Target Healthcare REIT PLC

Well, thank you everybody for coming in this Mipham week and some races and so on. It's nice to see a number of you here. It's also Gordon's son's birthday. So we're wondering why in the world did we choose today, but there we go. And it's also 11 years last week since we started, since we launched this fund. So we're in the fortunate position of being able to show quite an interesting track record over that period. Gordon and I will be presenting to you today in the usual way, some introduction highlights, financial results, and we're going to speak a bit about the investment case and why we believe that investing in modern purpose-built care homes is a great long-term play for us all. A reminder about who we are as a business. This is a prime portfolio of modern purpose-built homes, all with ensuite wet rooms as standard. 98 of them today, 6,500 beds, just under 60 million of rental income contracted. 99% of it with inflation-linked rental uplifts, albeit with caps and collars at 2% and 4%. Very diversified income with 32 different tenants and portfolio value of just over £900 million at a 6.25% net initial yield. And long income, as I see in front of us, we think modern purpose-built homes create the likelihood of very long income with the tailwinds that we have behind us. I'm going to take you through the kind of financial highlights first of all. Gordon will get you into the detail. The EPRA net tangible assets per share NTA is 106.7, up 2%, and this is the fourth consecutive quarter, in fact, of NTA growth. The EPRA earnings per share is 3.05 and that has also grown. And as I say, that ties into the certainty of rental income growth that we see with these fixed uplifts. I've said to people in the past that the rental increases are not a subject of big discussion with our tenants. They happen quarter by quarter and it's a technical exercise. And the dividend on the current share price, just over 7%. It's 107% covered and 2.856 pence. 2% dividend growth compared to the six months to June 2023. So in summary, the portfolio highlights for the six months to 31st December, 2023, 99% rent collection. You'll see me speak a little bit more about 1.9 times rent cover. which is really an all-time high. Like-for-like rental growth of 1.9% for the period. Fourth consecutive quarter of valuation growth. And a new thing is this MSCI index. We've been right from the very beginning of the pandemic establishment of the REIT, we have been reporting to MSCI and for the calendar year to December 23, we're the top performer for the UK Healthcare Property Index Award. There are 34 products in that index made up of GP surgery funds, care homes, hospitals. The information just came out last week and we're the top performer for that index. So let me take you a bit into the portfolio. Here is the MSCI index. You'll see in the dark blue bars what our annual return has been compared to the index. And you'll see in 2023, we've outperformed again, number one, as I mentioned, with a 9.7% return compared to 4.4 for the index. It would be interesting for us to know more about what was in the 4.4, but we do know what's in the 9.7. So that's been an encouraging thing as we reflect on the 10 or 11 years of our life. How is that created? Well, you need, we believe, to have good homes, and good homes should create great occupancy. In fact, occupancy currently is still not up to pre-pandemic levels. Occupancy is currently at the 86%, 87% level. Typically, occupancy drops a little in the winter and rises again in the spring and summer and into the autumn. And we're seeing that happening in February and March. We haven't seen much growth since we last spoke to you all in February. But we are seeing a recovering occupancy. You'll see the trends on this slide. But rent cover is at an all-time high. All of these slides that I'm showing you just now are going back six years to 18. You'll see where rent cover has been spot over that period, and you'll see what's happened to rent cover now up at 1.9 times. So our tenants are profitable in summary. And when you think of the last 12 months rolling, kind of smooth out the rent cover, you see that the trend there towards the end is pretty healthy, rising towards a longer term 1.9 times cover. And a reminder that that is based on 86-87% occupancy and we would expect occupancy to get back towards the 90% level by the summer-autumn this year. Rent collection in 17, 18, 19 was 100%. And we're back up in 99%. And if you have 100 homes, there's always something that will have a little bit of an issue. But the fundamentals of this diversified portfolio is a robust position on rent collections. And that is also predicated on the... The mature percentage of the full portfolio, where we're up now to 92% for the portfolio being mature. We entered the pandemic, as a little reminder, with only 70% of the homes mature. So actually to get through the pandemic as well as we did with immature homes, we think was quite an achievement and quite a testimony to the underwriting that we do as a house. So the portfolio increasingly maturing as you would expect with these new homes. And the average uplift of rent reviews completed in the quarters is again 4%. That's approximately every quarter, roughly 20, 25 homes get rent reviews. And as I say, these are not major discussions. They're technical assessments. We don't need valuers involvement. in arriving at the rental increase. So the average uplift of rent reviews completed in the quarter up at 4%. And now I'm going to hand on to Gordon.

