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Secure Income REIT bucks the trend to report strong earnings and NAV for 2016

Secure Income REIT has published its results for the year ended 31 December 2016. EPRA NAV per share was up 14.4% to 323.6p and adjusted EPRA EPS was up over 330% to 11.3p for the year (from 2.6p). Quarterly distributions commenced in August 2016 and the company is currently yielding an annualised 4.1% on 31 December 2016 EPRA NAV. They expect an uplift in dividend after the majority of the 2017 rent review cycle is completed to an annualised c. 14p per share in August 2017, yielding c. 4.3% on December 2016 EPRA NAV. NAV total returns were 16.5% and they claim that shareholder returns of 30% put them at the top of the sector for the year.

The jump in earnings reflects lower financing costs, 2.3% uplifts in rents and the Travelodge deal.

They saw a significant valuation uplift in the year, amounting to a 7.0% increase on the portfolio owned throughout 2016.  Including the Travelodge hotels portfolio acquired in the year, they report a blended net initial portfolio yield of 5.3% at 31 December 2016.  After the majority of the 2017 rent reviews that will occur between May and July this year, they believe that yield will increase to an estimated 5.4% by July 2017.

The4 valuation increase of GBP85.0 million before currency movements includes the adverse impact of the increase in the rate of English SDLT from 4% to 5% during the year, which reduced the 2016 valuations by GBP11.9 million.

The healthcare valuations at 31 December 2016 reflect a weighted average net initial yield of 5.0% compared to 5.2% at 31 December 2015.  Together with the 2.8% increase in passing rent and net of the increase in the SDLT rate, the result is a valuation uplift of GBP58.5 million (7.0%) in the year.

The UK leisure valuations at 31 December 2016 reflect a weighted average net initial yield of 5.2% compared to 5.4% at 31 December 2015.  Together with the 1.3% increase in passing rent and net of the increase in the SDLT rate, the result is a valuation uplift of GBP12.6 million (2.9%) in the year.  The German leisure valuations at 31 December 2016 reflect a weighted average net initial yield of 5.8% compared to 6.3% at 31 December 2015 which, together with the 3.34% increase in rent, resulted in a valuation uplift of EUR12.3 million (12.3%) in the year; currency translation movements have also increased the Sterling equivalent resulting in a net Sterling valuation uplift of GBP22.9 million (31.2%) in the German leisure assets over the year.

The hotel valuations at 31 December 2016 reflect a weighted average net initial yield of 6.5%, resulting in a valuation uplift of GBP3.8 million (2.0%) over the cost of the portfolio, with rents unchanged between the completion of the acquisition in October 2016 and the balance sheet date.

Interest cover has also improved from 1.6 times at the end of 2015 to 1.9 times at the end of 2016. The net Loan To Value ratio reduced to 53.5%, down from 61.0% at 31 December 2015.

SIR : Secure Income REIT bucks the trend to report strong earnings and NAV for 2016

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