WASHINGTON, DC: Real Estate Investment Trust (REIT) Primary Health Properties (PHP) is to up its UK exposure as a counterweight to an invasion of American REITs escapting from a slowing USA healthcare sector.
Its focus remains the acquisition of UK primary healthcare property leased to GPs, NHS organisations and other healthcare users.
It has become the leading UK investor in its field with a portfolio of facilities now worth over ₤1 billion; its first-half rental income received went up by 50% to $29.4 million versus interest expense up 40% to $17.6 million, although management says it has reduced its average cost of debt to 4.6% against 5.5% last year.
The debt structure has been strengthened partly to make more acquisitions: an 11 November update cited consolidating loans into two tranches of 10-15 years with a fixed interest rate of 4.9% and reducing lending margins on other facilities. The group has net debt of about $625 million and total facilities of $786.4 million, relative to a net asset value (on European Public Real Estate Association measures) of $341.9 million or 308p a share. The end-June balance sheet had short-term debt of $3.5 million and $396.6 million long-term debt, mainly term loans, and $224.9 million bonds.
Notes regarding the debt facilities (including bonds) cite an average remaining term of 7.1 years and unsecured debt represents 25% of debt drawn. Of debt drawn, $396.1 million is fixed rate debt and $235.6 million is hedged by interest rate swaps or caps. These measures provide some security for what is a quite highly leveraged operation: management says only 18% of debt facilities would be exposed to interest rate changes, if fully drawn…