Yew Grove REIT plc

Strong strategy, tenants and total returns

17 Nov 2020 / Corporate research

Yew Grove invests in RoI office and industrial real estate, let to a carefully selected type of tenant. Through 2020, 97%-plus of rent has been paid on time, rising to over 99% now. Tenants are creditworthy: 96% large corporate or the government. The strategy creating such a secure income stream also brings high and rising rents. The gross yield on the portfolio is 7.9%. Yew Grove has found asset classes where buyer-competition is modest. The assets are appropriate for the world of COVID-19 and post COVID-19, with generous, uncrowded floorplates. During 2020 the modest voids reduced further. We note the mere 0.01% asset value fall in June.

  • Strategically placed for secure, sustainable, rising income: The target markets are 50/50 into RoI regional growth zones and the ring outside Dublin CBD. Office assets are low rise – typically three storeys – and well connected for car-based occupiers, and many are also connected to public transport.
  • Growth: Yew Grove raised €35.8m equity and purchased €50.3m investment assets through 2019 to February 2020. The shorter-term deliverable acquisition pipeline is more than €300m. Shareholders renewed authority for a further equity raise of up to €100m in May of this year.
  • Investment returns: Strong accounting returns amount to 3.1% p.a. since the 2018 IPO, post all investment costs. Since the 2018 flotation, asset values have grown, with like-for-like up 5.8% in 2019. Acquisition costs affect NAV. 2019 featured a special dividend but even the ongoing dividends yield over 6%.
  • Risk mitigation: WAULT (weighted average unexpired lease term) in recent months lengthened to 4.6 years to first break due to new longer leases. WAULT stands at 7.7 years. Yew Grove invested where rent rises and capital values lagged Dublin CBD over the cycle, yet its rents are starting to outperform.
  • Investment case and valuation: Office assets in locations attractive to FDI/government employers and employees deliver secure income. Industrial assets are located where the IDA is promoting growth, which underpins broadly positive market forces. Other secure income REITs offer average historical dividend yields of 4.7% and share prices trading, on average, at 103% NAV.
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