What follows is entirely my opinion, partly from memory and partly from back of an envelope calculations, and should not be taken as fact - please double check everything if it matters to you!

PHP is a UK healthcare REIT which currently appears to offer an attractive yield.

In recent years, NAV has been falling, and if they were to refinance everything today, I fear the earnings and dividend yield might not be very appealing.

They currently have a very high LTV, about 57%, after acquiring another UK health REIT.

This is tricky, because covenants for REITs often become a problem at 60%-65% LTV.

The high LTV also amplifies price movements downwards in the assets; though, fortunately, their assets had appeared to be robust in the view of appraisers.

In the last set of results, NAV had not moved much despite movement in interest rates.

Today, they announced they had sold some hospitals into a joint venture.

On the one hand, this is good because they had an expensive bridging loan that can be cleared.

However, the hospitals were sold at 5% below 2025 December book value.

My fear is that this might reflects the true market value for all of PHP's assets.

If so, the high LTV has an amplifying effect of about 2.35x, by my estimates. e.g. a drop of 5% in values takes about 12% off the NAV.

I ran the numbers, and it appears that when you offset the reduction in debt against the drop in asset value, the LTV has perhaps only fallen to 54.4%, again by my own estimate.

This would be consistent with management stating 'below 55%' today.

The EPRA NAV, calculated with the 5% discount on assets that was used in the sale to the JV, would fall to 88.1p, by my estimate.

This is a kind of interesting problem for REITs.

When a REIT is heavily indebted, and it sells assets to reduce its LTV away from breach of covenant, any downward movement in the market value of the assets (due to market conditions or urgency of sale) can mean that the REIT is running fast yet standing still.

A year of work to reduce LTV from 57% to nearly 55%, does not seem like a huge success.

My feeling is that management should have moved faster earlier in the year, i.e. as fast as possible after the takeover was secure.

I believe that getting rid of a block of expensive bridging debt, plus gaining some JV fees, while reducing LTV, makes this a modest win in some ways.

However, PHP has in recent times often traded at a discount of 5-10% to NAV. If NAV has indeed fallen to 88p, I fear the share price may now trend down to 75-85p as the market digests the implications of the discount on the sale for the remaining assets.

I currently have no position in PHP, either long or short.

TRS