly, let me talk about the opportunity. There is a significant supply shortage of fit-for-purpose beds. That is, beds with en suite wet rooms. Overall bed numbers in the U.K. have been around about 470,000 for many years. Each year, approximately 6,000 beds leave the market.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Typically, about 200 old homes with 30 beds each which are not fit for purpose and can't be upgraded. Homes with facilities like those shown in the pictures on this slide. These homes are replaced by circa 6,000 new beds, each with en suite wet rooms, and that's about 100 homes with 60 beds each. Given the demographic tailwinds, there is a need for many more fit-for-purpose beds to enter the market. Of the circa 470,000 available beds, only 36% are fit for purpose with an en suite wet room, and the company owns 3.5% of the market of these beds. Therefore, there is plenty of scope for growth. As you will all be aware, the demographic tailwinds for the company are strong.

[James MacKenzie, Managing Director at Target Healthcare REIT]

The number of over 85s is forecast to increase from 1.8 million in 2025 to 3.6 million by 2050, and one in eight over 85s typically requires long-term residential care. Multiple needs necessitate residential care rather than domiciliary care. This is needs-based care that our operators are providing. The sector's supply and demand dynamics further reinforce our investment strategy. Turning to our growth ambition, the board aims to pursue growth in the property portfolio. Its desire is to scale accretively. The company has a specialist platform. It is the sole U.K.-listed specialist in care homes. It is supported by a specialist investment manager with a proven track record and in-depth experience of operating homes, delivering an annualized total accounting return of 7.8% since IPO. The company has a strong and growing pipeline, and I will talk through this in more detail on the next slide.

[James MacKenzie, Managing Director at Target Healthcare REIT]

The company has GBP 75 million of committed capital available for further investment. The group also has a variety of other capital sources available to support its growth ambitions. Debt, where the lower cost of financing would enhance returns without exceeding a loan-to-value ratio of circa 30%. Equity, where issuance and deployment in identified opportunities would be enhancing to earnings and support dividend growth. Capital recycling, similar to the activity demonstrated in the current year, where disposal proceeds can be redeployed into earnings-enhancing opportunities whilst maintaining or enhancing the quality of the property portfolio. The board will also continue to consider alternative financing and investing options that offer earnings-enhancing opportunities. The group has a strong and growing pipeline of high-quality, purpose-built care homes. The pipeline, which has increased since the half-year results presentation, is significantly in excess of available capital.

[James MacKenzie, Managing Director at Target Healthcare REIT]

It is made up of accretive investment opportunities at a net initial yield in excess of 6%, spread across diverse U.K. geographies with a balanced mix of both existing and new operators. It includes high quality, strongly performing existing U.K. care homes, all with en suite wet rooms, forward fundings in attractive locations, forward commitments, and one or two development opportunities earning an additional yield of circa 100 basis points. As a result of our close relationships with tenants, there is always several that would like to add a new home to their operating group, and given our strong reputation in the sector as the longest-serving investment team in the U.K. market, we expect to see every relevant care home transaction in the market. The acquisitions will follow our measured approach of identifying best-in-class properties in the right geographical locations, which are leased at sustainable rental levels and acquired at appropriate yields.

[James MacKenzie, Managing Director at Target Healthcare REIT]

As Kenneth mentioned, the group currently has an LTV of around 16%, which is below our long-term target, and we expect this to increase to 25%-30% as we acquire assets in the pipeline. In Target, you have a manager with a lot of experience and specialist expertise in U.K. care homes. We have a multidisciplinary team combining operator, clinical, property, and finance experience with over 16 years track record and 16 years of U.K. care home data collection. We have four team members who have experience of being directors of care operators, three who have been home managers, either at an individual home or a regional level, two nurses, three who are surveyors or have construction expertise, three corporate financiers, and 15 chartered accountants. Your manager is highly engaged in actively managing the portfolio.

[James MacKenzie, Managing Director at Target Healthcare REIT]

We carried out about 250 home visits in the year and have got rent collection back to 100% for the portfolio. 100% of respondents to our annual tenant survey said that they would recommend the manager to others. We are continually considering how the portfolio can be improved and have taken forward in the year a four-bedroom extension at one home and the installation of PV panels at four homes. We have built a strong and growing pipeline of assets in excess of available capital from our extensive networks. Our expertise means that we are well-placed to navigate the operational issues within the sector, some of which we have set out in a slide in the appendix to this presentation. This is particularly important in light of the potential for social care reform under Prime Minister Andy Burnham's leadership.

[James MacKenzie, Managing Director at Target Healthcare REIT]

As we have said before, we would welcome new solutions to the issues in social care. We agree it is sensible to bring forward the Casey Report to 2027. We believe that responsible private operators and long-term investors will continue to play a key role in ensuring that everyone can access high-quality care, providing dignity and security in later life, benefiting residents and society. I will now pass back to Kenneth to wrap up the presentation.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Thanks, James. It has been a real privilege to talk you through all that has been going on in the year under review. I think you can see that we are well-positioned to grow. As I think about the strategic outlook, and indeed as I was reflecting back over the last 20 years of thinking about this kind of vehicle, we continue with an unwavering commitment to the mission of investing in care and delivering returns. That is absolutely what we have done. We have been in the forefront of bringing appropriate real estate for our seniors. By investing in these modern purpose-built homes with en suite wet rooms, the kind of product that we would all want to be in if we were at that stage of our life, we have delivered long, stable returns.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

