Primary Health Properties — Continuing dividend growth

Primary Health Properties (LSE: PHP)

Last close As at 13/12/2024

GBP0.94

1.45 (1.56%)

Market capitalisation

GBP1,243m

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Research: Real Estate

Primary Health Properties — Continuing dividend growth

Primary Health Properties’ (PHP’s) H124 results show continuing earnings and dividend growth, driven by rental income and underpinned by a low cost ratio and significantly fixed borrowing costs. With open market rental growth, covering two-thirds of rent roll, accelerating further, we forecast this to continue through FY26, which would mark 30 years of unbroken dividend growth.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Primary Health Properties

Continuing dividend growth

H124 results

Real estate

24 July 2024

Price

93.5p

Market cap

£1,250m

Net debt (£m) at 30 June 2024

1,319

Net LTV at 30 June 2024

48.0%

Shares in issue

1,336.5m

Free float

97.4%

Code

PHP

Primary exchange

LSE

Secondary exchange

JSE

Share price performance

%

1m

3m

12m

Abs

2.5

0.5

(5.1)

Rel (local)

2.7

(1.7)

(11.4)

52-week high/low

106p

86p

Business description

Primary Health Properties is a long-term investor in primary healthcare property in the UK and the Republic of Ireland. Assets are mainly let on long leases to GPs and the NHS or HSE, organisations backed by the UK and Irish governments, respectively. The tenant profile and long average lease duration provide an exceptionally secure rental income stream.

Next event

Payment of Q324 DPS

16 August 2024

Analyst

Martyn King

+44 (0)20 3077 5700

Primary Health Properties is a research client of Edison Investment Research Limited

Primary Health Properties’ (PHP’s) H124 results show continuing earnings and dividend growth, driven by rental income and underpinned by a low cost ratio and significantly fixed borrowing costs. With open market rental growth, covering two-thirds of rent roll, accelerating further, we forecast this to continue through FY26, which would mark 30 years of unbroken dividend growth.

Year end

Net rental income (£m)

Adjusted earnings* (£m)

Adjusted EPS** (p)

NAV per share*** (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

12/22

141.5

88.7

6.6

112.6

6.50

0.83

7.0

12/23

151.0

90.7

6.8

108.0

6.70

0.87

7.2

12/24e

154.5

91.9

6.9

105.2

6.90

0.89

7.4

12/25e

157.3

94.2

7.0

107.3

7.00

0.87

7.5

Note: *Excludes valuation movements, amortisation of fair value adjustment to acquired debt and other exceptional items. **Non-diluted. ***Defined as adjusted EPRA net tangible assets (NTA) excluding fair value of derivative interest rate contracts and convertible bond, deferred tax and fair value adjustment on acquired debt.

Rental growth underpins further progress

Characteristically, H124 results were in line with market expectations, with earnings driven by organic rent growth and dividends (+3% y-o-y) fully covered by adjusted earnings. NAV was 3% lower, with rental growth only partly offsetting yield widening. There is no material change to our income earnings forecasts, which show rental growth, combined with one of the lowest cost ratios in the sector and 96% of debt costs fixed/hedged, driving further growth in fully covered DPS through FY26. Forecast NAV is lower but we expect yields to stabilise, such that rent growth drives NAV gains in future. We assume no benefit from acquisitions, which should look more attractive as interest rates fall and rents increase. For the new developments needed to modernise the healthcare estate to be viable, the rents need to increase 20–30%. This was effectively achieved on one new scheme that commenced in H1, through a capital contribution from the local authorities.

Well-placed to support healthcare reform

The long-term need for primary healthcare facilities is driven by demographic trends and is relatively unaffected by economic conditions. In both the UK and Ireland, populations are growing and ageing, with more complex healthcare needs. Increased use of online and telephone appointments, particularly for frontline triage, has done nothing to reduce the need for modern, integrated, local primary healthcare facilities. Not only will these better serve patients with an extended range of procedures, available locally, they will reduce pressures on the hospitals and support the NHS to reduce the treatment backlog. PHP is well-placed to help meet this need for investment and signals that it will remain the focus of its strategy.

Valuation: Visible income growth

Visible, secure and growing income is the core of the PHP investment case. Leases are long and substantially upward-only, 89% backed directly or indirectly by government bodies, with little exposure to the economic cycle or fluctuations in occupancy. The prospective yield of more than 7% contrasts with the UK 10-year government bond yield of a little over 4%.

