Target Healthcare REIT, which invests in modern, purpose-built UK care homes, has reported its annual results for the year ending 30 June 2023.

Pre-tax loss was £6.6 million compared with a profit of £49.1 million, driven by a swing to loss on the valuation of investment properties, according to a MarketWatch report.

Contractual rent increased by 2% to £56.6 million per annum (2022: £55.5 million), including a like-for-like increase of 3.8% predominantly driven by rent reviews. The weighted average unexpired lease terms figure was 26.5 years (2022: 27.2 years).

Target reported net asset value total return of minus 1.2% (2022: 8.1%), with valuation uplifts of 1.5% in the second half of the financial year predominantly reflecting inflation-linked leases.

The REIT’s EPRA net tangible assets per share decreased 6.9% to 104.5p (2022: 112.3p), while group specific adjusted EPRA earnings per share increased 18.8% to 6p per share (2022: 5.05p)

The dividend decreased by 8.6% to 6.18p for the year (2022: 6.76p), following a reduction in Q1 2023. Target announced an intention to increase the quarterly dividend for the year ending 30 June 2024 by 2% to 1.428p per share, representing an annual total dividend of 5.712 pence.

The REIT reported net loan-to-value of 24.7% as at 30 June 2023, with an average cost of drawn debt, inclusive of the amortisation of loan arrangement costs, of 3.7% and weighted average term to maturity of 6.2 years. It has £230 million of debt, being 100% of total drawn debt at 30 June 2023, fully hedged to maturity against further interest rate increases.

Target’s portfolio comprises 97 properties, consisting of 93 modern operational care homes and four pre-let sites let to 32 tenants with a total value of £868.7 million.

Target claimed its portfolio performance was resilient compared to the wider commercial real estate market with portfolio value decreased by £42.9 million, or 4.7%, to £868.7 million, including a like-for-like valuation decrease of 4.1% (2022: increase of 4.2%) versus 19% capital decline in the CBRE UK monthly index (all property).

Contractual rent increased by 2% to £56.6 million per annum (2022: £55.5 million), including a like-for-like increase of 3.8% predominantly driven by rent reviews The weighted average unexpired lease terms figure was 26.5 years (2022: 27.2 years).

Target’s chair Alison Fyfe said: “The board remains confident in the group’s prospects. Our portfolio consists of premium quality assets in a critical real estate investment class with compelling sector tailwinds.

“Our portfolio is performing strongly, benefitting from our initiatives to dispose of non-core assets, from further capex to refresh or enhance our real estate, from our active engagement with tenants, and from the more favourable trading environment. Our vacancy rate remains at nil with rent collection, rent cover and underlying resident occupancy all improving. Asset valuations remain stable, and our financing costs are well-protected from higher interest rates.

“This improvement in portfolio performance, when combined with our effective management of interest rate exposure, gives us confidence in the group’s earnings outlook, allowing us to increase our dividend in line with rental growth.”