Half-year Report

M7 Regional E-Warehouse REIT PLC

29 September 2023

 

THE INFORMATION COMMUNICATED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

29 September 2023

M7 Regional E-Warehouse REIT plc (ticker: REW)

(the "Company" or the "Group")

Half year results show continued robust operational performance and further value stabilisation

The Company, which owns a diversified portfolio of e-warehouses across the UK (ticker: REW) today announces its unaudited interim results* for the half year ended 30 June 2023.

The principal activity of the Group is to provide shareholders with a sustainable level of income together with the potential for income and capital growth through ownership of a diversified portfolio of e-warehouses across the UK.

James Max, Non-Executive Chairman of M7 Regional E-Warehouse REIT plc:

"We continue to be encouraged by the operational resilience of the portfolio and the longer-term strength of its rental income.  Occupancy remains high at 98.35% and contracted annual rental income is £8.90 million with the Group achieving strong quarterly rent collection of 93.28% for the 2023 year to date".

Following the significant rerating of most commercial property sectors in the second half of 2022, valuations began to stabilise early in 2023 and have continued that trend throughout the first half of 2023. While we reported a small decline of 3.75% in Net Asset Value per share, the value of the portfolio remained broadly flat with a marginal uplift to £106.13 million during the period to 30 June 2023.

The Group's balance sheet has been a priority with the senior loan facility of £54.34 million and mezzanine loan note of £19.70 million maturing on 17 August 2023 and 27 July 2023, respectively. The lender extended the term of the senior loan for another six weeks to facilitate the refinancing. On 26 September 2023, the Group entered into a facility agreement (the "new facility") with Coutts & Co. The new facility was utilised to refinance all amounts owed under the current loan facility with Aviva Investors. The new facility is for a principal amount of £55.40 million or 56.28% Loan to Value ("LTV") and with maturity date of 5 years. Interest is payable quarterly at current SONIA rate plus a margin of 2.40%. Amortisation payments will be made over 18 months to bring the LTV to 55%. No hedging was put into place at this time, but the Group will continue to review the position. On 26 July 2023, the Group successfully extended the term of the mezzanine loan notes to July 2026.

The current economic uncertainty and increases in inflation and interest rates have caused a significant increase in financing costs. Accordingly, and together with the refinancing activity being progressed above, the Directors have decided to pause dividend payments in relation to the quarter ended 30 June 2023. The Board will continue to review the Company's capacity to pay future dividends for the remainder of 2023 and into 2024, which will be largely dependent on the speed with which interest rates settle at a sustainable level. 

Financial Highlights

	30 June 2023 (unaudited)	31 December 2022 (audited)
Net Asset Value ("NAV")	£32.06 million	£33.31 million
NAV per share	84.01p	87.28p
Share price	111.00p	111.00p
Investment properties at fair value (based on external valuation)	£106.13 million	£106.05 million
Loan to Gross Asset Value ("GAV") A	67.25%	66.35%
Loan to Value (covenant) A [1]	49.09%	49.09%

* The financial information includes the result of its subsidiaries (collectively the "Group") and condensed consolidated financial statements.

For the period ended 30 June

	Half year ended 30 June 2023 (unaudited)	Period from 11 October 2021 to 30 June 2022 (unaudited)
Adjusted earnings per share ("EPS") A	3.17p	3.18p
Dividend cover A	317.00%	76.63%
Dividend per share	1.00p	4.15p
Operating profit before fair value changes	£2.79 million	£3.30 million
(Loss) / Profit after tax	(£0.10 million)	£5.40 million
(Loss per share) / EPS	(0.27p)	14.15p
Ongoing charges A	4.08%	3.18%

^A Considered to be an Alternative Performance Measure. Further details can be found at the end of this section and full calculations are set out following the notes to the condensed consolidated financial statements.

2 This is a target only and not a profit forecast (based on annual target dividend of 4.02pps). There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.

•    The impact of the valuation and increasing interest resulted in a NAV decline of 3.75% to £32.06 million, equivalent to 84.01 pence per share ("pps") (31 December 2022: £33.31 million, equivalent to 87.28 pps) as at 30 June 2023.

•    Given the current economic uncertainty, inflation and resultant interest rate rises, together with the refinancing of the senior loan, the Directors have not recommended a dividend for quarter ended 30 June 2023. The Company paid a dividend of 1.00pps in relation to quarter ended 31 March 2023.

•    Operating profit below fair value changes of £2.79 million (30 June 2022: £3.30 million), with £4.12 million (30 June 2022: £4.49 million) of net rental income, excluding service and direct recharges, for the half year ended 30 June 2023.

•    Loss after tax of £0.10 million, equivalent to -0.27pps in the period (30 June 2022: profit of £5.40 million, equivalent to 14.15p), driven primarily by increasing interest rates that led to a significant increase in financing costs. A tax provision of £0.12m as the result of default on the Real Estate Investment Trust Interest Coverage Ratio was recognised during the period (31 December 2022: Taxation gain of £307,893 representing the reversal of an over accrual of United Kingdom Corporation Tax recorded prior to Admission and entering into the United Kingdom Real Estate Investment Trust tax regime, at which point any gains or losses arising from property business are exempt from UK Corporation tax).

•    Ongoing charges have increased to 4.08%, a 0.9% increase from the prior period as the result of market conditions which have negatively impacted the Group's NAV. 

•    At 30 June 2023, the Group had total long-term borrowings of £74.04 million, which comprise a senior loan facility of £54.34 million and a mezzanine loan note balance of £19.70 million (31 December 2022: same), with significant headroom against the facility's ICR and LTV covenants. The loan to value of the total borrowings as compared to the current valuation of the investment properties amounts to 69.77%. The term of the loans is disclosed in note 12 of the condensed consolidated financial statements.

Property Highlights

•    The fair value of the Group's portfolio of 17 properties increased by £80,000 from £106.05 million at 31 December 2022 to £106.13 million at 30 June 2023. Since the end of 2022, the UK has seen a period of challenging market conditions linked to global inflationary pressures and higher interest rates. This has caused a weakening investment market generally, but demand in the occupier market remains robust.

•   Rent collection remains strong with an average of over 93.28% collected over the half year period to June 2023. Occupancy remained high with 98.35% let at 30 June 2023, a marginal increase from 98.17% as at 31 December 2022.

•    A lease renewal was completed during the period, with Matalan agreeing a new 10-year lease at Clyde Retail Park, with a contracted annual rent of £216,613 p.a. reflecting an 8.31% premium to ERV.

•    The weighted average unexpired lease term ('WAULT') at 30 June 2023 was 4 years and 9 months to break (30 June 2022: 5 years and 1 month) and 5 years and 8 months to expiry (30 June 2022: 5 years and 8 months).

•    The Market Rent (ERV) was assessed by Avison Young at £8.76 million p.a. as at 30 June 2023 (20 June 2022: £9.07 million). The reduction was a result of the valuation shift at the end of 2022.

•    Contracted annual rental income marginally decreased to £8.90 million (30 June 2022: £8.96 million). The annual net rent has decreased to £8.50 million (30 June 2022: £8.81 million) as a result of several rent-free periods provided to tenants during the period.

Post balance sheet highlights

•    On 4 September 2023, the Directors were notified by the International Property Security Exchange ("IPSX"), the market on which the shares in the Company are quoted and traded, that it has commenced the process of winding down operations. IPSX states that its secondary market operations will continue through the wind-down period of 90 days from 5 September 2023 and the buying and selling of shares in the Company may continue as normal. The Board is looking at the various options available for the Company. The Board, in consultation with its Asset and Investment Manager and its Lead Adviser, is considering alternative platforms for listing and trading its shares or delisting.

