Target Healthcare REIT PLC (THRL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Target Healthcare REIT plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, we would just like to submit the following poll. I would now like to hand you over to the executive management team from Target Healthcare REIT plc. Kenneth, good morning, sir.

Good morning, and good morning to all of our audience. We really appreciate your interest in Target Healthcare REIT, and we're delighted to present to you this morning the results for the year ended June 2025. Presenting with me today is Alastair Murray, our new CFO, who actually joined us 2.5 years ago and was the chap within our team who led the finance function to produce the numbers that we've been reporting to you over these last 2.5 years. And with the previous CFO resigning, we were delighted after due process to appoint Alastair to the position. And also with me today is James, who joined us at the start of this year in a Head of Investor Relations role after a dozen years as General Counsel at Aegon. So, we have a senior team with us. Alastair spent many years in the banks and has led the finance function in several organizations. What we plan to do today is, I'll take you through some highlights of the year. Alastair will go through the financial performance of the year; James, the portfolio performance. And then, we'll speak about some positive market trends that we believe Target Healthcare REIT is positioned in the middle of. And finally, some closing observations before we go to the Q&A. So, if we go to the next slide. What are the highlights for the year? Well, this is a robust, defensive portfolio of modern, fit-for-purpose care homes. We believe that across the sector, many care homes are not truly fit-for-purpose for the future. And we believe that for a long time, and we believe the sector is coming in line with our views. There are strong sector tailwinds with growing needs-based demand. We'll speak a bit about demographics later. And we're also an externally managed vehicle, but an external manager who's deeply engaged in the operational performance of the homes and working with our tenants. And with all of that, we have a strong market-leading long-term returns record, 7.5% annualized total accounting return since launch. And we're thankful that, that's the situation we find ourselves in now that we're 12 years old. Let's go on to the next slide. Some evidence in relation to that. You'll see the light blue blocks are the MSCI U.K. Annual Healthcare Property Index. You'll see that in the dark blue, which is the returns that Target Healthcare REIT has achieved, we've outperformed this index, which has about GBP 9 billion of property in it, about 30-plus constituents. And you'll see we've outperformed in every single year. And in fact, for the last couple of years, we've been effectively about double the performance of the index, which is clearly satisfactory. And the cumulative effect of that on the next slide shows that we have significantly outperformed over these last 10 or 11 years. So, we're thankful for that. And while we never apply for awards, we think it's better just to deliver good performance. You'll see on this slide that MSCI has listed us for listed funds, the highest relative total return annualized over 3 years and also the highest 10-year risk-adjusted total return within their overall property index. So, that has been humbling and pleasing. So, what is your portfolio? Let's have a look at the next slide. Your portfolio that you own through this vehicle is at the end of June, a portfolio of 93 care homes, just under 6,500 beds, GBP 61 million of contracted rent, portfolio value of GBP 930 million with 34 different sources of income, very modern and with inflation linkages and visibility of 26 years of income going forward, which is an unusually long income focus, which we think is helpful and helps us to understand and see into the future as far as that is possible. And then since the year-end, as you'll see on this slide, we have conducted the largest disposal since IPO at just under GBP 86 million and at a significant premium to book value. We've also secured new bank debt finance, and we'll speak about that later. And we have an attractive acquisition pipeline of accretive opportunities looking forward. So, it's been a busy year on the next slide with challenges that have been navigated. During the year, sadly, we had to put a tenant into administration. It's the first time we've had to do that. It was a care home that we acquired at new in Weymouth and with the tenant unable to meet their rental obligations due to poor trading at some of their other homes, we ultimately decided that it was best for the residents and best for the returns for our investors that we would bring it to a head and put the tenant into administration. And we had strong operator demand to find a new tenant. And indeed, the result of it all was a modest increase in the passing rent. But costs were involved in it all. We're glad that, that is largely behind us. And we also had tenant arrears for some homes that we had re-tenanted, but we have a strong expectation that some of these arrears, though they are written off in the accounts that we're considering that some of these will, in fact, be recovered. So, that's my introduction in terms of the highlights. And I'm going to pass on now to Alastair to do the financial performance and take you through the numbers.

