A good third quarter has allowed Primary Health Properties (PHP ) to keep its dividends ahead of last year, but short-sellers are betting shares in the real estate investment trust will continue to struggle with high interest rates. 

The £1.1bn portfolio of doctors’ surgeries and medical centres said rental growth, which was up £0.9m to £3.3m compared to the preivous year, drove performance in nine months to 30 September.

This generated £3.1m of additional income over the same period, up from £2.3m the year before, representing a 4.4% increase on an annualised basis.

This has allowed the trust to increase its dividend by 3.1% compared to the previous year. PHP will pay a fourth quarterly dividend of 1.675p per shares, equivalent to an annual 6.7p dividend. This puts the shares on a 7.7% yield with Stifel analysts expecting the payout to be continue to be covered by recurring revenues.

However, some asset managers are sceptical. Since the end of September Polar Asset Management, JPMorgan Asset Management and GLG Partners have taken out short positions totalling 2.7% in the stock.

GLG has the largest with a 1.02% short bought on 20 October, according to disclosures to the Financial Conduct Authority. JP Morgan has a 0.6% position and Polar has 0.66%. They join Sandell Asset Management who has had a 0.5% short since March 2019. 

In the results chief executive Harry Hyman said PHP remains on course to generate more than £4m of extra income from rent reviews this year ‘driven by the impact of inflation on both index-linked and open market value reviews’.

Another £200,000 was generated from asset management activities where the company exchanged on five new projects, completed six lease regears, and three new lettings.

‘There is a strong pipeline of a further 26 asset management projects which, in addition to extending lease lengths and increasing rents, will improve the environmental performance of the buildings,’ said Hyman.

Hyman, who will be succeeded by Mark Davies when he steps down at the next annual general meeting, has furthered the reach of the fund into Ireland with the acquisition of the country’s first ‘enhanced community care’ facility in Cork for €29.6m.

The development, which is nearing completion, is fully let to the Health Services Executive, Ireland’s equivalent of the NHS, on a 25-year lease with index-linked rent reviews every five years.

This is in line with Hyman’s plan to push into Ireland and he said the ‘future pipeline of opportunities continues to be focused predominantly in Ireland and PHP’s existing portfolio through asset management projects’.

Hyman also leaves his post having entered the South African market, listing the fund on the Johannesburg Stock Exchange where ‘a number of investors have already shown strong interest in the unique healthcare property investment opportunity’.

The board believes the secondary listing in South Africa will improve liquidity and increase its profile in the region.

‘This is a significant milestone that demonstrates the international attraction of PHP’s equity story as we grow and become a global healthcare investment opportunity,’ he said.

Shares have slipped 17.1% over one year and the net asset value (NAV) of the fund has ticked 4.3% lower, leaving the fund trading at a 22% discount. Over 10 years they have delivered a total return of 79% including dividends.