TIDMDRIP
RNS Number : 4282L
Drum Income Plus REIT PLC
19 July 2017
19 July 2017
LEI: 213800FG3PJGQ3KQH756
Drum Income Plus REIT plc
("Drum" or the "Company")
Unaudited Net Asset Value as at 30 June 2017
Drum Income Plus REIT plc (LSE: DRIP) announces its unaudited
net asset value ("NAV") as at 30 June 2017.
Highlights
Period from 1 April to 30 June 2017
-- Fair value independent valuation of property portfolio as at
30 June 2017 of GBP58.2m (31 March 2017: GBP49.2m).
-- On a like-for-like basis, this represents an increase of
GBP0.4m in the value of the property portfolio.
-- NAV per share at 30 June 2017 of 94.5p (31 March 2017: 96.5p).
-- Earnings per share (excluding revaluation gains and losses on
fair value of investments) for three months ended 30 June 2017 were
1.4p.
-- Dividend paid during the quarter of 1.375p fully covered by earnings for the period.
-- NAV total return (NAV movement plus dividend paid) of -0.6%.
-- Acquisition of Kew Retail Park, Southport for GBP8.65m, which
represents a Net Initial Yield of 8.78%. Costs relating to the
acquisition of Kew equate to GBP0.6m (1.5p per share of the
NAV).
-- Arthur House - GBP0.4m (1p per share of the NAV) of capital
expenditure was invested in this building during the quarter. The
investment performance in terms of rental growth, quality of
occupational tenants and lease length will now drive valuation
uplifts.
Introduction
The Company aims to provide shareholders with a regular dividend
income plus the prospect of income and capital growth over the
longer term. The Company invests in smaller UK commercial
properties, principally in the office, retail (including retail
warehouses) and industrial sectors, which have the potential to
offer a secure income stream, to create value through active asset
management and have strong prospects for future income and capital
growth.
Unaudited NAV (As at 30 June 2017)
GBPm Pence per
Share
NAV as at 31 March 2017 36.9 96.5
Capital expenditure and
acquisition costs (1.1) (2.9)
Valuation change in property
portfolio 0.3 0.9
Income earned for the
period 1.2 3.1
Expenses for the period (0.5) (1.3)
Interest paid (0.2) (0.4)
Dividend paid (0.5) (1.4)
Unaudited NAV as at 30
June 2017 36.1 94.5
----------------------------- ----- ---------
The NAV has been calculated in accordance with International
Financial Reporting Standards and incorporates the independent
portfolio valuation as at 30 June 2017 and income for the period,
but does not include a provision for the second interim dividend,
which will be paid in August 2017. The earnings per share for the
period from 1 April 2017 to 30 June 2017 (excluding revaluation
gains and losses on fair value of investments and expenses charged
to capital) were 1.4p. Acquisition costs on new property purchases
have been written-off.
As at 30 June 2017, the Company had cash balances of GBP1.0
million and borrowings of GBP22.8 million (loan to value of
39.1%).
Market Overview
During the quarter to end June 2017 there are a number of
sectors noting improved investor appetite, however, there was no
change in prime yields in April or May. What did change was the
number of sectors reporting downward pressure. While this is little
to write home about, it does highlight the continued appetite for
UK real estate in the face of Brexit and further political issues.
As previously noted the issues we currently face are political and
not financial. This is apparent in Q1 transaction volumes which
totalled GBP12.8bn, largely driven by activity in the London office
and industrial markets, 20.5% higher than the 10 year first quarter
average.
The weaker Pound post the EU Referendum has renewed overseas
investor interest in UK real estate, particularly those from Asia
Pacific. The rolling 12-month total for overseas investment was up
4.9% on a quarterly basis in Q1 with activity from Asia Pacific
investors up 22.1%. UK acquisition volumes by this group totalled
GBP2.9bn in Q1, almost double that reported in Q1 2016 and is the
highest quarterly total seen since Q4 2013.
With currency forecasts from Oxford Economics suggesting that
the Pound will remain relatively weak against the Euro and Dollar
over the short term, overseas investor interest in the UK is likely
to continue over the course of 2017. The weight of money from
overseas investors is helping to maintain current pricing and may
even translate into yield compression in some sectors over the
remainder of 2017. This is also being supported by the amount of
undeployed capital sat in PE funds. Dry powder for private equity
(PE) real estate funds reached a new high in March of $247bn, with
$63bn of this related to European funds.
