Net Asset Value at 31 March 2020
6 May 2020
UK Commercial Property REIT Limited (“UKCM” or “the Company”)
LEI: 213800JN4FQ1A9G8EU25
Net Asset Value at 31 March 2020
STRONG BALANCE SHEET, LOW LEVERAGE AND DIVERSIFIED PORTFOLIO
Net Asset Value
- NAV per share of 86.3p (31 December 2019: 89.8p), resulting in a NAV total return of -2.9% in the period with continued low net gearing of 13.1%*.
- As previously disclosed like-for-like portfolio capital value decreased by 3.1% net of capital expenditure. This compares to the 2.7% fall in the MSCI monthly index over the period. The portfolio is now valued at £1.29 billion (31 Dec 2019: £1.38 billion) following the sales previously announced at Portsmouth Motor Park and Broadbridge Retail Park, Horsham, for a combined £47.9 million. The occupancy rate remained at 92% as at 31 March 2020 (31 December 2019: 92%).
Positive Investment Activity
- The Company has agreed to a forward funding of a new 221 bed student residential development in Exeter, adjacent to the main university campus, with completion expected for the start of the 2022/23 academic year. The land, with full planning permission, was acquired for £6.5 million with an additional capped funding commitment of c. £21.5 million.
- On 5 May 2020, the Company unconditionally exchanged contracts to sell Eldon House, its only office asset in the City of London, to CLI-Dartriver within one of its European private investment programs, for £40 million representing a 3.6% discount to its valuation as at 31 March 2020. The property was purchased for £27.8 million in 2015 and the sale follows the completion of an asset management plan which comprised a refurbishment of public spaces, as well as capturing reversionary potential by achieving full occupancy and regearing existing leases.
Continued asset management
- Agreed a new 10 year reversionary lease with Rhenus Logistics at Gallan Park, Cannock, from the expiry of their current lease in 2024. The lease contains fixed increases in 2024 and 2029. The current rent passing is £667,680 per annum and a lease incentive of £315,000 was paid to the tenant. The asset was acquired as part of a portfolio in 2019 and the lease restructure secured a 12% uplift in value which was reflected in the March valuation.
- A new occupier, Express Logistics Ltd, was secured at Unit D, Ventura Park, Radlett, under a new 10 year lease without incentive, at a new headline rent of £11psf per annum, 5% ahead of the ERV for the unit. The unit was let at a rent £177,914 per annum with a break option at year five.
- Settled two rent reviews at Dolphin Industrial Estate, Sunbury at a total rent of £388,500 per annum, 33% ahead of the previous passing rent and 6% ahead of ERV.
- Completed a dilapidations settlement with the previous tenant at XDock 377, Magna Park, Lutterworth with a cash receipt to the Fund of £3,400,000.
Financial Position and Dividend
- Robust, lowly geared balance sheet with significant financial resources available of £194 million after the sale above completes. This comprises uncommitted cash of £94 million after allowing for future capital commitments and the May 2020 dividend plus £100 million available from its low cost, revolving credit facility. Together, these resources provide the Company with significant liquidity and flexibility at both a corporate and portfolio level.
- As at close of business on 28 April 2020, the Company had received payments reflecting 70% of rents due for what can collectively be termed advance billing for the second quarter of the year; this comprises both old and new English quarter days (25 March and 1 April) and the Scottish quarter day (28 February) and includes those tenants who have paid, by agreement, on a monthly in advance basis.
The Board has taken the decision to maintain a quarterly dividend, due in May 2020, but at the reduced rate of 50% which equates to 0.46 pence per share, while clearly communicating its aspiration to use the strength of its balance sheet and its current financial resources to continue paying a dividend throughout this period of uncertainty. The Board will, however, continue to monitor closely the evolution of COVID-19, together with its impact on the economy, rent receipts and recurring earnings, while balancing the income requirements of its shareholders, and keep its future dividend policy under review. In particular the Board will have clear visibility of 2020 earnings at the time of the Q4 distribution and therefore this will provide the opportunity to review the total dividend distribution for 2020 and future dividend policy.
