29 January 2020
DRIP REIT - Annual Report & Financial Statements to September 2019 (29/01/2020)
Drum Income Plus REIT was established in May 2015 with the initial objective being to provide its shareholders with a regular dividend income together with the prospect of income and capital growth over the longer term from a portfolio of regional real estate assets in the UK. I am pleased to present the annual report and accounts for the year to 30th September 2019.
The Group’s net asset value per share at 30 September 2019 was 84.5 pence.
When dividends paid during the year are included the net asset value total return for the year was 6.5%.
At the time of writing the share price stands at 77.5 pence, representing a discount of 9.5% when compared to the year end net asset value per share.
The Company has paid four quarterly dividends during the period each of 1.5 pence per share, making total dividends in respect of the financial year of 6.0 pence per share. The dividend yield on the current share price is 6.3%. It is the Board’s intention, in the absence of unforeseen circumstances to at least maintain the 6.0p level of payment for the current period.
The Company was fully invested and had drawn down substantially all of its available loan facilities when it entered the financial year. No properties were sold during the year and therefore all the investment activity related to the existing properties and, in particular, the realization of a number of asset management opportunities at the respective properties.
A full description of the portfolio and the management initiatives is given in the Investment Adviser’s Report on page 8.
A review of the UK Commercial Property Market as we near the end of 2019 would suggest that the well established trends of recent months and indeed quarters remain firmly in place. Institutional investors from all over the world would appear to have large quantities of capital available to invest in the UK market, but the majority are waiting for some clarity on Brexit and the resulting implications for the sector.
Whilst demand for top quality office property in the UK regional cities remains very high against a backdrop of increasingly tight supply, the retail sector in particular continues to display very negative sentiment in the face of both the ongoing decline of high streets and the continuing structural shift toward increased online spend.
As a result of the foregoing, the valuation of the retail parks and malls within the portfolio have inevitably come under pressure, and this is reflected in the lower NAV, but our managers continue to work on asset management initiatives on each of the properties with a view to improving the long-term NAV, and they have been able in a number of situations to both improve lease terms and rents, and these will stand the portfolio in good stead as market conditions hopefully improve once some of the macro-economic uncertainties are finally removed.
Whilst the result of the UK general Election in December 2019 may have given us greater clarity on the direction of travel, there is as yet no such clarity for the real estate sector on what the implications will be of whatever Brexit agreement is eventually reached. As a result, risks and a level of uncertainty are likely to remain throughout 2020.
That said, the UK real estate market remains an attractive one for global investors, and as uncertainties are gradually removed, we may see some of the pent up demand for commercial estate being released, which could be beneficial for valuations. Our own portfolio is in excellent condition, and is well placed to benefit over time from the various asset management opportunities which continue to be undertaken by the managers.
Hugh Little | Chairman
28 January 2020
To view full Accounts and Financial Statments please see the following link: click here