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 July 2011.
· Delivery of a further £18m of investment properties
· Commitment to purchase new properties in Ramsgate, Kent and Arley, Warwickshire
· Portfolio continues to be 100% let
· Annualised passing rent roll of £30.1m at 30 September 2011 (£29.0m at 30 June 2011)
· Continued pipeline of attractive property acquisition opportunities
· New £75m interest only facility from Aviva credit approved and expected to complete shortly
· An interim dividend of 9p per share in respect of the year ended 31 December 2011 was paid to
shareholders on 28 October 2011
The Directors believe that initial property yields in the Group's portfolio have remained stable at approximately 5.75% in the period under review as demand continues from property investors in all sectors for quality assets let to covenants. The next valuation of the freehold, leasehold and development properties of the Group will be carried out at the year-end date of 31 December 2011.
As detailed above, the Group has secured a number of new acquisitions in the period and is able to access further forward commitments to acquire newly developed assets and continues to be active in the standing let investment market. PHP sees a strong pipeline of attractive acquisition opportunities which will be accretive to the overall rent roll and profitability.
Health and Social Care Bill 2011
The period saw continued progress of the Health and Social Care Bill 2011 through its various stages of government approval and it is anticipated that the Bill will become statute in early 2012.
Meantime, the NHS Commissioning Board has been formed and its directors appointed, with Sir David Nicholson as its Chief Executive. A number of the changes driven by the Bill have been instigated in a number of areas of the country in readiness for the enactment of the Bill.
The Directors feel that the Bill reinforces 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 Board expects the creation of Clinical Commissioning Groups to facilitate further care moving into local services and sees development activity increasing as the new NHS management structures are bedded in through 2012.
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.
Rent roll and rental growth
Annualised passing rent roll of the portfolio as at 30 September 2011 was £30.1m (30 June 2011 £29.0m), the increase being due to deliveries since the half year and uplifts from rent reviews concluded in the period.
Average rental growth achieved on rent reviews completed to 30 September 2011 showed an annualised rate of 3.2% which is comparable to that achieved in 2010 and pleasing when analysed in the context of the current economic climate.
Borrowings and Banking facilities
As at 30 September 2011, Group borrowings totalled £277.8m. Remaining commitments to fund and acquire future assets total £10.0 m. Aggregate facilities available to the Group as at 30 September 2011 were £367m, including the new £50 million facility from Clydesdale Bank that was completed on 28 July 2011.
The joint managers have continued to work to refinance the Group's term loans that expire in January 2013 and enlarge overall facilities available to PHP. As a first step toward this re-finance, a new £75 million, seven year, interest only facility from Aviva has received credit approval and is currently being documented and is expected to be completed shortly. This will replace a proportion of the existing term loans.
Positive discussions have continued with the Group's main lenders to agree terms to re-finance the balance of the term loans with the aim of securing the best possible facilities at the most attractive pricing for the Group.
Interest Rate hedging
The Group's interest rate swap portfolio of £208m includes £88m of callable swaps, which are reviewed on a quarterly basis. As at 30 September 2011, the total mark to model liability of this derivative portfolio was estimated at £46m, an increase from £27m at the interim stage. This reflects the volatility in interest rates between the various dates as the sovereign debt issues within Europe have continued. Conversely, as gilt yields are also at historic lows, this may have a positive impact on the eventual rate at which the new Aviva loan is drawn.
Whilst the underlying debt and interest rate markets exhibit uncertainty for the immediate future, the prospects for PHP remain strong. We currently have resources available to the Group to expand our portfolio and have made good progress with refinancing the Groups' debt. We are able to add to the asset base with appropriate acquisitions and have a strong pipeline of opportunities that we are looking to secure. We anticipate a conclusion to the Health and Social Care Bill in early 2012 which will pave the way for an increase in the number of approvals for new medical centres across England.
For further information contact
Harry Hyman/Phil Holland
Primary Health Properties PLC
T +44(0)20 7451 7050
M+44 (0)7973 344768/ +44 (0)7711 239592
David Rydell/Victoria Geoghegan/Elizabeth Snow
Pelham Bell Pottinger
T +44(0) 20 7861 3232
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.