When we established Target fifteen years ago, our approach from the outset was to ensure every investment decision we took was with the long-term impact in mind. It has been one of our guiding principles and has served us extremely well as we have judiciously curated an investment portfolio comprised of over 100 modern, purpose-built care homes with a value in excess of £1 billion and supporting approximately 40 care operators caring for 6,000 elderly residents.
Whilst this approach has not, and will not, change, the criteria for what underpins our long-term real estate investment strategy has subtly evolved.
Of course, elements which prioritise our core social impact values continue to feature strongly, such as single occupancy bedrooms with full en-suite wetroom facilities. These are features which Target have vociferously and passionately advocated across our properties since inception, with wetroom provision across the UK’s social care sector doubling to c.30% over the past ten years (99% across Target’s real estate portfolio). We are proud to have been at the forefront of this evolution, ensuring the elderly receiving personal care in our homes are able to live with both privacy and dignity in their later years.
Similarly, we extolled the virtues of residents having easy access to outdoor space and fresh air, bringing with it the associated physical and mental health benefits, through the design of bedrooms with direct access onto secure landscaped gardens. We have also encouraged the provision of upper floor balconies and terraces, enabling those residents who are less ambulant, but accommodated on the upper floors, to be able to enjoy the freedom of being outside without the logistical challenges that can be associated with a care home setting.
In addition, we have promoted spacious buildings with wide corridors and good sources of natural light which ensure bright and airy environments, benefiting both residents and staff alike; a range of amenities to ensure an engaging and diverse environment in which to live and work; and multiple lifts between floors, providing for the greater safety of residents in the event that one of the lifts were to be out of commission.
And so, what next? How are Target ensuring that our buildings remain impactful and are at the forefront of care home innovation; fit-for-purpose to support the residents who live in them and the staff who work there for the long-term?
As with the wider commercial real estate sector, in recent years we have rightly witnessed a growing emphasis on environmental impact and the raising of standards in the built environment. Elements such as ground source heat pumps and solar panels have been a feature of our portfolio in a modest way for several years, often supported by traditional, fossil fuel energy sources. However, times are changing.
"In the last year alone, we have funded the development of four operationally carbon zero care homes. These homes feature on-site renewable energy generation via photovoltaic panels and ground source heat pumps, with excess energy demand met either by using on-site battery storage or by accessing the National Grid. These elements, alongside other solutions such as air source heat pumps, are now embedded in our specification requirements for new care home developments as we continue to strive towards decreasing our reliance on fossil fuels as the primary energy source across our portfolio."
But it’s not just our new developments where we’re looking to make an impact. We have already embarked on an immediate investment programme in excess of £1 million to deliver carbon reduction initiatives across the portfolio and, on a more targeted scale, we also remain committed through our origination expertise to identify older buildings and undertake deep-refurbishments, bringing them up to modern day standards, both from an environmental and social impact perspective.
Naturally, this investment activity has to be supported by robust, empirical data. That is why in our ESG Charter, “Targeting Tomorrow”, we articulate and report on the progress we are making towards achieving our environmental impact goals. Whether this be that 99% of our properties benefit from an Energy Performance Certificate rating of an “A” or “B”; or that we continue to meet the commitment we made in 2022 that a minimum of 10% of our portfolio would be certified on a BREEAM-In-Use basis on an ongoing basis (this being a key performance measure for addressing environmental impact); or that we have increased the collection of energy usage data from our tenant population to 94% coverage, as well as improving the proportion of our leases with “green provisions”.
We are proud to publish this data as part of our commitment, holding ourselves to account in a transparent way for the decisions / action we take and to, once again, lead the way in our commitment to improving the overall environmental impact of UK social care real estate.
Naturally, we cannot do this alone. We are extremely grateful to our operating partners and external advisers for their continued input, support and guidance as we work towards fulfilling our commitments on achieving a zero-carbon portfolio. A key part of this has been helping us devise our Net Zero Pathway which, encouragingly, already shows us to be in a very strong position relative to other property companies. That does not mean, however, that we will rest on our laurels and as we continue to refine our targets, we will retain, at the heart of it, stakeholder value as a key objective.
So, whilst the criteria for our long-term investment decisions might evolve, what remains firm is our steadfast commitment to delivering impactful and sustainable investment in the UK social care sector for the duration.
Rob Scholes, Investment Director. Sept 2024
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Target Advisers LLP and Target Fund Managers Ltd (together ‘The Company’)
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