Thank you, Kenneth. I'm Alastair Murray, the new CFO at Target Fund Managers, and I'm delighted today to take you through the financial performance to June 2025 and cover the debt refinance post year-end. So, we start with the financial highlights of the year. Total accounting return of 9.3%, and this was driven by the EPRA NTA per share increase of 3.7% and the dividend paid in the year of 5.884p, which was up 3% on the previous year. We believe that this accounting return of 9.3% delivered in a time of a challenging backdrop for listed property companies, demonstrates the resilience of our operating model. EPRA earnings decreased marginally by 0.8% to 6.08p, and this was driven by the exceptional costs that Kenneth has just alluded to with respect to the administration and re-tenanting in Weymouth. I will cover those costs in more detail later in this section. And then finally, the annualized contractual rent growth was 4% in the year, and that was driven predominantly by our inflation-linked contractual rental growth. And I think it's also important to point out, as with every other year since we were formed, there were no voids in the portfolio. So, if I take you on to the P&L, we'll go through the key lines on this. So, the first one is rental income. That increased 3% in the year. Again, that's driven by our inflation-linked contracted rental growth. We also benefited from three development properties that have been opened in the previous years. We got the annualized return on that and by one development property opened in the current year. And this offset the disposal of four properties at the end of the prior year. If we look at the movement in the annualized contractual rent, this shows you a point-in-time basis, the increase between June 2024 and June 2025. That's a 4% increase. You can see clearly that, that was driven predominantly by the rent reviews, again, our contractual inflation-linked rental increases with a like-for-like increase of 3.3%. We also benefited from a new development being opened in the year, which more than offset the disposal at the end of the year. And we also got a small benefit from rentalization of CapEx and deferred payments in the year. If we look now at the operating expenses, you can see there that they have increased quite significantly, as Kenneth noted, and the credit loss has also increased, and this has led to an increase in the adjusted EPRA cost ratio. So, to look at this in a bit of detail. Operating expenses were up 27% on the prior year. Now this is predominantly due to the non-recurring costs associated with the administration and re-tenanting of Weymouth. Kenneth talked about that already on a sort of strategic level. But if we look at the numbers, that increased our cost by GBP 800,000, and that covered the legal costs, the administration and running costs and the marketing of the property when we're re-tenanting it. If you exclude these exceptional costs, our costs increased by 3% in the year, and this was predominantly driven by portfolio management activities. Our ongoing charges was stable at 1.51%. Ongoing charges looks at the recurring operating expenses and removes any non-recurring property costs. We also increased credit allowance. So that increased from GBP 1 million in the previous year to GBP 1.6 million in the current year, again, driven