The shops that ring up shareholder returns
ONLINE shopping is expected to account for 18 per cent of retail spending in Britain this year. That is a sizeable proportion, but it still means that more than 80 per cent of purchases are made in physical outlets.
Looking ahead, experts believe that even if online sales continue to grow, the vast majority of shopping will continue to be done in bricks-and-mortar stores.
The way consumers shop is changing however, making location more important than ever. Ediston Property Investment Company prides itself on owning the right sites in the right places and managing them in such a way as to deliver a consistent and attractive income to shareholders.
Unusually, the firm pays monthly dividends so investors are also rewarded 12 times a year for owning Ediston stock. The company floated in 2014 at 100p, the shares are 111p today and the total annual dividend is 5.75p, putting the stock on a yield of 5.2 per cent.
The share price and the dividend are expected to increase over time as Ediston expands its portfolio and raises rental income.
The Edinburgh-based firm is run by Calum Bruce, who has spent his career in the property sector. Bruce and his team take an unusually active approach to their sites.
Most companies employ one surveyor to look after 30 to 35 prop- erties. Ediston has ten surveyors for about 40 properties, so it puts much more effort into analysing sites before buying them. It also spends more time developing relationships with tenants once properties have been acquired.
The strategy works. When Ediston floated, around a quarter of its portfolio was vacant. Today, only 0.7 per cent of the group’s properties are not generating any rental income. At the same time, the estate has grown from a portfolio valued at £77 million in 2014 to £325 million today. Nearly 75 per cent of that portfolio is out-oftown retail parks in Scotland, Wales, the Midlands and the North. Bruce has focused on this sector because retail parks in these regions offer good value in today’s environment and appeal to both store owners and shoppers.
Retailers like them because rents are cheaper than on the high street and in city centre shopping malls.
It also means they can open bigger stores and offer easy clickand- collect access. Consumers like the accessibility too and Ediston works hard to ensure that stores are appropriate to each location, focusing on value in less affluent areas of the country, for example. As a result, Bruce has been able to raise rents, extend leases and offer firms such as Iceland and discount retailer B&M more space, while driving down vacancies. The group owns office space, too, again away from the South East.
Bruce r ecently acquired a development site in Haddington, 15 miles east of Edinburgh, where he hopes to build a retail park. The town is growing fast and large shops are in short supply, so the project should generate considerable value over time. Midas verdict: Ediston Property offers investors a good blend of conservatism, expertise and enterprise. Bruce focuses on delivering returns to shareholders so acquisitions and developments are undertaken only if they are likely to boost income and capital growth.
The ambition is to expand the portfolio to at least £500 million in the next few years. In the meantime, shareholders can enjoy that monthly dividend. At 111p, the shares are a good l ong- t erm investment.
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