*Net gearing - Gross borrowing less cash divided by total assets (excluding cash) less current liabilities
Ken McCullagh, Chair of UKCM, commented: “During the first two months of the year and into March the Company continued to perform well and progress its strategy. However, like all businesses we have had to adapt to the extraordinary circumstances that we now find ourselves in. While it remains too early to predict what the medium, and indeed, longer term impacts of COVID-19 will be, what does give me confidence is the strong position in which UKCM entered the crisis. We have a high quality and well diversified portfolio which is weighted heavily towards the industrial and logistics sectors as well as low gearing and significant cash and capital resources. Our decision to maintain the dividend at a reduced level reflects this confidence and our recognition of the income needs of our shareholders, while at the same time demonstrates the Board’s desire to exercise prudence and ensure that UKCM emerges well placed from the pandemic.
Will Fulton, Lead Manager of UKCM at Aberdeen Standard Investments, said: “As the crisis has evolved our team has adapted well to the new working from home environment and has been working hard alongside our tenants to address the challenges caused by the government imposed restrictions. Across our diversified portfolio we have a number of tenants that are performing well, such as many of the occupiers in our large industrial and logistics portfolio, while others are finding life more difficult, meaning we have to balance the priorities of ensuring we maximise rent collection with maintaining a tenant base that can continue to generate income as we emerge from the crisis. We have also focused on progressing our investment strategy and were pleased to have agreed the sale of our Eldon House asset in the City of London.”
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited net asset value per share calculated under International Financial Reporting Standards ("IFRS") over the period from 1 January 2020 to 31 March 2020:
| UK Commercial Property REIT Limited |
Per Share (p) |
Attributable Assets (£m) | Comment |
| Net assets as at 31 December 2019 | 89.8 | 1,167.1 | |
| Unrealised decrease in valuation of property portfolio | (3.3) | (42.7) | Like for like decrease of 3.1% in property portfolio after CAPEX and dilapidation receipts. |
| Loss on Sale | (0.1) | (1.9) | Predominantly relates to the loss on sale of Portsmouth Motor Park |
| Income earned for the period | 1.3 | 17.4 | Equates to dividend cover of 92% in the period |
| Expenses for the period | (0.5) | (6.7) | |
| Dividend paid on 28 February 2020 | (0.9) | (12.0) | |
| Net assets as at 31 March 2020 | 86.3 | 1,121.2 |
The EPRA NAV per share is 86.3p (31 December 2019: 89.8p) with EPRA earnings per share for the quarter being 0.85p (31 December 2019: 1.07p).
Net Asset Value analysis as at 31 March 2020 (unaudited)
| £m | % of net assets | |
| Industrial | 669.2 | 59.7 |
| Retail | 251.6 | 22.4 |
| Offices | 222.0 | 19.8 |
| Alternatives | 148.1 | 13.2 |
| Total Property Portfolio | 1,290.9 | 115.1 |
| Adjustment for lease incentives | (21.0) | (1.8) |
| Fair value of Property Portfolio | 1,269.9 | 113.3 |
| Cash | 81.4 | 7.3 |
| Other Assets | 43.1 | 3.8 |
| Total Assets | 1,394.4 | 124.4 |
| Current liabilities | (25.7) | (2.3) |
| Non-current liabilities | (247.5) | (22.1) |
| Total Net Assets | 1,121.2 | 100.0 |
The NAV per share is based on the external valuation of the Company’s direct property portfolio which included a material uncertainty clause as at 31 March 2020. It includes all current period income and is calculated after the deduction of all dividends paid prior to 31 March 2020.
The NAV per share at 31 March 2020 is based on 1,299,412,465 shares of 25p each, being the total number of shares in issue at that time.
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.
Details of the Company may also be found on the Company’s website which can be found at: www.ukcpreit.com
For further information please contact:
Will Fulton / Tom Elviss/Graeme McDonald, Aberdeen Standard Investments
Tel: 07801039483/07557800617/07717543309
Edward Gibson-Watt / Oliver Kenyon, J.P. Morgan Cazenove
Tel: 020 7742 4000
Richard Sunderland / Claire Turvey / Eve Kirmatzis, FTI Consulting
Tel: 020 3727 1000
The above information is unaudited and has been calculated by Aberdeen Standard Investments^.
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