by the Weymouth property. So Weymouth accounts for 1.4% of our annualized contractual rent roll, and that was provided for in full in the year. We also, as Kenneth mentioned, had one operator who runs three homes and accounts for about 3.2% of our contracted rent, not pay their rent in full in the final quarter of the year. So that's been provided for. These homes for the three-home operator have now been re-tenanted, and we do expect a significant recovery in this provision probably in the current quarter on the back of a parent guarantee from the exited tenant. So I think, it's fair to say that Weymouth has had an impact on the accounts, but we would expect this to be a one-off and not expect to incur costs of this level in the current year. So, if we turn to the P&L for one final time, you can see the impact of those extra operating expenses and credit loss. That's reduced our EPRA EPS by 0.8% to 6.08p. The dividend increased 3% in the year and was still covered fully at 103%, although this was a slight reduction from the previous year's 107%. So, moving on to the balance sheet. It is a fairly simple balance sheet. Key areas being portfolio market value and debt, which I'll come to later in this presentation. But first, we'll have a look at the EPRA NTA. That increased 3.7% to 114.8p in the year. And the drivers of that is the rent -- contractual rent reviews set off by a slight amount of yield shift and also the dividend being fully covered in the year. If we look more detail at the portfolio valuation, this increase is significantly due to the rent reviews, again, slightly set off with the yield shift, but gives us a like-for-like increase of 2.6%. This came down to the overall 2.4% due to the disposals being slightly above the development and CapEx. If we now look at the debt maturity profile. At the year-end, we had GBP 170 million of debt due for refinance in November 2025. This has subsequently been refinanced in September post the year-end, putting in GBP 130 million of debt to replace this. This increases the average -- sorry, the weighted average term to expiry from 4.2 years at the June year-end to 5.9 years currently. The debt also has two options to extend for 1 year at the end of year 1 and end of year 2 with ability to push this out then to 5 years. And finally, if we have a look at the debt book post the refinance, we think we have a very attractive debt book now. We've got GBP 130 million of new facilities, which comprises of GBP 50 million of term loan, which is hedged through an interest rate swap and GBP 80 million of RCF, which will be capped when we are committing that. The debt refinance reduced the amount of debt that we have from GBP 170 million to GBP 130 million, and this allows us to efficiently reinvest the disposal proceeds from the nine care homes that we have sold. And we have the ability to then put further debt in place through an uncommitted accordion facility of GBP 70 million with incumbent bankers. We should also note that the weighted average cost of debt, including the amortization of loan arrangement fees did increase from 3.9% to 4.3%, but this was driven by the expiry of a very attractive interest rate swap we put in place in the much lower interest rate environment in 2020. I'll now hand you over to James, who will talk you through the portfolio.

