Demand for offices might ebb and flow, but healthcare will always be a necessity. Increasing demands on the healthcare system from an ageing population will go hand in hand with increased demand for healthcare real estate. For the two UK listed healthcare real estate investment trusts (Reits), this is good news.
To the casual observer, Assura (AGR) and Primary Health Properties (PHP) look virtually identical. Their market capitalisations are neck and neck, each sitting at £1.4bn. When it comes to portfolio size, Assura is now the larger player, thanks to its acquisition of a £500mn private hospital portfolio from NorthWest Healthcare Properties Real Estate Trust (CA:NWH.UT), which brought its portfolio value to £3.2bn. PHP, meanwhile, has a portfolio value of £2.8bn.
However, over the past 12 months, total returns have diverged: PHP’s shares have made 12 per cent, while Assura is only up 1.3 per cent. This is reflected in PHP’s higher price to tangible book value – 0.99 times, compared with Assura’s 0.85 times. PHP’s longer-term performance has also been stronger, in relative terms, having outperformed its peer by 14 percentage points over five years. This divergence is intriguing given the strong sector fundamentals shared by the two Reits.