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Highlights:
Strong Tenant Rent Cover: Tenant rent cover for Q4 2024 reached 2.3x, indicating solid operational performance despite economic challenges.
Portfolio Growth and Stability: The company's portfolio grew by 5.3%, with 100% occupancy and all rent payments received for the quarter.
Increased Dividend Target: Care REIT announced a 3.6% increase in its dividend target for 2025, setting a new target of 7.20 pence per sharE.
Care REIT plc (LSE:CRT), a prominent real estate investment trust (REIT) focused on the UK healthcare market, has shared a trading update for the quarter ending 31 December 2024. The company reported a robust tenant rent cover of 2.3x for Q4 2024, marking an improvement from the 2.2x in both Q4 2023 and Q3 2024. This positive performance underscores the operational resilience of the REIT's tenants, despite ongoing economic pressures, including the anticipated rise in National Insurance contributions set for 2025.
Portfolio Growth and Stable Occupancy
Care REIT's portfolio continues to show growth, with annual contracted rent increasing by 5.3% to £51.4 million. The company’s portfolio remains fully occupied, with zero voids, and all rent payments due for the quarter have been received, reinforcing the stability of the business. Occupancy levels in care homes have increased to 89.2%, up from 88.2% in December 2023, highlighting the ongoing demand for healthcare properties in the sector.
In addition to strong occupancy, the average weekly fees charged by tenants grew by 6.5% year-on-year, reflecting the ability to maintain healthy revenue streams despite inflationary pressures. The REIT is also engaged in discussions with tenants and local authorities regarding further fee increases to help offset rising costs in social care.
Dividend and Future Outlook
For the quarter, the company declared a Q4 dividend of 1.7375 pence per share, which brings the total dividend for the year to 6.95 pence per share. Looking ahead, Care REIT has set a target of 7.20 pence per share for the year ending 31 December 2025, a 3.6% increase from the previous year. This increase highlights the company’s commitment to delivering sustainable and growing returns to shareholders, supported by its strong financial position and operational success.
Healthcare Properties and Lease Structure
The company's portfolio is comprised of 137 healthcare properties, including 135 care homes managed by 14 tenants. These properties are secured on fixed-term leases with an average weighted unexpired lease term (WAULT) of 20.1 years. The leases are linked to Retail Price Index (RPI) with a cap of 4% per annum, providing a stable and predictable rental income stream.
The company is also actively engaged in fee discussions with Local Authorities, anticipating a 6.3% rise in social care fees in 2025. Furthermore, the UK government is expected to allocate up to £3.7 billion to support social care funding, providing additional financial stability to the sector.
Financing and Debt Management
As of 31 December 2024, Care REIT's drawn debt amounted to £197.8 million, with an EPRA net loan-to-value (LTV) ratio of 27.7%. Notably, 88% of the company’s drawn debt remains hedged, providing protection against market volatility and ensuring stability in financing costs. Additionally, the company has secured favorable debt conditions by replacing a £50 million 3% interest rate cap with a new 12-month cap at the same rate.
