Secure Income REIT looks to broaden shareholder base

Secure Income REIT has published results for the year ended 31 December 2015. Over the period, the EPRA NAV rose by 9.4% to 282.8 pence per share (after incurring early debt repayment costs amounting to nearly 16% of EPRA NAV as at 31 December 2014). EPRA earnings per share for the period were 2.6p. They intend to pay quarterly distributions commencing in August 2016, initially reflecting a yield of 4.2% on 31 December 2015 EPRA NAV.

Today they have also announced that holders of at least 43% of the existing issued share capital are looking to get out. They are planning to place these shares with institutions with the aim of broadening the shareholder base. The sellers are the six founding shareholders of the company.

The emphasis last year was on sorting out the fund’s balance sheet with the aim of enabling the fund to start paying dividends this year. To that end they made asset sales in the year of £382m (c. 8% above 31 December 2014 book values), comprising the sales of the freehold of Madame Tussauds in London for £332m and New Hall hospital in Salisbury for £50m.

In August and September they secured over £900m million of new financing, completely replacing their original debt, extending the weighted average term to maturity by over seven years to nine years, reducing the annual interest cost by 23%, down to 5.2%, and reducing debt amortisation outflows.

Over the course of the year, the portfolio valuation rose by 6.3% to £1.35bn, reflecting a net initial yield of 5.3% and an equivalent yield of 6.4%.  The Group enjoys significant income security with financially strong covenants and a weighted average unexpired lease term of 23.5 years.  58% of the rent roll is guaranteed by Ramsay Health Care Limited, listed on the Australian Stock Exchange.  A further 39% of rents are guaranteed by Merlin Entertainments Plc.  The remainder of our rent roll is guaranteed by Orpea SA, the European leader in dependency care, listed on Euronext Paris.

As important as the security of income is its potential to grow.  Two thirds of the rent roll is subject to annual fixed uplifts (ranging from 2.75% to 3.34% and averaging 2.8% per annum) and the remaining third is subject to annual RPI-linked upward only reviews.

SIR : Secure Income REIT looks to broaden shareholder base