Proposed Issue of Equity

RNS Number : 9260J

Target Healthcare REIT PLC

26 August 2021

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION INCLUDING, WITHOUT LIMITATION, THE UNITED STATES, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (OTHER THAN TO PROFESSIONAL INVESTORS IN THE REPUBLIC OF IRELAND OR THE NETHERLANDS), CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND AND JAPAN.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, ANY OFFER FOR SALE OR SUBSCRIPTION OF, OR SOLICITATION OF ANY OFFER TO BUY OR SUBSCRIBE FOR, ANY SECURITIES IN TARGET HEALTHCARE REIT PLC (THE "COMPANY") OR SECURITIES IN ANY OTHER ENTITY, IN ANY JURISDICTION, INCLUDING THE UNITED STATES, NOR SHALL IT, OR ANY PART OF IT, OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR INVESTMENT DECISION WHATSOEVER, IN ANY JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A RECOMMENDATION REGARDING ANY SECURITIES.

THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE PURPOSES OF THE UK VERSION OF MARKET ABUSE REGULATION (EU) NO. 596/2014, WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

26 August 2021

TARGET HEALTHCARE REIT PLC

("Target" or the "Company", together with its subsidiaries, the "Group")

Proposed Issue of Equity

Target Healthcare REIT plc (LSE: THRL), the UK listed specialist investor in modern, purpose-built care homes, announces its intention to raise approximately £100 million by way of an issue pursuant to its existing Placing Programme (the "Issue") at an issue price of 115 pence per new Ordinary Share (the "New Shares"). The Investment Manager currently has its strongest pipeline of acquisition opportunities to date, including a major portfolio of 18 care homes which the Company has entered into an exclusivity agreement to acquire.

Highlights

· The Issue will be conducted at an issue price of 115 pence per New Share (the "Issue Price"), which represents a discount of 5.9 per cent. to the closing share price of 122.2 pence per existing ordinary share in the capital of the Company ("Existing Shares") on 25 August 2021 (being the last business day prior to this announcement) and a 4.2 per cent. premium to the Company's last reported EPRA NAV per Ordinary Share of 110.4 pence as at 30 June 2021

· The Group's portfolio has continued to demonstrate its high quality and defensive characteristics throughout the COVID-19 pandemic with the Company's rental income remaining substantially unaffected, demonstrating the stable and secure nature of the portfolio's cashflows

· The Investment Manager continues to believe in the underlying long-term fundamentals of the sector, with the COVID-19 pandemic reinforcing the requirement for high quality, modern, purpose-built care homes with ensuite wet room facilities, to provide a safe environment that best provides for residents' needs

· The Investment Manager has identified a strong pipeline of attractive acquisition opportunities, totaling £230 million (the "Pipeline Assets") and consisting of:

o  A major portfolio of 18 operational modern care homes which the Company has entered into an exclusivity agreement to acquire and on which it is completing due diligence (the "Acquisition Portfolio"). The Investment Manager has unparalleled knowledge of the individual assets within the Acquisition Portfolio, having originally sourced 17 out of the 18 care homes on behalf of the vendor as well as providing it with asset management services. The Acquisition Portfolio generates an annual contracted rent of £9.1 million and has collected 100 per cent. of rent due throughout the COVID-19 pandemic

o  Six assets in the final stages of due diligence consisting of three operational modern care homes and three forward-fund, pre-let development projects

· The Company is currently in advanced negotiations in relation to £100 million of long-term debt from one of the Group's existing lenders which will be used to part-fund the Pipeline Assets

· The Company today announces it is targeting a dividend for the year ending 30 June 2022 of 6.76 pence per share, a 0.6 per cent annual increase⁽¹⁾, which represents an implied dividend yield of 5.9 per cent. based on the Issue Price

Malcolm Naish, Chairman of the Company, said:  

"Against by far the most challenging backdrop in the Company's history, our modern, purpose-built care home portfolio has been a consistent and robust performer, with rent collection of 95 per cent. for the three most recent quarters, continued valuation uplifts and improving occupancy levels.

"At a time of increasing investor appetite for the stable, uncorrelated returns that our portfolio has consistently delivered, we believe these transactions will be transformational both in terms of scaling the Company and providing greater diversification by tenant and geography, as well as our mission to take a leading role in supporting and improving the UK care sector."  

