Primary Health Properties PLC Revised Advisory Agreement Terms (7894C)
April 20 2017 - 2:00AM
UK Regulatory
TIDMPHP
RNS Number : 7894C
Primary Health Properties PLC
20 April 2017
20 April 2017
Primary Health Properties PLC
Revised Advisory Agreement terms
Primary Health Properties PLC ("PHP" or the "Company"), the UK's
leading investor in modern primary healthcare facilities, is
pleased to announce that it has agreed revised terms with Nexus
Tradeco Limited ("Nexus" or the "Adviser") with respect to the fees
payable for the management of its property portfolio with effect
from 1 January 2017.
Nexus has delivered advisory services to the Company for over 20
years under the terms of an advisory agreement, identifying
suitable properties and negotiating the terms of purchase of those
properties and providing property management services on behalf of
the Company. During this time, it has generated consistently strong
returns for shareholders and PHP's property portfolio has grown to
comprise nearly 300 primary healthcare facilities in the UK and two
in the Republic of Ireland, both completed and committed, which are
let primarily to GP surgeries, NHS bodies and pharmacy operators.
The gross assets of the Company over this period have also grown
substantially to over GBP1.2 billion.
As PHP continues to deliver its strategy of growing its high
quality property portfolio whilst maintaining a covered dividend,
PHP 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, as the assets under management continue to
grow. Additionally, the independent directors of PHP wish to
provide an appropriate incentive for the Adviser and its key
employees to deliver superior returns going forward and to assist
with staff retention and recruitment.
Summary of revised terms
Under the revised terms, the fee payable for the management of
the Company's property portfolio will be amended to incorporate
additional lower fee increments as PHP continues to add scale, as
follows:
-- Gross asset value between GBP1,500m and GBP1,750m: 0.275%
-- Gross asset value between GBP1,750m and GBP2,000m: 0.25%
In addition to agreeing a reduction from 0.3% for fee rates as
the gross assets in the Company's portfolio increases above GBP1.5
billion, PHP has agreed a revised basis of calculating the
performance incentive fee ("PIF") payable to Nexus, and to
eliminate the currently carried forward deficit in respect of
calculation of the PIF.
Currently, the Adviser is entitled to a PIF calculated as a
percentage of total return, defined as change in IFRS net asset
value plus dividends paid ("Total Return"), delivered above a
hurdle rate of 8% Total Return. If the hurdle is met then Nexus is
entitled to a PIF of 11.25% of the Total Return above the hurdle
rate. Performance against the hurdle rate is carried forward in a
notional cumulative account, with any payment of the PIF in future
years being subject to the account being in a surplus position
("PIF Surplus or Deficit").
The revised method of calculating the PIF will be based on the
change in EPRA NAV rather than IFRS NAV - which the Board consider
to be a more accurate reflection of the performance of the
underlying property portfolio, unaffected by changes in accounting
practice and non-cash adjustments in relation to mark-to-market of
PHP's swap and convertible debt instruments, that under the current
methodology have resulted in a PIF Deficit despite strong
underlying shareholder returns.
In addition, it has been agreed that half of any PIF due to the
Adviser will be deferred to the following year and will be capped
at the lower of 20% of the Management Fee payable to Nexus in that
year or GBP2.0m. Furthermore, for the three years commencing on 1
January 2017, payment of PIF cannot cause PHP's dividend cover to
fall below 98%. The current PIF Deficit of GBP12.1m will be
eliminated.
Nexus has agreed that a minimum of 25% of any PIF payment will
be paid to key executives of the Adviser, excluding Harry Hyman,
the managing director, of which 50% will be satisfied in PHP
shares, subject to a three year holding period.
All other key terms of the advisory agreement will remain
unchanged.
Related party
For the purposes of the Listing Rules, Nexus is a related party
of the Company and the change to the advisory agreement falls
within Listing Rule 11.1.10 R, thus not requiring a shareholder
vote.
Alun Jones, Chairman of PHP, commented:
"We have benefitted from the Nexus team's wealth of knowledge
and expertise for over 20 years, and its performance to date has
been exemplary. The revised agreement announced today ensures that,
as we continue to grow the portfolio, the adviser and shareholders
remain aligned and focused on the long term performance of the
Company, with tight control of costs and an appropriate incentive
for the Nexus team."
More information on Primary Health Properties PLC can be found
on www.phpgroup.co.uk
Further details:
Alun Jones Harry Hyman
Chairman Managing Director
Tel: +44 (0) 20 7451 Tel: +44 (0) 20 7451
7050 7050
David Rydell / Elizabeth
Snow /
Eve Kirmatzis
Bell Pottinger
T +44 (0) 20 3772 2582
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCOKCDBOBKDPQD
(END) Dow Jones Newswires
April 20, 2017 02:00 ET (06:00 GMT)
Primary Health Properties (LSE:PHP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Primary Health Properties (LSE:PHP)
Historical Stock Chart
From Apr 2023 to Apr 2024