TIDMDRIP
RNS Number : 0430G
Drum Income Plus REIT PLC
03 August 2016
3 August 2016
Drum Income Plus REIT plc
("Drum" or the "Company")
Unaudited Net Asset Value as at 30 June 2016
Drum Income Plus REIT plc (LSE: DRIP) announces its unaudited
net asset value ("NAV") as at 30 June 2016.
Highlights
Period from 1 April 2016 to 30 June 2016
-- Fair value independent valuation of property portfolio as at
30 June 2016 of GBP41.2m (31 March 2016: GBP40.6m).
-- NAV per share at 30 June 2016 of 93.9p (31 March 2016: 92.9p).
-- Earnings per share (excluding revaluation gains and losses on
fair value of investments) for three months ended 30 June 2016 were
1.4p.
-- Dividend paid during the quarter of 1.3125p fully covered by earnings for the period.
-- NAV total return (NAV movement plus dividend paid) of 2.5%.
Post 30 June 2016
-- Third interim dividend of 1.3125p per share for period from 1
April 2016 to 30 June 2016 declared and payable on 26 August
2016.
-- Acquisition of 3 Lochside Way, Edinburgh Park, Edinburgh, for
a consideration of GBP4.5m (net of acquisition costs).
-- General Meeting convened to approve the purchase of Burnside
Industrial Centre, Aberdeen for GBP2.6m, GBP1.6m of the acquisition
cost to be satisfied by the issue of 1.6m Ordinary Shares at the
price of 100 pence.
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 2016)
GBPm Pence per
Share
Unaudited NAV as at 31
March 2016 32.2 92.9
Portfolio acquisition
costs (0.1) (0.3)
Valuation change in property
portfolio 0.5 1.3
Income earned for the
period 0.9 2.5
Expenses for the period (0.3) (0.9)
Interest paid (0.1) (0.3)
Dividend paid (0.5) (1.3)
Unaudited NAV as at 30
June 2016 32.6 93.9
----------------------------- ----- ---------
The NAV has been calculated in accordance with International
Financial Reporting Standards and incorporates the independent
portfolio valuation as at 30 June 2016 and income for the period,
but does not include a provision for the third interim dividend,
which will be paid on 26 August 2016. The earnings per share for
the period from 1 April 2016 to 30 June 2016 (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 2016, the Company had cash balances of GBP3.2
million and borrowings of GBP11.0 million (loan to value of
26.7%).
Market Overview
The property market does seem to have lost some momentum in
2016, with the blame initially being attributed to the hiatus
created by anticipation of the EU referendum and latterly by
uncertainty resulting from the decision for the UK to leave the EU.
This in turn triggered outflows from open-ended property funds,
with many managers temporarily suspending redemptions on these
funds as their cash reserves (which act as a drag on returns in the
good times) dwindled. The general consensus is increasingly that
open-ended illiquid funds are not the best vehicles for holding
real estate. Fortunately, managing cashflows to meet redemptions is
not a problem that affects closed-ended funds like DRIP.
EU Referendum Effect
In the wake of Britain's decision to leave the EU, the financial
markets have experienced significant turbulence and volatility. The
current consensus is that Brexit will have a negative impact on the
UK property sector with property valuations coming under downward
pressure. It is anticipated that the London office and high value
residential sectors could be most affected, with least impact in
the regions.
The Company's valuer, Savills, prepared its valuation in the
immediate aftermath of the referendum result. Since the result was
only announced on 24 June, it has not been possible for Savills to
gauge fully the effect of the Brexit decision by reference to
transactions in the marketplace. In line with the approach adopted
by other valuers, Savills has therefore provided written and oral
caveats to its 30 June valuation, but not changed the 30 June
valuation number.
Any effect which Brexit might have upon UK property values could
take several weeks or months to emerge, as we expect there to be a
cutback in trading activity due to both the summer period and
investors assessing the implications of the referendum outcome.
