Target Healthcare Reit, an investor in UK care home assets, intends to seek admission to trading on the premium segment of the Official List and the London Stock Exchange’s Main Market by way of a placing of a minimum of 45 million new ordinary shares at 100p per share.
The company anticipates that dealings in its new ordinary shares will commence on 7 March.
Dickson Minto is acting as sponsor and legal adviser to the issue, and Winterflood Securities is acting as broker.
The company seeks to raise in excess of GBP50m from institutional investors and wealth managers. The offer period closes on 4 March 2013.
Target Healthcare intends to invest the net proceeds of the placing in a portfolio of purpose built care homes with rents set at a level based on a sustainable trading performance. It will utilise Target Adviser’s specialist healthcare asset and fund management expertise to source and actively manage properties which meet the investment operating criteria of the company while seeking to maximise returns to shareholders.
The company expects to be fully invested within a period of six months after admission, having already agreed non-legally binding indicative terms to acquire a portfolio of three properties for consideration in the region of GBP14m.
As the UK population ages, the number of people aged 85 and over is expected to double over the next 20 years. On average around 15 per cent of this population group require residential care and as a consequence there will be an increased need for good quality care homes. Currently around 140 new care homes are being registered each year, while, according to Bupa, around 81,000 beds could be lost over the next ten years due to older care homes closing and other factors.
The growing market for quality care homes makes Target Healthcare confident of being able to deliver returns to investors of six per cent per annum in dividends once fully invested, while also offering investors the potential for capital and income growth. It is expected that dividends will be paid quarterly and will be fully covered once fully invested. The shares will be eligible for inclusion in ISAs and Self Invested Personal Pensions (SIPPs).
Target Advisers will provide specialist property and asset management services to the company. Target Advisers is a healthcare property manager with an existing track record in the UK care home sector. Its managing partner, Kenneth MacKenzie, has many years of healthcare investment and works with a close knit team of experienced healthcare property professionals.
Over the past three years, Target Advisers has invested more than GBP75m in UK care home assets via the Kames Target Healthcare Fund, an unregulated fund in the form of a unit trust.
To limit risk and maximise possible returns, Target Healthcare will only invest in assets whose tenants are backed by several sources of income, including private paying residents, and residents either supported by local authorities or the NHS.
Target Advisers will assess each home’s economic viability based on local competition, size of the local market, and balance sheets that are able to maintain the upkeep of the homes to agreed high standards. Each home will be visited regularly by Target Healthcare and there will be frequent dialogue with tenants.
The board of directors of Target Healthcare Reit will comprise Malcolm Naish, chairman, who is the former head of real estate at Scottish Widows Investment Partnership; Gordon Coull, a former partner of the asset management practice of Ernst & Young where he specialised in investment trusts and property; Professor June Andrews, director of Dementia Services Development Centre, Stirling, a world renowned dementia specialist; and Tom Hutchison, who has considerable experience in the US healthcare market.
Kenneth MacKenzie, managing partner of Target Advisers, says: “We are delighted to have already received strong support from potential investors and we are confident that we will raise GBP50m. The Target Healthcare Reit strategy is all about investing in best-in-class care homes and operators over the long term, creating stable inflation linked returns from a sensible, measured investment strategy. We are launching at the right point in the property cycle in terms of yield rates and sustainable rents, and also expect to benefit from the strong growth market for quality care homes run by principled, professional operators.”