•    On 26 September 2023, the Group entered into a facility agreement (the "new facility") with Coutts & Co. The new facility was utilised to refinance all amounts owed under the current loan facility with Aviva Investors. The new facility is for a principal amount of £55.40 million or 56.28% LTV and with maturity date of 5 years. Interest is payable quarterly at current SONIA rate plus a margin of 2.40%. Amortisation payments will be made over 18 months to bring the LTV to 55%. No hedging was put into place at this time, but the Group will continue to review the position.

•    On 26 July 2023, the Group agreed an extension on the term of the mezzanine loan note. The repayment date has been extended to 31 July 2026.

•    On 14 July 2023 M7 Real Estate Investment Partner VIII Holdco Limited was liquidated. On 30 July 2023, M7 Real Estate Investment Partner VIII Master Holdco Limited was liquidated.

•    New lease agreed with Poundland at Unit 1, South Bailey Retail Park in July 2023 on a five-year term at £200,000 p.a. which is equal to the ERV.

•    Following the collapse of the rescue package for Wilko and the subsequent administration, the Asset Manager is continuing to look for alternative occupiers for the Wilko unit at Castleford as well as exploring options to split the unit to provide more attractive floor plates.

ENQUIRIES

M7 Regional E-Warehouse REIT plc
James Max - Chairman	via FTI Consulting below
M7 Real Estate Ltd Richard Croft	[phone]
Dickson Minto (Lead Adviser)	[phone]
FTI Consulting (Communications Adviser)	[phone]
Richard Sunderland Eve Kirmatzis Oliver Parsons	[e-mail]
Alter Domus (UK) Limited (Company Secretary)	[phone]

The Company's ISIN is GB00BLN7H037.

Further information on M7 Regional E-Warehouse REIT plc is available at www.rewreit.co.uk[2].

NOTES

M7 Regional E-Warehouse REIT plc is a property investment company, listed on the International Property Securities Exchange offering shareholders a sustainable level of income together with the potential for income and capital growth by investing in its diversified portfolio of enhanced warehouse (e-warehouse) properties across the United Kingdom.

An e-warehouse is defined, by M7 Real Estate Ltd ("Asset Manager"), as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future. They are typically large regular shaped industrial units with retail frontages that could easily be converted to pure industrial use. They are generally located with good accessibility and sufficient car parking that could be used for yard space in the event of conversion. It is these types of characteristics which in M7's opinion underpins the value of the asset.

The Company's Asset Manager is a leading specialist in the pan-European, regional, multi-tenanted real estate market. M7 has over 225 employees in 14 countries across Europe. The team manages circa 620 properties with a value of circa €6.9 billion.

Chairman's Statement

Overview

I am pleased to present the unaudited interim result and condensed consolidated financial statements of M7 Regional E-Warehouse REIT plc (the "Company") together with its subsidiaries (the "Group") for the half year ended 30 June 2023.

The Company delivered another strong operational performance, with strong rent collection during the six months ended 30 June 2023. During the period to 30 June, the rent collection was 93.28% and occupancy stood at 98.35%.

After a challenging period in the UK commercial property market, particularly in the second half of 2022 when valuations fell significantly across the board, predominately as a result of the rapid increase in interest rates, we are pleased to report a marginal £80,000 increase in value of the Company's c. £106.13 million portfolio. This is an encouraging outcome when commercial property values in some sectors are still falling, albeit at a significantly slower rate than in the final quarter of last year, and hopefully this stabilisation will mark the green shoots of a recovery.

As I have previously reported, the broad composition and strong income characteristics of the Company's portfolio have helped mitigate the impact of this current downturn. According to the latest research from Income Analytics, more than 49% of the rental income is secured against tenants with a low or medium-low risk (the equivalent of a BBB- bond rating or better). The Asset Manager continues to closely monitor the financial performance of our tenants and is exploring every opportunity to reduce costs and drive income, as well as the opportunistic disposal of particular assets.

Whilst the Company delivered an attractive 8% dividend throughout 2022, it is unlikely that this level of dividend will be maintained during 2023 in view of the anticipated increased costs of debt post-refinancing in August 2023. The Board will continue to review the Company's capacity to pay future dividends for the remainder of 2023 and into 2024. 

While the outlook does look brighter than it did at the start of the year, we remain alert to the fact that there is still much uncertainty and the economy remains vulnerable to shocks from a number of different sources, not least the war in Ukraine,  another unexpected rise in interest rates and potential tenant default driven by difficult trading conditions.

Nonetheless, we expect the portfolio to continue to deliver a strong income return and cash flow and, with this in mind, the Board intends to restore the dividend to at least its original level as soon as it is prudent and responsible to do so.

At 30 June 2023, the portfolio comprised 55 tenants. The weighted average unexpired lease term was 4 years and 9 months to break and 5 years and 8 months to expiry. The ongoing asset management initiatives generally relate to voids, future lease expiries, breaks, rent reviews and capital expenditure. During the period, one lease renewal was completed (as detailed in the Property Highlights section). 

The portfolio valuation has marginally increased by £80,000 or 0.08% to £106.13 million as at 30 June 2023 compared to the property value at 31 December 2023 of £106.05 million. The current valuation reflects a net initial yield of 7.73% (31 December 2022: 7.75%).

M7 Real Estate Ltd ("the Asset Manager"), continues to consider asset management initiatives and transactions initiated on an opportunistic basis to further enhance income and capital growth; further information can be found in the Asset Manager's report below.  

Financing

At 31 December 2022, the Group had a senior loan facility of £54.34 million and a mezzanine loan note of £19.70 million, totalling £74.04 million. The senior loan was repayable on 17 August 2023, while the loan note was repayable on 31 July 2023. As discussed in the post balance sheet highlight on page 3, the Group has completed the refinancing its senior loan and has extended the term of the mezzanine loan note to 31 July 2026.

There continues to be significant headroom in the senior loan facility debt covenants. As at 30 June 2023, the senior debt loan to value A ratio was 49.09% (cash trap is greater than 65% and default level is greater than 70% and based on lender's valuation) and the interest cover ratio was 280.55% (cash trap/default level is less than 225%). The Group has complied with the senior loan covenants to date.

Valuation

The Group's properties are independently valued on a quarterly basis by Avison Young which has recognised relevant professional qualifications and recent experience on the type and location of the Group's investment properties. The Board has ultimate responsibility for the valuations (this being a key area considered by the Audit Committee and the Board).

Dividends & Earnings

One interim dividend of 1.00p was declared and paid in respect of the first half of 2023. This was declared on 9 May 2023 and relates to quarter ended 31 March 2023. Given the current economic uncertainty, increases in inflation and interest rates and with the refinancing of the senior loan, the Directors have not recommended payment of a dividend for quarter ended 30 June 2023. The Board will continue to review the Company's capacity to pay future dividends for the remainder of 2023 and into 2024, which will be largely dependent on the speed with which interest rates settle at a sustainable level.

Corporate Governance

The Board members have substantial experience in real estate including private equity, legal and transactional sectors.  The Board is committed to maintaining the highest standards of corporate governance and reporting to protect investments and investors.

The Board has considered the principles and recommendations of the 2019 AIC Code of Corporate Governance (the "AIC Code"), which addresses the principles and provisions set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company as an investment company.

The Board meets at least on a quarterly basis and has established the Audit Committee which also meets at least three times per year. Given the size of the Board, the Board has not established Nomination and Remuneration committees. A full report against the AIC code is provided in the annual report.

Shareholder Engagement

As part of its investor engagement strategy over the coming calendar year, the Board will continue to engage with shareholders and communicate all material news flow including financial results, dividend announcements, Environmental, Social and Governance undertakings, and other key initiatives that will drive long-term value to shareholders.