Within the regions, rising construction costs have squeezed
developer margins over the past 18 months, and with build cost
inflation set to reach 2.9% during 2017, developers have switched
their attention to refurbishments and the market is starting to see
a "new generation" of refurbishments which offer a much higher
quality product than ever before. Similarly a lack of appetite from
investors for speculative new development has given rise to a
growth in refurbished product.
Current Portfolio
Mar-17 Jun-17
Location Value % Weighting Value % Weighting
North East GBP15,725,000 32% GBP15,775,000 27%
Scotland GBP18,050,000 37% GBP18,250,000 31%
North West GBP10,150,000 21% GBP18,900,000 33%
South West GBP5,300,000 10% GBP5,300,000 9%
--------------- --------------
GBP49,225,000 100% GBP58,225,000 100%
---------------------------- ------------ -------------- ------------
Sector Value % Weighting Value % Weighting
Office GBP23,425,000 48% GBP23,625,000 41%
Shopping
Centre GBP13,100,000 27% GBP13,250,000 23%
Retail GBP10,100,000 21% GBP18,750,000 32%
Industrial GBP2,600,000 4% GBP2,600,000 4%
--------------- --------------
GBP49,225,000 100% GBP58,225,000 100%
---------------------------- ------------ -------------- ------------
Key KPIs
------------------------------------
Mar-17 Jun-17
-------- --------
Total Number
of Units 94 104
Total Number
of Tenants 82 88
Total SQFT 282,651 336,303
Vacancy (%
SQFT) 8.00% 7.60%
Vacancy (%
ERV) 8.70% 3.90%
WAULT (Expiry) 5.83 6.23
WAULT (Breaks) 4.44 5.05
---------------- -------- --------
Differentiated Investment Strategy
-- Target lot sizes of GBP2m - GBP15m in regional locations.
-- Sector agnostic - opportunity driven.
-- Entrepreneurial asset management.
-- Risk-controlled development.
-- Dividend paid quarterly.
-- Fully covered dividend policy - growing incrementally.
Portfolio Attributes
In the context of the market uncertainty, the Board believes it
is helpful to shareholders to highlight some key attributes of the
Company's property portfolio:
-- The Company has no exposure to Central London markets, which may take the brunt of any Brexit-related market weakness.
-- The weighted average unexpired lease term (WAULT) to expiry
of the portfolio is 6.23 years, which reduces the impact of any
uncertainty in occupational markets.
-- The portfolio yield is 8.0% (based on 30 June 2017 valuation).
-- The occupancy rate is high at greater than 95%.
-- Gearing - the loan-to-value ratio of 39.1% directly in line
with the stated intended target of 40%.
-- Further asset management angles to exploit.
Asset Management Update
Monteith House, Glasgow
-- LS Buchanan served notice to extend two leases over the 5(th)
and 6(th) floors for a further year. Lease expiry now January
2019.
-- Lift refurbishment works due to complete
-- Common parts refurbishment initiated
Duloch Park, Dunfermline
-- 2013 Rent Review agreed with Subway, showing a c10% increase in the passing rent
Arthur House, Manchester
-- The reception works are now complete and have been well received by the tenants.
-- Tony Gee have now taken occupancy of the 4(th) floor at a rent of GBP17.50psf
-- Vacant possession of the 6(th) floor has now been agreed and
we have significant interest in this space currently.
-- Capital expenditure has been invested in this building and
the majority of these works are now complete. The investment
performance in terms of rental growth, quality of occupational
tenants and lease length will now drive value.
Dividends
The Board is targeting fully covered aggregate quarterly
dividends of at least 5.5p per share in respect of the year ending
30 September 2017 and at least 6.0p per share in respect of the
year ending 30 September 2018*.
[*Target returns only and not a profit forecast. There can be no
assurance that these targets will be met and they should not be
taken as an indication of expected or actual current or future
results.]
Enquiries:
Drum Real Estate Investment Management (Investment Manager)
Bryan Sherriff 0131 285 0050
Cantor Fitzgerald Europe (Financial Adviser and Corporate Broker)
Sue Inglis (Corporate Finance) 020 7894 8016
Richard Sloss (Sales) 0131 240 3863
Dickson Minto W.S. (Sponsor)
Douglas Armstrong 020 7649 6823
Weber Shandwick (Financial PR)
Richard Bright 0131 556 6649
Nick Oborne 020 7067 0721
This information is provided by RNS
The company news service from the London Stock Exchange
END
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