Rent growth drives earnings and supports valuations

PHP’s H124 adjusted earnings1 increased by £0.4m or 0.9% to £46.3m compared with H123 (£45.9m). The increase in the period reflects the improving organic rental growth from rent reviews and asset management projects in both FY23 and H124, along with an increased contribution from PHP Axis2 (the Irish property management business acquired in January 2023) and slightly lower administrative costs.3 These were partly offset by increased interest costs on the small proportion of borrowings exposed to interest risk fluctuations. H124 DPS of 3.5p (+3.0%) was fully covered by adjusted EPS.

  1 Adjusted earnings and adjusted NTA are EPRA earnings and EPRA NTA, excluding the impact of fair value adjustments to long-term fixed rate debt acquired on the 2019 merger with MedicX. The negative mark to market adjustment (net of amortisation) is excluded from adjusted NTA and the positive, non-cash impact of amortisation on reported finance expense is similarly excluded. A reconciliation is shown in the financial summary (Exhibit 7).

  2 The PHP Axis contribution is shown after administrative expenses.

  3 Unlike the statutory accounts, administrative expenses are shown excluding costs relating to PHP Axis.

Exhibit 1: Summary of adjusted financial performance measures

£m unless stated otherwise

H124

H123

H124/H123

2023

Net rental income

76.2

75.5

0.9%

149.3

Axis contribution

0.7

0.5

1.1

Administrative expenses

(5.9)

(6.1)

-3.3%

(11.6)

Net finance expense

(24.7)

(24.0)

2.9%

(48.1)

Adjusted earnings*

46.3

45.9

0.9%

90.7

EPRA cost ratio

10.9%

10.1%

10.7%

Adjusted EPS (p)

3.5

3.4

0.9%

6.8

DPS (p)

3.5

3.4

3.0%

6.7

DPS cover (x)**

1.0

1.0

1.0

Adjusted NTA per share (p)***

105.0

111.1

108.0

Loan to value ratio (LTV)

48.0%

45.6%

47.0%

Source: PHP data, Edison Investment Research. Note: *Adjusted earnings excludes valuation movements, amortisation of acquired fixed-rate debt revaluation and other exceptional items. **Dividend cover is adjusted earnings as a percentage of dividends declared. ***Adjusted net tangible assets (NTA) per share excludes fair value movements in derivative interest rate contracts and convertible bonds, acquired fixed-rate debt revaluation and deferred tax.

Adjusted net tangible assets (NTA) per share was 3.0p, or 2.9%, lower than at end-FY23 reflecting a property revaluation deficit of £40.0m. This comprised the negative impact of yield widening (£73m), partly offset by gains arising from rental growth and asset management (£33m). The endperiod EPRA net initial yield was 5.18% (end-FY23: 5.05%), with a reversionary yield of 5.5% (endFY23: 5.4%). PHP believes that yield expansion is close to an end and that values should start to stabilise in the remainder of 2024 and 2025, with continuing rental growth offsetting any further widening of yields. It notes the dearth of recent market transactions, leaving valuers significantly reliant on sentiment to arrive at fair values, and believes that further significant reductions in primary care values are likely to be limited, with the stronger rental growth outlook and the expectation of interest rate reductions providing support.

The balance sheet remains strong and liquid, with the cost of 96% of drawn debt fixed or hedged, and more than £300m of undrawn headroom.

No change to forecast earnings and DPS growth

There is no change to our forecasts for growth in FY24 and FY25 adjusted earnings and fully covered DPS. We expect further growth in fully covered DPS in FY26, forecast for the first time. The growth in operating profit is driven by increased rental income, primarily organic but also benefiting from development completions, with further improvement in the already low EPRA cost ratio. PHP expects to save £1m pa from FY25 as a result of staff reductions.

Our forecasts allow for some additional moderate property yield widening (to c 5.35% vs 5.18% at end-H124), more than offset rental growth in FY25 and FY26, with valuation gains generating growth in NAV and a modest reduction in the loan to value ratio (LTV).