The AIFM and the Asset Manager

M7 Real Estate Financial Services Ltd (the "AIFM") provide day-to-day discretionary portfolio and risk management of the Company's investments subject to the AIFM Agreement, the Company's Articles of Association, the prospectus and to the overall supervision of the Directors.

M7 Real Estate Ltd (the "Asset Manager") provide day-to-day asset management and advisory services to the Group. More information about the Asset Manager and its strategy can be read at the Group's website (https://www.rewreit.co.uk/).

Future Growth and Outlook

The results outlined demonstrate a resilient portfolio with high occupancy and strong rent collection helping drive an underlying profit. The Group's strategy and ongoing focus remains unchanged, focussing on active asset management to grow income and value, as well as risk mitigation and opportunistic transactions.

Despite the current economic uncertainty and significant increases in both inflation and interest rates, the Group is well positioned to focus on asset management initiatives supported by a strong balance sheet.

The Group will continue to closely monitor the market and economic conditions and respond accordingly to any changes.

I would like to thank our shareholders, my fellow Directors, the Asset Manager and our other advisers and service providers who have provided professional support and services to the Group during the period.

James Max Chairman

29 September 2023

^A Considered to be an Alternative Performance Measure. Further details can be found at the end of this section and full calculations are set out following the notes to the condensed consolidated financial statements.

Key Performance Indicators ('KPIs')

KPI AND DEFINITION	RELEVANCE TO STRATEGY	PERFORMANCE
1.       Net Initial Yield ('NIY') Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with purchasers' costs estimated by the Group's External Valuers.	The NIY is an indicator of the ability of the Company to meet its target dividend after adjusting for the impacts of leverage and deducting operating costs.	7.73% at 30 June 2023 (31 December 2022: 7.75%)
2.       Weighted Average Unexpired Lease Term ('WAULT') to break and expiry The average lease term remaining to expiry across the portfolio, weighted by contracted rent.	The WAULT is a key measure of the quality of the portfolio. Long leases underpin the security of our future income.	4 years and 9 months to break and 5 years and 8 months to expiry at 30 June 2023 (30 June 2022: 5 years and 1 month to break and 5 years and 8 months to expiry)
3.       Net Asset Value ('NAV') per share NAV is the value of an entity's assets minus the value of its liabilities.	Provides stakeholders with the most relevant information on the fair value of the assets and liabilities of the Group.	£32.06 million/ 84.01p at 30 June 2023 (31 December 2022: £33.31 million/ 87.28p)
4.       Dividend per share Dividends declared in relation to the period are in line with the stated dividend target as set out in the Admission Document at IPO. The Company targets a dividend of 8 pence per Ordinary Share per annum.	The Company seeks to deliver a sustainable income stream from its portfolio, which it distributes as dividends.	1.00p for the half year ended 30 June 2023 (30 June 2022: 4.15p)
5.       Adjusted EPS Adjusted EPS from core operational activities, as adjusted for non-cash items. A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. See Note 7 to the condensed consolidated financial statements.	This reflects the Company's ability to generate earnings from the portfolio which underpins dividends.	3.17p for the half year ended 30 June 2023 (30 June 2022: 3.18p)
6.       Leverage (Loan-to-Value) (covenant) The proportion of the Group's properties values that is funded by borrowings (both senior and mezzanine loan).	The Group utilises borrowings to enhance returns over the medium term.	49.09% at 30 June 2023 (31 December 2022: 49.09%)

 

Asset Manager's Report

Market Outlook

UK Economic Outlook

The UK economy grew by 0.2% month on month in April, against a decline of 0.3% in March. However, contrary to the negative GDP data, CPI inflation decreased to 8.7% for both April and May, compared to an anticipated 8.9%.

Overall, the GDP figures for 2022 saw growth of 4.1% leaving the UK's GDP 0.8% below pre-pandemic levels. The OECD's latest forecasts for GDP growth for 2023 is 0.3% whilst IMF forecasted 0.4% which is up on the initial negative forecasts made at the start of 2023 - however, these figures were published prior to the latest inflation and BoE rate hikes. Q2 2023 has seen inflation rates stabilizing overseas while they have continued to rise in the UK. This resulted in more action from the Bank of England who raised interest rates by 75 bps to 5.00% during the quarter, with a further increase to 5.25% in August.

Interest rate predictions have pushed out further, with the peak of 6.25% anticipated to come at the end of 2023 and potentially remain high for 2024. Furthermore, the BoE and IMF are predicting that if UK rates hit 5.75% by November, it would result in a year long recession thereafter.

PWC has produced forecasts for 2023 which show a 1.0% variance from the 'subdued growth' expectation of 0.1% growth to the 'prolonged damage' expectation of -0.9% GDP contraction. This same analysis by PWC also shows 'subdued growth' in 2024 of 1.0% and 'prolonged damage' of -0.4% for 2024.

Whilst current expectations of the UK economic outlook remain stagnant, most forecasts assume it will not endure a severe or long-term recessionary period. Capital Economics' long-term outlook aligns with a postponed moderate recession whilst inflation and interest rates return to the target 2.0% and c. 2.5% equilibrium respectively over the next decade.

The three main economic themes of 2023 remain as falling inflation (particularly having finally seen a fall in food price inflation from a peak of 19.1% in April 2023), peaking interest rates and market stabilization towards the new normal of 2.0% interest rates from 2026.

Investment Market Commentary

The UK commercial real estate market has continued to feel the effects of the downturn in the UK economy. The increase in interest rates, increasing inflation and Government intervention have all contributed to the reduction in investment activity over the past quarter whilst bank lending on commercial real estate has hit 6-year highs with a net lending position of £651m as at May 2023 according to Capital Economics.

Whilst this is growing, the 7.1% share of outstanding debt secured on commercial property is well below the 12% seen in the build-up to the GFC. This increase in lending could be reflective of an alignment of values between purchasers and sellers with an underlying confidence that capital values have stabilised.

Retail Investment Market

Retail capital values grew in May with the MSCI index rising by 0.16% m-on-m, up from 0.10% in April. As in previous months, the growth was entirely driven by retail warehouses (0.33%). Retail warehousing is now one of the most attractive asset classes for investment in 2023. Total returns or Q2 were 2.37%. Retail property investment stood at £6.6 billion in the year to April, compared to £6.9 billion in the year to March.

Investment volumes for the retail warehouse sector increased 31% in comparison to the end of 2022. Investment volumes totalled £659 million, which is above the 5-year quarterly average for this sub sector. UK Institutions made up the largest percentage of buyers.

Occupational Market

The following sector-specific commentary is provided by the Company's independent valuer, Avison Young.

The retail economy appears to have been given an arguably artificial boost with the numerous Bank Holidays which afforded those working typical 9-5 working patterns further opportunity for discretional spend.

Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), said: "May's three Bank Holidays gave retailers a needed boost as sales growth accelerated to 7.7%. This could be seen for books, and SPF cosmetics in particular, which improved due to the brighter weather at the end of the month and as people prepare for summer getaways. Nonetheless, households continue to feel the pinch from the high cost of living and are limiting their discretionary spending."

• ONS data referenced by the BRC confirms that:

- Retail sales volumes are estimated to have risen by 0.3% in May 2023, following a rise of 0.5% in April 2023 (unrevised from our previous publication).

- Non-store retailing sales volumes rose by 2.7% in May 2023 because of strong sales by online retailers selling outdoor-related goods and summer clothing; this was boosted by the warm weather in the second half of the month.

- Food stores sales volumes fell by 0.5% in May 2023, with some anecdotal evidence of increases spending on takeaways and fast food because of the extra Bank Holiday, however retailers also indicated that increased cost of living and food prices continued to affect sales volumes.

