Interim Management Statement

RNS Number : 4825E

Primary Health Properties PLC

10 April 2014

 



PRIMARY HEALTH PROPERTIES PLC

A specialist REIT providing Primary Care accommodation to the NHS

Interim Management Statement

Primary Health Properties PLC ("PHP", the "Group" or the "Company") the UK's leading investor in modern primary healthcare facilities, today issues its Interim Management Statement for the period from 1 January 2014 to 10 April 2014, the date of the Company's Annual General Meeting.

Highlights

·    Successful completion of stage one of the refinance of the debt assumed with the acquisition of Prime Public Partnerships Limited ("PPP") in December 2013

·    Stage two of the PPP refinance agreed and being documented, including a new £50 million debt facility agreed with HSBC

·     Acquired or committed to fund a further three property assets for a total of £23 million

·     Total property portfolio with a book value of £981 million¹

·     Weighted average unexpired lease term in portfolio of 16 years

·     Annualised contracted rent roll, including commitments, of £59.2 million at 31 March 2014

·     Attractive pipeline of acquisition opportunities

·     Interim dividend of 9.75p per share payable to shareholders on 25 April 2014

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¹ Including properties under development as if completed

Property portfolio

The Group has secured three new acquisitions in the period:

Asset	Acquisition basis	Acquisition cost	Size sqm	Target completion date
Gorse Stacks, Chester	Forward commitment	£19.0 million	5,754 sqm	December 2014
Caia Park, Wrexham	Forward commitment	£2.3 million	850 sqm	December 2014
Newton Abbot, Devon (Pharmacy unit)	Completed investment	£1.7 million	753 sqm	Rent producing

The Group's portfolio comprises 262 high quality assets with a total value of £981 million.  This includes 256 completed assets and a further six that are currently on site under development.  The next independent valuation of the Group's property portfolio will be undertaken at the interim date of 30 June 2014.

PHP continues to appraise a strong pipeline of attractive acquisition opportunities, a mix of further forward commitments to acquire newly developed assets and standing let investment acquisitions, all of which would be accretive to Group profitability and enhance dividend cover.

Rent roll and rental growth

The total contracted rent from the portfolio as at 31 March 2014 stood at £59.2 million, up from £57.6 million as at 31 December 2013.

Growth from rent reviews has contributed to this increase with 25 reviews completed in the period to 31 March 2014, generating a total increase in rent of £0.1 million.  These reviews showed an annualised rate of growth of 2.0%, as was also achieved on reviews in 2013.  

Borrowings and banking facilities

In the period under review, the Group has completed the first stage of its refinance of the debt that was assumed as part of the acquisition of PPP in December 2013.  This saw the crystallisation of an early refinance fee of £13.7 million that had been provided by the vendor within the acquisition pricing, reducing the interest rate by over 80 basis points with effect from 1 January 2014.

The second stage will refinance a proportion of the debt into a new £50 million, five year revolving facility that has been agreed with HSBC.  This facility will accrue interest at a rate of between 200 and 225 basis points over LIBOR and will include an element that will be used to fund forward development commitments. 

The remainder of the PPP debt is to be re-structured with Aviva to provide amended interest only facilities that will to refinance the remaining £113 million of assumed debt.  This will reduce the applicable rate of interest further below the reduction secured from January 2014 rate.  These changes are currently being documented.

The Group's current average interest rate, including the effect of its swap portfolio, is 4.85%.  With net debt of £608 million as 31 March 2014, Group LTV stood at 63.5%.

Interest rate hedging

The total mark to market liability of the derivative portfolio was estimated at £30.8 million as at 31 March 2014, a small increase from £28.6 million as at 31 December 2013. This increase has occurred as the shape of the longer-term swap rate curve has changed.  The change in the mark to market valuation has no cash impact for the Group.

Outlook

The actions taken in 2013 laid a strong foundation to increase earnings to achieve the number one priority for the Board of returning the Company to full dividend cover at the earliest opportunity.  The refinance of the debt assumed with the PPP acquisition has taken a further step in this process.  From 30 April 2014, the administrative services will be provided by Nexus along with property management services, but at a fixed fee that is greatly reduced from that previously paid with reference to asset values.  This will further enhance earnings in 2014 and beyond.

Harry Hyman, Managing Director, commented:

"We are able to continue to acquire further assets that yield a satisfactory surplus over PHP's marginal cost of debt and have a number of projects either on site or being worked through the approval process that will create additional value and income from the existing portfolio.  Whilst the rental market remains tough, increases at review are being achieved and will also contribute to increased earnings to assist in achieving dividend cover.

"The demands on the GP sector and wider NHS continue to grow and increase the pressure on large parts of the NHS estate that are old and outdated.  The Group is ideally placed to take a lead in the next phase of development of new, modern specialist primary care premises demanded by our tenant healthcare professionals, following the Health & Social Care Act and devolution of budget and commissioning responsibility to GPs. We continue to look forward to the future with confidence."

For further information contact

Harry Hyman/Phil Holland
Primary Health Properties PLC
T:  [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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