TIDMDRIP
RNS Number : 1317M
Drum Income Plus REIT PLC
26 April 2018
26 April 2018
Drum Income Plus REIT plc
("Drum" or the "Company")
Unaudited Net Asset Value as at 31 March 2018
Drum Income Plus REIT plc (LSE: DRIP) announces its unaudited
net asset value ("NAV") as at 31 March 2018.
Highlights
Period from 1 January 2018 to 31 March 2018
-- Fair value independent valuation of property portfolio as at
31 March 2018 of GBP58.7m (31 December 2017: GBP58.7m).
-- NAV per share at 31 March 2018 of 95.4p (31 December 2017: 95.4p).
-- Earnings per share (excluding revaluation gains and losses on
fair value of investments) for three months ended 31 March 2018
were 1.8p.
-- Dividend paid during the quarter of 1.50p fully covered by earnings for the period.
-- GBP0.1m (0.3 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.
-- NAV total return (NAV movement plus dividend paid) of +1.6%.
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 31 March 2018)
GBPm Pence per Share
NAV as at 31 December 2017 36.5 95.4
Capital expenditure (0.1) (0.3)
Valuation change in property
portfolio 0.0 0.0
Income earned for the period 1.2 3.1
Expenses for the period (0.4) (0.9)
Interest paid (0.2) (0.4)
Dividend paid (0.6) (1.5)
Unaudited NAV as at 31 March
2018 36.4 95.4
----------------------------- ----- ---------------
The NAV has been calculated in accordance with International
Financial Reporting Standards and incorporates the independent
portfolio valuation as at 31 March 2018 and income for the period,
but does not include a provision for the second interim dividend,
which will be paid in May 2018. The earnings per share for the
period from 1 January 2018 to 31 March 2018 (excluding revaluation
gains and losses on fair value of investments and expenses charged
to capital) were 1.8p.
As at 31 March 2018, the Company had cash balances of GBP1.2
million and borrowings of GBP22.8 million (loan to value of
38.8%)
Market Overview
Following three consecutive months of no movement in the Savills
prime yield series, February saw a hardening of 2bps and the
average yield reach 4.50%, it now stands just 19bps from the
previous peak of 4.31% in 2007. This was driven by an inward
movement of prime yields for the logistics sector which now stand
at 4.25%, the lowest level ever experienced. Due to continued
strong interest from investors in the M25 office sector we expect
the average prime yield to see continued downward pressure into
2018.
Whilst the dominance of overseas investors is well documented,
it has been pleasing to note that UK institutions have increased
their purchases, accounting for GBP10.5bn of transactions in 2017,
up from GBP8.2bn in 2016 and higher than the long term average of
GBP10bn. All eyes will now turn towards global macro-economic
factors such as global interest rate rises, Brexit negotiations, US
trade tariffs and other geopolitical issues such as North Korea and
Russia and how they will impact the markets. The US Federal Reserve
raised interest rates in March by a quarter of a point to 1.5%
which is the sixth increase since 2015. This may signal that the
era of historically low interest rates that began during the Global
Financial Crisis appears to be coming to an end. With the Bank of
England also suggesting that rates are expected to rise this could
alter the spread between commercial real estate and risk free rate
with UK 10 year gilts currently trading at 1.5%.
Regional markets remain in good health. The attraction of the
regional towns and cities to both occupiers and investors continued
in 2017 and DRIP REIT finds the regional commercial property
markets to be in good health and increased tenant demand has been
visible, although in some instances letting decisions are taking
longer to execute. Office supply in regional markets remains low,
with occupier take-up continuing to reduce availability,
particularly of Grade A space, which should be a positive for
occupier demand and rental growth in the good quality secondary
space targeted by DRIP REIT.
Overall investment volumes in UK commercial property (including
London) in 2017 were significantly higher than in 2016, with an
increasing share taken by regional markets. Data for the office
market suggests that regional offices continue to represent
attractive yield compared with London, and that regional secondary
office yields have room to tighten further versus prime. As a
result of investor demand, the average yield spreads between the
regional and London offices has continued to narrow, but remains
wider than it was before recovery took hold in the London market in
2009, and is similar to the longer-term average. As London
recovered, the spread of secondary over prime yields narrowed
steadily, while the recovery in the regions was later to take hold
such that the regional spread of secondary over prime yields
remains wide despite more recent tightening.