Thank you. Okay, so I'm going to take you through a bit more on the financials. I'll start with some detail on our earnings numbers. It's been a stable six months, similar to the previous six months to June 23, and also similar to the comparative period to December 2022. Some notable line items in here, which I'll just take you through. Rental income is growing. You heard that from Kenneth. We have mechanical rental growth, minimal uplifts, linked to inflation with caps and collars, and that is driving earnings growth quarter on quarter, period on period. And we've got that coming through again in this period with rental income up 1.8%. Next line item is somewhat linked to that, but interest from our development funding. So we've been busy on five development sites during the period. And for those who track this, we started the period with four. We added a new one in July. We had five at the period end. But since December, we've had two sites reach practical completion. So we now have three left busy on site. So as we fund those developments with the capital, we earn a coupon on that equivalent to the net initial yield on the the rental income investment. And so with that investment activity during the period, we've seen more interest coming through to an adjusted earnings number for that. And what I would also note is the two development sites which have PCed since December, they are now contributing £1.67 million of contractual rent per annum. And the three remaining sites, when they come online and they're live, will contribute £2.34 million worth of contractual rent per annum. So good activity there, bringing nice new modern homes to the market and they will drive some rental income going forward. And the flip side of that, as you might expect, our financing costs are a bit higher. So as we've drawn £22.5 million worth of new debt over the period, that has been floating with Sonia being higher than it was in the comparative period. And the previous six months, that has led to an increased financing cost charge. So you see the overall net impact on earnings up just over 1% and on a per share basis, 1.3%. I would also flag the, lastly, dividend cover here. So as Kenneth mentioned earlier, 1.07 times for the six months, and we have had a covered dividend for four full quarters now, and that's for the full 2023 calendar year. So the dividend is in a good place relative to earnings. Some additional information on this slide here on the income statement. This is really reconciling adjusted earnings to EPRA earnings to our IFRS profit as we go down through the slide there. Firstly, my regular reminder that our adjusted earnings, EPRA earnings number, I know it can be a trigger to some, but our adjusted EPRA earnings number is lower than the EPRA earnings number because we are taking out the the smoothing effect of our guaranteed rental uplifts. And the difference there is the adjusted EPRA earnings number, which we use as our key management metric, at 3.05 pence per share, the EPRA earnings number is 3.78 pence per share. And so what's really driving the movement from EPRA earnings to our IFRS profit is the revaluation movement in the year, sorry, in the six-month period, taking us from those adjusted earnings of just under 19 million to EPRA earnings of 23 million And then that valuation profit of close to £8 million in the round gets us to our IFRS profit of £38.7 million for the six months period. So the impact of the property valuation coming through. And you can see that in the accounting total return for the period of 4.9% for the six months. And just a reminder, that's the EPRA NTA movement of 2.1% and the dividends in respect of the period, which have been announced and one of those paid. 4.9% accounting total return is something we're pleased with. It's a good positive result for the six months. And you can see the impact of all that just quickly on the EPRA NTA bridge there. So we moved the EPRA NTA was 104.5 pence at the start of the period, growing to 106.7 pence at the end of the period. And you can see the 1.9 pence per share contribution of the property revaluation movement is a black bar just to the left of the middle there. And then we see the effect of the covered dividends, the black and the blue towards the right-hand side there. contributing another 0.2 pence to get to that 2.1 pence per share growth in EPRA NTA for the six months. Our balance sheet is straightforward once we remove the impact of those IFRS smoothing numbers, but as I say, it is a straightforward balance sheet. The key aspects to point out here, our LTV is still pretty conservative at 25.8%. It's grown marginally in the period as we've drawn more debt to fund our development activity and some capex in the portfolio. And the other key aspect I draw here is the headroom we have. So there's still £67.5 million of debt available that's committed or available from our facilities. And once we account for the remaining capital commitments we have in the portfolio, that still gives us around £42 million worth of capital headroom. So flexible balance sheet with low gearing. And it's a fairly straightforward message there that this is good, robust balance sheet that we have at this point in time. And on our debt, I thought it would be useful just to talk briefly about our hedging position and our fixed rate debt. We have, as of the balance sheet date, 91% of our drawn debt is fixed and or hedged. And indeed, £180 million of that £230 million which is hedged was done so long before the interest rate movements in the second half of 2022. And that equated to 71%. So that was good. Delighted to have done that. We've got some good debt in the portfolio at attractive rates. And then we were decisive during that rate movement period in the second half of 2022, and we capped a further £50 million. of our floating rate debt at that point. So we have 230 million hedged or fixed, over 252 and a half million drawn, so 91% fixed or hedged. And we're well protected right now to any other upward movement in rates. The impact of that 9%, which is floating, if Sonia does move by 1%, it's 225,000 more interest, about 63 basis points in dividend cover. So well protected right now. We've got low sensitivity to rate rises. And the duration of that in the debt summary sheet here, I would flag that £150 million of that fixed rate debt is fixed for over 10 years. The other £80 million of the hedging position is still fixed for greater than 18 months. So we're clearly looking at refinancing options and planning and strategising for that to give us as much flexibility as possible going forward. But we're in a good position with that hedging. As I say, nothing falls off until November 25th. So in a good position there right now. And I'll pass back to Kenneth.