Portfolio update

Target was created with the purpose of advancing the much-needed modernisation of the UK's care home real estate, through providing long-term institutional investment. It has been, since its launch, a promoter of the need to improve real estate standards within this sector in order that the dedicated professionals providing care can do so, providing dignity and safety for residents.

The Investment Manager's specialist insight and experience as an engaged landlord within the care home sector has been demonstrated throughout the COVID-19 pandemic. There is a clear increase in demand for modern care homes and the Investment Manager continues to work hard in its stewardship of the Company's portfolio and in sourcing an attractive pipeline of assets. Throughout the COVID-19 pandemic, the Company's tenants continue to care for residents with skill and compassion. The Company has, through the Investment Manager, kept in close communication with its tenants to provide support, share best practice, and to continue its usual monitoring programme as an informed and engaged landlord. The benefits of modern fit-for-purpose care homes have been clearly exhibited since the outbreak of the COVID-19 pandemic, allowing for effective infection control and shielding, while ensuring dignity for residents.

The Company's portfolio of modern care home assets diversified by tenant, geography and source of resident fees has demonstrated its robustness and resilience throughout the COVID-19 pandemic, with rent collection of 95 per cent. for the three most recent quarters, demonstrating the stable and secure nature of the portfolio's cashflows. As anticipated, occupancy levels across the mature portfolio have begun to recover from the lows seen in the first quarter of 2021, with encouraging growth of c.5 percentage points in the quarter to 30 June 2021. This aligns with the strong enquiry levels from potential residents reported by the Group's tenants in recent months. Reported COVID-19 cases across the portfolio remain very low. As at mid-August, there were confirmed COVID-19 cases in 0.2 per cent. of total portfolio beds across three care homes, down from the peak of 3.2 per cent. suspected or confirmed cases across 32 care homes during the third week of April 2020. In addition, all residents and staff have had access to COVID-19 vaccinations, with substantial uptake across each group. The vaccine deployment across the portfolio provides shielding from the worst effects of the virus for residents and staff and allows for increased admissions.

Tenant management information for the recent June 2021 quarter end has shown the portfolio rent cover to be stable, with underlying resident occupancy increasing. Concessions made to tenants during the COVID-19 pandemic to date have generally been to allow monthly rental payments, with some limited usage of rent deposits to help tenants manage short-term cash flow pressures. The more significant arrears the Company has experienced recently were in relation to two tenants, comprising eight per cent. of rent roll, that had difficulties prior to the COVID-19 pandemic . These have been substantially resolved as follows:

· Tenant 1: Settlement agreement for partial payment of outstanding rent; one care home has been re-tenanted with rental income now being recognised. The other care home is in heads of terms and a lease to a new tenant is expected to complete by the end of the year

· Tenant 2: Trading performance has improved in these two immature care homes, whose operator is new to the sector. For one care home the tenant has been paying rent monthly in full since December 2020 and for the other partially paying rent and is expected to commence paying rent in full during Q4

The Investment Manager's most recent tenant resiliency review compares more favourably to that last reported in February, based on the progress made on the two tenants noted above and with trading improvements at a number of others. However, one of the Group's tenants, comprising approximately seven per cent. of the Group's total rent, has recently indicated it may require limited concessions to alleviate some short-term cash flow pressures resulting principally from the pandemic having slowed the growth in occupancy at its newly opened homes. The Group will work constructively with the tenant to agree initiatives which will protect the Group's position whilst ensuring continuity of care for residents in the care homes.

Despite the short-term challenges faced by a limited number of tenants as noted above, the most recent data collected in discussion with the Company's tenants indicates a continued increase in underlying occupancy and the Board expects this to continue through 2021.

As at 30 June 2021, the Group's EPRA NAV per share was 110.4 pence, up 1.2 per cent. for the quarter, primarily underpinned by valuation uplifts across the portfolio due to modest yield compression alongside annual rental uplifts. The total property portfolio value was £684.8 million and the EPRA "topped-up" net initial yield was 5.83 per cent.

Background to the Issue

The Group listed on the London Stock Exchange's Main Market on 7 March 2013 with an investment remit to focus on a diversified portfolio of modern, purpose-built care homes that are let to high quality tenants who demonstrate strong operational capabilities and a holistic care ethos, both of which the Company believes are critical to long-term success in the care home business.

The Company's positive impact on the UK's social care sector is at the heart of its investment philosophy. Its environmentally efficient care homes serve their respective local markets at sustainable rental levels, and deliver a high quality offering, with ensuite wet rooms and good public and private spaces. The Investment Manager continues to advocate the benefits that intelligently designed, modern care homes can bring and wants more residents, care professionals with good governance and local communities to benefit from their positive social impact.