Asset Management Update
The Investment Adviser has successfully negotiated significant
leasing activity at Gosforth Shopping Centre:-
-- A 10 year lease to a new client, Naked Deli, at a rent of
GBP45,000 pa with a break option at year 5
-- A new 10 year lease to Boots, an existing tenant, at a rent
of GBP77,000 pa has been secured
-- A new 5 year lease to Card Factory, a new client, at a rent
of GBP31,000 pa in year 1 on a unit which had been vacant for a
significant period of time has been entered into
-- A bespoke web address has been created along with installing
free Wi-Fi into the mall. The initiatives are aimed at increasing
engagement with the local community, increasing dwell time within
the mall and thereafter increasing mall income.
As a result of these new initiatives the value of Gosforth has
increased from GBP12.6m to GBP12.8m.
At Duloch Park, Dunfermline the Investment Adviser has secured
an increased rent at review with Lloyds Pharmacy of 15% on the
previous passing rent. This has rebased the rents for future lease
events across the park.
At Arthur House, Manchester the Investment Adviser has submitted
a planning application to remodel the reception and entrance area,
in line with the asset management plan for the property.
As we enter the next phase of the cycle, in which income return
is expected to be the main component of total return, we continue
to see attractive investment opportunities with deliverable asset
management angles.
Current Portfolio
Jun-16 Mar-16
Location Value % Weighting Value % Weighting
North East GBP15.4m 37.33 GBP15.2m 37.51
Scotland GBP10.8m 26.22 GBP10.4m 25.56
North West GBP9.7m 23.58 GBP9.7m 23.87
South West GBP5.3m 12.87 GBP5.3m 13.06
---------- ------------ --------- ------------
GBP41.2m 100.00 GBP40.6m 100.00
----------------------- ------------ --------- ------------
Sector Value % Weighting Value % Weighting
Office GBP13.9m 33.82 GBP13.8m 33.88
Shopping
Centre GBP12.8m 30.96 GBP12.6m 31.04
Retail GBP14.5m 35.22 GBP14.2m 35.08
---------- ------------ --------- ------------
GBP41.2m 100.00 GBP40.6m 100.00
----------------------- ------------ --------- ------------
Key KPIs
---------------------------------------------
Jun-16 Mar-16
--------
Total Number of Units 79 79
Total Number of Tenants 72 72
Total SQFT 228,874 228,874
Vacancy (% Square Feet) 2.80% 4.40%
Vacancy (% ERV) 4.70% 6.30%
WAULT (Expiry) 6.79 6.97
WAULT (Breaks) 5.69 5.92
------------------------- -------- --------
Differentiated Investment Strategy
-- Target lot sizes of GBP2m - GBP15m in regional locations
-- Sector agnostic - opportunity driven
-- Entrepreneurial asset management
-- Risk-controlled development
-- 5.25% dividend yield on 31 March share price
-- Dividend paid quarterly
-- Covered dividend policy
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 market weakness
-- The weighted average unexpired lease term of the portfolio is
6.79 years, which reduces the impact of any uncertainty in
occupational markets
-- Low vacancy rate of 4.7%
-- Low gearing - the loan-to-value ratio of 26.7% provides
resilience against the risk of covenant breach from significant
market falls (28.9% following the acquisition of Lochside)
-- Further asset management opportunities to exploit
Dividends
In the absence of unforeseen circumstances, the Company intends
to pay a fourth interim dividend of 1.3125p per share in respect of
the quarter ending 30 September 2016*.
*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.
Equity Issuance
A 12 month placing programme opened on 24 March 2016. Any
capital raising under the placing programme will be subject to
prevailing market conditions.
Under the placing programme, shares will only be issued at a
premium to the most recent NAV per share at the time of issue
(adjusted, where appropriate, for any dividends subsequently paid).
The premium will be intended to cover the direct costs of issue and
will seek to contribute to the financial impact of investing the
net proceeds. The price at which new shares are issued will also
take into account the prevailing price of the existing shares in
the market.
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
Ben Heatley / Richard Sloss (Sales) 020 7894 8529 / 0131 240 3863
Dickson Minto W.S. (Sponsor)
Douglas Armstrong 020 7649 6823
Drum Income Plus REIT Plc
Martin Cassels, Company Secretary 0131 550 3760
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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