I'm glad I've got Gordon there to do all the numbers and make sure that they're right. Gordon has been with me in this from about two months after we launched the fund, or even less perhaps, about two months after we launched the fund in March 13. So the numbers are robust. the numbers work in terms of does it produce long, stable income? We've shown you some pretty long graphs and quite a bit of a track record being created by this. And what is that based on? Well, it's based on modern purpose-built buildings. Personally, I have loved sometimes in my life to live in lovely old houses, and lovely old houses are lovely places to be, but the problem with them sometimes is that they're a little expensive to own, they're a little expensive environmentally, they're a little expensive in terms of... not being always the safest place to be because there can be trip hazards and one or two extra steps and things in some of the houses that we're in. That's not the kind of portfolio that we have. We invest in modern-purpose built homes, and there's an example of one sitting there in front of you, and I'm also going to show you a few more pictures of the kind of physical real estate that you're invested in. In addition to that, we have three significant tailwinds. strong tailwinds. I've spoken from the beginning about demographics when I first went round the market in 2011 and 12, but you'll see from that slide that while the number of over 85s has grown a little over these last 10 years, the rate of growth of the over 85s in the next 20 years is significantly speeding up. So there's strong tailwinds in terms of will there be demand for care home bed spaces and that is something very much in our favour. The number of over 85s is expected to double in the next 25 years. In addition, the trend to quality is really clear. You'll see the top little sentence there. It's one of the interesting things that's happened, and we've been aware of it for about nine months, is a market shift towards the en-suite wet rooms, with the largest operator in the sector making a clear move to acquire about 40 homes in the space. and also a statement by them less publicly that they plan to lay off a further 70 of their own homes and they've got about 300 homes that they're operating. So there is definitely a market shift going on with the larger operators recognising that the modern purpose-built home is really appropriate. I was actually in America a couple of weeks ago speaking with KKR and speaking about some of this trend. And this trend has really largely happened now in America with homes with wet rooms being the norm across their stock. The chap I was speaking to said that he reckoned it was about 98, 99% of the residents were in bedrooms that had en suite wet rooms. So Britain will catch up with that. And Britain is catching up with that. If you look at 2014, 14% of the beds were with wet rooms. Nine years later, 32% of the beds with wet rooms. A reminder of Target's position in the middle of that. 99% of its beds with wet rooms and will be at about the 100% in not too long. because we have a clear plan for that and we exclusively buy in the wet room space. there's also a quite an interesting thing happening we think in terms of the investment market uh obviously we have our own frustrations and not been able to grow as fast as we might like to but there is still an investment market for modern purpose-built homes which is quite different to what is the reality of the current market for the second-hand stock, the product without wet rooms and the product with no facilities at all. You'll see on this slide that there is continued activity primarily from private capital but institutional capital buying in the sector. with very little purpose in the second-hand part of the market. And we've been looking for... We asked one of the agents to give us their view of what's happened, of what the current pricing is, So super prime, fabulous covenants in the high fours. Prime, the kind of product we have being bought in the mid fives to towards six. Poor on sweets. Going back really to some of what happened 10, well, 15, 20 years ago, really. at 8% to 10% for non-prime. And a couple of quotes there from one of the US REITs who has a number of actually just the second-hand product here in the UK. It's mostly SNFs, they call them, Specialized Nursing Facilities, both in the US, UK, quoting cap rates north of 9%. And in quarter three, 2023, they did a transaction here with an initial cash yield of 10.2 with 2.5% annual escalators. So definitely a change between the modern purpose built and the product that people understand needs to be fundamentally rebuilt or to leave the market. And then in relation to the product, is this boasting? Should I not be saying this? I'm trying to give you facts. En-suite wet rooms for ourselves, 99%. The listed peers average 28%. I suppose I'm trying to say that it's just very different. And then in relation to EBC ratings, am I boasting again or I'm just trying to give you some facts? Target at 98% A and B rated, listed peers average at 60%. And then in relation to the age of buildings, The light green is very different, isn't it? Because we are purpose-built largely since 2010 with a little bit in the thousands, whereas the listed pure average, just very different stock. And yet, I've written in my notes here, wow, how does that work? Our valuation basis at 6.25% and the listed peer average at 6.4%. Just really different stock. If you remember also that our physical rooms are about 20% more