- Non-food stores sales volumes fell by 0.2% in May 2023, following a rise of 0.9% in April.

- Total non-food stores sales volumes (the total of department, clothing, household and other non-food stores) fell by 0.2% over the month.

Within non-food stores, the sub-sector other non-food stores fell 1.4% over the month because of falls in watches and jewellery stores (following strong growth in April 2023), and other retail sales of new goods, such as sales in art galleries. Clothing stores sales volumes fell by 0.4%, while department stores sales volumes rose by 0.6%. Household goods stores reported a monthly rise in sales volumes of 1.5% because of strong sales in DIY stores who reported that good weather boosted sales at the start of the summer period.

Whilst this may allow for some sectors, including DIY, to continue to perform well, the market remains turbulent with some retailers continuing to be unable to adapt to a post-pandemic economy. June 2023 has seen the launch of closing down sale commence at David's Bridal, the UK arm of an $1.3bn American bridalwear chain which collapsed triggering over 9,000 planning redundancies in North America.

Cath Kidston, the apparel retailer, was put into administration in late March 2023 by its private-equity owners Hilco Capital, with the IP but not the stores purchased by Next. Next have additionally purchased the IP of Made.com, Paperchase and Joules in the last 12 months, as well as running the UK businesses of Gap and Victoria's Secret. Next serves as an example of the large, established retailers with mass appeal surviving through tough market conditions and capitalising on opportunities presented by smaller brands who could not achieve the same.

National retailers currently pursuing store reconciliation processes include Marks and Spencer, Clintons, Boots Pharmacies and H&M, together with numerous high street banks including Halifax, TSB, Barclays and NatWest. As of August, Wilko fell into administration, following a brief period of hope for the business, the administrators have been unable to find a buyer for the Wilko brand and as such it will cease to trade. A number of parties have made offers to purchase prominent stores with Poundland understood to be taking 71 stores.

Portfolio Activity During the Period

The following asset management initiatives were undertaken during the year:

·      One lease renewal was agreed during the period;

·      Matalan Retail Ltd at Clyde Retail Park agreeing a new 10 year lease, 6 months rent free, with a contract rent of £216,613 p.a. (8.31% ahead of ERV, £200,000 p.a.).

·      Rent collection remains strong with an average of over 92% collected over the past four quarters, 94.06% in respect of the March 2023 and 92.49% in respect of June 2023. Occupancy remained high with 98.35% let at 30 June 2023 an increase from 98.21% as at 31 December 2022.

·      As at 30 June 2023, there were 55 tenants and the WAULT was 4 years and 9 months to breaks and 5 years and 8 months to expiry.

NAV Movements

			Half year ended 30 June 2023		Period ended 31 December 2022
			(unaudited)		(audited)
			Pence per share	£ million	Pence per share	£ million
NAV as at beginning of period			87.28	33.31	-	-
Shares issuance - net			-	-	98.89	37.74
Change in fair value of investment property			0.26	0.10	(12.84)	(4.90)
Income earned for the period			11.66	4.45	24.37	9.30
Finance costs for the period			(7.52)	(2.87)	(8.93)	(3.41)
Other expenses for the period			(4.67)	(1.78)	(7.99)	(3.05)
Dividends paid during the period*			(3.00)	(1.15)	(6.22)	(2.37)
NAV as at the end of the period			84.01	32.06	87.28	33.31

* 2.00p of the dividend per share paid during the half year ended 30 June 2023 relates to 2022 and 1.00p relates to 2023 (as described in Note 8).

 Valuation

At 30 June 2023 the Group owned 17 assets (31 December 2022: 17 assets). The 17 properties held for the period were valued at £106.13 million at 30 June 2023 (31 December 2022: £106.05 million).

Asset Summary at 30 June 2023

Asset	Area (sq ft)	Contracted Rent (£m)	Valuation (£m)	Valuation (%)	NIY (%)	WAULT (years)	ERV (£m)	Vacancy (%)
Baildon Bridge Retail Park, Shipley	37,175	382,006	4.38	4.12%	7.24%	3.53	365,322	-
Mitre Retail Park, Wolverhampton	46,445	357,102	4.27	4.03%	7.89%	6.40	359,998	-
Wilko & Euro Car Park, Castleford	39,568	478,582	4.00	3.77%	11.70%	4.60	430,000	-
70 Carron Road, Falkirk	45,542	422,000	4.71	4.44%	8.40%	6.29	409,878	-
Clyde Retail Park, Glasgow	148,845	1,484,816	19.79	18.65%	5.43%	5.27	1,637,460	7.32
Festival Leisure Park, Stoke on Trent	122,857	1,122,975	12.06	11.36%	8.73%	10.44	1,096,496	-
Greyfriars Place Retail Park, Stafford	40,480	396,884	5.25	4.94%	6.42%	7.16	421,070	-
Haydn Road, Nottingham	42,163	422,428	4.83	4.55%	8.20%	4.82	352,450	-
Moor Allerton District Centre, Leeds	34,848	430,002	4.85	4.57%	8.32%	6.24	414,360	4.74
Mount Street Retail Park, Wrexham	54,902	539,628	6.40	6.03%	7.41%	3.15	559,253	-
Parkfield Road Retail Park, Stockton on Tees	48,599	412,535	4.52	4.26%	8.56%	4.84	410,500	-
Sands Industrial Estate, Gateshead	26,641	171,828	1.90	1.79%	8.53%	0.98	173,000	-
Saltney Retail Park, Chester	48,200	340,000	4.25	4.00%	7.46%	8.11	340,000	-
Sandy Lane Retail Park, Worksop	51,991	716,760	10.02	9.45%	6.70%	4.21	674,741	-
South Baileygate Retail Park, Pontefract	68,106	641,000	7.10	6.69%	6.29%	3.33	547,972	-
Tower Retail Park, Lowestoft	33,770	383,500	5.20	4.90%	6.92%	9.19	383,500	-
Wickes, Scunthorpe	20,792	202,000	2.60	2.45%	7.30%	4.40	181,895	-
Total	910,924	8,904,046	106.13	100.00%	7.73%	5.82	8,757,895	1.65

Top Five Tenants

Tenant	Property	Annual Contracted Rental Income (£)	% of Portfolio Total Contracted Rental Income
Matalan Retail Ltd	Multiple	1,279,757	14.37%
Go Outdoors Retail Limited	Multiple	754,648	8.48%
Odeon Cinemas Ltd	Festival Leisure Park	740,000	8.31%
B&M Retail Ltd	Multiple	498,000	5.59%
B&Q Ltd	Sandy Lane Retail Park	463,058	5.20%

The Group's top five tenants, listed above, represent 41.95% of the total contracted rental income of the portfolio.

Lease Expiry Portfolio - To the earlier of break of expiry

Year	Rent pa (£)	Cumulative (%)
Vacant	193,376	2%
Holdover	265,000	3%
2023	131,000	1%
2024	171,828	2%
2025	615,033	7%
2026	1,397,758	16%
2027	6,323,426	71%
2028+	193,376	2%

M7 Real Estate Ltd

29 September 2023

 

 

Directors' Responsibility Statement

This half-yearly financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority.

The Directors confirm that to the best of their knowledge these condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting and that the interim management report includes a fair review of the information required by DTR 4.2.7 and 4.2.8, namely:

• an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 • material related-party transactions in the first six months.

A full list of the Directors of the Company can be found in the Company Information page at the rear of this report.

