Results snapshot: 6.8% total return and a 4.0% lift in EPRA NTA
Target Healthcare REIT has posted a strong first half to 31 December 2025. Total accounting return – the change in EPRA NTA plus dividends reinvested – came in at 6.8% (2024: 4.5%). EPRA Net Tangible Assets rose 4.0% to 119.4p per share, helped by valuation gains and profitable disposals.
Adjusted EPRA earnings per share increased 8.5% to 3.40p, aided by a non-recurring recovery of historical rent arrears worth 0.18p per share. Dividends for the period totalled 3.016p per share and were covered 113% by adjusted EPRA earnings. The quarterly dividend was raised 2.5% to 1.508p.
Key numbers investors should know
| Total accounting return | +6.8% |
| EPRA NTA per share | 119.4p (+4.0%) |
| Adjusted EPRA EPS | 3.40p |
| Dividend per share (period) | 3.016p – covered 113% |
| EPRA Cost Ratio | 12.7% |
| Portfolio valuation | £894.6 million |
| Contractual rent | £59.5 million (-2.7%) |
| Like-for-like rent growth | +1.8% (38 reviews at +3.8% on average) |
| Rent collection | 99% from a fully let portfolio |
| Rent cover (mature homes) | 1.9x |
| Spot occupancy (mature homes) | 86% |
| WAULT (weighted average unexpired lease term) | 26.3 years |
| Net LTV | 15.2% |
| EPRA LTV | 17.5% |
| Cost of drawn debt | 3.92% on average |
| Debt hedged | 98% of drawn debt hedged until at least Sep 2030 |
| Share price discount to EPRA NTA (period end) | 18.3% (97.6p vs 119.4p) |
What drove the performance
Premium disposals and smart reinvestment in Central Scotland
The team leaned into active investment management. Ten homes were sold for £93.9 million at an average 11.7% premium to June 2025 book value, implying a 5.3% net initial yield. Disposals and a surrender premium together added 1.8p per share to EPRA NTA.
Almost half of the proceeds have already been redeployed: £45 million invested into three modern, operational care homes plus a forward commitment to a fourth – all in prime Central Scotland – at a blended net initial yield in excess of 6%. Management flags a growing pipeline, with about £100 million of committed capital still to place and outline terms agreed on assets with indicative yields above 6%.
Robust underlying trading and re-tenanting wins
Like-for-like portfolio valuation increased 3.1%, driven by inflation-linked uplifts (+1.6%), gains on disposal (+1.0%), asset management including re-tenantings (+0.3%) and a small amount of yield tightening (+0.2%).
Rent collection improved to 99% as underperforming tenants were replaced and arrears were recovered. Mature home rent cover remains healthy at 1.9x, with spot occupancy at 86%. The tenant base is diversified – 32 operators across 86 properties – and deliberately weighted towards private pay residents at 77%, which helps absorb wage and cost inflation.
Earnings, dividend and cost discipline
Adjusted EPRA EPS rose to 3.40p. Note that 0.18p relates to a one-off recovery of historical arrears, so investors should not annualise that benefit. Even so, the dividend was well covered, and the Board lifted the quarterly rate by 2.5% to 1.508p. On costs, the EPRA Cost Ratio fell to 12.7% (15.4% on a Group-specific adjusted basis), reflecting operational efficiency and arrears recovery.
Contractual rent reduced 2.7% to £59.5 million because of net disposals, but like-for-like rental growth of 1.8% cushioned the impact. As the remaining proceeds are redeployed at >6% yields, management expects earnings momentum to improve.
Balance sheet and debt: low gearing with long-dated, fixed rates
Leverage remains conservative. Net LTV is 15.2% and EPRA LTV 17.5%. The Group refinanced shorter-term bank facilities on attractive terms, ending the period with a weighted average cost of drawn debt of 3.92% and an average maturity of 5.6 years. Importantly, 98% of drawn debt is hedged until at least September 2030.
Facilities total £280 million, including £150 million of long-term fixed-rate debt and £130 million of term and revolving credit facilities. Accordion options provide potential extra headroom of up to £70 million, subject to lender consent. If the identified pipeline is fully funded, LTV would move to around 25%, still within a prudent range for a long-lease, inflation-linked REIT.
Portfolio quality and sector tailwinds
This is very much a quality-first portfolio: 100% of rooms are fully en suite wet-rooms, 100% of assets are A or B EPC rated, average space per resident is a generous 48m², and 97% of properties are post-2000 build or significant redevelopment. The WAULT sits at 26.3 years – among the longest in the sector – providing visibility over future cash flows.
Macro-wise, the ageing UK population continues to underpin demand, with a clear trend toward modern, purpose-built homes. The portfolio outperformed the MSCI UK Annual Healthcare Property Index by more than 350 basis points in 2025 and has beaten it every year since IPO.
Valuation and my take for investors
At the period end, the shares traded at a discount of 18.3% to EPRA NTA (97.6p vs 119.4p). Discounts can persist, but they also offer potential upside if the market closes the gap as earnings rebuild through reinvestment and as sentiment towards REITs and interest rates improves. That is not guaranteed, but the ingredients – low gearing, long leases, inflation linkage, and disciplined capital allocation – are supportive.
Positives to like
- Active management delivering real value – disposals at an 11.7% premium and reinvestment at >6% yields.
- Strong balance sheet – net LTV 15.2%, 98% of debt hedged, and low average cost of debt at 3.92%.
- High-quality, modern portfolio with long WAULT of 26.3 years and sector-leading ESG and design metrics.
- Resilient operations – 99% rent collection, 1.9x rent cover, 86% mature occupancy, and 77% private pay exposure.
- Dividend growth with solid cover and room for earnings to improve as capital is redeployed.
Watch-outs and what to track next
- Non-recurring items helped H1 earnings. Look for the underlying run-rate as disposals and acquisitions bed in.
- Execution on the c.£100 million deployment pipeline – timing, yields and tenant quality will be key.
- Sector cost pressures – national living wage rises, food and energy costs, and any regulatory changes. The private pay bias helps, but public fee uplifts may lag.
- Share price discount – attractive on paper, but sentiment to REITs and interest rate expectations remain important.
Bottom line: quality portfolio, disciplined capital rotation, and growing income
Target Healthcare REIT has combined portfolio pruning, accretive reinvestment, and steady underlying trading to deliver a 6.8% total accounting return and a 4.0% NTA uplift. With low gearing, mostly fixed or hedged debt and a long, inflation-linked lease profile, the foundations look solid. If the team continues to recycle capital into >6% yielding assets and maintains near-full rent collection, earnings should nudge higher and the dividend looks well supported.
For now, the market is marking the shares at a notable discount to EPRA NTA. The coming quarters – especially the pace and pricing of reinvestment and the continuation of 99% rent collection – will tell us whether that discount starts to narrow.