actual space for people to look after the residents well. So very different. And I've spoken about... loving personally to live in older homes, but for workspace, I think the whole office move, isn't it, to green space and modern and purpose-built, same happens here. Here's a a modern fit-for-purpose home that opened a week last Friday, just beside Dartford, just at the south side there of the Thames. I actually saw the development of that, and the ground went to check out that site 18 months, 20 months ago, and it's been great to see that home opened. You'll see there the balconies, the gardens, just a great place to live. Spacious rooms, fully equipped wet rooms, appropriate for the kind of conditions and the reality of care in a care home. wide corridors, attractive space for people to work in. Can this be better staffed than in a cramped old building? Oh my goodness, yes. Great outdoor space and outdoor space that is also safe so that folks can't go wandering. Remember that 90% plus of the residents will have some degree of dementia. And another example of a home that opened about five weeks ago, I think, Kings Court. And this is an interesting one because I remember presenting in Cootes eight or nine years ago, and one of the operators, the operator of this home, saying, Kenneth, you're evangelical about modern purpose built in wet rooms, but you need to understand that my old, and at the time he had 23 or 24 care homes, which were of the poorer standard, are fabulous cash cows, and these homes are still profitable. But he said, how can we move to this new stuff other than we recognise, he said, you're like our conscience. Well, during the pandemic, in the first three or four months of the pandemic, he phoned us up and said, you're right, we need to move. And in fact, today we have four homes and we have another home being that will come out of, well, will be finished before the end of this year. But this is a home that we have done with him. And there's a little fly over here that you'll see. So that's who we are, modern purpose-built, future-proofed, and we're thankful to be in that space. So finally, some comments about market outlook. I've spoken about tailwinds. The demographics are with us. We have a strong preponderance of private pay fees in the mid-70s percent. Needs-based care is a reality in the sector. This isn't generally an optional purchase. This is families in extremes, what do we do with our loved one because they're no longer safe on their own and nor do we have the time or capacity to look after them. And the whole question of the NHS and the mess, sadly, of what the NHS is, but everybody or many recognise that freeing up NHS beds so they can move into these kinds of facilities, plus domiciliary care, is absolutely part of the medium-term future of how the UK will cope with its ever-growing elderly population. Inflation is easing. Wage inflation has been supported by fee increases, and that's evidenced by the rent covers that you've seen reported today. And energy costs have been managed. Staffing is in a good position. Increased availability of staff. The visa scheme is now used more widely. The actual restriction on dependence of people coming in under the visa is not causing the care home sector great concern. There's a better understanding of the career in the care sector as an honourable and great vocation with long-term stable employment. The real estate within the sector itself is also improving. The quality is improving, moving from 14% to 32% over the last nine years. There are older homes and beds leaving and not being replaced. with any of that old kind of product. There are staff favouring modern homes. These homes are great for the whole ESG story. And we don't have a concern in our portfolio about EPC ratings and about the capex to get to the requirements of government. We don't have concern about capex for ESG aspects. Demand for places is robust. Dementia is a reality and is growing. There is this whole challenge of loneliness. A care home gives community. And dual income families leave less time to care for seniors. And how can all this be funded? Well, maybe you younger people can pay more taxes. Or maybe the government won't want to increase taxes and take it out of the value of the older people, the seniors. Do the seniors have money? It's quite interesting. I did a little bit more research for this as I was thinking of this presentation. And I remember, I think 11 or 12 years ago, when we launched probably the first FIVET fund, 13 or 14 years ago, speaking about 1.1 trillion or 1.3 trillion of net worth. The net worth of the over 65s today is 2.6 trillion. The sector takes about 20 billion a year of income, 20, 25 billion a year of income. There's a fair bit of capital to fund the private fees going forward. And of course, in addition to that, local authorities have a statutory duty to fund social care for seniors when the seniors themselves do not have any net equity. So in summary, real estate quality supporting great value with good investor demand in the sector. The portfolio performing, it's improved through the year. Our rental income is supported by profitable tenants. with a conservative balance sheet, with a significant element of fixed or hedged finance costs, and the demographics and the trends to quality, evidencing a significant gap between prime and non-prime real estate in senior living. So that's our presentation over. Welcome to have questions. And I will probably come and sit beside Gordon again and take them from there.