This report was approved by the board of directors on 29 September 2023 and signed on its behalf by:

James Max

Chairman

29 September 2023

Condensed Consolidated Statement of Comprehensive Income
For the half year ended 30 June 2023
	Notes	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000

Income
Rental and other income	3	4,454		4,758
Property operating expense	4	(997)		(476)
Net rental and other income		3,457		4,282

Other operating expenses	4	(666)		(983)
Operating profit before fair value change		2,791		3,299

Change in fair value of investment properties	9	98		3,210
Operating profit		2,889		6,509

Finance expense - net	5	(2,873)		(1,416)
Profit before tax		16		5,093

Taxation (charge) / gain	6	(118)		308
(Loss)/ profit and total comprehensive (loss)/ income attributable to shareholders		(102)		5,401

(Loss)/ earnings per share (basic and diluted)

7

(0.27p)

14.15p

Adjusted EPS (basic and diluted)

7

3.17p

3.18p

All items in the above statement are derived from continuing operations.

The accompanying notes form part of these condensed consolidated financial statements.

Condensed Consolidated Statement of Financial Position
As at 30 June 2023
	Notes	As at 30 June 2023 (unaudited) £'000		Period ended 31 December 2022 (audited) £'000
Assets
Non-Current Assets
Investment properties	9	106,125			106,045
Current Assets
Receivables and prepayments	10	1,542			2,658
Cash and cash equivalents		2,441			2,890
		3,983			5,548
Total Assets		110,108			111,593
Current Liabilities
Payables and accrued expenses	11	(4,046)			(4,408)
Interest bearing loans and borrowings	12	(74,001)			(73,877)
Total Liabilities		(78,047)			(78,285)
Net Assets		32,061			33,308
Equity
Share capital		382			382
Share issue costs		(422)			(422)
Share premium		37,780			37,780
Deficit		(5,679)			(4,432)
Total equity		32,061			33,308
Net Asset Value per share (basic and diluted)	7	84.01p			87.28p

The accompanying notes form an integral part of these condensed consolidated financial statements.

The financial statements were approved by the Board of Directors on 29 September 2023 and were signed on its behalf by:

James Max

Chairman

Company number: 13671085

Condensed Consolidated Statement of Changes in Equity

For the half year ended 30 June 2023

	Notes	Share Capital £'000	Share issue costs £'000	Share Premium £'000	Deficit £'000		Total equity £'000
For the period ended 30 June 2023
(unaudited)
Balance as at 1 January 2023		382	(422)	37,780	(4,432)		33,308
Share issued		-	-	-	-		-
Share premium		-	-	-	-		-
Total comprehensive loss		-	-	-	(102)		(102)
Dividends paid	8	-	-	-	(1,145)		(1,145)
Balance as at 30 June 2023		382	(422)	37,780	(5,679)		32,061

	Notes	Share Capital £'000	Share issue costs £'000	Share Premium £'000	Retained earnings £'000	Total equity £'000
For the period ended 30 June 2022
(unaudited)
Balance as at 11 October 2021		-	-	-	-	-
Share issued		382	-	-	-	382
Share issue costs		-	(422)	-	-	(422)
Share premium		-	-	37,780	-	37,780
Total comprehensive income		-	-	-	5,401	5,401
Dividends paid	8	-	-	-	(820)	(820)
Balance as at 30 June 2022		382	(422)	37,780	4,581	42,321

The accompanying notes form an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statement of Cash Flows

For the half year ended 30 June 2023

			Notes	Half year ended 30 June 2023 (unaudited)		Period from 11 October 2021 to 30 June 2022 (unaudited)
				£'000		£'000
Cash flows from operating activities
(Loss)/ profit before tax				(102)		5,093
Adjustment for:
Finance expenses			5	2,873		1,416
Change in fair value of investment properties			9	(98)		(3,210)
Lease incentives (net of amortisation)			9	18		(255)
Operating results before working capital changes				2,691		3,044
Corporation tax paid				(141)		-
Change in working capital
Decrease in other receivables and prepayments				373		1,011
Decrease in other payables and accrued expenses				(191)		(385)
Net cash generated from operating activities				2,732		3,670
Cash flows from investing activities
Acquisition of net assets of the subsidiaries				-		(38,162)
Net cash used in investing activities				-		(38,162)
Cash flows from financing activities
Proceeds from issuance of share capital				-		38,162
Proceeds from issuance of preference shares				-		50
Finance costs paid				(2,036)		(1,710)
Dividends paid			8	(1,145)		(681)
Share issue costs				-		(552)
Net cash (used) / generated from financing activities				(3,181)		35,269
Net (decrease)/ increase in cash and cash equivalents				(449)		777
Cash and cash equivalents at start of period Cash acquired through subsidiaries				2,890 -		- 2,799
Cash and cash equivalents at end of period				2,441		3,576

The accompanying notes form an integral part of the condensed consolidated financial statements.

Notes to the Condensed Consolidated Financial Statements

For the half year ended 30 June 2023

1.  Corporate Information
The Company is a public limited company which was incorporated on 11 October 2021 and is domiciled in the UK and registered in England and Wales. The registered office of the Company is C/O Alter Domus (UK) Limited, 10th Floor, 30 Mary Axe, London, United Kingdom, EC3A 8BF. The principal activity of the Group is to provide its shareholders with an attractive level of income together with the potential for capital growth by investing in the property portfolio. The Company's Ordinary shares were admitted on the Wholesale Market of International Property Securities Exchange ("IPSX") on 21 December 2021.
2. Accounting policies
	2.1		Basis of preparation
			These condensed consolidated financial statements (the "financial statements") for the half year ended 30 June 2023 have been prepared in accordance with International Accounting Standard ('IAS') 34 'Interim Financial Reporting'. These financial statements do not include all the information required for annual financial statements and should be read in conjunction with the Group's last annual consolidated financial statements for the period ended 31 December 2022 (the "Audited Annual Financial Report"). The Audited Annual Financial Report are available at www.rewreit.co.uk.
			These financial statements have been prepared under the historical cost convention, except for investment properties and derivatives which have been measured at fair value. These financial statements are presented in Sterling, which is the Group's presentational and functional currency, and all values are rounded to the nearest thousand pounds (£'000), except where otherwise shown. The financial information in this report does not constitute statutory accounts within the meaning of sections 434-436 of the Companies Act 2006 and has not been audited nor reviewed by the Company's auditor. The financial information for the period ended 31 December 2022 has been extracted from the published accounts that have been delivered to the Registrar of Companies, and the report of the auditor was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
		2.2	New standards, amendments and interpretations
				(a) New and amended standards adopted by the Company The Company has applied the following new standards and amendments in these financial statements: •   Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) (effective 1 January 2022) •   Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022) •   Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16) (effective 1 January 2022) •   Reference to the Conceptual Framework (Amendments to IFRS 3) (effective 1 January 2022) The new standards and amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. Forthcoming requirements The following are new standards, interpretations and amendments, which are not yet effective, and have not been early adopted in this financial information, that will or may have an effect on the Group's future financial statements: •   Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) (effective 1 January 2023) •   IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts (effective 1 January 2023) •   Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) (effective 1 January 2023) •   Definition of Accounting Estimates (Amendments to IAS 8) (effective 1 January 2023) •   Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendments to IFRS 17) (effective 1 January 2023) •   Classification of liabilities as current or non-current (Amendments to IAS 1) (effective 1 January 2024) •   Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) (effective 1 January 2024) •   Non-current Liabilities with Covenants (Amendments to IAS 1) (effective 1 January 2024) •   Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) (Optional) These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
		2.3			Segmental information
					Each property held by the Group is reported to the chief operating decision maker. In the case of the Group, the chief operating decision maker is considered to be the Board of Directors. The review process for segmental information includes the monitoring of key performance indicators applicable across all properties. These key performance indicators include Net Asset Value, Earnings per Share and valuation of properties. All asset cost and rental allocations are reported by property too. The internal financial reports received by the Directors cover the Group and all its properties and do not differ from amounts reported in the financial statements. The Directors have considered that each property has similar economic characteristics and have therefore aggregated the portfolio into one reportable segment under the provisions of IFRS 8.
		2.4			Going concern
					The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the earlier in this report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and the accompanying notes. The financial statements also include the Group's objectives, policies and processes for managing its capital; its financial risk management objective; and its exposures to market price risk, real estate risk, credit risk and liquidity risk. The Asset Manager on behalf of the Directors has projected the Group's cash flows for the period up to 30 September 2024 and beyond, challenging and sensitising inputs and assumptions to ensure that the cash forecast reflects a realistic outcome given the uncertainties associated with the current economic environment. The scenarios applied were designed to be severe but plausible, and to take account of the availability of mitigating actions that could be taken to avoid or reduce the impact or probability of the underlying risks. The Directors have also considered the continuous impact of the global pandemic, which resulted in unprecedented risks and significant levels of volatility over the past two years. These risks have reduced significantly over the course of 2022 and 2023. The Group's senior debt of £54.34 million matured in August 2023. As disclosed in note 16, the Group has successfully completed the refinancing of the senior debt. The Group has reported full compliance with its loan covenants to date. Based on cash flow projections, the Directors expect the Group to continue to remain compliant. The headroom of the loan to value covenant is significant and any reduction in property values that would cause a breach would be significantly more than any reduction currently envisaged. The Directors do not forecast a breach of loan covenants over the next 12 months. Compliance on the new loan will be reviewed once the refinancing has completed. Considering the Group's forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have continued to adopt the going concern basis of accounting in preparing the financial statements.
		2.5			Summary of significant accounting policies
					The accounting policies and methods of computation and presentation adopted in the preparation of the interim financial statements are consistent with those applied in the Audited Annual Financial Report.

