The IPD UK Annual Healthcare Index total return (published annually) in 2010 was 11.1% year-on-year, falling behind the IPD UK All Property total return for the first time in four years which showed a return of 15.1% for the same period as the overall index benefitted from a market correction in yields yet to be seen in primary care property. Whilst MedicX Fund achieved a comparable total return of 7.1% for the year ended 31 December 2010, this was the impact of the market catching up to the Company as the return for the past three years ending December 2010 of 3.6% is comparable to the healthcare index return of 3.7% for the same period. The IPD UK Healthcare Index total return outperformed the IPD UK All Property total returns in 2007, 2008 and 2009 and over the four year period to the end of 2010 showed a positive return of 5.7% per annum compared with negative return of 2.7% per annum for UK All Property.

The October 2011 IPD UK Monthly Index net initial yield figures for All Property and Retail were 6.20% and 5.98% respectively, a proportionate reduction of 21.6% and 21.4% respectively since the low point in property values in June 2009 and reductions of 3.28% and 2.13% respectively from October 2010. Prime Retail and Office properties have in many cases returned to pre-recession yields with net initial yields ranging between 3.75% and 5.25%.

The primary care property sector has historically been less volatile and lagged behind other property classes with net initial yield for the Fund at 5.84% in September 2011 compared with 5.88% in September 2010. The low point in valuations since the launch of MedicX Fund occurred in March 2009 with a net initial yield of 6.09%, compared with the peak of 5.01% in March 2007. The September 2011 net initial yield of 5.84% represents only a 4.1% reduction since the low point in property values in March 2009.

The restructuring of the NHS is becoming clearer with the NHS Bill now being debated by the Lords. Clinical commissioning groups are the proposed replacement for the existing PCT structure, but will have a wider community involvement. To this end some steps have already been taken to restructure the PCTs into clinical consortia to support the new structure when the new legislation is implemented, which is currently anticipated to be in February 2012. Continued debate over the final form of the NHS Bill means that the role the GPs will take in the revised structure of the NHS has yet to be defined, but they will continue to be the cornerstone of primary care delivery. The question of who will take ownership for the existing NHS primary care estates once the PCT structure is dissolved is still being debated, although it is anticipated that this will be the commissioning groups.

A continuing theme in the discussions over the restructuring is the ability for the NHS to deliver efficiencies in the provision of healthcare. The provision of modern purpose-built and flexible primary care properties, such as those in the Fund’s portfolio, is consistent with the search for further efficiencies in NHS operations. Demand for new primary care premises continues with a majority of premises still not fit for purpose.