Ediston Prop Inv - Net Asset Value(s)
31/01/2023 07:00
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RNS Number : 3210O Ediston Property Inv Comp PLC 31 January 2023
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 31 December 2022
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces
its unaudited NAV at 31 December 2022.
Quarter Headlines
· NAV per share at 31 December 2022 of 80.93 pence (30 September 2022:
94.86 pence), a decrease of 14.7% in the quarter.
· Fair value independent valuation of the property portfolio at 31
December 2022 of £203.1 million, a like-for-like decrease of 12.3% on the
audited financial year end valuation at 30 September 2022.
· NAV total return (including dividends) for the quarter of -13.4% (30
September 2022 quarter: -2.5%).
· NAV total return of -5.8% for the year ended 31 December 2022.
· NAV decline of 10.7% for the year ended 31 December 2022.
· Portfolio weighted average unexpired lease term (WAULT) of 5.1 years
and EPRA Vacancy Rate of 6.7%.
· Dividends totalling 1.25 pence per share (5.00 pence per share
annualised) paid in the quarter.
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· Four asset management deals completed, in line with or ahead of the
independent valuer's ERVs, securing £829,500 of rental income per annum.
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Net Asset Value
The unaudited NAV of the Company at 31 December 2022 was £171.02 million, or
80.93 pence per share, a decrease of 14.7% on the Company's NAV per share as
at 30 September 2022.
Pence Per Share £ million
NAV at 30 September 2022 94.86 200.48
Valuation of retained property portfolio (13.41) (28.36)
Capital expenditure (0.14) (0.30)
Income earned 1.90 4.01
Expenses & finance costs (1.03) (2.17)
Dividends paid (1.25) (2.64)
NAV at 31 December 2022 80.93 171.02
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards ('IFRS'); the EPRA NAV is not
reported separately in this update as it is the same as the IFRS NAV.
The NAV incorporates the independent portfolio valuation as at 31 December
2022 and undistributed income for the quarter, but does not include a
provision for any accrued monthly dividend.
Overview
During the period, commercial property values fell across all sub sectors. The
market continued to adjust to the repriced gilt market, rising interest rates
and general negative economic conditions and outlook.
According to the MSCI UK Monthly Index, 'All Property' capital values declined
by 16.5% over Q4 2022. This was driven by 'All Industrial' falling by 21.8%
and 'All Offices' by 13.3%. According to this index, retail warehousing fell
in value by 13.0% in the period.
The Company was unable to buck this negative trend and saw its property
portfolio decline in value by 12.3%, to £203.1 million as at 31 December
2022. The decline was driven by outward yield movement, partially offset by
the completion of asset management activity and the fact that there were no
new voids or rental value falls within the portfolio.
After adjusting for gearing, capital expenditure and Company costs, the
Company's NAV declined by 14.7% in the period.
Asset management activity
Four asset management deals were completed during the period, securing
£829,500 of income per annum.
At Widnes Shopping Park, the Company signed an Agreement for Lease (AFL) with
Poundland, an existing tenant that is increasing its trading footprint from
4,998 sq. ft. to 11,295 sq. ft. To facilitate the deal, the Company has served
notice to break on New Look, a tenant that was paying below the market rent
following its most recent Company Voluntary Arrangement (CVA).
The new rent is 43% ahead of the rent being paid by New Look and 12% ahead of
the independent valuer's estimated rental value (ERV) of the unit. On
completion of the five-year lease, which is subject to vacant possession and
the completion of landlord works, the Company will have one unit of 4,998 sq.
ft. available to let. Given its location on the terrace and the strong tenant
line-up, the Investment Manager is confident it will secure a new tenant to
lease it.
At Kingston Retail Park, Hull, Mamas and Papas signed a five-year lease
extension on its 4,693 sq. ft. unit. The rent, which is in line with the
valuer's ERV, remains unchanged.
At Wombwell Lane Retail Park, Barnsley, B&M extended its lease by
10-years. It now expires in September 2037. The passing rent increased by 6.0%
and is in line with the valuer's ERV.
At Springkerse Retail Park, Stirling, Bensons For Beds (Bensons) 'rightsized'
from a unit of 11,916 sq. ft. to one of 9,977 sq. ft. and signed a 10-year
lease (without break). The annual rent being paid by Bensons on the new unit
is 48% higher than under its old lease and is 11.5% higher than the valuer's
ERV.