Exhibit 2: Summary of forecasts

Actual

Revised forecast

Previous forecast

Growth

£m unless stated otherwise

FY23

2024e

2025e

2026e

2024e

2025e

2024e

2025e

2026e

Net rental income excluding PHP Axis

149.4

152.7

155.8

159.9

153.1

156.6

2.2%

2.1%

2.6%

PHP Axis net contribution

1.1

1.8

1.4

1.5

1.2

1.3

63.6%

-19.9%

2.0%

Administrative expenses

(11.8)

(12.4)

(12.1)

(12.5)

(11.7)

(12.0)

4.7%

-2.4%

3.7%

Operating profit

138.7

142.1

145.2

148.9

142.6

145.9

2.5%

2.2%

2.5%

Net financing costs

(48.0)

(50.2)

(51.0)

(54.4)

(50.2)

(52.5)

Adjusted earnings

90.7

91.9

94.2

94.5

92.4

93.3

1.3%

2.5%

0.3%

EPRA cost ratio

10.7%

10.8%

10.1%

10.1%

10.7%

10.6%

Adjusted EPS (p)

6.8

6.9

7.0

7.1

6.9

7.0

1.3%

2.5%

0.3%

DPS (p)

6.7

6.9

7.0

7.1

6.9

7.0

3.0%

1.4%

1.4%

Dividend cover (x)

1.01

1.00

1.01

1.00

1.00

1.00

Adjusted EPRA NTA per share (p)

108.0

105.2

107.3

110.3

107.1

109.4

-2.6%

2.0%

2.8%

LTV

47.0%

48.0%

47.5%

46.9%

47.8%

47.6%

Source: Edison Investment Research forecasts, PHP FY23 data

Accelerating market rent uplifts support the outlook

Organic rental growth is driving earnings growth and we expect this to continue as market rents accelerate. Annualised rent roll increased by £1.8m in H124, to £152.6m, including £1.6m from rent reviews and £0.2m from asset management projects. Acquisitions (see below) added £0.5m but this was offset by FX translation movements in respect of the Irish portfolio and lease surrenders and voids. Occupancy of 99.2% was temporarily affected by the insolvency of LloydsPharmacy at three units in the UK (co-located with primary health facilities) and the surrender of two pharmacy leases in Ireland, where the space is to be re-let to the HSE as part of an asset management initiative.

The annualised rent increases secured on completed reviews have picked up very significantly over the past three years. The continued acceleration of open market rent reviews in H124 is highly encouraging even though the overall achieved increase of 3.2% was lower than the 4.0% average annual uplift in 2023, as the impact of inflation linked uplifts waned.

Exhibit 3: Rental growth is continuing to accelerate

Source: PHP data, Edison Investment Research

Open market reviews apply to 68% of rent roll and are key to sustaining organic rental growth. After many years of very modest uplifts, high levels of land and building cost inflation, particularly in the past couple of years, are increasingly being recognised but there is much further to go. Open market rents are typically reviewed every three years, but it can take much longer for these to settle. At end-H124, rent reviews on £87m of rents were outstanding. Around half the outstanding reviews are in the process of being settled, with the potential to lift rents by £2.1m or 4.8% versus the existing level. The balance of outstanding reviews will be actioned when there is further comparative evidence available to support the expected level of market rent. All awards need to be agreed with the district valuer and the evidence to support uplifts comes from the completion of historical rent reviews and the rents set on delivery of new properties into the sector. NHS initiatives to modernise the primary care estate will result in previously agreed rental values having to be renegotiated to make a number of these projects viable in the current economic environment.

Exhibit 4: Annualised rental uplifts on completed rent reviews in the period

H124

2023

2022

2021

2020

UK – open market

2.1%

1.8%

1.5%

1.5%

1.3%

UK – indexed

4.8%

8.4%

7.4%

2.8%

2.3%

UK – fixed

2.8%

2.7%

3.1%

2.9%

2.7%

Total UK

3.2%

4.0%

3.4%

1.7%

1.8%

Ireland – indexed

4.6%

3.3%

2.6%

0.8%

1.1%

Total annualised increase

3.2%

4.0%

3.4%

1.7%

1.8%

Source: PHP

The balance of UK rents are linked to UK inflation (27%) or have fixed uplifts (5%). Irish rents (c 9% of the total) are linked to Irish CPI and are reviewed every five years.

