Drum Property Group’s investment business is set for significant UK expansion following the flotation of a new Real Estate Investment Trust (REIT) on the Main Market of the London Stock Exchange.
The Drum Income Plus REIT, which has raised £31.9 million on flotation, will target commercial property assets in strong regional locations across the UK. Shares will target a fully covered gross dividend yield of five per cent on the issue price once fully invested, generating income and capital growth for investors over the longer term.
The move comes at a significant time for Drum Property Group, which operates out of Aberdeen and Edinburgh. The company, first set up by group Managing Director Graeme Bone in 2004, has enjoyed a steady growth specialising in the creation of large development schemes and the construction and redevelopment of buildings across the UK, with a portfolio currently valued in excess of £1 billion.
In 2014, Drum set up an Edinburgh-based co-investment division headed by Investment Director Bryan Sherriff, with the specific intention of bringing new investment products to the market, building on a successful track record of working on investment management projects with institutional partners throughout the UK.
The REIT will be managed by Drum, with Turcan Connell Asset Management acting as Investment Adviser and cornerstone investor. Welcoming the start of trading, Drum’s Managing Director Graeme Bone said, “The REIT is an important and logical step forward in the evolution of Drum Property Group.
“We have enjoyed a major expansion in the past year across the business and now manage a diverse portfolio of property interests across the UK. This is perfect timing to capitalise on the knowledge and expertise of our management team.
“With the UK commercial real estate market continuing to gather momentum, the REIT offers investors the potential for appealing investment returns. We are looking forward to the REIT establishing a regional commercial property portfolio of significant value over the next six months, adding to growth across Drum Property Group as a whole.”
The REIT acquisition targets will initially target lot sizes of between £2m and £15 million, exploiting a perceived lack of competition in the market. Drum’s Investment Director Bryan Sherriff explained, “The REIT will principally target commercial property assets in strong regional locations that offer identifiable asset management and risk-controlled development opportunities.
“In recent years, the majority of investors have been focusing on prime properties and larger lot sizes in excess of £50 million. Interest from smaller property companies and private individuals has not returned to previous levels following the 2008 crisis due to the ongoing lack of available credit. This has created a pricing anomaly in smaller lot sizes due to a lack of competition for assets, and the REIT will be ideally placed from launch to benefit from this.”
“As we invest the proceeds of the IPO we anticipate, over time, undertaking further equity issues which – together with debt finance to our target gearing levels – will support and drive the growth of the business and provide healthy returns for shareholders.”
Turcan Connell Asset Management, one of Scotland’s leading wealth managers, oversees £1 billion on behalf of private clients, trusts and charities. Chief Investment Officer Haig Bathgate, commented, “We identified the opportunity to invest in the regional commercial property market and have found the appropriate expertise at Drum. The Drum Income Plus REIT offers our clients an attractive yield, the opportunity for capital growth and diversification from mainstream asset classes.”