The Group's care homes benefit from favourable local dynamics, including supportive demographics, as well as long leases at sustainable rental levels. These leases are typically structured to include annual rental uplifts (RPI-linked or fixed) and cure rights. Informed by its proprietary research, the Group has built a portfolio of high quality assets in the right locations, with the services and facilities that suit its tenants' needs. This is set against a backdrop of a rising population of those aged over 85 in the UK, a shift in how society cares for its elderly, and an insufficient supply of ensuite, wet room accommodation, demand for which has been highlighted during the COVID-19 pandemic. There is a chronic undersupply of these care homes where demand far outstrips supply with a c.263,000 shortage of appropriate quality beds.

Since IPO, the Group has carefully crafted an investment portfolio which consisted of 77 properties, externally valued at £684.8 million as at 30 June 2021. The portfolio comprised 73 modern operational care homes with en-suite wet rooms and good public and private spaces, and four pre-let sites,   which are being developed through capped forward funding commitments with established development partners. The portfolio has a high level of diversification across its 28 tenants, geographically and through source of funding from the ultimate end-users. Crucially, whilst the portfolio and tenant base are well diversified, the underlying asset quality is unequivocally consistent. In excess of 96 per cent. of beds in the Company's portfolio are housed in modern, fit-for-purpose care homes, characterised by having en-suite wet-rooms throughout, accommodation designed for twenty-first century social care and a wide availability of public space, both indoors and out, for the residents.

The Company, together with its Investment Manager, is passionate about providing high quality environments for the tenants and their residents, whilst noting that modern assets with modern amenities provide a greater level of future-proofing to the business. The long weighted average unexpired lease term of 28.8 years and the potential benefit of annual (RPI or fixed) rental uplifts in the Group's lease contracts are vital in helping to protect the Company's future financial returns. In selecting its assets, the Group looks for buildings that are specifically designed to be operated as homes, not care facilities. Due partly to this specification, as well as other factors such as geography and average fee rates charged by the Company's tenants, the portfolio has a bias towards residents who pay for their care privately (either in whole or through a mix of private and public funding), which provides a level of financial insulation to the Company's tenants who continue to face various issues arising from, inter alia, the current uncertainty around public sector funding in the sector.

Use of Proceeds

The Company believes the long-term fundamental demand drivers for elderly care have not changed, nor have the advantages of the Group's strong care ethos and strategy of owning modern, purpose-built care homes which house residents in self-contained wings, facilitate enhanced infection control, and, as needed, allow effective isolation of residents in their own rooms safely and effectively through the required provision of private ensuite wet rooms.

Despite a challenging and competitive environment, the Group has demonstrated that it can continue to grow its portfolio on accretive terms whilst being highly selective with its approach to acquisition opportunities. Following the Group's oversubscribed equity issuance in February 2021, the Group has acquired four modern care homes for a total consideration of c.£51 million that includes two assets acquired post 30 June 2021, consisting of an operational modern care home in Liverpool and one forward-fund, pre-let development project in Holt.

The Investment Manager continues to explore investment opportunities across the market and, owing to its established reputation in this property sub-sector, is well positioned to source attractive opportunities. The Investment Manager currently has its strongest pipeline of acquisition opportunities to date across 24 modern, purpose-built care homes for an aggregate consideration of approximately £230 million (including costs). These Pipeline Assets consist of:

· A major portfolio of 18 operational modern care homes which the Company has entered into an exclusivity agreement to acquire and on which it is completing due diligence. The Investment Manager has unparalleled knowledge of the individual assets within the portfolio, having sourced 17 out of the 18 care homes on behalf of the vendor as well as providing it with asset management services. The portfolio generates annual contracted rent of £9.1 million and has collected 100 per cent. of rent due throughout the pandemic; and

· Six assets in the final stages of due diligence consisting of three operational modern care homes and three forward-fund, pre-let development projects.

The Acquisition Portfolio offers a unique opportunity to acquire a pre-screened portfolio that meets the Group's strict investment criteria and provides it with an acquisition opportunity of significant scale that would improve tenant and geographic diversification of the Group's portfolio further contributing to its mission of providing best-in-class accommodation for its residents.