Thanks, Alastair. I'll now talk about how the portfolio is performing and then discuss the post year-end transaction that we've executed to sell nine homes and its impact on the portfolio and how we are planning to use the proceeds of that sale. Firstly, let me share some insights into the portfolio and how the operators are performing. This is a busy table of portfolio metrics for you. I'll highlight a few particularly interesting points for your attention. Overall, the group's property portfolio continues to perform well, driven by the strong level of inflation-linked rental income growth. Over the last 6 years, average weekly fees have increased 49%, whilst inflation over that period has increased 38%, showing that operators have been able to pass on the increase in their costs to residents, of which about 60% are staff or agency costs. Remember, our operators are providing needs-based care, and there is circa GBP 6 trillion of net wealth of the over 65s to fund these weekly fees. The group's average rent cover for the last 12 months at over 1.9x represents the highest achieved since IPO and provides a strong foundation for the group. This high level of rent cover is the result of the increases in average weekly fees that operators have been able to make and the high levels of resident occupancy, which, as you can see from this slide, has recovered post-COVID for our mature homes, that homes which have been trading for 3 or more years to 86.3%. Of course, the group's portfolio has always been fully let since IPO. This is just resident occupancy that we're talking about here. And how does your portfolio compare to the market in terms of the underlying real estate? Well, for a stable long income, you want your portfolio to be modern and fit-for-purpose. And as you can see from this slide, you have a significantly more modern portfolio than the market. This is a premium portfolio. 84% of the homes have been built since 2010. This percentage has stayed high for the group over the last few years as a result of our capital recycling strategy and focus on improving the modernity of the portfolio. 100% of the homes have EPC ratings of A or B. 100% now have en-suite wet rooms, enabling our seniors to be cared for in their home with the dignity and respect that we would want for ourselves. And the average home has significantly more space per resident than the market at 48 square meters. In terms of the performance of our operators, the average Tripadvisor style rating on carehome.co.uk is 9.6 compared to 9.3 for the market. In summary, you have a great quality portfolio as a result of our active management, buying and selling and funding prime real estate and improving the assets that you hold. And I want to spend a couple of minutes on our disposal track record. This slide summarizes all the material disposals over the last 3 years. All of the sales have been above book value, and I'll now take you through the detail. So, our first significant disposal was in Q1 2023 and was of four homes that we owned in Northern Ireland. This represented a strategic decision to exit Northern Ireland. As a result of the local authorities, they are having what we consider to be too much control over the level of private fees. These four homes were sold at a premium to the prevailing book value and 12 months prior. In Q2 2024, we sold four homes to an incumbent tenant, who wanted to own the holdco. These were four of our older and smaller homes, and so we agreed to sell them. And again, they were sold at a premium to the prevailing book value and 12 months prior. And then in September, we agreed to sell nine homes to reduce our exposure to our largest tenant. By way of background to this transaction, we had 18 homes with Ideal Carehomes. Ideal was then acquired by HC-One. And as part of our active management approach, we reviewed the position as they were our biggest tenant with over 16% of the portfolio, and we concluded that we would rather diversify our position, and we were therefore considering selling some of the homes. And then earlier this year, an institutional purchaser indicated that they were willing to buy half of the HC-One homes. We created two near identical pots in terms of spread and quality, one of which they have now acquired. The nine homes we've sold are representative of the whole portfolio, and they represent at GBP 4.8 million, 7.9% of the total contracted rent. At GBP 77 million, 8.3% of the total portfolio value. And the rent cover of our homes sold is above our average for the portfolio, but was declining. And as they were slightly older than the portfolio average, we were happy to sell them. The net effect on our key portfolio indicators of this disposal is overall quite negligible. And as you can see from the bar charts on the right-hand side, our tenant diversification has greatly improved post this disposal with our exposure to our largest tenant, HC-One reducing from 16% to 8.8%. This transaction, this disposal represents the most significant disposal undertaken by the group since IPO and further demonstrates the demand for our assets and the reliability of our valuations. As a result of the disposal, we have a great opportunity to further improve the portfolio by recycling capital. The group has a strong and growing pipeline of over GBP 150 million of accretive investment opportunities at a net initial yield in excess of 6%, including high-quality, strongly performing existing U.K. care homes, all with en-suite wet rooms, near-term forward commitments and forward fundings in attractive locations. The pipeline assets are spread across diverse U.K. geographies with a balanced mix of both existing and new operators. As a result of our close relationships with tenants, there is always one or two that would like to add a new home to their operating group. And given our strong reputation in the sector as the longest serving investment team in the U.K. market, we expect to see every relevant care home transaction in the market. The acquisitions will follow our measured approach of identifying best-in-class assets in the right geographical locations, which are leased at sustainable rental levels and acquired at appropriate yields. And the acquisition of the first homes in our pipeline standing assets is expected to take place in November. I'll now pass back to Kenneth to address the positive market trends in our sector.