Morning, Martin King, medicine. Are these high levels of rent cover the new norm, do you think? Or should we not be surprised if over the medium term the operators give back some of that profitability perhaps by slower fee growth relative to inflation?

One of the interesting questions is why isn't occupancy building a little bit quicker? And what we're seeing is that our tenants are taking their time. They're being a bit choosy about who they bring in. And that is slowing occupancy. And they're doing that off the base of having profitable homes already. So I don't see any tendency towards giving back. I would like them to be thinking more about providing fabulous careers for an incredibly diligent workforce and also providing stable income to us. On average, the seniors have the equity to be able to pay for these fees.

Hi, Stuart Bell from IDCM. Embarrassingly, I should probably know the answer to this question, but to what extent do you have control over the occupancy in the sense that you get your rent from your operators and they presumably control who comes in and who doesn't? But is that a two-way dialogue which you can influence?

So we have no interests, economic or otherwise, in the ownership or the management or no shadow directors of any of our tenants. They are absolutely a standalone business and separate to us. So we monitor the occupancy. On a Friday night, I'll have the latest updates of the occupancy in our homes. We don't get them from every home on a weekly basis, but we have the quarter or so who have reported that week will update the occupancy figures. But we don't have any control over it. That is very much a tenant question. There's one behind you. You're being patient.

So just building on the question about the occupiers, obviously your rent cover at 1.9 times. I'm guessing there is some variance sort of within the occupiers. There is your rent roll, your tenant roster is more diverse than the peer group average. Is there sort of anything that you can, any color on sort of trends within the operators in terms of that rent cover? Obviously we've seen some consolidation in the operator space. Is that something you expect to continue going forward?

Well, as I said when I was speaking about rent receipts at 99%, there will always be one or two homes with a challenge. That is the reality. We have one or two homes with a challenge, but 90% plus of the homes have very adequate rent covers. We did the original underwriting based on rent cover being at 1.6 times, so we're significantly ahead of that currently.