It is encouraging that the rental levels which have been secured are in line
with or ahead of the valuer's ERVs. It is also significant that all four
tenants currently trade from the Company's parks and are validating them as
trading locations by taking new leases. The Investment Manager continues to
progress lettings and lease restructures across the portfolio, with the aim of
improving the Company's income stream and reducing the vacancy rate.
Cash and dividend
At the date of this announcement the Company has approximately £50.5 million
of cash available for investment and operational purposes. The Company also
has £31.2 million of cash held in its debt facility, which is subject to the
lender's LTV requirements being met for it to be released for investment
purposes.
The Company has held its cash position for approaching a year. It pulled
back from purchasing assets in the middle of last year as the market started
to correct. It has evaluated several opportunities since then, but none were
deemed sufficiently attractive at the prevailing pricing levels to merit
acquisition.
The Board is aware of the impact of holding cash on the coverage of the
dividend whilst cash remains uninvested. However, it believes that continuing
to pay the current level of dividend from cash resources is sustainable, given
that it is unlikely that uninvested cash will be retained for the longer term.
The Board believes holding cash to invest is a positive for the Company as it
allows it to review repriced properties for acquisition. However, this is in
the context of ensuring that any acquisition terms reflect market conditions,
and that the financial resilience of the Company remains secure.
Debt
As at 31 December 2022, the average loan-to-value across the Company's two
debt facilities was 39.4%. The Company is compliant with its debt covenants
and there are no imminent refinancing events, with £56.9 million maturing in
2025 and £54.2 million in 2027.
Summary
Despite the valuation readjustment and consequent NAV decline, the Board and
Investment Manager take considerable comfort from the operational performance
of the portfolio.
During the quarter the effect of the asset management initiatives has been to
improve the rental value of the portfolio and increase the WAULT. In addition,
rent collection remains strong (99.9% of rent expected to be collected for the
period) and there are no new voids in the portfolio.
There is good tenant demand for the Company's assets, as evidenced by ongoing
discussions with multiple retailers across its portfolio who want to lease
vacant space or extend leases on existing units. Completing these transactions
should increase the WAULT of the property portfolio and reduce the EPRA
Vacancy Rate.
Clearly there are concerns about the effect of a recession on the Company's
occupier base. However, the retail warehousing format would appear to be
working well and is a good platform for delivering retailers' omnichannel
strategies. The sector appears less vulnerable, off its rebased rents,
compared to other sectors of the real estate market.
The Board and Investment Manager remain comfortable with the Company's
investment strategy in focusing on the retail warehouse sector. The
attraction of the sector is a view shared by others. According to the IPF
Consensus Forecast published on 30 November 2022, the retail warehouse sector
is again forecast to be the top performing property sub-sector, on a total
return basis, over the period 2022 to 2026.
Portfolio sector weightings and tenant and locational exposure as at 31
December 2022
Sector
Sector Exposure (%)
Retail warehouse 100.0
Geography
The portfolio is diversified across the regional markets.
Region Exposure (%)
Scotland 28.9
Wales 23.5
Yorkshire 16.4
North West 16.4
North East 8.6
East Midlands 6.2
Top five tenants (contracted income) as at 31 December
2022
Tenant Exposure (%)
B&Q Limited 11.6
B&M Retail Limited 7.9
Marks & Spencer plc 7.5
Boots UK Limited 4.6
Pets at Home Limited 3.8
Valuation yield profile as at 31 December 2022
Net Initial Yield 6.3%
Equivalent yield 7.2%
Forthcoming events
The next interim dividend announcement is expected to be made by 2 March 2023.
The next scheduled independent quarterly valuation of the property portfolio
will be conducted by Knight Frank LLP for 31 March 2023. The unaudited NAV per
share at that date is expected to be announced in April 2023.
The Company intends to publish its next factsheet shortly, which will be made
available on the Company's website at www.ediston-reit.com
(http://www.ediston-reit.com) .
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014. Upon the publication of this announcement via Regulatory
Information Service, this inside information is now considered to be in the
public domain.
Enquiries
Will Barnett - Investec Bank plc 0207 597 5873
Calum Bruce - Ediston Investment Services Limited 0131 225 5599
Ruth Wright - JTC 0203 893 1011
Ben Robinson - Kaso Legg Communications 0203 995 6672
Stephanie Ross - Kaso Legg Communications 0203 995 6676
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