Drum Income Plus REIT has provided an update that covers the period from its launch on 29 May 2015 to 31 December 2015. The company listed on the London Stock Exchange on 29 May 2015 raising gross proceeds of £31.9m. During the period to 31 December 2015, the company acquired four properties for total of £25.1m (excluding costs). In addition, the company entered into a conditional agreement, in December, to acquire Lakeside 5500 in Cheadle, Manchester, for £5.2m (excluding costs); this acquisition completed on 22 January 2016 and, following this transaction, the company says that its net IPO proceeds are now fully invested. The company say that the board is giving consideration to raising further capital.
The company says that the fair value independent valuation of the property portfolio as at 31 December 2015 was £25.4m whilst NAV per share was 95.1p. Earnings per share (excluding revaluation gains and losses on fair value of investments) was 0.83p during the period. The company say that the current portfolio benefits from a high occupancy rate of c 96%. There are two vacant units and these are currently under offer at rental levels at or above the business plan forecast. Lease renewals are also in hand with two national retailers at Gosforth, which will have a positive impact on the portfolio WAULT and value.
The company has declared an interim dividend of 1.3125p for the period (this is payable on 26 February 2016 to shareholders on register at close of business on 5 February 2016). The company says it is targeting dividends of 5.25p per share (1.3125p per quarter, commencing in respect of the quarter ended 31 December 2015) in respect of the period from launch to 30 September 2016. The company is also targeting fully covered aggregate dividends of at least 5.5p per share and 6.0p per share in respect of 12 months ending 30 September 2017 and 30 September 2018 respectively.
Since the period end, the company has also put in place a £20m 18-month revolving facility with The Royal Bank of Scotland, which they say will be used to fund further acquisitions. The interest rate on the facility is LIBOR plus 1.1%.
Under the terms of the management agreements among the Company, R&H Fund Services (Jersey) Limited and Drum Real Estate Investment Management, the Company currently pays a total management fee of 1.25% per annum of the Company’s net assets. However, with effect from 1 January 2016, this total management fee was reduced to 1.15% per annum of the Company’s net assets up to £150m and 1% of net assets over £150m.
In terms of outlook, the company says that the investment manager has identified a pipeline of attractive investment opportunities that are currently being offered for sale and that meet Drum’s investment policy, acquisition criteria and return profile. They say that the immediate pipeline comprises eight real estate assets (including a portfolio of five properties) with an aggregate value in the region of £40m and a weighted average acquisition yield of around 8%. The company also says that the board is currently considering raising additional capital through the issue of new shares and the introduction of a placing programme to take advantage of the attractive investment pipeline. They say that any such capital raising, including regarding timing and size, will be subject to prevailing market conditions and that the new 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. The company says that further details will be announced in due course.
Drum Income Plus REIT is fully invested and considering raising further capital : DRIP