3. Rental and other income

	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000
Gross rental income	4,436		4,561
Spreading of lease incentives	(319)		(69)
Total	4,117		4,492
Service charges and direct recharges (note 4)	239		266
Dilapidations income	98		-
Total rental and other income	4,454		4,758

All rental, service charges and direct recharges and other income are derived from the United Kingdom.

4. Expenses

	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000
Property operating expenses	232		204
Impairment of receivables	329		6
Write-off of receivables	197		-
Service charges and direct recharges (see note 3)	239		266
Property operating expenses	997		476
Asset management fee	232		345
Fund costs*	131		277
Professional fees*	106		162
Fund administration*	81		94
Director's remuneration (note 5)*	55		44
AIFM fee	26		32
Auditor remuneration	35		26
Other costs*	-		3
Other operating expenses	666		983
Total operating expenses	1,663		1,459
Total operating expenses (excluding service charges, direct and insurance recharges)	1,424		1,193

*Amounts for the period ended 30 June 2022 were amended to align the presentation of certain balances in the year    end audited accounts.

Haysmacintyre LLP is the Group's auditor. They have not provided any non-audit services to the Group.

5. Finance expenses - net

	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000
Interest payable on secured bank loan (note 12)	1,961		940
Interest payable on mezzanine debt (note 12)	831		875
Change in fair value of financial instruments (note 10)	743		(532)
Amortisation of loan arrangement fee (note 12)	124		131
Interest received from financial instrument	(778)		-
Other finance costs - net	(8)		-
Total	2,873		1,416

6. Taxation

	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000
Tax charge comprises:
Analysis of tax charge in the period
Profit before tax	16		5,093
Theoretical tax at UK corporation tax standard rate of 25% (2022: 19%)	4		968
Effects of tax-exempt items under REIT regime	114		(1,276)
Taxation charge /(gain)	118		(308)

The taxation charge in the period relates to a provision for breaching the REIT interest coverage ratio

The resulting taxation gain in the prior period represents the reversal of an over accrual of United Kingdom Corporation Tax recorded prior to Admission and entering into the United Kingdom Real Estate Investment Trust tax regime, at which point any gains or losses arising from property business are exempt from UK Corporation tax.

Factors that may affect future tax charges

Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

7. Earnings per share ("EPS") and NAV per share

	Half year ended 30 June 2023 (unaudited) £'000		Period from 11 October 2021 to 30 June 2022 (unaudited) £'000
(Loss) / EPS:
Total comprehensive (loss) / income (£'000)	(102)		5,401
Weighted average number of ordinary shares (number)	38,161,963		38,161,963
(Loss) / EPS (basic and diluted) (pence)	(0.27p)		14.15p
Adjusted EPS*:
Total comprehensive (loss) / income (£'000)	(102)		5,401
Adjustments:
Change in fair value of investment properties (£'000)	(98)		(3,210)
Change in fair value of financial instruments (£'000)	743		(532)
Amortisation of loan arrangement fee (£'000)	124		131
Provision for impairment of trade receivables (£'000)	329		6
Write-off of receivables (£'000)	197		-
Rental income recognised in respect of rent free periods (£'000)	18		(274)
Reversal of overprovision of tax pre listing (£'000)	-		(308)
Adjusted earnings (basic and diluted) (£'000)	1,211		1,214
Adjusted EPS (basic and diluted) (pence)	3.17p		3.18p

* Adjusted EPS is a measure used by the Board to assess the level of the Group's dividend payments. This metric adjusts earnings for non-cash items in arriving at an Adjusted EPS as supported by cash flows.

* (Loss) / Earnings per share is calculated by dividing (loss)/profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period.

NAV per share:	30 June 2023 (unaudited) £'000		31 December 2022  (audited) £'000
Net assets (£'000)	32,061		33,308
Ordinary shares (number)	38,161,963		38,161,963
NAV per share (pence)	84.01p		87.28p

8. Dividends paid

	Quarter Ended		Rate		Half year ended 30 June 2023 (unaudited)		Period from 11 October 2021 to 30 June 2022 (unaudited)
					£'000		£'000
Dividends in respect of period ended 30 June 2022
1st dividend	31-Mar-22		2.15p		-		820
Dividends in respect of period ended 31 December 2022
4th dividend	31-Dec-22		2.00p		763		-
Dividends in respect of period ended 30 June 2023
1st dividend	31-Mar-23		1.00p		382		-
Total dividends paid					1,145		820
2nd dividend	30-Jun-22		2.00p		-		763
4th dividend	31-Dec-22		2.00p		(763)		-
Total dividends payable in respect of the period					382		1,583
Total dividends payable in respect of the period per share					1.00p		4.15p

Dividends declared after the period are not included in the financial statements as a liability.

9. Investment properties

	30 June 2023 (unaudited)		31 December 2022 (audited)
	£'000		£'000
At the beginning of the period	106,045		-
Acquisition of properties through subsidiaries	-		110,700
Change in fair value of investment properties	80		(4,655)
Valuation provided by Avison Young	106,125		106,045
Change in fair value of investment properties
Change in fair value before adjustments for lease incentives	80		(4,655)
Adjustment to spreading of tenant incentives	18		240
	98		(4,895)

Valuation of investment properties

Valuation of investment properties is performed by Avison Young, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued. The valuation of the Group's investment properties at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).

10. Receivables and prepayments

	30 June 2023 (unaudited)		31 December 2022 (audited)
	£'000		£'000
Trade receivable	1,520		1,424
Less: Provision for impairment of trade receivables	(858)		(528)
Fair value of financial instruments	213		956
Tenant deposit (note 11)	86		85
Other receivables	581		721
Total	1,542		2,658

Other receivables include an amount of £0.51 million (£0.61 million) which represents cash held by the property manager relating to service charge monies and rent collected from tenants.

