Ever-increasing Circles – The Property Chronicle
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Ever-increasing Circles An analysis of Circle Property, an AIM-quoted property investment company

The Analyst

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Circle is an internally managed property investment company, registered in Jersey. It was initially founded as a limited partnership in 2002, became a Jersey Property Unit Trust (JPUT) in 2006, and has been quoted on AIM since February 2016. Its focus is office properties in the UK’s provincial cities, targeting assets that may be too small for most institutional investors, but too large for most private investors, and where the income profile is likely to deter REIT investors. It typically targets short-let properties (or vacant properties, if the letting prospects are sufficiently strong) where it can add value by undertaking lease renewals, rent reviews, lettings and refurbishments.

Circle’s senior management team includes three full-time property professionals and the company is governed by a highly experienced board. Together, the management and board own approximately 30% of the company, closely aligning their interests with external shareholders. The company has a strong track record of NAV total returns, both prior to IPO and since, and this continued through H118.

The current portfolio of 15 assets is now valued at £103.5m (30 September 2017), of which 11 office buildings comprise 90%. All the assets, with one exception (an office property in Moorgate), are outside London and significant refurbishment programmes have been recently completed at three of them, which are expected to increase rent and capital values significantly on those assets. The concentration of assets is mitigated to some extent by a more diverse lease portfolio of 113 units let to 53 tenants, ranging from major international companies such as Compass Group to local businesses.

Circle Property’s recent interim results show asset management initiatives continuing to drive operational progress, delivering strong growth in rental income and cash earnings, and lifting portfolio valuations. Letting progress has continued in H218, including at recently refurbished assets, but significant reversionary potential remains and capital values remain low.

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