Primary Health Properties' Covid-19 balancing act

Many landlords have had a rough time getting paid in the past year but Primary Health Properties’ (PHP) medical centre ownership has seen it sail through the pandemic. The company has increased its quarterly dividend and said the gradual shift in favour of primary care facilities meant its asset values would remain in growth territory after the pandemic. 

The 1.55p quarterly pay-out equals a 6.2p annual dividend, a 5 per cent increase on 2020. 

PHP chief executive Harry Hyman said Covid-19 had seen health authorities look for alternatives to hospitals. “We continue to see demand for extra space to help enable the redirection of activities out of hospitals,” he said. The flip side of this is GP surgeries moving toward video conferencing, cutting their need for space. Mr Hyman told analysts that these two factors would balance each other out somewhat. 

“For the GP parts of our portfolio, we're seeing a balance between more consultations being done on Zoom, but with an increasing use of primary care for other services that are being moved out of hospital into primary care,” he said. 

The NHS is facing a massive backlog in elective procedures and regular consultations because of the pandemic, adding to the demand for surgery and medical centre appointments. 

While rental collection in the office and retail sectors became patchy once lockdowns came in last year, PHP received 99 per cent of owed rents in the UK and Ireland. 

PHP’s rent reviews last year would add 1.8 per cent in revenue on an annualised basis and the rent roll increased by 5.9 per cent to £135m. The MedicX acquisition contributed around £10m of the £16m increase in net rental income in 2020, which was £131m. 

The company also spent close to £60m on 23 new medical centres last year. And, in January, it brought its management structure in-house, at a cost of £36m, giving rise to savings of £4m a year. A further £59m in targeted acquisitions are under offer currently. Hyman said there had been some “crazy prices” paid for property recently and underlined PHP’s ability to look at Ireland for better deals. “We don’t want to overpay in a head-to-head slug out where the only determinant of whether you’re successful is price,” he said. 

The health system is at a crossroads. Covid-19 could certainly result in a massive shift to video appointments, but the existing backlog will surely be a driving force for at least the next year. Hold.

Last IC View: Hold, 153p, 29 Jul 2020