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 in recent years.
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 the financial flexibility to acquire and renovate.
How it's doing
Circle Property said rent collection across its portfolio improved in the final quarter of 2020.
Since the outbreak of the COVID-19 pandemic in March 2020, average rent collection has clocked in at 90.5% while in the fourth quarter it stood at 92%. For the current quarter, the repayment rate is 84%.
Those struggling to meet the payments mostly come from the property company’s limited retail assets, comprising two pubs and one restaurant in central Birmingham.
The tenants in those properties remain solvent and are expected to reopen and resume rental payments when lockdown restrictions allow.
Circle’s rental income has been increasing throughout the year as rent-free periods on more recently granted leases come to an end and net income now stands at £7.9mln a year.
What the boss says: John Arnold, chief executive
"From our direct experience during the period, we are pleased to see that there is plenty of activity in the regional office sector, with strong demand for well-designed office space, which provides office workers with flexible, safe environments.
"We believe that as the UK progresses out of the pandemic, office workers will be keen to return to the workplace and we aim to ensure that our offices provide attractive working conditions fit for the future."
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.