NAV as at 31 December 2021 & Trading Update
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 31 December 2021
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces its unaudited NAV at 31 December 2021 and a trading update for a quarter of considerable asset management activity.
Quarter Summary
· Fair value independent valuation of the property portfolio at 31 December 2021 of £249.85 million, a like-for-like increase of 2.03% compared to the valuation at 30 September 2021.
· The uplift was reduced by the sale of the office assets below the 30 September valuation and by a fall in the value of the remaining office asset.
· Retail warehouse values continued to improve with a 4.4% like-for-like increase in the quarter.
· NAV per share at 31 December 2021 of 90.64 pence (30 September 2021: 89.69 pence), an increase of 1.06% in the quarter.
· NAV total return (including dividends) for the quarter of 2.5% (30 September 2021, 4.2%).
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· In line with the revised strategy, during the period, sold three of the four offices realising £36.4 million.
· Completed ten lease transactions, securing £1.2 million of rent per annum.
· EPRA vacancy rate has reduced from 8.6% to 8.2%.
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Net Asset Value
The unaudited NAV of the Company at 31 December 2021 was £191.5 million, or 90.64 pence per share, an increase of 1.06% on the Company's NAV per share as at 30 September 2021.
|
|
Pence Per Share |
£ million |
|
NAV at 30 September 2021 |
89.69 |
189.55 |
|
Valuation of property portfolio |
(15.39) |
(32.53) |
|
Capital proceeds net of capital expenditure |
14.53 |
30.70 |
|
Profit on sale of investment properties |
1.94 |
4.10 |
|
Income earned |
2.10 |
4.44 |
|
Expenses & finance costs |
(0.98) |
(2.08) |
|
Dividends paid |
(1.25) |
(2.64) |
|
NAV at 31 December 2021 |
90.64 |
191.54 |
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 2021 and undistributed income for the quarter, but does not include a provision for any accrued monthly dividend.
Sale of the office portfolio and reinvestment strategy
During the period, in line with the revised strategy announced in quarter three last year, the Company disposed of three of its four office assets. It sold Midland Bridge House, Bath; 145 Morrison Street Edinburgh; and Citygate II Newcastle. The sales realised £36.4 million before costs. This was below the 30 September 2021 valuation and reflected the general weakness in office markets outside London. However, the sale price was above the book cost of £29.9 million. The net income received from these properties was £2.4 million per annum.
The Company found that there was not a significant depth of investor demand for office assets. This affected the prices achieved and consequently had a negative impact on the NAV.
The Investment Manager believes that selling the office assets was the correct decision as the effects of the COVID-19 pandemic and increasing ESG requirements have not yet had full impact on the office occupational market or are reflected in the current valuation of office properties.
With the sale of the three offices, the Company has made good progress with the implementation of the revised investment strategy. The remaining office will be sold in due course. The Investment Manager remains focused on the redeployment of capital into retail warehouses and is pursuing several opportunities. It is targeting the completion of the reinvestment programme over the next four months.
For the foreseeable future the Company will concentrate its investment in the retail warehouse sector. The Investment Manager believes the prospects are attractive for retail warehouses, both in absolute terms, and relative to other sectors of the real estate market.
Asset management update
During the period ten lease transactions were completed, which secured £1.2 million of income per annum. The EPRA vacancy rate reduced from 8.6% to 8.2%.
Eight of the ten deals were in the retail warehouse portfolio and there was one in each of the office and leisure portfolios.
At Kingston Retail Park in Hull, the letting to The Range completed. The Range signed a 15-year lease on a 14,500 sq. ft. unit which was vacated by Outfit (Arcadia) in Q2 2021. Also at Hull, Greggs exchanged an Agreement for Lease (AFL) on a 2,000 sq. ft. unit which is leased to, but not occupied by, Carphone Warehouse. A lease surrender has been agreed with Carphone Warehouse.