The improving rental growth outlook is reflected in the independent valuers’ assessment of estimated rental values (ERV) of the portfolio, which increased by 1.7% in H124. The portfolio reversionary yield is 5.5% compared with the EPRA net initial yield of 5.23%.

Highly selective external investment stance

PHP adopted a cautious approach to investment activity as acquisition yields tightened, this continued as interest rates climbed, and remains the case until the economic and interest rate environment become clearer. During H124, it ‘opportunistically’ acquired a completed health centre at Basingstoke for a total consideration of £4.5m and commenced work on its second development scheme at South Kilburn, London. The scheme was made viable by a capital contribution from the commissioning Integrated Care Board and local authority, each contributing £0.5m to the overall development cost. By reducing PHP’s share of the cost, this equates to a 26% uplift in the rent originally set by the district valuer.

More generally, PHP continues to pause direct development activity and estimates that to compensate for much higher costs, to make new development economically viable and bring forward schemes that are much needed by the NHS, agreed rents need to be 20–30% higher.

Ireland remains PHP’s preferred area of future investment activity, with similar market dynamics to the UK from a lower cost of capital and higher property yields. Over the medium term, the company targets an increase in the Irish share of the portfolio from the current 9% to c 15%. However, PHP’s most immediate pipeline of external investment opportunities in legal due diligence continues to be focused predominantly on existing portfolio asset management projects. These create value by increasing rents and extending lease lengths. There are currently 23 projects in legal due diligence with an aggregate investment requirement of c £15.3m, expected to generate an additional £0.7m pa of rental income and extending the weighted average unexpired lease term on those premises back to an average of 19 years.

The new UK government is committed to NHS investment

The UK commitment to NHS reform and investment has been reiterated by the new government, particularly a continuation of the shift of services out of hospitals and into the community. It recognises the need for a reform of primary healthcare and seeks to provide enhanced patient access to services and earlier diagnosis of progressive health conditions, but this will be challenging to achieve and will require significant investment. Driven by an increasing and ageing population, there is constantly growing demand for healthcare services, while existing facilities face capacity constraints. The extent of the NHS backlog also remains a significant concern, with the number of patients waiting for treatment reaching record highs and hospitals struggling to meet objectives. All these factors make more urgent the need for improved and increased primary healthcare infrastructure, with approximately one-third of the UK’s current primary care estate in need of modernisation or replacement.

PHP is very well placed to help meet the need for investment but, for it to be economically viable, rents must increase materially.

Strong, flexible balance sheet, with rate protection

PHP has a strong balance sheet. Debt facilities are well spread by lending source and maturity, with an average maturity of more than six years. Of the drawn debt, 96% is fixed rate or hedged, with an average rate of 3.3%. Allowing for capital commitments, it has more than £300m of undrawn headroom.

The LTV ratio increased marginally to 48.0% during H124, due to the property valuation movements, but it sits comfortably within the company’s target range of 40–50%. Although this is above the LTV range for more mainstream listed UK commercial property investors, it needs to be seen in the context of the exceptional strength of the tenant covenant, the essential nature of the assets and long leases with upwards-only4 rent reviews. Net debt/EBITDA is more than 9x. It would take a more than 30% decline in portfolio value, or an implied 8.0% net initial yield, to challenge covenant headroom. Rightly in our view, PHP has reiterated its comfort with its balance sheet structure and, for the avoidance of doubt, confirmed that it has no plans to reduce borrowing by raising equity.

  4 It is possible for Irish rents to be negatively indexed to inflation, but this seems a remote prospect.

Terms have been agreed to extend and increase existing revolving credit facilities that mature in 2025. Once completed, the new facilities will provide sufficient headroom to repay both the £150m convertible bond and £70m variable rate bonds that mature in 2025.

Low volatility, income-led returns

Progressive, fully covered DPS

Stable and growing dividends are central to PHP’s business model and the investment case. PHP is already in its 28th year of unbroken DPS growth and the company comments that this is set to continue as the new UK government commits to increased investment in primary and community care.

For the current (FY24) year, PHP targets annual DPS of 6.9p, in four equal payments, three of which have already been paid or declared. We forecast dividends of 7.0p in FY25 and 7.1p in FY26.

