Just what the doctor ordered: £80m injected in property fund

A property fund set up to build and buy a string of GP surgeries has raised more than £50m for a listing on the London Stock Exchange next month.

MedicX Fund, which was started three years ago with backing from private equity firm Cabot Square Capital, aims to capitalise on the Government's push to move more care into community-based surgeries.

MedicX's executive director, Keith Maddin, said: "The dynamics are changing. All the political parties want to push more care out of acute hospitals and into primary care in the community." The company expects to raise £80m by the time the offer period closes on Wednesday. The shares will begin trading on the main list on 2 November. Broker Panmure Gordon is handling the float.

Mr Maddin is also the executive director of Cabot Square, which has invested £20m since MedicX was started.

He said the institutions and private investors who have already signed up to the offering were attracted by the near-guaranteed rental cashflows. Rent paid by private GP surgeries is reimbursed by the NHS.

According to recent statistics from the Department of Health, 80 per cent of doctor's surgeries are too small. Half of them are converted houses or shops. As the sophistication of medical equipment increases, along with the demands on the capabilities and capacity of local surgeries, the number of GPs who can afford to buy a building for their practice is decreasing.

Mr Maddin expects to raise £80m in debt, on top of the £80m in equity, to build a portfolio of up to 40 properties across England and Wales.

Similar funds have performed well. Shares in Primary Health Properties, an Australian group, have increased by more than 60 per cent in the past 18 months. Medical Properties Trust of the US has gained more than a third in the same period.

"It's a very unusual property class. It has very good long-term visibility on its rental income," said Mr Maddin. "We have been growing towards this for three years. There will always be a need for GP surgeries. It's a way for investors who want a safe return to get access to government infrastructure."

The company's property development business, Primary Asset Management, buys and develops new purpose-built surgeries, which it then offers to MedicX. The fund will only invest in a property that already has a signed rental agreement in place.

The company has a development pipeline of 21 properties worth £73m.