Yeah, at last. Hello, morning. I'm just thinking about what you've been saying about the clear bifurcation in the market between sort of best and the rest for assets and that pick up in Q1 in the investment market. There's obviously clearly an appetite now for quality assets. I think you've got three developments left to complete and then you'll have about 40 million or so of uncommitted cash and the LTV will still be well, well within 30%. Does it make sense sort of on a yield on cost basis to perhaps take on some more projects now and push that LTV a bit, given that you've got that very visible learning stream.

I think the answer to that is these are really good questions. We would love to see the yields expand a little further. So we're not keen to feed that haste for assets. But we would also like to grow. So it's a kind of interesting tension. But with net initial yields, the portfolio valued at six and a quarter,

It's that balance, really, that we're just being... The development site we entered into during the period was a great asset. It's operationally net zero. It's the cutting edge of the type of development that we want to see. And whilst the The yields were still fairly skinny on that relative to the cost of capital. It was something that we wanted to do as a company to get our hands on that asset. So case by case basis, we'll keep looking at opportunities. We are still seeing opportunities like that. And there was something which we may use our headroom towards.

you've got that visibility on index linkage you can almost accept a skinny yield now because you know that that yield will be higher very quickly with some degree of certainty and therefore you can get into the market perhaps ahead of things which is how you would want to do it wouldn't you once you see that things are turning yeah there are total return possibilities in the sector at around about the eight percent level

with buying in the high fives. And with the annual rental uplifts, that is absolutely part of our active consideration.

Compared to cost of capital, that's getting to the point where it's quite a stretch.

Yeah, exactly. Thank you. The challenge of that is... competitive capital sources and just trying to be wise in that part, in that consideration.

Just continuing on the yield question, so your valuation yields six and a quarter and then you put up a chart about the investment market prime trading sort of five and a half and lower. What's the difference? Because you're painting a picture of prime assets, but they're not being valued at prime rates.

Yeah. So there were three bits. There was the very high covenants, very strong covenants. And if you go back 18 months, they were typically trading in the high threes. And that has extended by about 100, 120 basis points. And this portfolio that we have developed is primarily around not quite SPV covenants, but tenants that aren't part of very large groups with a big balance sheet. So our underwriting from the beginning has been about is this a best-in-class care home in a 10-minute drive time that will have a long-term future? And will it build up? So that's where the five and a half to six depends on the strength of the covenant more than the performance of the home as we see it in the medium term.

Where do you see yields going from here?

Last week there was a deal done which would have tended to show that yields had tightened a little, but we don't have sufficient data on that yet to be able to accurately answer that. It obviously should tie into bond rates and therefore we think that yields around about the mid fives to low sixes is about right for the kind of product that we're looking at.

Do you get the sense that this is the last of the outward yield shift?

Yes. Yeah. Yeah, for sure. But we don't want to actively encourage inward shifting.

Justin Bell from Deutsche Numis. Just following on from that, the comments about the value in your real estate being very much location-focused, high-quality kit, rather than it being a sort of covenant play. Do you think having 25, 26-year leases really adds value? And in the current environment where obviously inflation is running ahead of your caps, are you tempted with some of your new developments to to have different structures, either shorter leases or open market?

We haven't been tempted. We set out 10 years ago to be a long, stable income fund that over the longer term will produce this kind of total returns of 8%, 9%, 10%. And you've seen the MSCI index, which evidences that happens. And we are inclined to stay true to our original purpose to be this long, stable income fund that will, in fact, get you the 7% or 8% type returns over the very long term. and having that long income we think is attractive.

Thank you. Harry Goodrich from IDCM. You mentioned on your portfolio that the mature levels had reached just over 90%. I assume your ideal range would be slightly below that. Do you have a target split between mature homes and newer, developing homes?

Well, what we'd love to do is get back into buying new homes. And if we buy 10 homes a year and maturity takes three years, we'll begin to drop down a bit from 90%. You could imagine us getting back to around about the 80% level once we get proactive back in buying in the market.