If acquired, in aggregate the Pipeline Assets would increase the number of care homes in the Group's portfolio by 24, providing 1,625 additional beds and adding seven new tenants to the Group's portfolio. In addition, the contracted rent for the Group would increase by £12.9 million and the weighted average unexpired lease term would marginally reduce (from 28.8 years as at 30 June 2021 to 28.5 years assuming that the Pipeline Assets are acquired and including acquisitions post 30 June 2021) . In accordance with the Company's investment strategy, all of these assets are high quality, modern, purpose-built care homes with en-suite wet-room facilities across 97 per cent. of beds and are expected to be acquired for a weighted average net initial yield of 5.6 per cent. broadly in line with yields across the existing assets in the Group's portfolio.

The £100 million target issue size, together with associated debt financing, should enable the Company to purchase the Pipeline Assets whilst maintaining a prudent gearing level. The Company is currently in advanced negotiations in relation to £100 million of long-term debt from one of the Group's existing lenders. The Company intends to use this debt facility to part-fund the Pipeline Assets. The Group currently has a pro-forma net LTV of 22 per cent. after accounting for the full funding of development assets and the Investment Manager expects the net LTV of the Group will be 29 per cent. (assuming acquisition of the Pipeline Assets and reaching the targeted capital structure).

Benefits of the Issue

The Board believes that the Issue will have the following benefits for the Shareholders and the Company:

· enable the Company to continue with its growth strategy, provide scale to its investment portfolio and increase the liquidity of its shares by increasing the market capitalisation of the Company and further diversifying the shareholder register;

· provide additional equity capital which should allow the Company to pursue current attractive investment opportunities in the market and make further investments in accordance with the Company's investment policy and within its strict investment criteria further enabling the Company to remain well positioned in the face of increased competition and the anticipated sector-wide flight to high quality care home assets with wet room showers in en-suite facilities;

· further diversify the portfolio by introducing new tenants to the Group and operating in geographical locations that are currently under-represented in the portfolio; and

· deliver a larger equity base over which the fixed costs of the Group may be spread, thereby reducing the Company's ongoing costs per Share.

Expected timetable

Latest time and date for receipt of commitments under the Issue	11 a.m. on 9 September 2021
Results of the Issue announced	10 September 2021
Admission and dealings in New Shares commence	8 a.m. on 14 September 2021

The timetable is subject to change at the discretion of the Company, Stifel Nicolaus Europe Limited ("Stifel") and Dickson Minto W.S . ( " Dickson Minto " or " DM " ). If any of the above times and/or dates change, the revised times and/or dates will be notified to shareholders by announcement through a Regulatory Information Service. References to time in this announcement are to London time.

Further information on the Issue

The Company is proposing to raise gross proceeds of approximately £ 100 million through the issue of New Shares at 115 pence per New Share. The Issue Price represents a discount of 5.9 per cent. to the closing price of 122.2 pence per Existing Share on 25 August 2021 (being the last business day prior to the date of this announcement) and a 4.2 per cent. premium to the Company's last reported EPRA NAV per Ordinary Share as at 30 June 2021 of 110.4 pence.

The Company is targeting an issue of approximately £100 million with the issue size based on the Company's attractive investment pipeline as well as the Company's prudent gearing target. In the event that the Company has demand from investors which exceeds £100 million, the Company may consider increasing the size of the Issue (subject to a maximum cap of 141,694,710 New Shares, being the total unused element of the Placing Programme of 95,945,946 New Shares and the 45,748,764 New Shares available under the pre-emption authorities that shareholders approved at the Company's last annual general meeting on 2 December 2020). Any decision to upsize would only be made after: (i) careful consideration of the prevailing market conditions; (ii) the availability and estimated price of the assets that the Investment Manager has identified as being suitable for purchase by the Company; and (iii) the length of time it would likely take to acquire such assets.

The Issue may be scaled back by the Directors for any reason, including where it is necessary to scale back allocations to ensure the Issue proceeds align with the Company's post fundraise acquisition and leverage targets.

The Issue, which is not underwritten, is conditional upon, inter alia, on Admission becoming effective no later than 8.00 a.m. on 14 September 2021 (or such later date as the Company and Stifel may agree not being later than 12 October 2021) and the Placing Agreement becoming wholly unconditional in respect of the Issue (save as to Admission) and not having terminated in accordance with its terms prior to Admission.

The Issue will close at 11 a.m. on 9 September 2021 or such later date as the Company, Stifel and Dickson Minto, acting as sponsor to the Company, may agree. The results of the Issue are expected to be announced on 10 September 2021. The New Shares will be issued and credited as fully paid and will rank pari passu in all respects with the Existing Shares. The New Shares will be issued in registered form and will be capable of being held in both certificated and uncertificated form.

