Primary Health Properties PLC (LSE:PHP) has agreed to establish a 50:50 strategic joint venture with global investment firm GIC, initially comprising 27 private hospitals from its existing property portfolio valued at approximately £700 million.
Under the agreement, Primary Health Properties (PHP) will retain a 50% interest in the hospital assets and continue to provide property and asset management services to the joint venture.
The transaction is expected to generate approximately £500 million in net cash proceeds for PHP, which the company intends to use to repay debt associated with its acquisition of Assura and other variable-rate borrowing.
Following the proposed debt repayments, PHP expects group net debt to decline to approximately £2.9 billion.
Joint Venture to Include 27 Private Hospitals
The new joint venture will focus on investment in private hospital infrastructure, with an initial portfolio comprising 27 hospitals currently owned by PHP.
The properties have an aggregate valuation of approximately £700 million.
GIC and PHP will each hold a 50% interest in the venture, providing both parties with exposure to the hospital portfolio.
PHP will remain responsible for property and asset management, generating management fee income alongside its retained ownership interest.
The arrangement will allow PHP to continue participating in the financial performance of the assets while sharing ownership with an institutional investment partner.
The agreement also establishes a platform for potential further investment in private hospital properties.
Approximately £500 Million in Net Cash Proceeds Expected
PHP expects the transaction to generate net cash proceeds of around £500 million.
The company intends to apply these funds towards reducing variable-rate debt, including borrowings incurred in connection with its acquisition of Assura.
The planned repayments include the group’s bridging facility and a £266 million term loan associated with that transaction.
By using the proceeds to repay borrowings, PHP expects to reduce its overall debt balance and exposure to variable interest rates.
The company has identified debt reduction as a principal financial objective of the joint venture transaction.
Net Debt Expected to Fall to £2.9 Billion
Following the proposed application of the proceeds, PHP expects its net debt to decrease to approximately £2.9 billion.
The reduction is also expected to improve the group’s leverage metrics.
PHP said the transaction supports its objective of maintaining a strong investment-grade credit rating.
The anticipated reduction in variable-rate borrowings would also change the composition of the group’s financing arrangements.
The final financial impact will depend on completion of the transaction and the application of the proceeds as planned.
Government-Backed Income Proportion Expected to Exceed 80%
PHP expects the joint venture transaction to increase the proportion of government-backed income across its retained property portfolio to more than 80%.
The change reflects the transfer of a 50% interest in the private hospital assets to the joint venture and the resulting adjustment to the group’s property ownership structure.
PHP’s wider portfolio includes healthcare properties in the United Kingdom and Ireland, with a substantial proportion of rental income supported by government-related healthcare occupiers.
The company focuses on modern healthcare facilities intended to support the delivery of medical services.
Following its combination with Assura in 2025, PHP manages a healthcare property portfolio valued at approximately £6 billion.
PHP to Retain Asset Management Role
In addition to retaining a 50% equity interest, PHP will act as property and asset manager for the hospital joint venture.
This role will provide a fee-based income stream associated with the management of the portfolio.
The arrangement represents an extension of PHP’s existing property management activities through a jointly owned investment structure.
The company will continue to manage its wider healthcare real estate portfolio while participating in the hospital joint venture.
The agreement with GIC also provides a framework for potential future investment in the private hospital sector, although no additional acquisitions have been specified in the supplied announcement.
Transaction Supports Debt Reduction Strategy
The proposed joint venture forms part of PHP’s financial strategy following its acquisition of Assura.
The company expects to receive approximately £500 million in net cash proceeds, reduce net debt to around £2.9 billion and increase the share of government-backed income in its portfolio to more than 80%.
PHP will retain a 50% interest in the initial £700 million hospital portfolio and continue to receive income from its asset management responsibilities.
The supplied update does not specify a completion date or detail any outstanding transaction conditions.
The anticipated financial benefits remain dependent on completion of the joint venture and the planned debt repayments.
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