Specialist primary care property investor Assura believes the UK is at an ‘inflection point’ in healthcare as demand for private treatment soars.

Shares in the £1.3bn investor in GP surgeries, pharmacies and treatment facilities, weakened after half-year results last week, with their discount widening 3.5% to 15% below net asset value (NAV). 

The self-managed real estate investment trust, which is AA-rated by Citywire Elite Companies. said it had broadened the portfolio with a £500m acquisition of a private hospital portfolio.

Chief executive Jonathan Murphy said the 14 private hospitals would generate a day one rental income of £29.4m, with all of the leases subject to annual index-linked rent reviews and a weighted average unexpired lease term of 26 years.

Murphy said this ‘increases our exposure to the structurally supported private healthcare market as we continue to diversify our offering to meet changing UK healthcare demands’.

Assura also established a joint venture with the university pension scheme, USS, which ‘provides a new source of funding and opportunities to recycle capital into our growth pipeline’, said Murphy.

The need for healthcare investment was set out in the Lord Darzi report this year, which found the system not fit for purpose, with more than a million people waiting for treatment.

‘We are at an inflection in the UK, with structural changes to the delivery of healthcare services, the government targeting preventative services in a community setting, and rising demand for private providers,’ said Murphy.

‘Assura has firmly positioned itself to facilitate this change, being well-placed to work with all healthcare providers to deliver high-quality, sustainable facilities for the long term.’

The portfolio stands at 625 properties with an annual rent roll of £179.1m as of 30 September, up from £150.6m in March.

Over the half-year, the fund completed three developments at a total cost of £46m, including a GP surgery, an ambulance hub and the largest in-house development project to date with the building of the Northumbria Health & Care Academy in Cramlington.

The fund is currently in ‘advanced discussions’ for the disposal of 12 assets, and has five developments – including a GP surgery and a children’s therapy centre – in construction at a total cost of £44m, with £27m of spending remaining.

Murphy said there was a pipeline of 14 asset enhancement projects projected to cost £8.8m over the next two years.

Panmure Liberum analyst Tim Leckie said the shares were ‘attractive’ offering a 7.8% dividend after a 2.4% quarterly dividend increase to 0.84p per share in July. 

The double-digit discount reflects the way the shares have lost over a third of their value over three years despite NAV proving more resilient with a 2.3% dip.

Merchants Trust (MRCH ) fund manager Simon Gergel has been enthused by the low valuation of the shares, snapping up Assura for his £850m UK equity portfolio this year. He told Citywire that the ‘solid tenant base’ a lack of GP surgeries in the UK, as well as low-cost debt, made the Reit a good buy.