“We continue to be a property-backed business and remain fully committed to this model,” said Priory Group CEO Tom Riall.
Priory Group sold 6 acute psychiatric hospitals across the UK, including Roehampton in south west London, as part of a £223million sale and leaseback portfolio deal with M&G. The other 5 hospitals are in Altrincham, Bristol, Chelmsford, North London, and Woking.
M&G acquired the freehold of the properties, which have been leased back to The Priory for 30 years on a full repairing and insuring basis with annual reviews linked to inflation. The deal is understood to represent a net initial yield of under 6%.
The Priory’s hospitals care for patients suffering with mental health problems such as addiction, eating disorders and depression. The company, which makes half of its revenues from health care, runs schools, nursing homes, respite and psychiatric care at 273 sites.
The deal follows a poor set of company results from The Priory earlier this month: it was hit by an impairment charge last year after closure of a site for children with learning disabilities that contributed to a reversal of a pre-tax profit the previous year. Despite revenues rising 3.8% to £480.8million, pre-tax losses reached £45.7million, compared with a £12.9million profit in 2012.
All proceeds from the deal will be reinvested in the business in a bid to reduce its debt. The Priory has spent £127million on improving its estate since it was acquired by Advent in March 2011.
“This transaction is a unique opportunity to take advantage of our market leading position and further invest in our business to consolidate our position as the leading independent provider of mental health and specialist education services in the UK,” said CEO Tom Riall.
Ben Jones, director of real estate income at M&G said: “This transaction offers a secure, growing income for institutional investors and attractive long-term financing for a leading provider of private healthcare.”