Assura, UK universities pension in £250m NHS JV

Assura CEO Jonathan Murphy

Warrington-based healthcare real estate investment trust (REIT) Assura plc and Universities Superannuation Scheme Limited (USS) announced they have entered into a new £250 million 20:80 joint venture “to support investment in essential NHS infrastructure.”

Assura also published results for the year ended March 31, 2024, showing net rental income up 4% to £143.3 million and investment property value of £2.708 billion (March 2023: £2.738 billion).

Total dividends settled in the year were £96.1 million or 3.24p per share (2023: 3.08p per share).

Assura’s EPRA earnings were up 6% to £102.3 million. 

“A strategic partnership has been formed between USS, the principal pension scheme for universities and higher education institutions in the UK with over £75bn of assets under management, and Assura, the specialist healthcare property investor and developer,” said Assura.

“This long-term partnership will support investment into essential NHS community healthcare buildings, which help to address the current backlog of patients waiting for care.

“As the population ages and more people live with chronic conditions, modern, flexible healthcare buildings are central to the NHS’s priority of delivering more care closer to patients.

“The joint venture has an initial term of 20 years and will be seeded with an initial agreed portfolio of seven assets (£107 million), transferred from Assura’s existing portfolio at a small discount to the March 2024 valuation.

“The joint venture is targeting acquisition-led growth to £250 million over the next three years, with potential to grow to £400 million thereafter.

“The joint venture will focus exclusively on assets let directly to NHS or GP tenants with rents linked to inflation or with fixed uplifts

“Assura will retain a 20% equity interest in the JV and act as property and asset manager, receiving asset management fees linked to the valuation of the portfolio.

“The transaction will further strengthen Assura’s balance sheet, bringing additional diversity to the available funding sources to support Assura’s continued growth trajectory.

“It is intended that the net cash proceeds received (£85 million) will be recycled into Assura’s attractive pipeline of acquisition and development opportunities across medical centres and broader healthcare markets.”

Lazard & Co., Limited acted as exclusive financial adviser to Assura.

Assura CEO Jonathan Murph said: “We are delighted to announce this exciting transaction with a high-quality and long-term capital partner in USS.

“This important transaction highlights the attractive investment characteristics in the healthcare sector and specifically the long term resilient cash flows generated by our assets.

“As well as demonstrating our ability to re-deploy capital into our pipeline of opportunities in broader healthcare markets, we have sourced new capital that will fund investment in healthcare infrastructure that is so badly needed to enable better health outcomes.”

USS Head of Property Alex Turner said: “We are looking forward to working with Assura on this exciting joint venture.

“As a long term investor, we believe that investing in important UK infrastructure and paying our members pensions are strongly aligned as these kinds of assets can provide inflation-linked income over many years.

“Healthcare is a very important sector and we’re delighted to support investment in essential social infrastructure.”

On Assura’s results CEO Murphy said: “We have continued our track record of growth to deliver another period of increased EPRA earnings and dividend, driven by our disciplined approach to investment, extensive sector expertise, and ability to identify new market opportunities.

“It is these capabilities, underpinned by our strong financial position and secure balance sheet, that make Assura best placed to meet the critical need for new and enhanced healthcare capacity in a community setting.

“Our portfolio continues to deliver high-quality cash flows, against a turbulent economic backdrop, as we further demonstrate our long-term resilience with another year of strong financial performance – increasing rental income by 4% to £143.3 million.

“Opportunities across broader healthcare markets, each identified as meeting the same underlying demand and offering attractive risk-adjusted investment characteristics, are becoming meaningful contributors to Assura’s £2.7bn portfolio and cash flows.

“Our five completions reflect the shifting demand in the healthcare sector and include schemes for private operators such as a state-of-the art day case hospital in Kettering as well as our first development in Ireland.”