The Primary Care Market

The last year has seen continued development of the Government’s NHS LIFT programme. So far, a handful of projects have been completed and it is interesting to note that since the NHS LIFT programme started at the beginning of 2001, we have completed the purchase of over 30 schemes totalling around £67m. Of these, 19 schemes (approximately £42m) were six months or more from going on site at the start of 2001. To the best of our knowledge there are 12 NHS LIFT buildings open to the public and whilst there are expected to be more opening over the next few months, it is our view that it has not been the most effective approach to solving the lack of investment in deprived areas.

Both within LIFT and outside the LIFT remit, available premises funding for new Primary Care Schemes is being carefully controlled. Government’s perceived desire to see Primary Care as the cornerstone of a modern NHS is undermined by the lack of premises funding reaching the front line. However, the advent of Practice Based Commissioning and Alternative Providers of Medical Services (APMS) will allow PCTs and GP Practices to be far more innovative in sourcing funding streams and we believe that this is an exciting time for Primary Care as a whole.

Throughout the country, demand for new medical centres continues. There is more cohesion within PCTs to see the Primary Care framework evolved and to take the lead in estates strategy to improve health service delivery in the local health economy.

Increased competition in the marketplace for new purpose built medical facilities has made these types of investment more attractive and has driven purchase yields down. This has a positive effect on the existing portfolio, but means new acquisitions are more costly and we must continue to purchase properties where we believe there to be good long term growth prospects. During the year we bid for two portfolios of Primary Care centres, but due to the increased interest from other investors the price was pushed above what we considered to be their intrinsic worth and therefore we withdrew our bids.

We have continued to add value to properties in the portfolio by negotiating new lease terms and refurbishing premises. For example, during the year we successfully negotiated a substantial extension in building area and a new lease term at our Droitwich property, which was originally purchased in 1997.

Future Prospects

There are a great number of changes occurring within Primary Care and pharmacy relating to the structure and organisation of the sector – including the introduction of practice-based commissioning and the opening up of the sector to private operators through APMS. In addition competition is increasing through the entry of new participants. Although in the short term this may lead to delays in approval of new projects, we remain confident that the need to renew the Primary Care estate remains a top Government priority and that the Group has a good pipeline of deals to complete over the next 12 months.

In the meantime our existing portfolio continues to perform very well and we are working hard to add value from rent reviews and lease re-gearings.

Harry Hyman Managing Director
20 September 2006

An extract from the Managing Director’s Report, taken from the 2006 Annual Report