What it does
Circle Property's strategy is to identify under-utilised office buildings and rejuvenate them to boost the underlying value and rental income.
The sweet spot is properties worth between £5mln and £15mln or that are too small for institutional funds and too large for most private investors.
About 94% of the portfolio is regional offices, a property sub-sector that has been one of UK’s performers recently.
There is a minimum total return target of 12% on acquisitions and 20% on development projects.
Circle is not a REIT, so it is not obliged to return rental profits to shareholders, something that gives it financial flexibility to acquire and renovate.
How it's doing
In November, Circle said it expected growth in net asset value (NAV) per share to pick up over the next few months.
The company’s portfolio was been independently valued at £135.6mln as of 30 September, up from £124.6mln at the end of March.
The NAV per share edged up to 278p per share, up a penny from six months earlier.
The company is expecting to see most NAV growth in the second half of the current fiscal year.
Contracted rental income growth in the six-month reporting period rose by 7.2% to £8.2mln from £7.6mln, driven by the letting of space in the company's redevelopment and refurbishment pipeline.
What the boss says
"During the first six months of this year, we have been highly active in creating a pipeline of well-located, income-generating assets to complement our portfolio, which are expected to provide significant upside and deliver strong NAV growth over the full year,”
What the broker says
Circle offers "investors with the opportunity to invest in a small, nimble and well regarded property investment and development company which specialises in opportunistically buying and actively managing provincial offices in undersupplied towns and cities".
Analysts say that being a relatively small, but a highly nimble company has "undoubtedly helped as generating income and capital growth from a small number of properties can significantly boost total returns" and Circle has added substantial value to a number of its previously under-utilised regional office buildings.
- Economic activity in the UK improves, boosting demand for offices
- Shares at 26% discount to NAV
- Consistent growth in asset value in recent years