TIDMDRIP
RNS Number : 5103U
Drum Income Plus REIT PLC
25 October 2017
25 October 2017
Drum Income Plus REIT plc
("Drum" or the "Company")
Unaudited Net Asset Value as at 30 September 2017
Drum Income Plus REIT plc (LSE: DRIP) announces its unaudited
net asset value ("NAV") as at 30 September 2017.
Highlights
Period from 1 July to 30 September 2017
-- Fair value independent valuation of property portfolio as at
30 September 2017 of GBP58.2m (30 June 2017: GBP58.2m).
-- NAV per share at 30 September 2017 of 94.0p (30 June 2017: 94.5p).
-- Earnings per share (excluding revaluation gains and losses on
fair value of investments) for three months ended 30 September 2017
were 1.8p.
-- Dividend paid during the quarter of 1.375p fully covered by earnings for the period.
-- GBP0.4m (0.9 pence per share of NAV) invested in capital
expenditure during the period. This is expected to assist in rental
growth, the quality of occupational tenants and lease length to
drive future valuation uplifts.
-- Successful asset management initiatives, which have reduced
the vacancy rate and increased the WAULT.
-- NAV total return (NAV movement plus dividend paid) of +1.0%.
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 September 2017)
GBPm Pence per
Share
NAV as at 30 June 2017 36.1 94.5
Capital expenditure (0.4) (0.9)
Valuation change in property - -
portfolio
Income earned for the
period 1.2 3.0
Expenses for the period (0.3) (0.7)
Interest paid (0.2) (0.5)
Dividend paid (0.5) (1.4)
Unaudited NAV as at 30
September 2017 35.9 94.0
----------------------------- ----- ---------
The NAV has been calculated in accordance with International
Financial Reporting Standards and incorporates the independent
portfolio valuation as at 30 September 2017 and income for the
period, but does not include a provision for the fourth interim
dividend, which will be paid in November 2017. The earnings per
share for the period from 1 July 2017 to 30 September 2017
(excluding revaluation gains and losses on fair value of
investments and expenses charged to capital) were 1.8p.
As at 30 September 2017, the Company had cash balances of GBP0.7
million and borrowings of GBP22.8 million (loan to value of
39.1%)
Market Overview
Following four consecutive months of no movement in the Savills
prime yield series July and August have seen a hardening of 10bps
and the average yield reach 4.65%, the lowest level since May 2016.
Following the unexpected UK general election, markets are now
seeing an uptick in activity. This, combined with relatively low
levels of investment stock, has seen pricing for a number of
sectors move in following months of downward pressure. July saw
yields shift inwards for UK logistics, the sector remains in vogue
for investors driven by the well documented structural change in
the retail sector which is driving occupier demand. Coupled with
the fact that speculative development levels are low and headline
rents are maintaining their upward trajectory, investors have been
keen to deploy capital into the sector. Indeed at the half year
point in 2017 investment volumes in the sector have reached
GBP2.3bn, almost GBP1bn higher than the same period in 2016 and
150% higher than the long term average.
Prime yields for foodstores sharpened in August reaching their
lowest level since the end of 2014. With a more robust occupational
story assisted by retailer merger and acquisition and the fact
foodstores offer long term indexed linked income and potential
asset management opportunities led by residential or mixed use
development means the sector has become increasingly attractive,
particularly to currency sensitive overseas investors and income
driven local authorities.
Whilst year to date investment volumes by value are on par with
2016, the actual number of transactions taking place has increased,
a feature of the market that is supportive of the Company's
investment strategy.
Office based employment across the regional cities is forecast
to grow by 4.6% over the next five years, equating to a net
additional 55,000 jobs and indicating a need for around five
million sq ft. The strongest growth is expected to be seen in the
administrative and professional, science and tech sectors. The
development pipeline remains limited, with 49% of space already
pre-let. Savills estimate 3.5 million sq ft of speculative
development to complete by end 2019.
Current Portfolio
Jun-17 Sep-17
Location Value % Value %
Weighting Weighting
North East GBP15,775,000.00 27% GBP15,925,000.00 27%
Scotland GBP18,250,000.00 31% GBP18,300,000.00 31%
North West GBP18,900,000.00 33% GBP18,900,000.00 33%
South West GBP5,300,000.00 9% GBP5,100,000.00 9%
------------------ -----------------
GBP58,225,000.00 100% GBP58,225,000.00 100%
------------------------------- ----------- ----------------- -----------
Sector Value % Value %
Weighting Weighting
Office GBP23,625,000.00 41% GBP23,775,000.00 41%
Shopping
Centre GBP13,250,000.00 23% GBP13,400,000.00 23%
Retail GBP18,750,000.00 32% GBP18,550,000.00 32%
Industrial GBP2,600,000.00 4% GBP2,500,000.00 4%
------------------ -----------------
GBP58,225,000.00 100% GBP58,225,000.00 100%
------------------------------- ----------- ----------------- -----------
Key KPIs
---------------------------------------------
Jun-17 Sep-17
-------- --------
Total Number of Units 104 104
Total Number of Tenants 88 92
Total SQFT 336,303 336,303
Vacancy (% SQFT) 7.60% 5.80%
Vacancy (% ERV) 3.90% 1.60%
WAULT (Expiry) 6.23 6.40
WAULT (Breaks) 5.05 5.13
------------------------- -------- --------
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 has increased to 6.4 years, which reduces the
impact of any uncertainty in occupational markets.
-- The portfolio yield is 8.0% (based on 30 September 2017 valuation).
-- The occupancy rate is high at greater than 98%.
-- 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 Overview and Update
We have just passed the second anniversary of our first
acquisition Mayflower House, Gateshead which was acquired in August
2015. This acquisition was quickly followed by Duloch Park and
Gosforth Shopping Centre. From these first acquisitions we now have
a portfolio of 10 assets and 92 tenants spread across the UK. The
Total rent roll is now circa GBP4.9m pa. As we enter this next
period of the Business Plans for each asset we are beginning to see
the benefits of the asset management undertaken to date. Valuations
across the portfolio have increased by c GBP2.5m since the first
asset was acquired.
Since last quarter we have reduced the Vacancy rate and also
witnessed an increase in the weighted unexpired lease term.
The Board and the Investment Advisor remain committed to the
strategy of investing in regional assets where value can be
unlocked via entrepreneurial asset management.
Duloch Park, Dunfermline
-- Unit 3 Greggs 2013 Rent Review settled at GBP23,300 pa, circa
GBP1,500 ahead of Business Plan
Gosforth Shopping Centre
-- Following completion of 3 new Kiosk units at a total cost of
c GBP40,000, Kiosks 1 and 2 have now been let for a period of 5
years at an annual rent of GBP14,000 pa.
-- Unit 19 is currently under offer and the Agreement for Lease
should be completed imminently.
3 Lochside Way
-- Nucanna have taken 2 separate leases for a total of c 5,500
sq ft at a rent ahead of business plan.
-- We now only have 1 suite available at Lochside Way which is currently under offer.
Arthur House
-- Gordon Levy have relocated within the building on a 5 year
lease at a Headline rent of GBP18.50 per sq ft pa.
-- We have secured vacant possession of the 6(th) floor and
after a short marketing campaign this suite is under offer to one
occupier, cementing the business plan.
Eastern Avenue, Gloucester
-- Following the acquisition of Staples by Hilco we have secured
a new 10 year lease with SUK Retail Limited.
Dividends
The Board has declared fully covered aggregate quarterly
dividends of 5.5p per share in respect of the year ending 30
September 2017, and is targeting 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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