Investment Trust Insider on student housing
James Carthew: DIGS’ London moat had direct impact on returns
GCP Student Living (DIGS) is five years old and it has been a great success. An investor who subscribed £1 for a share in the real estate investment trust’s initial public offering on 20 May 2013 has received 26.07p in dividends with another 1.48p on the way and, after a recent rally, has a share worth £1.46.
This works out as a return of 11.7% per annum, well ahead of the company’s 8%-10% annualised total return target. At the same time, the trust’s managers have seen a fund worth £70 million grow to one with a £759 million property portfolio and a market value of £562 million.
DIGS has traded at a healthy premium to net asset value (NAV) for much of its life but its share price was dragged down by the profit warning that emerged from Empiric Student Property (ESP) in September 2017. Having traded at a discount approching 6%, it has just moved back to trading at asset value once again.
Empiric’s share price started falling in the first week of September, ahead of the publication of its interim results on 12 September. The tone of the statement was upbeat but it warned that ‘certain one-off items… have adversely impacted the result for the half year… the dividend for the full year is now not expected to be substantially covered by adjusted EPRA earnings per share’.
A negative research note from Numis Securities and a business review published in November highlighted the real problem…. read more here