Interim Management Statement

RNS Number : 7351E

Primary Health Properties PLC

12 April 2011

 



PRIMARY HEALTH PROPERTIES PLC

A specialist REIT providing Primary Care Accommodation for the NHS
Interim Management Statement

Primary Health Properties PLC ("PHP", the "Group" or the "Company") one of the largest providers of modern primary healthcare facilities in the UK, today issues its Interim Management Statement for the period from 1 January 2011 to 12 April 2011.

Highlights

•      Completed acquisition of a further £12.3m of investment properties

•      Commitment to the purchase of a new property in Newark for £4.3m

•      Portfolio continues to be 100% let

•      Rental growth has continued with reviews settled in first quarter generating an annualised uplift of 3.27%

•      Annual passing rent roll of £28.9m at 31 March 2011 (£28.0m at 31 December 2010)

•      Continued pipeline of attractive acquisition opportunities

•      Credit approval for a new £50m interest only facility from Clydesdale Bank

•      A second interim dividend of 9p per share in respect of the year ended 31 December 2010 was paid to shareholders on 31^st March 2011

•      Health and Social Care Bill proposals for England expected to enhance the role of GPs and lead to increased demand for modern primary healthcare facilities in the medium term

•      The Group has separately announced today a share placing to raise approximately £16.1m

Property valuation

Since 31 December 2010, the directors believe that initial property yields in the Group's portfolio have remained stable at approximately 5.8%.   The next semi-annual valuation of the freehold, leasehold and development properties of the Group will be carried out at the interim date of 30 June 2011.

The market

Occupier demand for modern purpose built primary care facilities remains high and as a result the directors consider this to be one of the sectors within the property industry that is demonstrating continued rental growth.  The market continues to be underpinned by the Government's commitment to ensuring that primary care is delivered from modern purpose built accommodation that is fit for purpose and environmentally efficient.

The Group has a pipeline of attractive acquisition opportunities, which could be exploited and which would be accretive to the overall rent roll as well as helping PHP generate possible additional economies of scale whilst creating further critical mass.

Health and Social Care Bill 2011

The period saw the publication of the Coalition Government's Health and Social Care Bill 2011. As part of these proposals, responsibility for much of the NHS Budget is set to pass to GP consortia, which will be supervised by a national NHS Commissioning Board.

Although the announcement of the abolition of the PCT structure in England has led to a short term reduction in the approval of new developments, once the Bill has been passed, the directors anticipate that activity will increase. 

In response to a question recently asked by the Company Earl Howe, a member of the healthcare ministerial team, has confirmed that the NHS Commissioning Board will in future take over the responsibility for reimbursement of GP premises costs from PCTs and that this move will not impact the reimbursement process.  (Note: The text of the letter can be seen on the company's website at www.phpgroup.co.uk)

Rent roll and rental growth

The annualised passing rent roll of the portfolio as at 31 March 2011 was £28.9m (31 December 2010 £28.0m), the increase being due to deliveries since the year end and uplifts from rent reviews concluded in the period.

Growth achieved on rent reviews concluded in 2010 averaged 10.0%, which equates to an annualised rate of 3.22% over the typical three year rent review cycle of the sector. 

Actual rental growth achieved in the first quarter of 2011 shows an average annualised rate of 3.27% across the portfolio overall, slightly ahead of what was achieved in 2010. Taking into account the current economic climate, the Directors continue to be pleased with the actual rental growth rates achieved in the first quarter of 2011.

The prospect of a period of continued higher inflation is a positive factor for future rental growth as around 13% of our portfolio is formally linked to inflation.

Borrowings and Banking facilities

As at 31 March 2011, Group borrowings totalled £287.0m.  Remaining commitments to fund and acquire future assets total £22.4m.  The Group has secured a new £50m interest only facility from Clydesdale Bank, which has been credit approved and is currently being documented.  Accordingly, on 12 April, aggregate available facilities were £371m, including the new facility from Clydesdale Bank.

The majority of the Group's facilities do not expire until January 2013 and as at 31 December 2010, the Group had an LTV ratio of 57.6%.  Discussions continue between the joint managers and the Group's lead bankers regarding refinancing the term loans and enlarging the overall facilities available.  In addition, the joint managers are investigating the feasibility of using the debt capital markets in combination or as an alternative to traditional bank lending.

Interest Rate hedging

In the current interest rate climate, PHP remains committed to maintaining a relatively high level of interest rate hedging cover against the Group's variable rate borrowings. The Group's fixed rate cover of £208m includes £88m of callable swaps, which are reviewed on a quarterly basis.

As at 31^st December 2010, the Group's derivative portfolio showed a net mark-to model liability of £31m. As at 31 March 2011, the valuation had reduced to a net liability of £23m having been £22m on the date of announcement of results. This reflects the continued volatility in longer term interest rates between the various dates.

Placing

The Group has separately announced today a placing of 5,284,041 shares at 305 pence per share to raise net proceeds of approximately £15.6m.  The proceeds will be used to provide PHP with further headroom to expand the portfolio and also provide additional flexibility with regards to the Group's working capital and overall financing position. 

For further information contact

Harry Hyman/Phil Holland

Primary Health Properties PLC

T [phone]

M+44(0)7973 344768/ [phone]

[e-mail]/[e-mail]

David Rydell/Victoria Geoghegan/Elizabeth Snow

Pelham Bell Pottinger

T [phone]

This interim management statement may contain forward looking statements. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances.

These statements reflect the knowledge and information at the time of the release of this interim management statement. Nothing in this Interim Management Statement should be construed as  a profit forecast or estimate

Apart from the information contained in this Interim Management statement there have been no material events or transactions affecting the Group during the period.

 

END

 

 

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