Yes. And this -- actually, this slide 15, 17 years ago is what caused me to think that this was a great sector for us all to be putting effort into, both from the point of view of looking after our seniors really well, but flowing from that core business proposition, a great space for us to be invested in, because there will be continued and ever-increasing demand. So, we all know the demographic story, but I think it's worth -- well worthwhile us being reminded of it. Compared with today to 2050, 25 years on, the number of over 85s doubles. And typically, 1 in 8 of the over 85s require long-term residential care. So this is a sector that will continue to see significant growth. And there's also, as you'll see on the next slide, a move to quality. So, the demand for beds in England and Scotland is for 408,000 residents and the supply of beds, and this is just a total kind of beds is 443 residents. On the next slide, Alastair. Thank you. And then, if you compare the supply of beds to the actual number of beds which are fit-for-purpose, you'll see that there's 0.25 million shortage of beds, which are fit for purpose. And that, we think, is really important for us to understand. There are beds in the U.K. that have no facilities at all. They perhaps have a wash and basin in the corner. There are beds in the U.K. that claim to be en-suite, but they are the en-suite that none of us would use, namely en-suites, which only have a WC in a wash and basin and no showering or bathing facilities. And you'll see on this slide that Alastair has just put up that the long-term trend is to en-suite wet rooms. The black line at the top is the total number of beds. You'll see that the dark blue line is slowly growing over the period and the other two lines, the ones with poor en-suites and the ones with no facilities are a long-term drift downwards, whereas our kind of facilities are a long-term drift upwards. The second market trend on the next slide is also, we think, really important, the trend towards private pay. We all know that our government and an upcoming budget will confirm it all the more, I'm sure, have many challenges in terms of the public purse. And we don't want to be subject to what the austerity of government funding. So, how do we handle that? Well, if you go to the next slide, you'll see what the whole market position is, where there's the mix of private pay, the dark bit and topped-up private pay and local authority pay. And then let's compare on the next slide how very much more significant the income for our company is from private fees (sic) [ pay ] sources, just under 80% compared to 57% for the whole sector. And you'll see on the next slide how that has changed for our portfolio since 2020 with ever higher proportions of private pay. And we believe that is a long-term trend, and that comes out of the -- out of that GBP 6.6 trillion of net worth that James referred to earlier. There are always operational issues within the Care Home sector. We've said this from the very beginning. You need to recognize that half of the operational -- half of the income of a care home goes typically on labor costs. So, when the government changed national insurance, that was a significant cost increase. When the government changed minimum wage, that's a significant cost increase. The employment right bill may cause challenges too. So what are the ways in which our tenants can cope with all of that? Well, it's about this focus of private pay. It's about the demand that there is in the sector for quality. And we are seeing fees rising, as James pointed out in that quite busy slide we referred to earlier. I think, if I remember the numbers over the last 6 years, 37% inflation over the period, 45% fee increase over the period for our tenants. Also operating care homes, there will always be an operational issue. Humankind is fragile and somebody will let somebody down somewhere. And so, we are consciously an external manager who actively manage the portfolio. Often, our tenants are family businesses. They love to deal with us in the way we go about it. And the evidence that, that is working, I would submit, is the robust rent covers that we are seeing in the portfolio. At a more macro level, the sector has continuing challenges with its regulator. And even since we started presenting this to investors, the CEO of the regulator has resigned again. So again, well, I think maybe there's a new person who'd be stepping in to help a bit, but there's significant disruption within the regulator. And so actually, from the very beginning, we have been doing our own regulation in many ways. And in any typical year, we complete more than 200 inspections of our homes. There's also the Casey review, which is supposed to come out in 2028, which is something that the labor government has come. We'll wait and see what comes out of that. And then finally, there's been a recent thing from the labor government about upward-only rent reviews. That will not exist for our existing leases, they will be unaffected. And in fact, we're engaging with industry to inform the government on it. And in fact, just last week, we heard that it's quite possible that if the upward-only rent reviews have collars and caps, in fact, they may be okay. So, we're very much engaged in all of that and trying to look after our interest. So, some closing observations from me. As I said at the beginning, we do believe we have a robust defensive portfolio with modern homes. We have great sector tailwinds. We have a manager that is actively involved. We're passionate about doing this well. We think looking after seniors is the most honorable calling and profession and business model. And with all of that, we have really long-term stable results. I think, I remember saying 10 years ago, that I thought we would be long and stable rather than short and exciting. We're committed to the mission. We want to scale. We have ability to deploy, and we are delighted with this -- at this time to be able to announce the progressive dividend with a further 2.5% increase, which reflects the kind of net benefits we see going forward. So with that, that's our presentation. We really appreciate you taking the time to listen and to consider and to be invested with us, and we'll be delighted to go on to a Q&A session, which you have been listing for us while this has been going on. Thank you.

