About UsKey Strategies

Strategy and Value Creation

The Manager seeks to draw on its competitive strengths to deliver sustainable growth and returns to Unitholders through its three-pronged value creation strategy.

Our Competitive Strengths

Well-located Assets with Strong Fundamentals

The strength of our portfolio of 97 quality assets is anchored by the geographical diversity of our assets, the counter-cyclical business of our primary tenant, and long WALE of our leases.

Primary Tenant with Defensive Business

DWP is the UK Government’s largest public service department with more than 80,000 employees supporting more than 20 million people. Our well-located assets are of long-term relevance in the provision of DWP’s Jobcentre Plus services through economic cycles.

Prudent Capital Management

Our prudent approach towards capital management and continued access to various sources of funding, coupled with strong balance sheet position, provide us the financial flexibility to pursue opportunities and drive long-term sustainable growth.

Proactive Manager with Proven Track Record

Our employees are dedicated professionals with a wealth of experience in investment and management of real estate assets, finance and investor relations. With an average of more than 15 years of experience, each employee is key to the growth and value creation process.

Strong Sponsors with Alignment of Interest

We are able to leverage the knowledge and expertise of three established sponsors with a track record in real estate, financial strength and industry networks. Our Sponsors have an aggregate of close to 20% interest in the REIT, aligning their interests with Unitholders.

Attractive and Well-developed Market

UK is a highly liquid real estate market supported by an economy which has demonstrated relative resilience over the long- term. The market continues to be favoured by international investors for its real estate transparency and open approach to foreign ownership.

Our Approach to Value Creation

The Manager seeks to achieve the value creation objectives of the REIT with the following strategies:

Acquisition Growth Strategy

  • Adopt a rigorous research driven selection process across the UK
  • Focus on value-accretive commercial properties to provide attractive cash flows and yields
  • Leverage Sponsors’ Right-Of-First-Refusal (“ROFR”) pipeline of quality UK commercial assets
  • Extensive expertise in the UK with strong sourcing capabilities
  • Long-term investment approach to improve future income and capital growth

Active Asset Management and Asset Enhancement Strategy

  • Endeavour to drive organic growth in revenue and net property income
  • Proactive engagements with tenants to build on strong tenant relationships
  • Focus on improving tenant mix as acquisition strategy gains traction
  • Optimise lease tenures to increase stability of income and realise cost efficiencies
  • Identify potential property enhancements or redevelopment opportunities to enhance income streams
  • Divest under-performing assets to redeploy capital and optimise the performance of our portfolio

Prudent Capital Management Strategy

  • Prudent management of Gearing Ratio and Interest Coverage Ratio
  • Diversify sources of financing to ensure financial flexibility
  • Employ an appropriate mix of debt and equity to finance acquisitions and asset enhancements
  • Optimise borrowing costs and employ effective interest rate hedging strategies
  • Continuous monitoring of exposure to risk with a view to maximise risk- adjusted returns to Unitholders

FY2020 Value Creation

Acquisition Growth Strategy

  • Structured and proposed maiden acquisition of 58 properties
  • Yield accretive acquisition increased net internal area by 1.3 million sq ft to 3.9 million sq ft
  • Increased the number of assets in portfolio to 155 and overall portfolio exposure to the London area to 14%
  • Tenant mix diversified with five new strong credit government tenants through maiden acquisition

Active Asset Management and Asset Enhancement Strategy

  • High occupancy of 100%
  • Strong relationship with AA-rated government tenant continues to guarantee recession resistant cash flow
  • Collecting rent quarterly in advance
  • Conduct lease negotiations with an aim to remove break clauses or lease extensions, which are expected to materially increase valuations, thereby providing increased debt headroom for growth

Prudent Capital Management Strategy

  • Aggregate leverage of 31.0%
  • Effective interest rate1 of 2.4%
  • 50% of debt on fixed interest rates
  • Interest cover of 7.7 times
  • No refinancing requirements till FY2024

Financial Performance

  • Income available for distribution of £14.8 million, up 2.1% from IPO forecast of £14.5 million
  • DPU of 4.44 pence, up 2.3% from IPO forecast of 4.34 pence
  • 7.5%2 distribution yield (annualised)
  • Fair value gain on investment properties of £15.9 million reflects the underlying intrinsic value of the properties
  • Achieved total return of -2.9% compared to a decline of 11.1% in FTSE ST All Share Index and a decline of 10.6% in the FTSE ST REIT Index3
  1. Includes amortisation of loan upfront costs and transaction costs; for the financial period from 6 February 2020 (the “Listing Date”) to 31 December 2020.
  2. Based on closing price at 31 December 2020 of 66.0 pence.
  3. Source: Bloomberg LLP, total return for the period from Listing Date to 31 December 2020.
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