Fair value of financial instruments

The Group does not apply hedge accounting in accordance with IFRS 9. Nevertheless, interest rate caps are part of economic hedge relationships. Interest rate caps are used to fix the interest payments of variable debt instruments (see Note 12). The notional amount of the interest rate cap is £46.67 million with a cap rate of 1.2% with a term ending 17 August 2023. The Group will review the hedging relationship with the refinancing of its senior loan (see note 16).

The valuation of the derivative instrument is performed on a quarterly basis by an external specialist. Significant inputs into models are market observable and are included within Level 2 of the fair value hierarchy. The fair value loss on financial instruments amounts to £742,749 (period ended 30 June 2022: gain of £532,047). The Group earned interest from financial instruments of £777,534 during the period (30 June 2022: £Nil), £278,305 of which is outstanding (31 December 2022: £Nil) (note 12).

The aged debtor analysis of receivables which are past due but not impaired is as follows:

					30 June 2023		31 December 2022
					(unaudited)		(audited)
					£'000		£'000
Less than three months due					600		522
Between three and six months due					17		111
Between six and twelve months due					45		263
					662		896

11. Payables and accrued expenses

	30 June 2023 (unaudited) £'000		31 December 2022 (audited) £'000
Deferred income	1,830		2,090
Bank interest payable (note 12)	797		827
Accruals	375		398
VAT	499		416
Trade creditors	341		333
Corporation tax*	118		259
Tenant deposit liability (note 10)	86		85
	4,046		4,408

*Relates to a tax provision as the result of default on the REIT Interest Coverage Ratio.

12. Interest bearing loans and borrowings

	30 June 2023 (unaudited) £'000		31 December 2022 (audited) £'000
Facility drawn at the beginning of the period	74,042		-
Secured bank loans and loan notes utilised through acquisition of subsidiaries	-		74,042
Less: unamortised loan issue cost incurred	(165)		(419)
Plus: amortised loan issue costs	124		254
At end period	74,001		73,877
Repayable between 1 and 2 years	74,042		74,042
Repayable between 2 and 5 years	-		-
Repayable in over 5 years	-		-
Total	74,042		74,042

At 30 June 2023, the Group had senior loan facility of £54,342,830 and a mezzanine loan note balance of £19,699,563 totalling £74,042,393. The loans are measured at level 2 in the fair value measurement hierarchy.

Secured bank loan

The Group entered into a loan facility agreement with Aviva Investors Alternative Income Solutions Investment S.A. and Aviva Investors Multi-Asset Alternative Income S.A and is secured against the Group's property portfolio. The senior loan matured on 17 August 2023. The Group was able to extend the term to 29 September 2023.

Interest is payable quarterly at the current SONIA rate plus a margin of 2.80%. During the period, a total of £1,961,509 (net of £278,305 interest receivables from the interest cap) of interest was incurred (30 June 2022: £939,622), £516,982 of which was outstanding at 30 June 2023 (31 December 2022: £547,199).

In order to hedge against the risk of interest rate fluctuations the Group has entered into an interest rate cap agreement (Note 10).

On 26 September 2023, the Group entered into a facility agreement (the "new facility") with Coutts & Co. Please refer to note 16.

Mezzanine loan note

Mezzanine loan note relates to an external loan from Auskerry Finco Limited with a facility limit of £50,000,000 for which 8.5% interest is payable quarterly in arrears. As at 30 June 2023, £19,699,563 was utilised. During the period, a total of £830,950 of interest was incurred (30 June 2022: £876,226), £279,842 of which was outstanding at 30 June 2023 (31 December 2022: £279,842).

The loan had a maturity date of 31 July 2023 and has been extended to July 2026. Please refer to note 16 for post balance sheet events relating to the extension.

13. Commitments

The Group has entered into commercial property leases on its investment property portfolio. Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2023 as follows:

	30 June 2023 (unaudited) £'000		30 June 2022 (unaudited) £'000
Less than one year	8,372		8,387
One to two years	8,144		7,955
Two to three years	7,940		7,266
Three to four years	7,254		6,817
Four to five years	6,071		6,096
Five to ten years	11,304		13,398
Total	49,085		49,919

During the period ended 30 June 2023 there were no material contingent rents recognised as income.

14. Investments in subsidiaries

The Company has three wholly owned subsidiaries as disclosed below:

Name and company number		Country of registration and incorporation		Date of incorporation		Principal activity		Ordinary Shares held
M7 Real Estate Investment Partner VIII Master Holdco Limited (Company number 126719)		Jersey		25 June 2018		Holding Company		38,161,961*
M7 Real Estate Investment Partner VIII Holdco Limited (Company number 126720)		Jersey		25 June 2018		Holding Company		38,161,961*
M7 Real Estate Investment Partner VIII Propco Limited (Company number 126721)		Jersey		25 June 2018		Real Estate Company		38,161,961

* Ordinary shares of £1.00 each.

M7 Regional E-Warehouse REIT plc as at 30 June 2023 owns 100% controlling stake of M7 Real Estate Investment Partners VIII Master Holdco Limited.

M7 Real Estate Investment Partners VIII Master Holdco Limited holds 100% controlling stake of M7 Real Estate Investment Partners VIII Holdco Limited.

In April 2023, the entire share capital of M7 Real Estate Investment Partner VIII Propco Limited was transferred from M7 Real Estate Investment Partner VIII Holdco Limited to the Company.

Please refer to note 16 for post balance sheet events relating to the subsidiaries.

15. Transactions with related parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Directors

Directors of the Group are related parties. Directors' remuneration is disclosed in note 4.

Asset Manager

M7 Real Estate Ltd was appointed as Asset Manager on 20 December 2021. The Asset Management and Investment Advisory fee is calculated at a rate equivalent of 7.00% per annum of the actual rent collected, payable quarterly in arrears and apportioned 90% as the Asset Management fee and 10% as the Investment Advisory fee. During the period, the Group incurred Asset Management fees of £232,254 (30 June 2022: £344,895), of which £116,033 was outstanding as at 30 June 2023 (31 December 2022: £153,630).

Alternative Investment Fund Manager

M7 Real Estate Financial Services Ltd was appointed as Alternative Investment Fund Manager on 20 December 2021. The Asset Management and Investment Advisory fee is calculated at a rate equivalent of 7% per annum of the actual rent collected, payable quarterly in arrears and apportioned 90% as the Asset Management fee and 10% as the Investment Advisory fee. During the period, the Group incurred Investment Advisory fees of £25,806 (30 June 2022: £32,308), of which £12,893 was outstanding as at 30 June 2023 (31 December 2022: £17,070).

16. Events after reporting date

Debt refinancing

On 26 September 2023, the Group entered into a facility agreement (the "new facility") with Coutts & Co. The new facility was utilised to refinance all amounts owed under the current loan facility with Aviva Investors. The new facility is for a principal amount of £55.40 million or 56.28% LTV and with maturity date of 5 years. Interest is payable quarterly at current SONIA rate plus a margin of 2.40%. Amortisation payments will be made over 18 months to bring the LTV to 55%. No hedging was put into place, but the Group will continue to review the position.

On 26 July 2023, the Group agreed an extension on the term of the Mezzanine Loan Note. The repayment date has been extended to 31 July 2026.

Liquidation of subsidiary entities

On 14 July 2023 M7 Real Estate Investment Partner VIII Holdco Limited was liquidated. On 30 July 2023, M7 Real Estate Investment Partner VIII Master Holdco Limited was liquidated.

