Primary Health Properties Calls 2025 “Transformational” as Assura Synergies, Rent Growth Accelerate

Primary Health Properties (LON:PHP) executives used a trading update call to outline what CEO Mark Davies described as a “transformational year” following the combination with Assura, highlighting early integration progress, rent review performance, development momentum and plans to bring leverage back within policy limits.

Integration progress and synergy delivery

Davies said the enlarged group has created a “strong platform” as a £6 billion healthcare REIT. Following Competition and Markets Authority approval on 29 October, management moved quickly into integration, supported by a detailed plan. Davies said the group has already delivered 60% of targeted annualised synergies of £9 million, citing the removal of duplicated roles and lower professional fees as key contributors. He added that further market updates would follow in due course.

Davies also said management has identified “low hanging fruit” within the portfolio and in how it has been run and managed, and expects to capture that upside as soon as possible. He noted the company is “ahead of even our own expectations” on integration and synergy delivery.

Rent reviews, inflation linkage and rental evidence

Management pointed to rent review outperformance in the months following the acquisition, noting that economic control of Assura began on 12 August. Davies said rent reviews in that period added £8.3 million of rent, which he described as 6.8% (or 3.2% annualised), above the 3% increase referenced at the company’s Capital Markets Day in July. He said the performance supported the combination of the businesses and the group’s increased exposure to inflation-linked leases and long lease terms.

In Q&A, executives discussed the outlook for the company’s 3% organic rent growth target. Davies said primary care open-market rent reviews referenced in the update were “closer to 2% than 3%,” and suggested any change to forward guidance would be considered either with the imminent results or once the company has clarity on the portfolio mix and its retained exposure to private hospitals.

Management also highlighted asset management activity as a source of rental evidence. Davies and finance chief Richard said they had reported rent increases on existing assets from just below £190 per square metre to just under £220 per square metre, which they described as a 15% increase. Davies said new primary care developments in Tetbury (Gloucestershire) and Weston-super-Mare are setting rents above £300 per square metre, which he said supports future rental tone and evidence.

On Ireland, Davies said the announced annualised rent increase of 4.1% reflects inflation capture on leases every five years.

Development pipeline and joint venture strategy

Davies said the enlarged group is benefiting from Assura’s development capability and larger team, with the update including what he described as an unusually large number of live projects versus recent years. He said the company is more confident on development as rents move to levels that allow projects to proceed economically.

Among specific items discussed:

• Davies said projects such as Tetbury and Weston-super-Mare are planned to be placed into the USS joint venture at an “attractive yield,” and that doing so also helps set rental evidence.
• He noted a private hospital development in Peterborough with Ramsay, describing it as “a really excellent scheme” and saying it would deliver a “very, very handsome yield on cost,” although the company did not disclose the yield.
• Davies said the company had won a 10-year assignment with the East of England Ambulance Trust to develop new ambulance hubs, with potential for “as many as 20” new ambulance and emergency operations centres over time.

Management also updated on progress expanding the existing joint venture with USS. Davies said the JV currently holds £170 million of assets and is targeting £400 million, and he expressed confidence the JV could expand beyond its original mandate once that level is reached. He described USS as a strategic partner with a low cost of capital and said the JV expansion is advantageous as the company seeks proceeds to reduce debt.

Deleveraging, refinancing plans, and private hospitals

Executives repeatedly returned to deleveraging as a central priority. Richard said the group’s strategy and financial framework include bringing leverage back below a 50% cap, with targeted net debt/EBITDA of 9.0x to 9.5x and an interest cover target of 2.5x. He added that there is “a lot of refinancing work to do” in 2026, including refinancing a remaining £1 billion bridging facility.

Richard said the bridging facility is relatively cheap currently but has step-up margins over time, creating an incentive to refinance before it becomes “too expensive.” He said the company expects savings in credit margins across the enlarged group due to increased scale and delivery of a BBB+ rating referenced by management.

On funding options, Richard said the company expects to use a combination of bank debt and bond market issuance, with CEO Davies adding that the Assura transaction has accelerated PHP’s move toward unsecured borrowing and expanded access to the bond market. Davies referenced Assura’s existing unsecured profile, including more than £900 million of listed bonds, and said management intends to maintain the BBB+ rating, subject to delivering its plans.

Regarding private hospitals, Davies said the private hospital portfolio acquired through the merger is performing well operationally and from a rental growth perspective. He said the company is identifying a strategic partner for a private hospitals joint venture, with proceeds expected to help return leverage to policy. When asked about balancing LTV reduction against NAV impact, Davies said the company expects assets injected into joint ventures to transfer at book value or close to book value, and that it does not expect to prejudice NAV through those transactions.

Dividend track record and near-term milestones

Davies said the company has increased its dividend for 30 consecutive years, marking its 30th year of dividend growth. Looking ahead, he said management is focused on maintaining a “fully covered dividend,” continuing to deliver synergies, and providing additional guidance—including on the cost ratio—alongside full-year results expected in the coming weeks.

About Primary Health Properties (LON:PHP)

Primary Health Properties plc is a leading investor in modern primary healthcare properties. The Company acquires or forward funds the development of modern, purpose-built premises that are leased to GP’s, government healthcare bodies, pharmacies and other providers of related healthcare services.