Interim Management Statement

RNS Number : 3757B

Primary Health Properties PLC

16 April 2012

 



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, today issues its Interim Management Statement for the period from 1 January 2012 to 16 April 2012, the date of the Company's Annual General Meeting.

Highlights

·     Successful completion of the refinance of the Group's bi-lateral debt facilities

·     Acquisition of a further £4.5 million of investment properties

·     Portfolio continues to be 100% let

·    Annualised passing rent roll, including commitments, of £32.5 million at 31 March 2012 (£32.3 million at 31 December 2011)

·     Continued pipeline of attractive property acquisition opportunities

·     An interim dividend of 9.25p per share in respect of the year ended 31 December 2011 was paid to shareholders on 5 April 2012

·     Granting of Royal Assent to Health and Social Care Bill

Borrowings and Banking facilities

As announced on 3 April 2012, the Group completed a new four year, £175 million club banking facility with Royal Bank of Scotland and Santander Corporate Banking.  This included separating the security for the Allied Irish Banks facility of £27 million whose terms remain unchanged.

Following the refinance, total facilities available to the Group amount to £384 million with borrowings drawn totalling £316.6 million.  Remaining commitments to fund and acquire future assets total £7.4 million, giving the Group head room of £60 million to fund further acquisitions.  Discussions are also ongoing with new debt providers to secure further debt facilities to be utilised to expand the Group's portfolio.

Interest Rate hedging

A highlight of the refinance detailed above was that there was no need for the Group to break its interest rate swap portfolio.  This portfolio includes £88m of callable swaps where the Group took advantage of market conditions to buy out the counterparty's call option for the next four years for just £60,000.  As at 31 March 2012, the Group's interest rate swap portfolio was for a nominal value of £173 million.

The total mark to model liability of the derivative portfolio was estimated at £41.8 million as at 31 March 2012, a reduction from its value of £49.5 million at 31 December 2011.  This movement has been caused by an uptick in longer term rates as more positive data has come from global markets despite sovereign debt issues continuing within Europe.

Property portfolio

The Group has secured a number of new acquisitions in the period:

Asset	Acquisition basis	Acquisition cost	Size sqm
Conan Doyle, Edinburgh	Standing let-investment	£3.6 million	1,144
Pharmacy Unit, Connahs Quay, North Wales	Standing let-investment	£0.9 million (unit adjoins the medical centre owned by PHP)	145

Transactions totalling some £17.5 million are also in solicitors' hands to acquire assets in South Wales, West Midlands, Norfolk and Somerset.

The Group continues to appraise a strong pipeline of attractive acquisition opportunities, a mix of further forward commitments to acquire newly developed assets and standing let investments all of which would be accretive to overall rent roll and Group profitability.

The Directors believe that initial property yields in the Group's portfolio have remained stable at approximately 5.74% in the period under review as demand continues from property investors in all sectors for quality assets let to strong covenants.  The next valuation of the freehold, leasehold and development properties of the Group will be carried out at the interim date of 30 June 2012.

Rent roll and rental growth

Annualised passing rent roll of the portfolio as at 31 March 2012 was £31.7 million (31 December 2011 £31.4 million), the increase being due to deliveries since the year end and uplifts from rent reviews concluded in the period.

Average rental growth achieved on rent reviews completed to 31 March 2012 showed an annualised rate of 2.4%.  This is lower than that achieved for 2011 (3.0%) but has been derived from a small sample and is pleasing when analysed in the context of the current economic climate.

Health and Social Care Bill 2011

The Health and Social Care Bill gained Royal Assent on 27 March 2012 to become the Health and Social Care Act (2012) (the "Act").  The Act devolves large areas of responsibility for commissioning care to front line health professionals with the aim of increasing accountability and patient choice.

The establishment of the Act brings to an end a protracted period of uncertainty within the health sector that has impacted on the flow of new medical centre developments and reduced volumes.  The Directors believe that the Act will have a positive impact on future development opportunities but do not expect there to be an immediate rush by the new NHS management structures to approve a large number of new projects.  It is expected that development project numbers will increase slowly as the structures and processes of the Act are implemented in the coming year.

As previously detailed, PHP has received confirmation from a member of the healthcare ministerial team, that in the future the NHS Commissioning Board will be responsible for the reimbursement of GP premises' costs which the Board views as a positive development.

Outlook

The completion of the refinance of the Group's banking facilities has provided a secure capital base and capacity for the continued growth of assets under management.  The prospects for PHP remain strong as we have resources available to the Group to expand our portfolio and have a strong pipeline of opportunities that we are looking to secure.  The passing of the Health and Social Care Bill into statute has now been achieved and will provide a platform to increase the number of approvals for new medical centres across England.

For further information contact

Harry Hyman/Phil Holland

Primary Health Properties PLC

T:  [phone]

M: [phone]/ [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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