Assura looks to region’s mixed-use schemes for growth
The Warrington-based primary care investor is on the hunt for North West acquisitions and developments and sees particular opportunities in large-scale regeneration schemes where healthcare is a key component.
“This is absolutely something we will be doing more of in 2021,” Assura’s chief executive Jonathan Murphy told Place North West. “There is a rising appetite for quality health services within mixed-use communities being masterplanned or developed, and although there aren’t any examples yet of where we’re doing this in the North West, it is a trend and something we expect to do more of in 2021.”
Assura is working with the local council in Plymouth to deliver a health facility within a shopping centre redevelopment. It is also working to integrate a health centre within a regeneration scheme in Brighton alongside developer U+I.
Murphy cautioned that opportunities would be led by the availability or otherwise of public funds. For example, the £600m redevelopment of North Manchester General Hospital in Crumpsall into a “healthy living campus”, with homes, specialist care facilities and commercial uses, is being funded by the Government and local bodies. This provides little opportunity for a private investor such as Assura to get involved.
“But we’re continuing to work to identify potential deals,” the chief executive said.
The North West accounted for 14.5% – around £300m across 51 buildings – of Assura’s £2.2bn national portfolio of healthcare properties as of the end of September and this proportion is likely to grow, according to Murphy.
“We have a very significant regional portfolio already and it could easily grow,” he said. “We’re constantly looking for new opportunities and, because we’re based here, we naturally have an excellent network and relationships and if good investment opportunities arise, we have an excellent track record of securing them.”
In a trading update for the quarter ending 31 December 2020, published yesterday, London Stock Exchange-listed Assura said it was on site with 15 UK developments with a total cost of £71m and an immediate development pipeline totalling a further £60m – schemes it expects to be on site within the next 12 months.
Its immediate acquisitions pipeline for deals expected to complete within 3-6 months stood at £80m as of the end of last year, Assura said. Murphy told Place North West that no specific acquisition talks are ongoing in the region at present, but that the company is looking to acquire “well-established medical centres with strong patient lists, in good locations and specialist buildings, deemed essential for the communities they serve”.
Assura and Trafford Housing Trust’s redevelopment of Timperley Library into a modern community medical centre was supposed to complete by the end of last year but has been delayed until later this month together with the Assura’s acquisition of the asset.
But Assura wants to continue expanding its development pipeline in the coming year, by redeveloping otherwise non-viable healthcare sites that would be unlikely to survive in their current form for the next 20-30 years and where there are significant opportunities to add value.
“We’ve successfully built up the development side of the business over the last few years and we’ve done that very deliberately because developments are slightly more profitable than acquisitions as you can generate a bit of a pick-up in the yield,” he said.
“Timperley is a good example. We now have the best medical centre there and there’s no way that position is going to change any time soon. It’s about getting the best asset in a prime location, pick up the yield, get it on a long lease – 20-21 years.
“So, development is a really profitable part of the business for us and will continue to be very important for Assura’s growth in 2021.”
Last October, Assura issued a £300m ‘social bond’ to be spent on acquiring, developing and refurbishing primary care and community healthcare centres, following an £185m equity raise that April. Further fundraising activity is unlikely, said Murphy, “because we have more than sufficient liquidity and plenty of headroom on our [loan] facilities, but you can never say ‘never’ as there may suddenly be a flurry of deals”.
Assura’s net debt stood at £849m as of 31 December with undrawn facilities of £225m, according to yesterday’s trading update. In its latest financial results for the six months to the end of September, pre-tax profit was up 20% to £43.8m, driven by 7.5% net rental income growth to £54.4m.
Rent collection has continued “at normal levels” throughout the pandemic and this, coupled with the UK’s ageing population and rising demand for modern healthcare facilities, continue to stabilise the business and prepare it for further growth in 2021, Murphy told Place North West.