Exhibit 5: Now in the 28th year of unbroken dividend growth

Source: PHP data

Over 10 years to H124, PHP has generated an average accounting total return/ EPRA NTA total return5 of 8.0% pa. Dividends paid have accounted for two-thirds of the total.

  5 The change in EPRA NTA plus dividends paid (but not assuming reinvestment).

Exhibit 6: 10-year income and capital returns

Source: PHP data, Edison Investment Research. Note: *H214 and H124 are annualised rates.

Exhibit 7: Financial summary

Year end 31 December (£m)

2020

2021

2022

2023

2024e

2025e

2026e

PROFIT & LOSS

Net rental income

131.2

136.7

141.5

149.9

152.7

155.8

159.9

PHP Axis net contribution

0.0

0.0

0.0

1.1

1.8

1.4

1.5

Net property income

131.2

136.7

141.5

151.0

154.5

157.3

161.4

Administrative expenses

(13.2)

(10.5)

(9.6)

(13.7)

(13.4)

(13.1)

(13.5)

Operating profit before revaluation movements and non-recurring items

118.0

126.2

131.9

137.3

141.1

144.2

147.9

Net realised and unrealised portfolio gains/(losses)

51.4

110.5

(61.5)

(53.0)

(40.0)

30.0

40.0

Exceptional items related to corporate acquisition

0.0

(37.0)

0.0

0.0

0.0

0.0

0.0

Operating profit

169.4

199.7

70.4

84.3

101.1

174.2

187.9

Finance income

1.2

0.8

0.9

0.2

0.0

0.0

0.0

Finance expense

(43.0)

(60.5)

(41.2)

(45.2)

(47.2)

(48.0)

(51.4)

Fair value movement on swaps and convertible bond

(15.2)

1.6

26.8

(13.2)

(4.2)

(1.4)

0.0

Profit Before Tax

112.4

141.6

56.9

26.1

49.7

124.8

136.5

Tax

(0.4)

(1.5)

(0.6)

1.2

(0.9)

0.0

0.0

Profit After Tax

112.0

140.1

56.3

27.3

48.8

124.8

136.5

Adjusted for the following:

Net realised/unrealised gain/(loss) on investment property

(51.4)

(110.5)

61.5

53.0

40.0

(30.0)

(40.0)

Fair value gain/(loss) on derivatives & convertible bond

15.2

(1.6)

(26.8)

13.2

4.2

1.4

0.0

Other adjustments

0.4

26.1

0.6

0.2

1.9

1.0

1.0

EPRA earnings

76.2

62.1

91.6

93.7

94.9

97.2

97.5

Amortisation of fair value adjustment to acquired debt

(3.1)

(3.2)

(2.9)

(3.0)

(3.0)

(3.0)

(3.0)

Other non-recurring charges and adjustments

0.0

24.3

0.0

0.0

0.0

0.0

0.0

Adjusted earnings

73.1

83.2

88.7

90.7

91.9

94.2

94.5

Period end number of shares (m)

1,315.6

1,332.9

1,336.5

1,336.5

1,336.5

1,336.5

1,336.5

Average Number of Shares Outstanding (m)

1,266.4

1,330.4

1,334.8

1,335.7

1,336.5

1,336.5

1,336.5

Fully diluted average number of shares outstanding (m)

1,368.4

1,435.8

1,443.7

1,444.6

1,451.7

1,451.7

1,336.5

Basic IFRS EPS (p)

8.8

10.5

4.2

2.0

3.7

9.3

10.2

Adjusted EPS (p)

5.8

6.2

6.6

6.8

6.9

7.0

7.1

Dividend per share (p)

5.9

6.2

6.5

6.7

6.90

7.00

7.10

Dividend cover (x)

1.0

1.0

1.0

1.0

1.0

1.0

1.0

Adjusted EPRA NTA total return

10.1%

8.9%

2.0%

2.0%

3.8%

8.7%

9.4%

EPRA cost ratio

11.9%

9.3%

9.9%

10.7%

10.8%

10.1%

10.1%

BALANCE SHEET

Non-current assets

2,576.1

2,801.4

2,816.3

2,786.9

2,762.0

2,799.0

2,845.0

Investment properties

2,576.1

2,795.9

2,796.3

2,779.3

2,755.3

2,793.3

2,840.3

Other non-current assets

0.0

5.5

20.0

7.6

6.7

5.7

4.7

Current Assets

121.0

51.7

48.2

40.0

37.7

38.3

47.0

Cash & equivalents

103.6

33.4

29.1

3.2

4.3

4.9

13.6

Other current assets

17.4

18.3

19.1

36.8

33.4

33.4

33.4

Current Liabilities

(68.1)

