Assura Group, the healthcare property investor, has entered a £250m joint venture with Universities Superannuation Scheme (USS) to invest in NHS infrastructure.
The JV (which is split 80:20 in favour of USS – the principal pension scheme for universities and higher education institutions in the UK) will be seeded with an initial portfolio of seven assets (£107m), transferred from Assura’s existing portfolio at a small discount to the March 2024 valuation.
It is targeting acquisition-led growth to £250m over the next three years, with potential to grow to £400m thereafter. The JV will focus exclusively on assets let directly to NHS or GP tenants with rents linked to inflation or with fixed uplifts.
As well as retaining a 20% equity interest in the JV, Assura will act as property and asset manager, receiving asset management fees linked to the valuation of the portfolio.
The £85m net cash proceeds received by Assura in the sale of the initial portfolio to the JV will be recycled into Assura’s pipeline of acquisition and development opportunities across medical centres and broader healthcare markets.
Assura results
Assura also announced full year results for the 12 months to 31 March 2024, posting an 8.0% fall in EPRA net tangible assets (NTA) to 49.3p per share.
This was mainly due to a 4.0% like-for-like drop in the value of its portfolio to £2,708m, as the portfolio net initial yield moved out 30 basis points to 5.17%.
Operationally, the company posted strong numbers with passing rent up 5% to £150.6m, net rental income up 4% to £143.3m and EPRA earnings up 6% to £102.3m or 3.4p on a per share basis (2023: 3.3p).
Reflecting the strong rental growth, the company’s quarterly dividend increased 2.4% to 0.84p (3.36p on an annual basis), with effect from July 2024.
The company has an LTV of 45% (up from 41%), with a fixed average weighted interest rate of 2.3% for an average term of 6 years.
Jonathan Murphy, chief executive, said:
“We have continued our track record of growth to deliver another period of increased EPRA earnings and dividend, driven by our disciplined approach to investment, extensive sector expertise, and ability to identify new market opportunities. It is these capabilities, underpinned by our strong financial position and secure balance sheet, that make Assura best placed to meet the critical need for new and enhanced healthcare capacity in a community setting.
“Our portfolio continues to deliver high-quality cash flows, against a turbulent economic backdrop, as we further demonstrate our long-term resilience with another year of strong financial performance – increasing rental income by 4% to £143.3 million. Opportunities across broader healthcare markets, each identified as meeting the same underlying demand and offering attractive risk-adjusted investment characteristics, are becoming meaningful contributors to Assura’s £2.7bn portfolio and cash flows. Our five completions reflect the shifting demand in the healthcare sector and include schemes for private operators such as a state-of-the art day case hospital in Kettering as well as our first development in Ireland.
“We have today separately announced a £250m joint venture with USS is an exciting transaction that will further strengthen our balance sheet whilst diversifying the available funding sources to support Assura’s continued growth trajectory. The long-term partnership aligns with cross-party political support for investment into essential NHS community healthcare buildings that are so needed to enable better health outcomes.
“Assura is the partner of choice for the future – best positioned to provide high-quality, sustainable new premises for the delivery of health services in the community – and deliver long-term value for all stakeholders.”