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Primary Health Properties PLC Acquire Apollo Medical Partners Ltd

Acquisition of Apollo Medical Partners Ltd
 
Primary Health Properties PLC ("PHP"), one of the UK's largest providers of modern, purpose built primary healthcare facilities, announces that it has unconditionally agreed to acquire the entire issued share capital of Apollo Medical Partners Limited ("AMP"), an investor in primary care and pharmacy properties with a UK wide portfolio.

  • Consideration payable of approximately £10.2 million, including transaction costs of £0.6 million
  • Consideration will be settled as to
    • £4.2 million payable in cash on completion (including transaction costs)
    • £1.8 million in cash deferred until delivery of assets under construction, and
    • the issue on completion to the vendors of AMP of 1,231,395 new Ordinary shares of 50p each in the capital of PHP
  • The Consideration Shares will be subject to a twelve month lock-in and subsequent 12 month orderly market agreement
  • High quality portfolio of 14 primary care properties across the UK
    • 11 are completed assets, 10 of which were constructed within the last five years
    • Three due for completion between February - August 2013
  • Total rent roll on completion of £3.8 million, reflecting a net initial yield on actual acquisition cost of 5.9 per cent
  • A weighted average lease length of 18 years
  • Assumption of  fixed cost debt of £49.8 million

Application is being made to the UK Listing Authority for admission of the Consideration Shares to the Official List and to trading on the London Stock Exchange. It is expected that admission will become effective and dealings in such shares will commence on or after 19 December.
 
Following admission of the Consideration Shares, the total number of ordinary shares in issue will be 76,034,208.
 
AMP owns 14 primary care properties, 11 of which are completed assets, all but one constructed within the last five years, and three that are on site with planned completion dates between February 2013 and August 2013.  £1.8 million of the above cash consideration is deferred and released in part against the delivery of each of the three assets still under construction.  The total rent roll once all assets are complete will be £3.8 million. 
 
This high quality portfolio is let to General Practitioners, Primary Care Trusts, NHS bodies and pharmacy operators with a weighted average lease length remaining of 18 years.  Rental income is derived 92% directly or indirectly from the NHS with the remainder largely from strong covenant pharmacy operators. The properties are located across mainland UK.
 
The assets have been acquired at a total cost of £64.6 million, including transaction costs, reflecting a net initial yield to PHP of 5.9 per cent.
 
The portfolio has been independently valued by Lambert Smith Hampton at an aggregate of £62.3 million, which results in a reduction of net asset value of £2.3 million or 3.0 pence per share.  There are a number of opportunities within the portfolio to add to the rent roll and secure increases in valuation.
 
PHP's costs of the transaction of £0.6 million are significantly below industry standard purchaser costs for property transactions of £3.6 million, reflecting the saving due to the corporate nature of the transaction. 
 
In addition to the consideration payable, PHP will assume AMP's £49.8 million of fixed cost debt.  The assumed debt has a weighted life of approximately 18 years and will be incremental to the Group's existing debt facilities.
 
PHP will look to re-set or refinance this debt at the earliest opportunity to lock in to historically low interest rates and achieve a cost of funding of c.200 bps below the transaction initial net yield. An allowance has been made for a proportion of the potential cost of re-setting the debt in agreeing the consideration.
 
The Apollo Capital Projects Development team ("ACPD"), a sister company of AMP and led by Johnny Dryburgh, have developed, procured and managed the portfolio.  ACPD will complete the procurement and handover into occupation of the three schemes that are under construction.
 
PHP have entered into a Partnership Agreement with ACPD with an option to fund and acquire future schemes in their ongoing development pipeline.
 
Following completion, PHP's portfolio will comprise of 183 primary care properties with a total value of £643.3 million (including commitments).  Total debt facilities available to PHP will be £508.5 million, of which £399.9 million will be drawn or committed.  The group's contracted rent roll will increase to £38.9 million.
 
PHP believes that the acquisition adds high quality assets to its existing portfolio and increases its recurring income surplus which will reduce the proportion of its current dividend that is partially uncovered by earnings.
 
Harry Hyman, Managing Director of PHP, said:
"This is an important acquisition for PHP which demonstrates our ability to acquire modern, well-let portfolios at cash yields ahead of the current portfolio net initial yield.  The acquisition adds 14 high quality assets to our existing portfolio, boosts PHPs rental profits and is in line with management's aim of returning to full dividend cover at the earliest opportunity."
 
Acquired Portfolio

 Property
 Region
m2
 Clydach Medical Centre, Clydach
 Wales
1,549
 Tweedale Medical Practice, Fort William
 Scotland
3,468
 Govan Medical Centre, Govan
 Scotland
510
 Dr Youd & Partners, Heckmondwike Medical Centre
 Yorkshire & Humberside
1,600
 Dr Hoggins & Partners, Mold Medical Centre
 Wales
986
 Old Kilpatrick Medical Centre, Old Kilpatrick
 Scotland
571
 Rhyl Medical Centre, Rhyl
 Wales
1,706
 Rippendon Medical Centre, Rippendon
 Yorkshire & Humberside
1,090
 Dr Eisner & Partners, Shipley
 Yorkshire & Humberside
2,394
 Dr Bondi, Sudbury Medical Centre
 East Anglia
1,063
 Port Tennant Practice, Swansea
 Wales
2,901
 Carlton Medical Practice, Bradford
 Yorkshire & Humberside
705
 Rumney Medical Practice, Cardiff
 Wales
2,210
 Cloughmore Medical Practice, Cardiff
 Wales
1,042
 Total
 
21,795

Analysis of rental income by region

 Region
Proportion
 Wales
46%
 Scotland
24%
 Yorkshire & Humberside
27%
East Anglia
3%

 

This information is provided by RNS
The company news service from the London Stock Exchange