(70.5)

(64.1)

(71.2)

(65.0)

(65.0)

(65.0)

Current borrowing

(6.4)

(2.2)

(2.3)

(2.4)

0.0

0.0

0.0

Other current liabilities

(61.7)

(68.3)

(61.8)

(68.8)

(65.0)

(65.0)

(65.0)

Non-current liabilities

(1,214.6)

(1,282.7)

(1,318.2)

(1,331.8)

(1,352.5)

(1,358.9)

(1,371.9)

Non-current borrowings

(1,206.5)

(1,273.0)

(1,297.1)

(1,320.9)

(1,341.3)

(1,347.7)

(1,360.7)

Other non-current liabilities

(8.1)

(9.7)

(21.1)

(10.9)

(11.2)

(11.2)

(11.2)

Net Assets

1,414.4

1,499.9

1,482.2

1,423.9

1,382.2

1,413.4

1,455.1

Derivative interest rate swaps

0.1

(4.4)

(7.1)

(2.7)

(2.7)

(2.7)

(2.7)

Change in fair value of convertible bond

25.0

21.6

(7.1)

(2.3)

(2.8)

(2.8)

(2.8)

Other EPRA adjustments

45.8

38.8

36.8

26.1

29.6

26.6

25.1

Adjusted EPRA net tangible assets (NTA)

1,485.3

1,555.9

1,504.8

1,445.0

1,406.3

1,434.5

1,474.7

IFRS NAV per share (p)

107.5

112.5

110.9

106.5

103.4

105.8

108.9

Adjusted EPRA NTA per share (p)

112.9

116.7

112.6

108.1

105.2

107.3

110.3

CASH FLOW

Operating Cash Flow

118.9

140.4

117.6

133.6

138.5

145.2

148.9

Net Interest & other financing charges

(65.9)

(46.6)

(42.4)

(47.1)

(47.7)

(48.0)

(51.4)

Tax

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Acquisitions/disposals

(102.8)

(129.3)

(74.8)

(39.5)

(20.6)

(8.0)

(7.0)

Net proceeds from issue of shares

136.8

(0.1)

(0.1)

0.0

0.0

0.0

0.0

Debt drawn/(repaid)

(58.4)

82.8

48.8

23.6

23.1

5.0

13.0

Equity dividends paid (net of scrip)

(69.1)

(74.4)

(81.6)

(89.5)

(92.2)

(93.6)

(94.9)

Other cash movements and FX

1.6

(43.6)

28.9

(7.0)

0.0

0.0

0.0

Net change in cash

(39.5)

(70.2)

(4.3)

(25.9)

1.1

0.7

8.6

Opening cash & equivalents

143.1

103.6

33.4

29.1

3.2

4.3

4.9

Closing net cash & equivalents

103.6

33.4

29.1

3.2

4.3

4.9

13.6

Debt as per balance sheet

(1,212.9)

(1,275.2)

(1,299.4)

(1,323.3)

(1,341.3)

(1,347.7)

(1,360.7)

Convertible bond fair value adjustment

25.0

21.6

(7.1)

(2.3)

(1.4)

0.0

0.0

Unamortised borrowing costs

(13.8)

(13.7)

(15.3)

(12.7)

(10.4)

(7.4)

(5.9)

Fair value of acquired debt

42.4

34.4

31.4

28.4

25.5

22.5

21.0

Closing net debt/(cash)

(1,055.7)

(1,199.5)

(1,261.3)

(1,306.7)

(1,323.3)

(1,327.7)

(1,332.0)

Net LTV

41.0%

42.9%

45.1%

47.0%

48.0%

47.5%

46.9%

Source: PHP historical data, Edison Investment Research forecasts


General disclaimer and copyright

This report has been commissioned by Primary Health Properties and prepared and issued by Edison, in consideration of a fee payable by Primary Health Properties. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom


General disclaimer and copyright

This report has been commissioned by Primary Health Properties and prepared and issued by Edison, in consideration of a fee payable by Primary Health Properties. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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