Take a look at the share price chart for this FTSE 250 stock…

Does that look like an exciting stock to buy today with the aim of generating big piles of passive income?

At first sight, a 42% five-year fall doesn’t inspire confidence, does it? I think the market has this one wrong. And for a while I’ve been thinking it might just be a great long-term income buy.

Oh, I nearly forgot, what is it? It’s Primary Health Properties (LSE: PHP), a real estate investment trust (REIT). The fall surely has to be all about real estate, and that’s not suprising. But it’s the nature of the real estate and the security I think it brings that makes me see this as a potential buy.

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Healthy income

Just like fellow FTSE 250 REIT Assura, this trust invests in healthcare properties. They’re in the same kind of business and offer very similar dividend yields. I’m considering both of them as candidates for my next investment.

Primary Health gets “90% of rental income directly or indirectly backed by the government, via the NHS in the UK or HSE in Ireland“, it told us at Q3 time in October. In that update, ahead of full-year results due on 28 February, CEO Mark Davies spoke of “the significant opportunity ahead in primary care and PHP’s continued dedication to dividend growth.”

He added: “We welcome the new Government’s commitment to reforming the NHS and specifically the need for increased investment in primary care which will add further resilience to the business model.”

In the first nine months of the year, the company generated £2.7m in extra rental income. That was the equivalent of a 3% annualised rise. And full-year guidance suggests in excess of £3m in extra income over the full year.

Big borrowings

This kind of business relies a lot on funding by debt, which can be scary. At 30 September, net debt stood at £1.32bn, which represented a pro-forma loan-to-value ratio ratio of 48.1%. It’s within the target range, and I’m happy enough with that. There’s still £301m in undrawn loan facilities available.

I particularly like the fact that 95% of debt was fixed or hedged at a weighted average cost of 3.3%, even at a time of high interest rates. Overall liquidity looks good to me. And if that’s how things look in today’s tough lending environment, I’m optimistic about the future when rates should fall further.

Risk/reward balance

I’d say the main risk does come from being so heavily dependent on debt. Also, Primary Health has issued new equity over the years to help fund its expansion. So investors need to keep their eyes open for any possible earnings or dividend dilution.

I expect commercial property weakness to put pressure on the share price for a while yet too. The market, it seems, is judging these stock valuations largely on asset values. But if the price does stay low for a bit longer, I’ll probably buy some.

If I don’t decide that Assura looks even better, that is.