Primary Health Properties (PHP) has paid €22 million for Laya’s Cork health and wellbeing clinic in its latest investment in the Irish market.
The acquisition was announced as London-listed PHP reported annual results that showed a 2.9 per cent increase in net rental income to £153.6 million (€186.2 million) and adjusted earnings of £92.9 million, up 2.4 per cent.
Chief executive Mark Davies descried it as a “great set of results, solid and dependable and that is what we do best”.
“Encouragingly, we have also seen positive valuation growth in the second half of the year, the first time since 2021, which has led to stability in our adjusted net tangible asset [NTA] per share,” he said.
“Now that valuations have stabilised and look set to improve as rental growth accelerates, we are seeing more opportunities to acquire earnings accretive acquisitions.”
The group specialises in primary care centres.
Ireland is the primary focus for that expansion in the short to medium term, the company said, in part down to the lower interest rates in the euro zone. Stabilising construction costs and an ongoing retendering of health centre projects by the HSE are other factors.
“The interest rate environment is right at the centre of our thinking,” Mr Davies said. “We have said that we would like to double the size of our Irish business. We have a good position in the market already. We can buy really attractive assets in Ireland.”
PHP owns 21 properties in Ireland, accounting for about 4 per cent of the group’s portfolio, but contributing over 9 per cent of the net rental income, in part because its Irish sites tend to be bigger than those in the UK.
“We can borrow so much cheaper in euro than we can in sterling – you are talking 200 basis points [two percentage points] – so we are devoting most of our time on the Irish market,” he said. “We want to do more in Ireland.”
He described the purchase the Laya building in Cork as “opportunistic”, with PHP’s Irish business, Axis Reliability Services, having been involved in the fit-out of it and other Laya centres and therefore knowing it intimately and having a strong relationship with Axa-owned private health insurer.
Axis managing partner James Buckley said the last three years had been difficult, primarily because of construction cost inflation, but also rising interest rates and stagnant rents.
“Developers could not build and sell to PHP at a price that was above total cost, so hence no development has taken place,” he said.
“We have turned the corner on that and the HSE has acknowledged that rents will have to increase, back to an economic level.”
With the HSE now in the process of retendering more than 50 projects over the coming years, Mr Buckley said the company “sees there is significant opportunity in Ireland in the next five years, certainly. We are going to bid, buy, build as many of these primary care centres as we can credibly lay our hands on.”
Mr Davies said Ireland’s system, where rents are index-linked to the consumer price index, was preferable for his business, which is lobbying the UK government to reform its rental system along similar lines.
PHP hopes to start construction on a new primary care centre in Youghal, Co Cork, later this year with two other big projects – in Enniscorthy, Co Wexford, and in Donnybrook, Dublin – pencilled in for next year.
