Net Asset Value as at 31 Mar 2023 &Trading Update
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 31 March 2023
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces its unaudited NAV at 31 March 2023, which will form part of the unaudited interim accounts expected to be published in May 2023.
Quarter Headlines
· Fair value independent valuation of the property portfolio at 31 March 2023 of £204.3 million, a like-for-like increase of 0.6% on the valuation at 31 December 2022.
· NAV per share at 31 March 2023 of 80.44 pence (31 December 2022: 80.93 pence), a decrease of 0.6% in the quarter.
· NAV total return (including dividends) for the quarter of 1.0% (31 December 2022 quarter: -13.4%).
· Portfolio weighted average unexpired lease term (WAULT) of 5.1 years and EPRA Vacancy Rate of 6.7%.
· Rent collection expected to be 99.9% for the quarter.
· Dividends totalling 1.25 pence per share (5.00 pence per share annualised) paid in the quarter.
· Share price total return of 5.4% for the quarter.
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· Four asset management deals completed, at rents ahead of the independent valuer's ERVs, securing £895,350 of rental income per annum.
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Net Asset Value
The unaudited NAV of the Company at 31 March 2023 was £170.00 million, or 80.44 pence per share, a decrease of 0.6% on the Company's NAV per share as at 31 December 2022.
|
|
Pence Per Share |
£ million |
|
NAV at 31 December 2022 |
80.93 |
171.02 |
|
Valuation of retained property portfolio |
0.26 |
0.54 |
|
Capital expenditure |
(0.30) |
(0.63) |
|
Income earned |
1.78 |
3.77 |
|
Expenses & finance costs |
(0.98) |
(2.06) |
|
Dividends paid |
(1.25) |
(2.64) |
|
NAV at 31 March 2023 |
80.44 |
170.00 |
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 March 2023, but does not include a provision for any accrued monthly dividend.
Overview
The volatility in pricing in the first quarter of the Company's new financial year dissipated in the second quarter as market values, with the exception of offices, were generally flat.
During the quarter, the Company's investment portfolio increased in value by 0.6%. The completion of asset management initiatives contributed to this positive performance. This contrasted with the significant fall in the previous quarter which gave rise to an overall fall of 11.7% over the half year period. As a reference point, the MSCI UK Monthly index recorded a market decline for All-Property of 17.6% over the same period.
After adjusting for capital expenditure and the use of capital to fund the uncovered dividend during the period, the Company's NAV decreased by 0.6% in the quarter. Over the six-month period the NAV declined by 15.2%.
The NAV total return over the quarter was 1.0% and -12.6% for the half year. The share price total return was 5.4% and -5.5% for the same periods. Dividends remained at previous levels and the discount of the share price to NAV narrowed, ending the period at -23.7%.
Strategic review
On 16 March 2023, the Board announced that it is undertaking a strategic review of the options available to the Company to maximise value for shareholders and to achieve its growth objectives (the 'Strategic Review'). As stated in the announcement, the Board has a preference for structuring a merger with one or more REITs, but it will consider all options available to the Company that offer maximum value for shareholders. Since commencing the Strategic Review, the Board and its advisers have engaged with a significant number of interested parties and the Board expects to provide an update to shareholders in early Q3 2023.
Asset management activity
Four asset management deals were completed during the period, securing £895,350 of income per annum.
At Widnes Shopping Park, having signed an Agreement for Lease (AFL) last quarter, Poundland completed a five-year lease on a unit of 11,295 sq. ft. Poundland is an existing tenant that has increased its trading footprint by 126%. The new rent is 43% ahead of the rent being paid by the former tenant and 12% ahead of the independent valuer's estimated rental value (ERV) of the unit.
At Springkerse Retail Park, Stirling, DFS has upsized from a unit of 9,979 sq. ft. and signed a 10-year lease with a five-year break option on a unit extending to 11,916 sq. ft. The new rent is 68% higher than the rent being paid by the previous tenant who was occupying the unit following an administration process completed prior to the Company's ownership. The new rent is 13% higher than the independent valuer's ERV.