The Company will apply for admission of the New Shares to listing on the premium listing segment of the Official List of the Financial Conduct Authority (the "FCA") and to trading on the Main Market for listed securities of London Stock Exchange plc (the "London Stock Exchange"). It is expected that settlement of subscriptions in respect of the New Shares and admission will take place and that trading in the New Shares will commence at 8.00 a.m. (London time) on 14 September 2021 ("Admission").

The New Shares, when issued, will rank pari passu for all dividends or other distributions declared, made or paid after Admission and in all other respects will rank pari passu with the Existing Shares. For the avoidance of doubt, based on the current expected timetable, the New Shares will qualify for the quarterly dividend which relates to the period 1 July 2021 to 30 September 2021, which is expected to be paid in November 2021.

The Existing Shares are already admitted to trading on the Main Market and to CREST. It is expected that all New Shares, when issued pursuant to the Issue, will be capable of being held and transferred by means of CREST.

The Issue will be carried out with and be subject to the terms and conditions of the Placing Programme set out in the Prospectus published by the Company on 12 February 2021, as supplemented by the supplementary prospectus published by the Company on 27 May 2021 (the "Prospectus").

Dealing codes for the Ordinary Shares and the New Shares

Ticker: THRL

ISIN for the New Shares: GB00BJGTLF51

SEDOL for the New Shares: BJGTLF5

The Company's LEI: 213800RXPY9WULUSBC04

A copy of this announcement will be available on the Company's website at www.targethealthcarereit.co.uk. Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

Terms used and not defined in this announcement bear the meaning given to them in the Prospectus.

Enquiries:

 Target Fund Managers Limited (Investment Manager to the Company) 

Kenneth MacKenzie			[phone]
Gordon Bland			[phone]
Stifel Nicolaus Europe Limited
Mark Young	[e-mail]		[phone]
Mark Bloomfield	[e-mail]		[phone]
Rajpal Padam	[e-mail]		[phone]
Jack McAlpine	[e-mail]		[phone]
FTI Consulting
Dido Laurimore	[e-mail]		[phone]
Claire Turvey
Richard Gotla

Notes

(1)  Target dividend yield is a target only and not a profit forecast. There is no guarantee that the target dividend yield can be achieved and it should not be taken as an indication of expected or actual future returns.

Important Information

The person responsible for arranging for the release of this announcement on behalf of Target Healthcare REIT plc is Kenneth MacKenzie, Founder and Chief Executive of Target Fund Managers.

The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time.

This announcement which has been prepared by, and is the sole responsibility of, the Directors of the Company, has been approved solely for the purposes of section 21 of the Financial Services and Markets Act 2000, as amended, ("FSMA") by the Investment Manager, which is authorised and regulated by the Financial Conduct Authority.

This announcement is an advertisement and does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor. Copies of the Prospectus, as supplemented by the supplementary prospectus, published on 27 May 2021 by the Company are available from the registered office of the Company, the offices of Stifel and on the Company's website www.targethealthcarereit.co.uk .

Recipients of this announcement who are considering acquiring New Shares are reminded that any such acquisition must be made only on the basis of the information contained in the Prospectus which may be different from the information contained in this announcement. Potential investors should read the Prospectus, in order to fully understand the potential risks and rewards associated with the decision to invest in New Shares. The approval of the Prospectus, as supplemented by the supplementary prospectus, published on 27 May 2021 by the Financial Conduct Authority should not be considered as an endorsement of the Company or of the New Shares.

This announcement does not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The New Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Shares in the United States.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, any securities in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, any securities will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement is not for release, publication or distribution to persons in the United States, any member state of the EEA (other than to professional investors in the Republic of Ireland or the Netherlands) Canada, Australia, the Republic of South Africa, New Zealand or Japan, and should not be distributed, forwarded to or transmitted in or into any jurisdiction, where to do so might constitute a violation of local securities laws or regulations.

Stifel, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting solely for the Company and no-one else in connection with the transactions and arrangements described in this announcement and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the transactions and arrangements described in this announcement.   Stifel is not responsible to anyone other than the Company for providing the protections afforded to clients of Stifel or for providing advice in connection with the contents of this announcement or the transactions and arrangements described herein.

