Kenneth Mackenzie0:15
My professional background is as a chartered accountant, qualified in Aberdeen many years ago. I set out to run my own business; some people would call me a serial entrepreneur. About 15 years ago, I began to get involved in the healthcare sector. I owned the largest domiciliary care business that was privately owned in Scotland, about 13 or 14 years ago. Then 10 years ago, I set out to create a long-term income fund post-Lehman Brothers, believing that new capital for modern homes was a desirable product. Out of that, there emerged something that is today called the Kames Target Health Care Fund. Then five years ago, we created Target Healthcare REIT in the public markets, with ourselves as the fund manager.
We set out to create a fund that would give a stable, boring, long-term income source to its investors by investing in modern, purpose-built care homes, and in particular care homes that had wet rooms. Across the stock, there are quite a lot of care homes in the UK: ten or twelve thousand of them, four hundred and seventy thousand beds, but only a hundred thousand of these beds have wet rooms in every one of the bedrooms. That is a key focus for us, based on the premise that you and I would like, if we were being cared for and living in a home, to have an ensuite facility, which is more than the en suites that exist in much of the sector, which are WCs and wash basins, but also have wet rooms, because the residents in a care home — 60 or 70% of them are incontinent, either singly or doubly. So having best-in-class, appropriate stock for the investor community to invest in is a fundamental part of what we set out to do.
So there are ever more elderly people. Dementia is a big issue across our nation, and with increasing aging and dementia, the ability of our communities to look after our elderly is diminished. So the number of care homes that are required will increase, with increasing acuity of illness and multiple morbidities. And as part of that, we wanted to invest in best-in-class homes which would create the right income source.
Well, the physical asset has to be the right kind of asset, with good public and private space. It has to be purpose-built, but you'll hear that comment often from other funds. Our particular interest is that not only are they purpose-built and modern, but also that they have appropriate personal care facilities in every single bedroom. So we buy care homes that have bedrooms with full wet room en suites, and sometimes we buy homes which don't have these wet rooms, but we have a plan A with our expected tenant to convert these into fully wet room facilities. And we are very unusual in that in the listed markets, we were the only UK listed fund that does that.
In terms of the asset class, within the healthcare sector there are today five funds that are listed and invest in healthcare: three GP surgery funds and two that invest in care homes. And within all of that, in the care home fund, the fact that we invest in this modern, future-proof stock is what differentiates us from others. In addition to that, we are a very diversified income source with over 20 different tenants, so if we had problems with any one particular tenant, they are always manageable. And also we have set out to be a low geared fund, so low level of debt, to be able to provide the income that we give to our investor community.
So over the last five years, the fund has returned a 50% return for its investor community. We have set out from the beginning to be paying a 6% dividend, which is actually what we've done year-on-year. So six times five is thirty percent, and twenty percent is capital uplift. So we're an active supporter of smaller operators, family businesses, and indeed we see ourselves from a real estate point of view as consolidators of these smaller businesses: physical, modern, purpose-built wet room real estate. And we see significant further opportunity to grow within that special space. Providing good care for the elderly is honorable. If that is to happen, you have to support the carer well, and you need to have focus on the resident on the home with best-in-class facilities. We see much opportunity to continue to do that.