Superdrug signed an AFL on a 7,539 sq. ft. unit on Prestatyn Shopping Park. The new lease will commence in Q2, once vacant possession has been secured from the existing tenant. On completion, Superdrug will sign a 10-year lease with a five-year tenant break option. The new rent is 2% ahead of the independent valuer's ERV.
As announced on 1 March 2023, the Company has signed an AFL with Marks and Spencer (M&S) at Plas Coch Retail Park, Wrexham. On completion of landlord works in August this year, M&S will sign a 10-year lease on a newly created 21,000 sq. ft. unit and will pay a market rent which is 27% ahead of the independent valuer's ERV.
A separate unit of 4,000 sq. ft. will be created as part of the works, which will provide additional income to the Company once let.
It is encouraging that the latest set of lettings have all been achieved at rents ahead of the independent valuer's ERVs. It is also a significant positive pointer to the strength of a park when a tenant is upsizing as is the case at Widnes and Stirling.
The Investment Manager continues to progress lettings and lease restructures across the portfolio, with the aim of improving the Company's income stream and reducing the vacancy rate.
Cash and dividend
At the date of this announcement the Company has approximately £47.7million of cash available for investment and operational purposes. The Company also has £31.2 million of cash held in its debt facility, which is subject to the lender's LTV requirements being met for it to be released for investment purposes.
To provide maximum flexibility for the Strategic Review, the Board has paused the investment of surplus cash until the outcome of the review has been determined. The dividend will therefore remain uncovered and funded from cash resources.
Debt
As at 31 March 2023, the average loan-to-value across the Company's two debt facilities was 39.1%. The Company is compliant with its debt covenants and there are no imminent refinancing events, with £56.9 million maturing in May 2025 and £54.2 million in December 2027.
Summary and outlook
The Board is encouraged that the turbulence in capital markets at the end of 2022 has eased over the first quarter of 2023. The fact that tenants are taking new space and rent collection is effectively 100% is also a good sign. However, retail markets remain vulnerable to further interest rate rises and an economy that falls into recession. The Board remains cautious on the outlook but hopeful that the worst of the valuation declines have been experienced and the Company can build from this base.
The completion of the Strategic Review will determine the future direction of the Company. Although considerable Board and Investment Manager resource is being utilised to drive this process, there is no let-off in the ongoing management of the portfolio. The Investment Manager continues to identify and execute asset management initiatives to improve rental value, extend the WAULT of the portfolio and drive the NAV upwards.
Portfolio sector weightings and tenant and locational exposure as at 31 March 2023
Sector
|
Sector |
Exposure (%) |
|
Retail warehouse |
100.0 |
Geography
The portfolio is diversified across the regional markets.
|
Region |
Exposure (%) |
|
Scotland |
29.3 |
|
Wales |
24.3 |
|
Yorkshire |
16.3 |
|
North West |
16.3 |
|
North East |
7.6 |
|
East Midlands |
6.2 |
Top five tenants (contracted income) as at 31 March 2023
|
Tenant |
Exposure (%) |
|
B&Q Limited |
11.7 |
|
B&M Retail Limited |
8.0 |
|
Marks & Spencer plc |
7.6 |
|
Boots UK Limited |
4.7 |
|
Pets at Home Limited |
3.9 |
Valuation yield profile as at 31 March 2023
|
Net Initial Yield |
6.2% |
|
Equivalent yield |
7.1% |
Forthcoming events
The Company expects to produce its unaudited interim results for the period to 31 March 2023 in May.
The next interim dividend announcement is expected to be made by 1 June 2023. The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank LLP for 30 June 2023. The unaudited NAV per share at that date is expected to be announced in July 2023.
The Company intends to publish its next factsheet shortly, which will be made available on the Company's website at www.ediston-reit.com.
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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