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Bearbull Income Portfolio: a healthy dilemma

Bearbull is seeking new income candidates and has a choice to make between two healthcare property stocks
Bearbull Income Portfolio: a healthy dilemma

You know the Jack Benny quip that runs along the line, “I really enjoy going to the doctor’s surgery. It’s in the waiting room that I see all my friends”. Granted, Covid-19 put a stop to that – and GPs remain Zoom’s greatest fans – but that will change; the days when the surgery’s waiting room functions as a hotspot for the over 80s will return. As Assura (AGR), a landlord to UK healthcare properties, is keen to point out, the proportion of the UK’s population that is 85 or over is set to double by 2040. That is a lot of assured demand on the way for primary healthcare providers. In turn, it is assured rental revenue for their landlords.

It is not as if the recent past has been very different. As the table below shows, both Assura and Primary Health Properties (PHP), the UK’s two biggest quoted healthcare real-estate investment trusts, run property estates that are, in effect, fully let mostly on long-term leases. Indeed, the similarity between the two groups on various metrics is almost spooky. Both run pretty well the same size of estate – either side of £2.5bn – from which each generates a similar rent roll and a near-identical rental yield. Each portfolio is funded by similar amounts of debt whose loan-to-value ratio is in the same ball park and whose weighted-average term – not quite 12 years – is virtually the same. The most notable difference is that PHP pays almost an extra percentage point on its debt.

 Primary Health Prop'sAssura
Share price (p)15473
Percentage 5-yr high9083
Mkt Cap (£bn)2.041.95
Div'd yield (%)4.04.1
Net asset value (p/share)115.457.2
Premium to NAV (%)3328
Property portfolio (£bn)2.62.4
Net initial rental yield (%)4.74.6
Contracted rent roll (£m)136122
% previous yr's rent104109
Ave unexpired lease term (yrs)11.811.9
Occupancy rate (%)99.698.7
Loan-to-value ratio (%)4137
Ave debt maturity (yrs)6.08.0
Weighted ave interest rate (%)3.52.5
Source: Company accounts, FactSet
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