Dickson Minto, which is authorised and regulated by the Financial Conduct Authority, is acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of DM or advice to any other person in relation to the matters contained herein.

In the case of any New Shares being offered to a financial intermediary within the meaning of Article 5 of Regulation  (EU) 2017/1129    (as as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018) , such financial intermediary will also be deemed to have represented, acknowledged and agreed that the New Shares acquired by it in the Issue have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any New Shares to the public other than their offer or resale in a relevant member state to qualified investors as so defined or in circumstances in which the prior consent of the Company or Stifel has been obtained to each such proposed offer or resale. Each of the Company and Stifel and their respective affiliates will rely on the truth and accuracy of the foregoing representation, acknowledgement and agreement.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. The Company, the Investment Manager, DM and Stifel expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Regulation Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

None of the Company, the Investment Manager, DM or Stifel, or any of their respective affiliates, accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, the Investment Manager, DM and Stifel, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

Information to Distributors

Solely for the purposes of the product governance requirements of Chapter 3 of the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK MiFIR Product Governance Requirements") and/or (where applicable to EEA investors and EEA firms) the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (" Directive 2014/65/EU "); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing Directive 2014/65/EU ; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK MiFIR Product Governance Requirements   or the MiFID II Product Governance Requirements, as applicable) may otherwise have with respect thereto, the New Shares have been subject to a product approval process, which has determined that the New Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as respectively defined in paragraphs 3.5 and 3.6 of the FCA Handbook Conduct of Business Sourcebook or the MiFID II Product Governance Requirements, as applicable; and (ii) eligible for distribution through all permitted distribution channels (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the New Shares may decline and investors could lose all or part of their investment; the New Shares offer no guaranteed income and no capital protection; and an investment in the New Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Issue and the Placing Programme.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of Chapters 9A or 10A respectively of the FCA Handbook Conduct of Business Sourcebook or the MiFID II Product Governance Requirements, as applicable; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Shares.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the New Shares and determining appropriate distribution channels.

Marketing disclosures pursuant to UK AIFMD and the AIFMD (as defined below)

The Company is an externally managed alternative investment fund and has appointed Target Fund Managers Limited as its alternative investment fund manager (the "AIFM")   for the purposes of UK AIFMD.

Pursuant to: (i) the requirements of the Financial Conduct Authority Rules implementing the EU Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") in the United Kingdom and related UK laws (including Commission Delegated Regulation (EU) No 231/2013, as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018) (together, "UK AIFMD"), which continue to apply notwithstanding the United Kingdom's withdrawal from the European Union; and (ii) the requirements of the AIFMD, the AIFM is required to make available to persons in the United Kingdom and the European Union who are invited to and who choose to participate in the Issue , by making an oral or written offer to subscribe for New Shares, including any individuals, funds or others on whose behalf a commitment to subscribe for New Shares is given (the "Subscribers") certain information (the "Article 23 Disclosures"). For the purposes of the Issue , the AIFM has made the Article 23 Disclosures available to Subscribers in the 'Investor Disclosure' footnote of the Company's website at: www.targethealthcarereit.co.uk.

PRIIPS

In accordance with the UK version of Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended (the "PRIIPs Regulation"), the AIFM has prepared a key information document (the "KID") in respect of the ordinary shares of £0.01 each in the capital of the Company ("Ordinary Shares"). The KID is made available by the AIFM to "retail investors" in the United Kingdom prior to them making an investment decision in respect of the Ordinary Shares at   www.targetfundmanagers.com .

If you are distributing Ordinary Shares, it is your responsibility to ensure that the KID is provided to any clients that are "retail clients"   in the United Kingdom.

The AIFM is the only manufacturer of the Ordinary Shares for the purposes of the PRIIPs Regulation and none of Stifel, DM or the Company are manufacturers for these purposes. None of Stifel, DM or the Company makes any representations, express or implied, or accepts any responsibility whatsoever for the contents of the KID prepared by the AIFM nor accepts any responsibility to update the contents of the KID in accordance with the PRIIPs Regulation, to undertake any review processes in relation thereto or to provide the KID to future distributors of Ordinary Shares.  Each of Stifel, DM and the Company and their respective affiliates accordingly disclaim all and any liability whether arising in tort or contract or otherwise which it or they might have in respect of the key information documents prepared by the AIFM. Investors should note that the procedure for calculating the risks, costs and potential returns in the KID are prescribed by laws. The figures in the KID may not reflect actual returns for the Company and anticipated performance returns cannot be guaranteed.

 

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