TIDMDRIP
RNS Number : 1959C
Drum Income Plus REIT PLC
18 January 2018
18 January 2018
Drum Income Plus REIT plc
("Drum" or the "Company")
Unaudited Net Asset Value as at 31 December 2017
Drum Income Plus REIT plc (LSE: DRIP) announces its unaudited
net asset value ("NAV") as at 31 December 2017.
Highlights
Period from 1 October 2017 to 31 December 2017
-- Fair value independent valuation of property portfolio as at
31 December 2017 of GBP58.7m (30 September 2017: GBP58.2m).
-- NAV per share at 31 December 2017 of 95.4p (30 September 2017: 94.0p).
-- Earnings per share (excluding revaluation gains and losses on
fair value of investments) for three months ended 31 December 2017
were 1.9p.
-- Dividend paid during the quarter of 1.375p 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 +3.1%.
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 December 2017)
GBPm Pence per
Share
NAV as at 30 September
2017 35.9 94.0
Capital expenditure (0.1) (0.3)
Valuation change in property
portfolio 0.5 1.3
Income earned for the
period 1.2 3.1
Expenses for the period (0.3) (0.8)
Interest paid (0.2) (0.5)
Dividend paid (0.5) (1.4)
Unaudited NAV as at 31
December 2017 36.5 95.4
----------------------------- ----- ---------
The NAV has been calculated in accordance with International
Financial Reporting Standards and incorporates the independent
portfolio valuation as at 31 December 2017 and income for the
period, but does not include a provision for the first interim
dividend, which will be paid in February 2018. The earnings per
share for the period from 1 October 2017 to 31 December 2017
(excluding revaluation gains and losses on fair value of
investments and expenses charged to capital) were 1.9p.
As at 31 December 2017, the Company had cash balances of GBP1.1
million and borrowings of GBP22.8 million (loan to value of
38.8%)
Market Overview
Despite an undercurrent of political uncertainty, 2017 turned
out to be a very positive year for economic growth in Europe. The
political environment within the UK will continue to play a
significant part in how the economy performs and may be a little
subdued over the next three years partly due to the impact of
Brexit and the uncertainty that has created.
From the evidence of economic performance in the final quarter
of 2017 after the economy held up well in the first 3 quarters of
2017 it can be gleaned that spending growth probably slowed in Q4.
Christmas trading is vitally important for retailers and on a
non-seasonally adjusted basis, the volume of sales in December is
typically 30% above its average monthly level in the rest of the
year. The latest available data on households' borrowing behaviour
suggests that consumers are willing and able to borrow to fund
their spending with annual growth in credit card borrowing picked
up again from 8.4% in October to 8.6% in November.
Data from MSCI showed that all-property rental values rose by
0.2% in November which was comparable to the average monthly rise
seen over the last six months, and was enough to keep the annual
and quarterly rates of rental value growth broadly unchanged
compared to October, at 1.8% y/y and 0.6% 3m/3m. Both of those
rates are stronger than most readings since the start of the
year.
However, beneath the all-property average, the picture looks
increasingly mixed. For instance, Rest of South East industrial
rents rose by 0.6% in November, broadly in line with the six-month
average. By contrast, at 0.2%, the rise in shopping centre rents
was a clear improvement on the average fall of 0.1% recorded over
the previous six months. South East Industrials and last mile
logistics remain a keenly contested market sector with yields
continuing to sharpen. DRIP REIT's continued strategy on core plus
and value add opportunities keeps us out of this sector and looking
at more entrepreneurial opportunities in, for example, the Retail
Warehouse sector where value can be unlocked via the managers
skills rather than just waiting on the market to add the value.
At GBP6bn, the value of Investment deals reported in November
rose by 42% compared to October. November's rise was enough to
reignite the upward trajectory in both the six- and twelve-month
averages of activity. On these metrics, investment activity was
stronger than at virtually any point other than the exceptional
highs of 2014 and 2015. Firstly, the value of the five largest
deals totalled nearly GBP2.2bn, around a third higher than the
five-year average. Although the number of deals signed was not too
far from the average seen in past Novembers, the value of deals was
particularly high. The upshot is that, at just under GBP50m, the
implied average lot size was higher than at any point since
November 2010. The size of deals and equity into the market
continues to be a focus where smaller assets are ignored as
investors are focussed on asset allocation i.e. real estate versus
say equities or bonds rather than the specific real estate
opportunities.