Perfect, guys. If I may just jump back in there. [Operator Instructions] I just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys, you can see that we have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions. But James, at this point, if I may hand over to you just to chair the Q&A with the team. And if I pick up from you at the end, that would be great. Thank you.

Thank you. So, let me take the questions that have been posted, and I will put them to the team or try to answer them myself. Our first question is, would a potential increase in business rates have a material impact on this REIT's asset values? Let me answer that one. We're pleased to say that Care Homes qualify for 100% relief from business rates, and we're not aware of that changing. So, we will keep an eye on any changes that are proposed or planned in that area. But yes, we get 100% relief. So no, if there's an increase in business rates, that won't impact on us. And of course, our focus on private pay, even if we were subject to business rates, we would give us flexibility to address any challenges that posed. But thank you for your question. Next one, Will there be any further increases in dividend distributions going forward? Alastair, perhaps you want to take that one?

Yes. So, in the current year, we're proposing a 2.5% increase. Now that basically is trying to pass on the like-for-like rental increases, but acknowledging that there has been a slight increase in the debt with the refinance and the loss of that very attractive hedging. That's something that I think we continue to look to as we go forward.

Great. Thank you. Our next question is, what percentage of the tenancy agreements is inflation linked? Is it 100%? And the answer to that is yes. Yes, it is. And we have a collar and a cap in lease provisions that are typically 2% and 4%. There are one or two which have a slightly higher cap. But yes, they are all inflation linked. So, that drives the strong rental income growth that we have been able to present to you today. Great. Kenneth, a question for you next. How do you see the Care Home model evolving over the long term, particularly in response to changing resident expectations or technological adoption?

Yes. So, in relation to changing resident expectations, we absolutely are seeing residents and especially residents, families choosing to place their loved ones in a home with excellent facilities rather than these bedrooms that don't have good facilities. So, there is this long, steady move to fit-for-purpose care homes. But I guess you're also asking this question in terms of, is there somehow in the medium term, some situation in which care homes won't be needed because of technological adoption perhaps. Care homes fundamentally have many people with dementia and/or extreme frailty, situations where families can't cope. And I think we probably are all aware of that in our wider family and friends' circles. And where in extremis -- and remember, we only expect this to be in 1 of 8 families. People have to be placed in a safe place where they cope better with loneliness or with dementia or with all of the complications of dementia. So, we actually believe that the care home model is really robust long term. Typically, the length of stay is 17 months. It may reduce a little, but it is robust and long term. And we -- that's our expectation in relation to this question.

Great. Thank you. Perhaps I can put the next one to you as well. Kenneth, how do you currently view the risk represented by issues with providers versus the challenge or possibility of dis-intermediating them and managing the sites completely?

Yes, it's a great question. We have considered this at length over the 15 years we've been doing this. We have four people in the manager who have run their own homes. We've got 150 years of running homes within the manager. And we think that the best way to have a credible investment platform is by the model that we have here, where we have a very distributed number of operators with all of the challenges of running the homes day-by-day in different geographies. And we are an aggregator and consolidator of the real estate, because there's significant capital. But we've never tried to be just a pure landlord who collects rent. There are some comments sometimes about the cost of running the vehicle. But that's because, we're -- in many ways, this is operational real estate, and we're all over the detail of the real estate, and that's how we manage the risk represented by issues with providers. And as we see providers failing the kind of standards that we want, then we recognize the need to -- the questioner asks -- uses the term dis-intermediate. We would probably call it more actively manage in terms of working with other tenants within the family of our tenants to operate that home really well for the benefit of our shareholders.

Thank you. And Alastair, perhaps a question for you next. What is the percentage sensitivity of NTA to a 1% yield shift?

Yes, that's a good one. First of all, I'd probably say that a 1% yield shift is not something that we would expect to see. Just before I joined, there was a bit of a correction back in December '22. And I think we went from about 6% to 6.2% net initial yield. So that was a major correction. But arithmetically, it would take about 18%. We've got a net initial yield of 6.2% just now. So, if you take -- if you add 1%, that would probably be about an 18%, 20% movement.

Great. And another one perhaps for you, Alastair. Please, could you give an indication of the basis of the management fee, how it's calculated?