You can see the returns that we have delivered, even in the difficulties of the current corporate climate. We have a desire to continue to scale, albeit we wish to do that accretively. We have loads of ability to deploy capital. We have a highly competent investment team and asset management team to run it. We have a fabulous group of accountants. It was interesting to see that slide a couple of slides ago that we have 15 chartered accountants. I wish one of them could have come and done the presentation on the numbers rather than me. Actually, I really enjoyed doing it. We are delivering growing earnings and a progressive dividend, a 3% increase announced for the coming year.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

All of that is predicated on having a robust defensive portfolio, with great asset management, with fabulous sector tailwinds. We are very thankful that we have delivered these good returns. With all of that, we want to thank you for your interest. We will be delighted to take your questions.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. We have a few questions that have come in during the presentation, so let me just take these in the order they've appeared. First question, you have spoken about competition in the investment market and the impact of bank lending. Meanwhile, interest rates have been rising. Can you talk about what changes you've seen in the composition or mix of the investment pipeline in terms of vendors, the mix of operational or development assets? How quickly do you think you can commit the available capital?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Yeah. It's always dangerous for us to give timing on the commitment of the capital, because we're always trying to take a long-term view and get the right assets and the right 10-minute drive times. I would say there has been some more bank debt available, and we're aware of that. We continue to see good opportunities to deploy the capital that we have.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great, thanks. Next question. You've outlined a clear need for further investment in this area, given the growing demographics and lack of supply. Under what circumstances, if any, would you consider increasing the LTV limits or carrying out a placing for funds from new and existing shareholders to accelerate opportunities in the pipeline?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Yeah. I remember five, 10 years ago speaking about wanting to be a long-term boring income fund, and that we are conservative by nature. That means that we will be very cautious about taking our debt levels much beyond the 30% level. If the markets enables us to place equity, then of course we will be delighted to do that, and we keep monitoring that opportunity.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. Next question. Thanks for the thorough presentation. In terms of the care home operators, have some of the difficult cost headwinds, National Insurance increases, et cetera, now gone into the rearview mirror? Are operators feeling a bit more confident in their respective futures than a year or so ago?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Yes. You will remember a slide in the presentation, which gives you a kind of six-year view of the income level and the percentages of that income level. It is slide 16A, I think, which highlights that the operators have coped well with cost increases. We do anticipate that the operators are in a good place. I think the other thing, and I think it is in the appendix to the slides, and we have said this from the very beginning. Care homes are operational businesses. The residents are in some degree of distress because they are confused, and they can no longer live in their own homes. The families are in some degree of stress because they loved granny or grandpa when they could play with them and be good fun.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

The employees are all on a bit above minimum wage, but they have to deal with the residents who are in some difficulty. It is very much an operational business, and we are strongly of the view, and it is why we have so many extra people within our business, going around the care homes and speaking about the operational issues, that you will never have perfection in operating a care home portfolio. There will always be a couple of homes where there is something going on. In the main, are they in a good place? Are the prospects in front of them good? Absolutely. They benefit from the same tailwinds as we see at the kind of portfolio level.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Thank you. Next question is on a similar theme. Average rent cover has been at a high level for some time. You continue to have been an active manager of the portfolio. Have you seen much move on a tenant-by-tenant basis?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Yes, absolutely. That's the average. We have some lower and some higher, and some of the lower ones this year are some of the higher ones next year and vice versa, because these are operational businesses. The general theme is very positive.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. There's one more question coming in here. I think you said the average weekly fees have increased 8%. Have the operators seen much difference between the private funded market and local authority funded?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Our portfolio predominantly gets its income from the private funded market. I think there's only 21%, 22% coming from local authorities. We see private fees rising. The interesting thing to remember in relation to care homes, it's all about 10-minute drive times. It's not tenant to tenant. It's all about what is the local supply and demand. We do see good opportunity for our tenants across the piece.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. There's one more question here. You've made a further GBP 26 million capital commitment. Can you say more about that?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Oh, I can tell you every time, every capital commitment, everything. It's only modern purpose-built care homes somewhere in the U.K. That's all we do. I can confidently tell you that it's got excellent EPC ratings, that it's got 100% en suite wet rooms, that it's a tenant that we have got to know and love and respect and are happy to work with. And actually, we added one or two new tenants in the last couple of years. We've added some superb tenants in the last two or three years, and we have a whole cadre of good ones as well. Thank you. Well, there's another question here, I think, about how likely do you view an improvement in the share price to match the excellent dividend. Well, there we go. That's a great question that we are not able to answer.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

But we understand why you would want to ask that question. Thank you.

[James MacKenzie, Managing Director at Target Healthcare REIT]

Great. The last question we have is, you mentioned the possibility of further capital recycling that would generate additional value and provide an opportunity to refresh the portfolio. By refresh, are you thinking mainly about the age of assets or other factors? The nine-home sale enhanced tenant diversification, is that also a capital recycling consideration?

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

All of the above. Yeah. All of the above. If we're going to be a modern purpose-built portfolio, I think two or three years ago, we sold some fully en suite facilities, but they were the oldest assets in the portfolio, and a little bit about the size of the rooms and the age of the rooms, and for that reason, we keep refreshing. Thank you.

[James MacKenzie, Managing Director at Target Healthcare REIT]

There are no more questions.

[Kenneth MacKenzie, Founder and CEO at Target Healthcare REIT]

Well, thank you very much for listening to us. Thank you very much for supporting us, and we pray and trust that we will continue to deliver, as we set out to do some 13 years ago, a long boring income fund that will be stable and productive for our investors. Thank you.

Participants

Executives

• Kenneth MacKenzie, Founder and CEO
• James MacKenzie, Managing Director