At Prestatyn Shopping Park, The Tech Edge leased a vacant unit of 1,300 sq. ft. on a five-year lease. At Clwyd Retail Park, Rhyl, Now to Bed leased 8,017 sq. ft. on a three-year lease.
At Barnsley, three deals completed across 20,000 sq. ft. of space. Bensons downsized from a unit of 10,000 sq. ft. into one of 5,036 sq. ft. and signed a five-year lease. Jysk signed an AFL on the unit vacated by Bensons. On completion of some landlord works, Jysk will enter into a new ten-year lease with a five-year tenant break option. Lastly at Barnsley, One Below, who was occupying a 4,996 sq. ft. unit on a short-term lease, has committed to the park for five years.
In the office portfolio, at Citygate II in Newcastle, UNW LLP signed an extension to its leases to expire in March 2032, with a tenant break option in March 2027. Subsequent to this deal completing, the asset was sold.
Finally, in the leisure portfolio, at Hartlepool, Mecca Bingo signed a 10-year reversionary lease with a seven-year tenant break option on its unit which extends to 31,284 sq. ft. The lease will expire in September 2032, with a break option in September 2029.
The Investment Manager is progressing other new lettings and lease restructures across the portfolio, which will further improve the Company's income stream. These will be reported on when completed.
Rent collection and dividend
Rent collection continues to be strong, with 99.9% of the rent due for quarter four 2021 expected to be collected. The income received by the Company will fluctuate over the coming months as the rent lost through office sales will be replaced by rent from new acquisitions. Against this backdrop, it remains the Board's expectation that the dividend will be increased further in the coming months, with the timing influenced by when the available capital is reinvested and becomes income producing.
Cash and debt
At the date of this announcement, the Company has approximately £30.4 million of cash available for investment and operational purposes. The Company also has £23.25 million of cash held in its debt facility.
At the date of the December valuation, the average loan-to-value across the Company's two debt facilities was 35.2%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset value covenants.
Summary
Three of the Company's offices have now been sold, but the weakness in the office market negatively affected the sale price and consequently the Company's NAV. However, the positive momentum in the retail warehouse sector has continued to build and looks set to improve further given increased tenant demand and attractive pricing, relative to other sectors of the market. Retail warehouse valuations increased again in the period and contributed to the third consecutive quarter of NAV growth for the Company.
The immediate focus is now on reinvesting the sales proceeds into suitable retail warehouse stock and on continuing to identify and execute asset management initiatives to improve both income and capital values across the portfolio.
William Hill, Chairman, commented:
"This is the third consecutive quarter of NAV growth for the Company which has been delivered despite the frictional costs of disposing of its offices. For the foreseeable future the Company will specialise in the retail warehouse market, a sector that has strong positive momentum and looks attractively priced relative to other property types."
Portfolio sector weightings and tenant and locational exposure
Sector
|
Sector |
Exposure (%) |
|
Retail warehouse |
87.7 |
|
Office |
10.2 |
|
Other commercial/ Leisure |
2.1 |
Geography
The portfolio is diversified across the regional markets.
|
Region |
Exposure (%) |
|
Wales |
23.9 |
|
Scotland |
22.9 |
|
North West |
14.2 |
|
Yorkshire |
13.4 |
|
West Midlands |
11.4 |
|
North East |
8.7 |
|
East Midlands |
5.5 |
Top five tenants
|
Tenant |
Exposure (%) |
|
B&Q Limited |
13.3 |
|
B&M Retail Limited |
7.0 |
|
Marks & Spencer plc |
5.7 |
|
Boots UK Limited |
4.1 |
|
AXA Insurance UK plc |
3.8 |
Forthcoming events
The next interim dividend announcement is expected to be made by 3 March 2022. The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank LLP for 31 March 2022, which will form part of the Company's interim report. The unaudited NAV per share at that date is expected to be announced in April 2022.
The Company intends to publish its next factsheet shortly which will be made available on the Company's website at 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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