Primary Health Properties: Attractive rewards at very low risk

Primary Health Properties (LON:PHP) is a real estate investment trust (REIT) that holds a portfolio of 510 primary health facilities in the UK (92% of the portfolio by value) and Ireland (8%). The business model is to manage the properties for rental income and to grow the portfolio over time. The asset base has some attractive characteristics for yield-focussed investors:90% government-backed rent99.5% occupancy rateWeighted average unexpired lease time (WAULT) of 12.5 yearsThis stable rental income base has allowed PHP to pay a steadily growing dividend, with increases every year since listing in 1997. We examine the underlying drivers in this report.Although PHP can be viewed as a ‘safety play’ for investors, there is no adverse trade-off in terms of overall returns. PHP has delivered an 11.5% annual total shareholder return over the last five years, versus 3.4% for the FTSE 350 and negative 3.5% for the UK REIT sector. In this report, we examine PHP’s strong financial returns in terms of:Solid rental income yield on propertyLow-cost ratioWe also examine PHP relative to sector peers on other characteristics such as lease terms and rental escalations.



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