Yew Grove REIT: Strong results, strong prospects

Hardman & Co

Yew Grove REIT plc (LON:YEW) invests in office and industrial assets in the Republic of Ireland (RoI). RoI was the best-performing European economy in 2020, with inward investment from multinationals, including medtech. Yew Grove taps into this strength, deploying the senior team’s expertise in managing and acquiring the optimal asset classes in optimal locations. In a busy first half – with the increased dividend reported on 27 August – the group raised fresh equity, achieved rent rises and new lettings. It collected effectively 99% rent and secured the final disposals of its (minimal) non-core portfolio. A strong pipeline of potential acquisitions is held.

  • 1H21 results: Like-for-like asset value rises were 2.4%, with vacancy rates reducing further, from 6.4% to 4.7%. Excellent rent collection continued. Life science tenants comprise 31% of rent roll. There is a particularly strong position here. Office new lettings and lease re-gears proved the market strength.
  • Resources for growth: €12.3m net equity was raised in 1H21 and €19.0m new investments were secured within eight weeks. In 2019, follow-on equity raises secured €34.7m net equity, purchasing €50.3m investment assets through 2019 to February 2020. A strong pipeline is in place.
  • Valuation: We outline the rationale for our conclusion that the NAV is particularly conservatively stated and that there are clear drivers to further portfolio value creation. This forms a compact group of complementary assets of the type which often accrue stock market valuations above NAV.
  • Risks: Normal real estate risks apply, but rent collection has been excellent, asset values particularly resilient when tested by COVID-19 and gearing is conservative. The REIT is ready to scale further and we welcome the scope this brings for efficiencies. However, acquisition costs are not negligible.
  • Investment case: High-quality office assets in locations attractive to both FDI/government employers and employees represent value for money to tenants. The industrial assets, many let to medtech tenants, are located where IDA Ireland (IDA) is promoting growth, and Yew Grove REIT tenants seek to grow with the company. Premium investment returns, underpinned by above-market yields, should provide strong resilience and make an attractive portfolio.

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