Target Healthcare REIT : Report and Financial Statements for the year to 30 June 2023

Investing in care. Delivering returns.

Target Healthcare REIT plc Annual Report and Financial Statements 2023

About Us

Responsible investment with a clear purpose - delivering returns and improving UK care home real estate.

Key financial metrics for the year to, or as at, 30 June 2023

EPRA NTA per share (pence)

104.5-6.9%

2023104.5

2022	112.3
2021	110.4

IFRS profit (£ million)

-£6.6m

-6.6	2023
2022	49.1
2021	43.9

Accounting total return (per cent)1

-1.2%

-1.2	2023
2022	8.1
2021	8.8

Dividend cover (per cent)2

97%

2023	97

202272

202180

Dividend per share (pence)

6.18-8.6%

20236.18

2022	6.76
2021	6.72

Portfolio value (£ million)

868.7-4.7%

2023868.7

2022	911.6
2021	684.8

1. Based on EPRA NTA movement and dividends paid, see alternative performance measures on page 97.
2. Based on adjusted EPRA earnings, see note 8 of the consolidated financial statements and alternative performance measures on page 97.

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Strategic Report	IFC-27
About Us	IFC
Chair's Statement	4
Business Model	6
At a Glance	8
Environmental, Social and Governance Charter	10
Investment Manager's Report	14
Our Strategy	16
Principal and Emerging Risks and Risk Management	24
Section 172 Statement	26

Corporate Governance	28-59
Board of Directors	28
Investment Manager	30
Directors' Report	32
Statement of Directors' Responsibilities	39
Corporate Governance Statement	40
Report of the Audit Committee	45
Directors' Remuneration Report	51
Independent Auditor's Report	54

Financial Statements	60-90
Consolidated Statement of Comprehensive Income	60
Consolidated Statement of Financial Position	61
Consolidated Statement of Changes in Equity	62
Consolidated Statement of Cash Flows	63
Notes to the Consolidated Financial Statements	64
Company Statement of Financial Position	81
Company Statement of Changes in Equity	82
Notes to the Company Financial Statements	83

Additional Information	91-104
Notice of Annual General Meeting	91
Shareholder Information	94
Alternative Performance Measures	97
EPRA Performance Measures	98
Data Centre	100
Glossary of Terms and Definitions	101
Corporate Information	104

This document is important and requires your immediate attention.

If you are in any doubt about the action you should take, you are recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in Target Healthcare REIT plc, please forward this document, together with the accompanying documents immediately to the purchaser or transferee, or to the stockbroker, bank or agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Annual Report and Financial Statements 2023

1

About Us continued

Committed long-terminvestment.

Our purpose is to accelerate the improvement in the physical standards of UK care homes through long term, responsible investment in modern real estate that delivers our return objectives to shareholders.

We are advocates of the benefits that intelligently designed, purpose-built care homes can bring and we want more residents, care professionals and local communities to benefit from their positive social impact.

Modern real estate.

Demographic tailwinds.

Sustainable rents with inflation-linked growth.

Portfolio protected from the sector's modernisation challenge

Care home sector-leading environmental credentials

Long-term outlook and commitment, aligned with care sector needs and supported by demographic trends

  Now

Standard-setting care home real estate.

100%purpose-built

98%wet-rooms

94%A or B EPC ratings

100%C or better

• Long leases at sustainable rents.
• Lowly geared balance sheet with long duration fixed-rate debt.
• Growing demand for care home places:
• • Number of people aged over 85 forecast to almost double from 1.7m to 3.3m by 2046.
  • 1 in 7 people aged over 85 will require residential care.

Near-future trends

Clear movement to these standards reflecting resident demand and expectations.

% UK care home market with wet-rooms

2023

31

201414

31

Minimum Energy Efficiency Standards (MEES) legislation has applied to commercial rented buildings since 2018. COP 26 commitments made by the UK Government anticipates the current "E" rating requirement will be raised to "B" for 2030, although recent Government announcements suggest this may be voluntary.

Many commercial real estate owners with older/ converted properties face a significant burden to meet the forthcoming changes.

Ageing population underpins demand

(m)	24														2046
people	20													c.2x over 85s
16												Today
12
of
Number	8
4
0																					2111
	1901	1911	1921	1631	1941	1951	1961	1971	1981	1991	2001	2011	2021	2031	2041	2051	2061	2071	2081	2091	2101
		65-74			75-84			85+

Source: LaingBuisson December 2022

2	Target Healthcare REIT plc

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Social impact: Why purpose-built matters

It's crucial. A building designed and then built with its end-users in mind will be a more dignified, agreeable and functional environment, particularly in a care home which has multiple user groups: Residents, their families and friends; their direct care-providers; and other essential

care home staff.

It's simple. Consider a typical home, or a vital medical facility like a hospital. These aren't converted from another use. More often than not it would limit suitability, usefulness and ambience. The correct environment can have a positive impact on the emotional wellbeing of the resident, particularly those with dementia.

The descriptors 'purpose-built' and 'modern' are often used broadly with the bulk of homes described in this fashion being very different from those of the standard we invest in.

Below are some additional characteristics of our real estate which may be assumed as pre-requisites for care homes but are absent in the majority of homes across the UK:

Wide corridors

Allows free and easy movement around the building for:

• Residents whilst socialising.
• Infirm or low-confidence residents to be accompanied.
• Residents requiring wheelchair use.
• Staff to move other equipment and residents' belongings such as laundry, and to distribute meals.

Assists the resident in being social and active, and boosts a home's efficiency and ambience.

Wide corridors are not present in many older, converted, care homes which often have narrow corridors with variations in levels, requiring steps.

Convenient outdoor access

Instinct and science both suggest convenient outdoor access to be beneficial for users, though it is often overlooked, particularly for residents not on ground level. We have long advocated for balconies and unrestricted access to outdoor space for all residents, whilst prioritising health and safety considerations.

Building services appropriately located

Thoughtful location of core building services provides a practical and efficient layout for care providers to manage the main "non-care" aspects of their service, such as:

• Kitchen
• Laundry
• Lifts
• Staff rest and administrative areas

This creates a more efficient home with happier staff providing better care and service to residents.

			Sta
			Laundry
			Lift
				Dining
Activity			Bedrooms	Bedrooms
Room	Lift
	Sta

Sun Lounge

Room

Sta

Bedrooms

Bedrooms

Lounge

Annual Report and Financial Statements 2023

3