Accounting for just over 50% of all transactions by value, the
office sector attracted the largest proportion of capital. Whist
the share of office investment was broadly in line with the recent
trend, the shares of retail and industrial investment were low by
recent standards. Meanwhile, three of the top five deals involved
alternative property assets - i.e. assets outside of the office,
retail and industrial sectors. For example, the largest of those
saw Pandox purchase a portfolio of Jury's Inn hotels for GBP800m
from Lone Star.
Current Portfolio
Sep-17 Dec-17
Location Value % Weighting Value % Weighting
North East GBP15,925,000 27% GBP16,200,000 28%
Scotland GBP18,300,000 31% GBP18,350,000 31%
North West GBP18,900,000 33% GBP19,050,000 32%
South West GBP5,100,000 9% GBP5,100,000 9%
--------------- -----------------
GBP58,225,000 100% GBP58,700,000.00 100%
---------------------------- -----------------
Sector Value % Weighting Value % Weighting
Office GBP23,775,000 41% GBP24,100,000 41%
Shopping
Centre GBP13,400,000 23% GBP13,700,000 23%
Retail GBP18,550,000 32% GBP18,550,000 32%
Industrial GBP2,500,000 4% GBP2,350,000 4%
--------------- -----------------
GBP58,225,000 100% GBP58,700,000 100%
---------------------------- -----------------
Key KPIs
Sep-17 Dec-17
-------- --------
Total Number of
Units 104 108
Total Number of
Tenants 92 92
Total SQFT 336,303 336,303
Vacancy (% SQFT) 5.80% 4.90%
Vacancy (% ERV) 1.60% 2.70%
WAULT (Expiry) 6.40 6.47
WAULT (Breaks) 5.13 5.17
-------- --------
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 6.5 years.
-- The portfolio yield is 8.2% (based on 31 December 2017 valuation).
-- The occupancy rate is high at greater than 97%.
-- 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
Having just published our second set of Annual Accounts for the
period to September 2017 the Board and the Investment Advisor
remain committed to the strategy of investing in regional assets
where value can be unlocked via entrepreneurial asset and
development management. Since the Company was launched in May 2015
we have assembled a strong portfolio of income producing assets
which are spread across the value add and core plus sectors of the
market. The asset management initiatives identified at acquisition
for each asset continue to be progressed, which is reinforced by
the progressive dividend policy.
Duloch Park, Dunfermline
-- Due to the strength of trade on the park Greggs and Subway
both decided not to serve tenant only break options.
Gosforth Shopping Centre, Gosforth
-- Kiosk 3 is now let and income producing and Kiosk 4 is under
offer, likely to be income producing in February.
-- The legal documentation for Unit 19 is now complete and the
tenant will take occupation following a short period of
refurbishment.
Kew Retail Park, Southport
-- As anticipated at acquisition Carpetright have chosen to
vacate at Lease Expiry in January 2018. Edgerly Simspon Howe &
Partners are currently marketing the unit and have received initial
notes of interest.
Lakeside 5500, Cheadle Royal Business Park, Cheadle
-- We have agreed the outstanding Rent Review with Agilent at
GBP310,000. This settlement reflects an uplift in rent of c
GBP10,000 per annum and will be backdated to March 2017. This
settlement figure is ahead of the Business Plan at acquisition.
Arthur House, Manchester
-- We have now secured vacant possession of the 5(th) and 6(th)
floors and will undertake a review of what refurbishment
specification should be delivered to the market.
-- We have strong interest in the 3(rd) floor voids and are
hopeful of announcing new lettings next quarter.
Lochisde House, Edinburgh
-- Following acquisition in July 2016 we have secured 4 new
tenants for the building covering c 12,000sqft which now makes the
building fully occupied. Lettings have been achieved at an average
rent of GBP18-sf, which is above business plan and the incentive
packages have been lower than anticipated in the Business Plan.
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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