I think I'll take some of the questions that have come in online now, so I'll probably do two of them, one for Kenneth perhaps, and I think one's already been answered. Cheyenne at Gravis was asking about the contractual rent rule figure that we disclosed, so the December number of £57.9 million, that does not include the rent contributed from the two developments which have gone PC after the year end, and nor does it include the the further 2.4 million from the three developments still to go. So both of those, all five of those developments will be additional to the 58 million rent rule as of December. And then Steven Scott was asking, what's our policy on adding solar power to the homes? Something we're very active on, we're speaking to all our tenants on that, about funding the addition of solar PV panels to each of the homes. Every tenant's case is different. as to how we might do that, but it's certainly something that we're seeking to add as much as possible to the homes to the extent that the homes can accommodate those. We have some in the pipeline at the moment, we're working on some of those and active dialogue with most of our tenants on that. Kenneth, I think Jacques' question was answered. It was similar to Matthew's one on the yields on the portfolio. And then there's a question about the acuity.

Can you do a colour on the level of acuity, care requirements across the portfolio? So the portfolio is something like 55% nursing beds, 45% residential. and if that is the case which it is that means higher acuity than lower acuity we have quite a number of homes that have just residential which generally you can think of as being dementia and then if the preponderance of beds are in nursing then that will be heavier dementia as well as medical needs we have One particular home that I'm thinking about where there are, well, no, actually, we've got two homes where there are doctors present 24-7, as well as whenever we speak about nursing beds, the nursing floor will have a registered nurse present 24-7. So that's the balance between the product. That's the end of the questions? Yeah. And more questions from you all. So thank you for your interest.

Sorry, just one last thing. On the growth in en suite wet rooms, the majority of that will be driven by new homes coming to the market and the obsolete stock retiring. But do you have any sense of the contribution of conversions within that? So converting homes to en suite wet rooms and whether there's any trend in that?

You know, when we used to report this, we had probably 300 beds that didn't have wet rooms. So we've done 300 beds ourselves. And we have two examples of a home that we bought at 77 beds, which became a 47 bed home with excellent wet rooms. So using an existing home, you essentially have to lose a third of the bedrooms and you split the one third bedroom into en-suites for the other two. We're actually going to put up on the website through this week an animation video explaining why we think that wet rooms are really important. In truth, I would have, I'm going to say this with a smile on my face, in truth, I would have had the animation video At this presentation, were I not deterred by some of our advisors that I might get too gruesome on why we think wet rooms are important? But if you go to our website by the end of this week, One of our former directors of the public company is commenting on the reason why we think wet rooms are important, and it's an excellent visual representation of why this is important. But I think the thought was that we should be more... Financial-related, rather than... How does the maths work with that?

So you've got a care home up and running, and you take out a third of the rooms to the birds, to the wet rooms... How much higher can you push on the tenants?

Well, your staff costs are going to reduce. Staffing is related to the number of people that you have in the homes. Remember that staff costs are about 50% of the costs of operating it. So the economics don't work in that home. That home is... That home actually took a little while to get up to decent rent covers, but as of this stage, it's a rent cover around about two times that home with 47 beds.

The capital sum we paid to acquire it was reflecting the work that was needing done, and clearly the operational differences in terms of staff costs coming down, but fees increasing for the better facilities make that work for the tenant as well.

I get the sense that's not the type of work you want to undertake in the future. You prefer to do modern purpose.

No, we would definitely do a bit of that as well. We continue to look at that. That's all about the pricing at which you can buy the 77 beds. So that first 77-bed home we bought, I think we spent £1.5 million and we spent £3.5 million to refurbish it. So we ended up with 47 beds at about £100,000 a bed. That was the economics.

So delighted to do it. I think there are some... It's a small population of homes which have the footprint appropriate, the corridors already. You're not going to get into gremlins once you get into the walls and start doing the rebuild and find things. So it needs to be...

If it's only knocking walls through to put in the plumbing and all the rest, that is relatively easy. But a lot of these old homes will have corridors the distance between there. So how do you get two wheelchairs along there? That's the kind of stuff that is the difficulty of the older stuff. Plus extra stairs, trip hazards, all that kind of stuff. So it just becomes more difficult, physical real estate, to run a home in smoothly. As I say, I love living in old homes. It's just different.

Okay. Okay. Thank you, everybody. Thanks for the questions, attendance and interest. That's much appreciated.