Target Healthcare REIT : Interim Report and Accounts for the six months ended 31 December 2022

Target Healthcare REIT plc

Interim Report and Financial Statements 2022

About Us

Responsible investment with a clear purpose - improving the UK's care home real estate

Key financial metrics for the period to, or as at,

31 December 2022

EPRA NTA per share (pence)1	Accounting total return (per cent)2
103.0 -8.3%	-5.4%
Adjusted EPRA earnings per share (pence)1	Dividend per share (pence)
3.01 +27.5%	3.38 +0.0%
Dividend cover (per cent)3	IFRS profit (£ million)
-34.2
89% +24bps

• 1 Alternative performance measure. See note 6 to the condensed consolidated financial statements for details.

• 2 Based on EPRA NTA movement and dividends paid, see the alternative performance measures on page 25.

• 3 Alternative performance measure. See page 24 for details.

Contents

At a glance 2

Key Performance Indicators and Corporate Activity 3

Chairman's Statement 4

Investment Manager's Report 6

Condensed Consolidated Statement of Comprehensive Income 8

Condensed Consolidated Statement of Financial Position 9

Condensed Consolidated Statement of Changes in Equity 10

Condensed Consolidated Statement of Cash Flows 11

Notes to the Condensed Consolidated Financial Statements 12

Directors' Statement of Principal Risks and Uncertainties 21

Statement of Directors' Responsibilities in Respect of the Interim Report 21

Independent Review Report 22

Glossary of Terms and Definitions 23

Alternative Performance Measures 24

Corporate Information 26

Interim Report and Financial Statements 2022 1

At a Glance

Portfolio snapshot

High quality real estate

Diversified

Long-term focus

Scale

Tenants

Weighted average unexpired lease term

100 homes £868m market value

33 tenants £57m contractual rent

26.8 years

Wet-rooms

Beds

Net loan-to-value

97%

6,701 beds1

25.1%

EPC ratings

Fee sources

Upwards only rent reviews

93% A-B 100% A-C

68% private3 32% public

99% inflation-linked 1% fixed/other

European Public Real Estate Association ('EPRA') Summary2

Six months	Six months
At 31 Dec 22	At 30 June 22	to 31 Dec 22	to 31 Dec 21
EPRA NTA per share (pence)	103.0	112.3	Adjusted EPRA EPS (pence)	3.01	2.36
EPRA NDV per share (pence)	109.6	116.2	EPRA EPS (pence)	3.89	3.08
EPRA 'topped-up' Net Initial Yield (per cent)	6.22	5.82	Adjusted EPRA Cost Ratio (per cent)	18.7	27.7
EPRA Net Initial Yield (per cent)	6.06	5.38	EPRA Cost Ratio (per cent)	15.7	23.3

• 1 At 31 December 2022. Will increase to 6,904 upon completion of the three development sites.

• 2 See note 6 to the condensed consolidated financial statements and the alternative performance measures on pages 24 and 25 for details.

• 3 Consists of 49% purely private fees and 19% 'top-ups' funded by a mix of public and private fees. All fee source figures are estimated based on information provided by tenants over the previous twelve months.

• 2 Target Healthcare REIT plc

Key Performance Indicators and Corporate Activity

For the six months ended 31 December 2022

Highlights

• • Principled investment exclusively in well-designed, purpose-built care homes

• • Long-term debt with interest costs hedged at attractive rates for the entire duration of 96% of the Group's drawn debt

• • Resilient performance from the diversified portfolio with robust rent collection

• • Four properties sold post period end for proceeds ahead of carrying value at both 30 June 2022 and 31 December 2022

Strategic ObjectiveTo grow a robust portfolio

Our focus is on real estate quality and stability for the long-term.

Sustainable returns from portfolio management with valued relationships as its core

To manage effectively within a complex sector as a highly engaged landlord.

Activity & Key Performance Indicators (KPIs) for the period

-

Portfolio valuation decrease of 4.8% by market value

• - Like-for-like movement of -5.5%, being -7.3% due to yield movements supported by 1.8% from inflation-linked rental uplifts

• - Increase of 1.2% due to acquisitions and development expenditure

• - Decrease of 0.5% due to the disposal of one non-core asset

• - Contractual rent increase of £1.6 million (2.9%), including 1.1% from net acquisitions

• - Wet-rooms 97% of portfolio, relative to national average of 31%

• - Diversified portfolio with 33 tenants across 100 properties

• - NAV total return1 of -5.4% (2021: 3.4%)

• - Portfolio total return on standing assets of -2.2% (2021: 4.8%)

• - Like-for-like movement

  - Contractual rent 1.8%

  - Market valuation -5.5%

• - Rent collection of 96%

• - Full recovery of rent outstanding from one tenant, of which £1.1 million had been provided

  for at 30 June 2022

  Regular dividends for shareholders

  Our focus is on disciplined & conservative financial and risk management to deliver earnings supporting quarterly dividends.

• - Earnings per share2: adjusted EPRA EPS 3.01 pence, EPRA EPS 3.89 pence

• - Dividends declared of 3.38 pence in respect of the period (2021: 3.38 pence)

• - Cost control3: Adjusted EPRA cost ratio 18.7%, EPRA cost ratio 15.7%

• - Dividend cover3 - 89% on adjusted EPRA earnings - 115% on EPRA earnings

• - Financial strength: Average cost of drawn debt 3.8%, average term to maturity 6.7 years, net LTV 25.1%, with interest rate hedged on 96% of drawn debt until expiry

  To achieve our social purpose via responsible and sustainable investment

  Our focus is on our social impact, allied with a firm commitment to environmental sustainability and good governance.

• - Selective development investment supporting high standard new-build care homes, one homes (66 beds) opened in the period, three homes (203 beds) were being funded at period end and a further development site (60 beds) was acquired post period end.

• - Completion of retrofit programmes on 47 rooms without full en suite wet-room provision to bring two homes to acceptable modern standards

• - Homes provide generous space at an average of 47m2 per resident

• - EPC ratings: 93% A or B rated, and currently compliant with the minimum energy efficiency standards anticipated to apply from 2030

Unless otherwise stated in the above table, references to 2021 mean the comparative six month period to 31 December 2021 and references to 2022 mean 30 June 2022, being the start of the period under review.

• 1 Based on EPRA NTA movement and dividends paid, see alternative performance measures on page 25.

• 2 For details of EPRA earnings and adjusted EPRA earnings refer to note 6 of the condensed consolidated financial statements.

• 3. See alternative performance measures on page 24.

Interim Report and Financial Statements 2022

3