Last checked at 28 Jan 2014 07:00
Primary Health Properties PLC ("PHP" or the "Company")
Revised advisory services terms
The Board of PHP is pleased to announce a revision to the structure for advisory fees paid for the management of its property portfolio with effect from 30 April 2014.
These changes are in addition to those announced on 25 September 2013 whereby Nexus Tradeco Limited ("Nexus") will become the sole advisor to the Company from 30 April 2014, taking on responsibility for those non-property services previously provided by J O Hambro Capital Management Limited. As advised on 25 September 2013, for these additional services, Nexus will receive a fixed annual fee which may be increased or decreased by up to 5% subject to movements in the Retail Price Index (or such other appropriate independent index agreed by Nexus and the Company) (the "Administrative Services fee"). This is unchanged by the following amendments.
Nexus has delivered advisory services to the Company for over 17 years under the terms of an advisory agreement and during this time has generated significant annual returns for shareholders.
Following significant transactional activity in 2013, PHP's property portfolio comprises over 260 primary healthcare facilities in the UK, both completed and committed, which are primarily let to GP surgeries, NHS bodies and pharmacy operators.
The gross assets of the Company have grown substantially, totalling approximately £933m on 3 December 2013 following completion of the acquisition of Prime Public Partnerships (Holdings) Limited. Accordingly, the Company and Nexus have deemed it appropriate to vary the terms of the advisory agreement in order to further reduce the incremental cost of advisory services and provide long term visibility regarding the fee structure as the assets under management continue to grow.
Summary of the changes to the advisory agreement
The current fee arrangement for property advisory services (the "Property Services Fee"), based on gross asset values is as follows:
Gross Assets | Total Fee |
First £50 million | 0.5500% |
Between £50 million and £350 million | 0.4125% |
Between £350 million and £450 million | 0.4875% |
Between £450 million and £500 million | 0.5625% |
Between £500 million and £750 million | 0.4500% |
Above £750 million | 0.3750% |
The revised terms of the advisory agreement will establish reduced incremental Property Services Fees payable to Nexus as gross assets increase firstly above £1 billion and then further when above £1.25 billion. The amended property advisory fee structure will continue to be calculated with reference to the gross asset value of the Company and is detailed below:
Gross Assets | Total Fee |
First £250 million | 0.5000% |
Between £250 million and £500 million | 0.4750% |
Between £500 million and £750 million | 0.4000% |
Between £750 million and £1 billion | 0.3750% |
Between £1 billion and £1.25 billion | 0.3250% |
Above £1.25 billion | 0.3000% |
The illustrative impact of the change to the Property Services Fee structure and associated savings are detailed below:
Assets under Management (£ Million) | Old Fee*(£ Million) | New Fee*(£ Million) | Saving / (Cost)(£ Million) |
£1,000 | £4.344 | £4.375 | £(0.031) |
£1,062 | £4.578 | £4.578 | £nil |
£1,125 | £4.813 | £4.781 | £0.031 |
£1,250 | £5.281 | £5.188 | £0.094 |
£1,375 | £5.750 | £5.563 | £0.188 |
£1,500 | £6.219 | £5.938 | £0.281 |
*Both Old and New illustrative fees shown reflect Property Services Fees only, i.e. the Administrative Services fee (the terms of which are unchanged under the revised agreement) is excluded.
As PHP continues to deliver its strategy of growing the property portfolio, all the financial benefits arising from the changes to the charging structure based on gross assets will accrue only to the Company and therefore its shareholders. The changes detailed above will come into effect on 30 April 2014.
The agreement remains terminable by the Company by not less than two years' written notice with the ability to terminate and make payment to Nexus in lieu of notice.
Graeme Elliot, Chairman said: "These amended fee arrangements reflect the strong portfolio growth achieved in recent years. The Board firmly believes shareholders should continue to benefit from the scale-ability of the PHP platform and we are pleased to announce the outcome of negotiations with Nexus, who have recognised the importance of maximising value for shareholders. Lowering the cost associated with managing further assets that the Company will acquire contributes to the Board achieving its priority of returning the Company to a fully covered dividend."
Further details:
Primary Health Properties PLC
Harry Hyman - Managing Director
Tel: 020 7451 7050
Pelham Bell Pottinger
David Rydell/ Victoria Geoghegan
Tel: 020 7861 3925