Six UK hospitals, known as the Salus portfolio, let to private hospital operator BMI Healthcare, have been put up for sale.
The seller is a syndicate of investors operating through a vehicle known as the General Mixer Healthcare Partnership, which is thought to include London & Regional.
It has appointed Knight Frank to market the properties – five freeholds and one long leasehold – for around £88.3m.
The portfolio comprises:
- The Cavell, Enfield, London
- Lincoln Hospital
- St Edmunds Hospital, Bury St Edmunds
- Huddersfield Hospital
- Lancaster Hospital
- Edgbaston Hospital, Birmingham (long leasehold)
The price tag reflects a yield of 7.75%. Currently rent stands at £7.1m per annum, which will be topped up in October to £7.3m.
These are trading on relatively short, unexpired leases of more than 13 years, with the option of renewal for a further 10 years after expiry.
Broadly, the signs are pointing towards an uplift in transactions in the hospitals sector after a lull in activity. Notably, Secure Income REIT sold eight of its 19 hospitals to Medical Properties Trust for £347m in July.
Charlie Fletcher, partner at Knight Frank, told EG the vendor is “looking to take advantage of investor appetite” generated by the uptick.
He added: “The drivers for the demand, mainly seen from US healthcare REITs, are: the currency play investing into the UK when sterling’s value is subdued; the extremely low interest rates in their domestic markets; and a good recovery story in the UK, which is seen by most as one of the most important locations for healthcare worldwide.”
There have been a string of owner exits from the BMI brand after most of the chain was put under landlord ownership last year. In February, its South Cheshire Private Hospital was acquired by the Mid Cheshire NHS Trust.
It has also closed its Esperance Hospital in Eastbourne, Somerfield Hospital in Kent and Fernbrae Hospital in Dundee this year.
BMI agreed a financial restructuring deal with Hospital Topco, the parent company for landlords at 35 hospitals as well as stakeholders and lenders, in December. The deal paved the way for a major recapitalisation, including a £60m capital injection, rent cuts of £65m per year and extended bank facilities to 2023.
South Africa’s Netcare, previously BMI Healthcare’s majority owner, had initially put the chain up for sale last year after five years of talks to reduce BMI’s rent fell through.
Netcare said at the time that rental costs represented around 20% of UK revenue, resulting in a “drain” on capital put towards investment.
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