Skip to main content

Covid-19 legacy will be a shot in the arm for Primary Health Properties

3 August 2020

The coroanvirus crisis will accelerate the modernisation of GP surgeries and medical centres, benefiting healthcare property investor PHP whose shares already stand on a 40% premium to asset value as investors like its government-backed assets and income.

The coroanvirus crisis will accelerate the modernisation of GP surgeries and medical centres, benefiting healthcare property investor PHP whose shares already stand on a 40% premium to asset value as investors like its government-backed assets and income.

Primary Health Properties (PHP ) has performed strongly during the pandemic but it is looking to the post-outbreak future in which healthcare centres will be forced to adapt to treat coronavirus survivors.

The £1.9bn real esate investment trust, which invests in medical centres and GP surgeries in the UK and Ireland, has seen its assets play a fundamental role during the Covid-19 pandemic, which has been reflected in its half-year results to 30 June. 

In contrast to mainstream UK commercial property trusts, PHP saw EPRA earnings leap 29% to £36m and net asset value add 1.1% to 109.1p a share. Demand for its properties has seen rental income shoot up 20.4% to £64.8m in the first six months of the year leaving the trust on track to pay total dividends of 5.9p this year in what would be its 24th increase in payouts.

Managing director Harry Hyman said he was ‘very conscious that we need to play our part’ in helping to contain and treat the virus, but the ‘resilient and robust’ performance this year was ‘to be expected as 90% of our cashflow comes directly through the NHS and [Irish equivalent] HSE’.

Hyman said the outbreak has sped up the existing trend for non-emergency care to be given in medical centres rather than in overstretched hospitals, creating a higher demand for the properties PHP invests in.

‘Hospitals will be for acute cases and pandemic patients, non-emergency cases will visit medical centres’ he said. ‘That is a trend that has been accelerated. The acceleration of change means the health services have had to adapt very quickly to the new environment and we have been benefiting in a strong way because [health services] don’t want people turning up to hospitals for care.’ 

The upward trajectory of this trend will also require more government funding, both in the UK and Ireland, and will help PHP’s portfolio further. 

Despite the impending recession and fears of austerity measures looming, Hyman (pictured) said governments will not stop paying rents on medical centres. 

‘There are no assets more integral to government,’ he said. ‘The amount of building [of medical centres] and space [dedicated to them] will go up...people will want to see more money going to the NHS and HSE,’ he said. 

The legacy of Covid-19 will be far-reaching for the healthcare service, and this will include how PHP properties operate in future.

‘You will see surgeries adapt so they can handle Covid-19 testing, with different entrances and exits, and treatment rooms for people who survive because they will need recuperative care,’ he said. 

‘Then there is the flu jab. The government wants to inject half the population with the flu jab and they will need more space to do it.’

He said the idea that healthcare services will move online, such as the growth of virtual doctor appointments, and physical medical centres will no longer be needed is ‘wrong’ and does not take into account the need for ‘follow up consultations and more testing’. 

In order to take advantage of the increased need for PHP’s properties, the trust raised £140m earlier this year in an oversubscribed placing, which finance director Richard Howell said would not only fund its pipeline of investments but reduce leverage. 

‘There is a big recession coming down the line so it seemed prudent to reduce the leverage with an equity raise,’ he said. 

‘But our main driver was the strong pipeline of future acquisitions.’ 

 

Investment company news brought to you by Citywire Financial Publishers Limited.

Announcements

View the latest investment company announcements or search the 12 month archive.

View announcements

Saving for children

Discover saving for children with investment companies.

Find out more