Safer, securer income from Assura

About half of the UK's GP centres are unsuitable for modernisation and expansion; it's hard to compare a converted semi-detached house with a purpose-built medical centre that contains support services such as X-ray machinery, physiotherapy, a pharmacy and other facilities to support an ever growing and ageing population. The government has slowly started to make fresh funds available. It makes sense to increase spending further because a visit to a primary health centre at £21 costs far less than a visit to a hard-pressed A&E department at £124.

The scope for offering proper facilities is considerable and Assura is in a good position to invest in this promising market. Its ability to finance deals has been helped by a £300m share placing in October 2015, with a new £200m revolving credit facility secured in May at 20 basis points lower than the previous facility. Total loans at the end of June stood at £412m, which equates to a comfortable loan-to-value ratio of 33 per cent, with an average debt maturity of 10.2 years.

A total of 30 medical centres were acquired in the three months to the end of June for £65.4m, which boosted the annualised rent roll by 7 per cent to £68.4m. Meanwhile, the pipeline of potential purchases and developments in solicitors' hands stood at £105m. Development risk is low, given that new centres are built on fixed-price contracts and only undertaken when a GP pre-let has been signed.

Rental increases, which are a key factor in driving the amount of income available to distribute to shareholders, have been relatively slow because low inflation limits the rise in RPI-linked rents. Open market rents, meanwhile, are calculated on the cost of new developments. But these have so far been low in numbers, giving the local district valuer little on which to base a higher rental regime. This is slowly changing, though, as new developments come on stream, which should bode well for rental growth.