UK Commercial Property REIT puts in solid first half

UK Commercial Property REIT announced its interim results for the half-year ended 30 June on Thursday, reporting a net asset value total return of 3.9%, which it said was driven by capital value growth and achieved with a limited gearing of 11.9%.

The FTSE 250 firm claimed that was “one of the lowest” in its peer group, and in the wider real estate investment trust sector.

Its share price total return was 1.4% for the period, which it said compared favourably to the FTSE All-Share REIT Index total return of 1.3%.

Since its inception, the company’s shares had delivered a total return of 74.9% compared to the REIT Index total return of a negative 3.1%.

UKCPR also pointed to its “attractive” dividend yield of 4.2% as also comparing favourably to the FTSE All-Share REIT Index yield of 3.9%, and the FTSE All-Share Index yield of 3.6% as at 30 June.

The REIT had uncommitted cash resources of £80m available for investment at period end, including £50m available from its revolving credit facility.

Overall, the company said it continued to have a “strong” balance sheet with “considerable” financial resources still available for investment.

On the property front, UKCPR said its portfolio value grew to £1.4bn due to “strong” capital performance, income accretive acquisitions and successful asset management initiatives.

It saw continued outperformance from its portfolio, which generated a total return of 4.7% compared to the IPD benchmark return of 4.0%.

That outperformance was apparently driven by above-benchmark exposure to the industrial sector, asset management and “good performance” from its office portfolio.

Occupancy increased to 93%, with half the remaining vacancy in “strong” locations within the industrial sector, which UKCPR said had “good” prospects to enhance future income and capital returns and further increase occupancy.

Less than 20% of its vacancy was in the retail sector.

A total of £4.1m of annual income was secured through five new lettings, after rent-free periods and incentives, and eight lease renewals and rent reviews.

A total of 99% of rent was collected within 21 days during the period, which the firm said underlined the “strength” of its tenant base.

Portfolio yield stood at 4.1%, with a reversionary yield of 5.3% highlighted by the board as evidence of its potential for earnings growth.

“Our strategy to grow and recycle capital into a diverse commercial portfolio producing sustainable, high quality rental income has continued to yield sound results in what has been another active period for the company,” said chairman Andrew Wilson.

“The successful conversion to a REIT at the start of July is an important milestone for the business, making it one of the larger diversified REITs in the sector.

“With a high quality portfolio of assets located throughout the UK, a strong balance sheet and the lowest gearing amongst the company’s peer group, UKCP REIT is well positioned to add value to its property portfolio and enhance returns for its shareholders.”

Will Fulton, UK Commercial Property REIT’s fund manager, added that successful property and financial management of the business to grow long term income and create shareholder value had been “key” to its continued positive performance during the period.

“Tenant occupancy across the portfolio remains high and we are confident that through active asset management we can grow income further, including through leasing progress on the small amount of unlet accommodation that remains. In addition to investment disposals, principally in the retail sector, the Company has also been actively pursuing a pipeline of attractive investment opportunities.

“The acquisition of an office in Reading, and, in August, of an estate near Glasgow, where we further increased our majority weighting towards Industrials, both demonstrate our ability to recycle capital into high quality assets that are well positioned to deliver growing and sustainable income.”