Well, thanks for that one. It's in the accounts and off the top of my head, it's 1.05% on the first GBP 0.5 million, and then I think it goes down to 0.95% up to GBP 750 million, which would be the calculation. I probably need to check that back on with the accounts, but it is in there.

No, it drops by 10 basis points for every subsequent GBP 250 million of net asset value.

Great. Perfect. Kenneth, one for you next, if that's okay. Are you able to elaborate at all on the reasons for the previous CFO resigning?

Yes. Gordon is a good friend. He worked with us because we've worked together for a dozen years. He had come in his early to mid-30s. He wanted a chance to do a second career somewhere, and he thought it was time to move on, nothing other than -- and bless him over the last dozen years, he has spent more summers preparing these annual accounts. And I think as a man with young children, he fancied a summer where he could get more time off. So, nothing significant about it at all.

Great. Thank you. And Alastair, maybe I come to you for the next one. What are the three financial metrics the company is hoping to meet by 2030? For example, reducing debt to what level?

Yes. Well, so the debt, once we've completed that sale, the LTV came down to 14%, and we consider that probably a bit low. We are planning to reinvest. And if we reinvest the proceeds and draw the debt, that will take us up to more about 24%, 25% LTV. So that's probably a comfortable zone. We have the accordion on an uncommitted basis, which if fully drawn would take us towards 30% and we will decide on the appropriateness as we reinvest. The other metrics, I guess, is to continue to grow the rent in line with inflation, control costs and deliver a good strong earnings.

Great. Thank you. Kenneth, one for you, please. Given what happened to your main competitor a few months ago, has there been much activity or interest from an M&A perspective over the last few months?

In the wider REIT universe, for sure, there's been quite a lot of that. And within the sector itself, and I mean by that, the tenants, there's always been kind of waves of interest sometimes from overseas REITs to buy more real estate and then sometimes it's more U.K. buyers. So currently, American REITs are a bit more active in the space. But in terms of people approaching us, that's not something that we are seeing.

Yes. Great. And then, there's a question here. Do you still have homes under construction? And does there remain a benefit in building new homes? Perhaps if I start answering that one. So, we've actually just finished the construction of the last of the homes in the portfolio that have been underway for the last year or 18 months. And we don't have any active homes that are currently under construction at the moment. But in the pipeline, we have some as well as standing assets, we have one or two forward commitments and funding -- forward funding opportunities, and we hope to bring one or two of those on to the books as part of the deployment of the proceeds from the transaction that we've just completed. So is there a benefit in building new homes? Absolutely. And there's massive needs still in the U.K. market. We think there's 100 new homes, approximately 100 new homes built every year, and we are very happy funders of those constructions. Great. Thank you. And then Kenneth, perhaps building on the same theme with the increasing demand for care homes in the years ahead, who is driving forward the creation of more homes? Anything you would want to add to?

The whole sector really and especially amongst the operators who have set out down the road to bring modern purpose-built homes. We have across our funds about 40 tenants. And at any one time, there's probably 10 of these people speaking to our investment team about wanting to add a home or two homes. We all know -- they all know -- they know it really directly on the ground in their local areas, the increasing demand for modern purpose-built space with ever-increasing numbers of seniors. So, it's really quite wide with operators across the sector recognizing the need.

Great. Thank you. And let me pass back to Jake. We don't have any other questions coming through. So let me -- yes, I'll pass back to you, Jake.

Perfect, guys. That's great. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation, just for you to review and to then add any additional responses if appropriate. But Kenneth, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. It's a privilege to have your support to enable us to go on with this mission to improve the quality of real estate. And we just want to thank you for your support, and we trust that we will continue to invest wisely on your behalf and bring the kind of long-term stable returns that we would think should be core to any investment portfolio. Thank you for your time.

Kenneth, that's great. And thank you all for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Target Healthcare REIT plc, we would like to thank you for attending today's presentation. That now concludes today's session. So, good morning to you all.