IPSX winding down its operation

On 4 September 2023, the Directors were notified by the IPSX, the market on which the shares in the Company are quoted and traded, that it has commenced the process of winding down operations. IPSX states that its secondary market operations will continue through the wind-down period of 90 days from 5 September 2023 and the buying and selling of shares in the Company may continue as normal. The Board is looking at various options available to the Company. The Board, in consultation with its Asset and Investment Manager and its Lead Adviser, is considering alternative platforms for listing and trading its shares or delisting.

Alternative Performance Measure (APM) Calculations

APMs are numerical measures of the Group's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Group's applicable financial framework is IFRS. The Directors assess the Group's performance against a range of criteria which are reviewed as particularly relevant for a closed-end REIT.

Dividend Cover

The ratio of Group's Adjusted EPS divided by the Group's dividends payable for the relevant period.

				30 June 2023 (unaudited)		30 June 2022 (unaudited)
Adjusted EPS		a		3.17p		3.18p
Dividend per share		b		1.00p		4.15p
Dividend cover		(a/b)		317.00%		76.63%

Loan to GAV

Loan to GAV measures the value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the Group's property portfolio (as provided by the valuer) and the fair value of other assets.

				30 June 2023 (unaudited)					31 December 2022 (audited)
Borrowings (£'000)		a			74,042			74,042
Total assets (£'000)		b			110,108			111,593
Loan to Value		(a/b)			67.25%			66.35%

Loan to Value (Covenant)

Loan to Value measures the value of loans and borrowings utilised expressed as a percentage of the combined valuation of the property portfolio (as provided by the bank).

				30 June 2023 (unaudited)		31 December 2022 (audited)
Borrowings (£'000)		a		54,343		54,343
Total property value per external lender (£'000)		b		110,700		110,700
Loan to Value		(a/b)		49.09%		49.09%

Ongoing Charges

The ongoing charges ratio is the total for all operating costs expected to be regularly incurred expressed as a percentage of the average quarterly NAVs of the Group for the financial period. 

			30 June 2023 (unaudited)		30 June 2022 (unaudited)
Other operating expenses for the period (£'000)	a		666		983
Ongoing charges- annualised where required (£'000)	b		1,307*		1,344*
Average net assets (£'000)	c		32,061		42,191
Ongoing charges ratio	(b/c)		4.08%		3.18%

*Nonrecurring costs of £12,500 (30 June 2022: £0.3 million) have been excluded in the annualised amount for 30 June 2023.

   Share Register Enquiries

The register for the Ordinary Shares is maintained by Equiniti Limited. In the event of queries regarding your holding, please contact the Registrar on:

Aspect House, Spencer Road, Lancing, West Sussex, United Kingdom, BN99 6DA

Helpline: [phone]
Lines are open Monday - Friday from 8.30 a.m. - 5.30 p.m. (excluding bank and public holidays in England and Wales)

Website www.shareview.co.uk

You can check your shareholding and find practical help on transferring shares at the website shown above.

Share Information

Ordinary £1 shares      38,161,963

SEDOL Number          BLN7H03

ISIN Number               GB00BLN7H037

Ticker/TIDM                REW

Share Prices

The Company's Ordinary Shares are traded on Wholesale Market of IPSX.

Frequency of NAV publication

The Group's NAV is released to the IPSX on a quarterly basis and is published on the Company's website www.rewreit.co.uk

Interim Reports

Copies of the Half-Yearly Reports will be available from the Group's website.

Financial Calendar 2023

30 June 2023              Half year end

29 September 2023     Announcement of half year results

31 December 2023      Year end

Company Website

https://www.rewreit.co.uk/

Registered Office

C/O Alter Domus (UK) Limited

10^th Floor

30 St Mary Axe

London EC3A 8BF

AIFM

M7 Real Estate Financial Services Ltd

10 Queen Street Place

London EC4R 1AG

Asset Manager

M7 Real Estate Ltd

3^rd Floor

The Monument Building

11 Monument Street

London

EC3R 8AF

Property Manager

Tandem Property Asset Management LLP

27 Bream Buildings

London

EC4A 1DZ

Depositary

Alter Domus Depositary Services (UK) Limited

10^th Floor

30 St Mary Axe

London EC3A 8BF

Company Secretary

Alter Domus (UK) Limited

10^th Floor

30 St Mary Axe

London EC3A 8BF

Registrar

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

Auditor

Haysmacintyre LLP

10 Queen Street Place

London EC4R 1AG

Valuer

Avison Young (UK) Limited

3 Brindley Place

Birmingham B1 2JB

Communications Consultant

FTI Consulting Management Limited

200 Aldersgate Street

London EC1A 4HD

Legal Adviser to the Company

Dickson Minto W.S.

Broadgate Tower

20 Primrose Street

London EC2A 2EW

Glossary

Alternative Investment Fund Manager or AIFM	M7 Real Estate Financial Services Ltd.
Annualised Gross Passing Rental Income	The annualised gross passing rent is the rent roll at the reporting date, taking account of any in-place rent free incentives or step rents annualised on a straight-line basis over the following 12-month period.
Company	M7 Regional E-Warehouse REIT plc.
Contracted rent	The annualised rent adjusting for the inclusion of rent subject to rent-free periods.
Earnings Per Share ('EPS')	Profit for the period attributable to equity shareholders divided by the weighted average number of Ordinary Shares in issue during the period.
Equivalent Yield	The internal rate of return of the cash flow from the property, assuming a rise to Estimated Rental Value at the next review or lease expiry. No future growth is allowed for.
Estimated Rental Value ('ERV')	The external valuer's opinion as to the open market rent which, on the date of the valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.
External Valuer	An independent external valuer of a property. The Group's external valuer is Avison Young (UK) Limited.
Fair value	The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion.
Fair value movement	An accounting adjustment to change the book value of an asset or liability to its fair value.
Gross Asset Value ('GAV')	The aggregate value of the total assets of the Group as determined in accordance with IFRS.
IASB	International Accounting Standards Board.
IFRS	International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board.
Asset Manager	M7 Real Estate Ltd.
IPO	The admission to trading on the International Property Securities Exchange of the share capital of the Company on 21 December 2021.
IPSX	International Property Securities Exchange.
Lease incentives	Incentives offered to occupiers to enter into a lease. Typically, this will be an initial rent-free period, or a cash contribution to fit-out. Under accounting rules, the value of the lease incentive is amortised through the Consolidated Statement of Comprehensive Income on a straight-line basis until the lease expiry.
Net Asset Value ('NAV')	Net Asset Value is the equity attributable to shareholders calculated under IFRS.
Net Asset Value per share	Equity shareholders' funds divided by the number of Ordinary Shares in issue.
Net equivalent yield	Calculated by the Group's External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears.
Net Initial Yield ('NIY')	The initial net rental income from a property at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase.
Net rental income	Rental income receivable in the period after payment of ground rents and net property outgoings.
Ordinary Shares	The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both income, in the form of dividends paid by the Company, and any capital growth.
Passing rent	The gross rent less in-place lease incentives.
pps	Pence per share.
REIT	A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria being met, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax.
Reversion	Increase in rent estimated by the Company's External Valuers, where the passing rent is below the ERV.
Share price	The value of a share at a point in time as quoted on a stock exchange. The Company's Ordinary Shares are quoted on the Wholesale Market on IPSX.
Weighted Average Unexpired Lease Term ('WAULT')	The average lease term remaining for first break, or expiry, across the portfolio weighted by contracted rental income (including rent-frees).

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[1] Loan to value (covenant) measures the value of loans and borrowings utilised (£54.34 million senior loan facility with Aviva Investors Alternative Income Solutions Investment S.A. and Aviva Investors Multi-Asset Alternative Income S.A) expressed as a percentage of the Group's investment properties (as provided by the lender).

[2] Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

 

END