Current Portfolio
Dec-17 Mar-18
Location Value % Weighting Value % Weighting
North East GBP16,200,000.00 27.60% GBP16,200,000.00 27.60%
Scotland GBP18,350,000.00 31.26% GBP18,400,000.00 31.35%
North West GBP19,050,000.00 32.45% GBP19,150,000.00 32.62%
South West GBP5,100,000.00 8.69% GBP4,950,000.00 8.43%
------------------ -----------------
GBP58,700,000.00 100.00% GBP58,700,000.00 100.00%
------------------------------------ ------------ ----------------- ------------
Sector Value % Weighting Value % Weighting
Office GBP24,100,000.00 41.06% GBP24,250,000.00 41.31%
Shopping Centre GBP13,700,000.00 23.34% GBP13,700,000.00 23.34%
Retail GBP18,550,000.00 31.60% GBP18,400,000.00 31.35%
Industrial GBP2,350,000.00 4.00% GBP2,350,000.00 4.00%
------------------ -----------------
GBP58,700,000.00 100.00% GBP58,700,000.00 100.00%
------------------------------------ ------------ ----------------- ------------
Key KPIs
---------------------------------------------
Dec-17 Mar-18
-------- --------
Total Number of Units* 104 108
Total Number of Tenants 92 91
Total SQFT 336,303 336,303
Vacancy (% SQFT) 5.80% 8.00%
Vacancy (% ERV) 1.60% 4.50%
WAULT (Expiry) 6.4 6.48
WAULT (Breaks) 5.13 5.3
------------------------- -------- --------
*increase in units due to the creation of kiosks at
Gloucester
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 is 6.48 years.
-- The portfolio yield is 7.9% (based on 31 March 2018 valuation).
-- The occupancy rate is high at greater than 95% by ERV
-- Gearing - the loan-to-value ratio of 38.8% directly in line
with the stated intended target of 40%.
-- Further asset management angles to exploit.
Asset Management Overview and Update
Eastern Avenue Gloucester
-- Discussions continue with retailers regarding the recent
demise of Maplin. Discussions are at a sensitive stage and once
documents are signed we will make an announcement
Gosforth Shopping Centre, Gosforth
-- Tenant interest remains strong and the long term vacancy rate
is low. We continue to market the centre and engage with the local
community, having recently undertaken an Easter campaign for
children.
Kew Retail Park, Southport
-- The asset management strategy remains in place and the
currently vacant unit is being marketed by Edgerly Simpson Howe
& Partners.
Arthur House, Manchester
-- We have recently agreed a simultaneous surrender and re-grant
of a new lease to Manchester City Council for c 1,500sqft at
GBP16.50psf, along with the letting of 2 further suites within the
building.
-- A new marketing campaign is about to be launched and aligned
to this is the appointment of JLL as joint letting agents.
-- In the next quarter we expect to instruct the refurbishment
of the 2(nd) , 5(th) and 6(th) floors at a total cost of c
GBP600,000.
Burnside Industrial Estate, Aberdeen
-- We have successfully agreed the surrender of unit 5 and
received a surrender premium of GBP108,000. This surrender premium
is to be utilised to refurbish the external of units 1-3 in the
summer of 2018.
-- Work to provide the tenants with their own utility meters was
undertaken late last year and we will now undertake some common
part refurbishment work including new estate signage
3 Lochside Way
-- Following a period of intense letting action, the building is
currently fully let, we are about to undertake a common parts
refurbishment of c GBP50,000. The refurbishment will include new
cycle racks, increased shower provision a refresh of the reception
area and redecoration of common parts.
Monteith House
-- We continue to invest in this asset and with potential
marketing opportunities in 2019 we are about to undertake a
refurbishment of the common parts including new reception area,
revised signage at a cost of c GBP100,000.
Dividends
The Board is targeting fully covered aggregate quarterly
dividends of 6.0p per share in respect of the year ending 30
September 2018*. At the current share price of 95.5p this would
represent an annualised dividend yield of 6.3%.
*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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