Net Asset Value ('NAV') as at 31 March 2021
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 31 March 2021
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces its unaudited NAV at 31 March 2021, which will form part of the unaudited interim accounts expected to be published in May 2021.
Quarter Summary
· Dividend increased by 25% to 5.00 pence per share annualised from May 2021, as announced earlier in the month.
· Monthly dividends maintained during the quarter at an annualised rate of 4.00 pence per share and were fully covered.
· 93% of rents due for quarter 1 collected, rising to 97% when rent deferments are factored in.
· The Tesco Superstore in Prestatyn was sold for £26.5m, a 5.22% initial yield, in line with valuation and above the 2017 acquisition price.
· Extended a lease with an office tenant in Newcastle for a further 10 years (break in year five). Rent secured is 9% ahead of passing rent.
· The development of Haddington Retail Park remains on time and budget, with completion anticipated in June 2021.
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· Like-for-like valuation increase of 0.45% for the retail warehouse assets, which comprise 66.2% of the Company's portfolio.
· Fair value independent valuation of the property portfolio at 31 March 2021 of £246.9 million, a like-for-like increase of 0.34% compared to the valuation at 31 December 2020.
· NAV per share at 31 March 2021 of 84.26 pence (31 December 2020: 84.63 pence), a decrease of 0.44% reflecting the impact of capital expenditure and transaction costs for the Prestatyn sale.
· Share price total return for the quarter of 0.02%.
· NAV total return (including dividends) for the quarter of 0.7%.
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· All types of retail warehouse tenant are now able to reopen for trade. Occupational demand is picking up and investor sentiment is improving towards the sector.
Net Asset Value
The unaudited NAV of the Company at 31 March 2021 was £178.04 million, or 84.26 pence per share, a decrease of 0.44% on the Company's NAV per share as at 31 December 2020.
|
|
Pence Per Share |
£ million |
|
NAV at 31 December 2020 |
84.63 |
178.83 |
|
Valuation of property portfolio |
0.39 |
0.82 |
|
Capital expenditure |
(1.04) |
(2.19) |
|
Profit on sale of investment properties |
0.09 |
0.19 |
|
Income earned |
2.04 |
4.31 |
|
Expenses & finance costs |
(0.85) |
(1.81) |
|
Dividends paid |
(1.00) |
(2.11) |
|
NAV at 31 March 2021 |
84.26 |
178.04 |
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 2021 and undistributed income for the quarter, but does not include a provision for any accrued dividend.
Over the quarter, the valuation of the property portfolio increased by 0.34% on a like-for-like basis. In the same period, the Company's retail warehouse assets increased in value by 0.45%, as sentiment for the sector improved.
The NAV decline is as a result of capital expenditure, transaction costs for the sale of the Tesco Superstore at Prestatyn and the impact of gearing.
Rent Collection update
As at 19 April 2021, 93% of the rent for quarter 1 2021 has been collected. This will rise to 97% when rent deferments are factored in. Similar levels of rent collection are anticipated for quarter 2. On a cash basis, the dividend cover for quarter 1 was 128%.
The Company's strong rent collection record during the pandemic period has been assisted by the high quality of its office tenants, and retail warehouse assets underpinned by tenants defined by the UK Government as providing 'essential services', who have been permitted to stay open for trade throughout the pandemic. Following the easing of lockdown restrictions, 100% of the retail warehouse portfolio (excluding vacant units) is open for trade.
For the 12 months to 31 March 2021, the Investment Manager has collected 92% of the rent due, rising to 94% once rent deferment and repayment plans are factored in. A more detailed analysis of the Company's rental income will be included in the interim report and accounts which are expected to be published in May 2021.
While this collection record is due in part to good communication and a collaborative approach with tenants by the Investment Manager, it is also because the retail warehouse sector has shown greater resilience during the pandemic than other parts of the retail market. Further, the sector's attributes have come to the fore during this difficult trading period. It is anticipated that the changes in retail patterns are likely to continue even when lockdown restrictions are removed.
Dividends paid and 25% dividend increase from May 2021
Over the quarter, the Company continued to pay a monthly dividend at a rate of 0.3333 pence per share, equating to an annualised dividend of 4.00 pence per share. The dividend remains fully covered.
The Company will increase its dividend by 25%, to 5.00 pence per share annualised, with the first payment at the increased rate being made in May 2021, for the month of April. This equates to 87% of the dividend rate of 5.75 pence annualised that was paid up until May 2020, when the dividend was reduced to 4.00 pence annualised.
The 25% dividend increase takes into account the improving outlook for income and rent collection and is not to the detriment of the Company's investment and asset management activities.
Sale of Tesco Superstore at Prestatyn Shopping Park
During the period the Company disposed of the Tesco Superstore which forms part of Prestatyn Shopping Park, for £26.5m (5.22% initial yield). The sale price was in line with the property's valuation as at 31 December 2020 and above the December 2017 acquisition price.
The Company will retain the remainder of the retail park, which extends to c. 91,500 sq. ft. across 14 units. The retail park is let to 13 tenants, with M&S as an anchor, and has various asset management angles to exploit.
The sale of this asset is in line with the investment strategy and provides the Company with the opportunity to recycle capital from lower yielding assets into higher yielding properties which are more suited to the Investment Manager's intensive style of asset management. This will further improve the Company's income stream.
Asset management and development update
At the office property in Newcastle, Citygate II, the Company completed a lease restructure with N&D (London) Limited ('N&D'). N&D occupies c. 11,000 sq. ft. on the first floor and has signed a ten-year reversionary lease, with a tenant break option after five years. The lease will now expire in March 2032, with the break option being in March 2027. The rent will increase by c. 9.0%, which is 6.5% ahead of the independent valuer's ERV.
The development of Haddington Retail Park continues on time and budget and is expected to complete during June 2021. It is 97% pre-let to Aldi, Home Bargains, Food Warehouse, Costa Coffee and Euro Garages, with one unit of 1,500 sq. ft. available to let. Once completed and fully occupied, the retail park will provide the Company with new contracted rental income of £875,000 per annum.
The Investment Manager is reporting improving occupational demand from the Company's retail warehouse and office tenants and is currently in discussions with tenants on new lettings and lease regears. These will be reported on more fully in due course.
Cash and debt
As at 19 April 2021, the Company had approximately £16.7m of cash for operational purposes. This includes £7.7m of the Prestatyn sales proceeds. The Company also has £26.9m of cash under its debt facility ring fenced specifically for investment. £18.7m of this cash is from the sale of the Tesco Superstore at Prestatyn.
At the date of the March valuation the average loan-to-value across the Company's two debt facilities was 34.1%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset cover covenants.
Summary
Full lockdown measures were put in place in various parts of the country in December 2020 and remained in place for the entire first quarter of 2021. These prevented certain businesses from being able to open for trade and it was anticipated they might put pressure on rent collection.
However, rent collection held up during the period and was ahead of projections made at the start of the quarter. Throughout the quarter c.73% (by income) of the Company's retail warehouse portfolio was either open for trade or offered a click and collect service which helped support rent collection.
Following the easing of lockdown restrictions in England and Wales, 100% of the Company's retail warehouse portfolio (excluding vacant units) is now open for trade.
As the economy re-opens, it is anticipated that rent collection will improve and that any rent deferred over the past 12 months will continue to be collected. There is ongoing asset management activity in the portfolio which, on completion, will further improve the income profile of the Company.
Occupational demand has improved, with several tenants in the retail warehouse sector reactivating requirements for new stores which had been put on hold during the pandemic. The Company is benefiting from this and the Investment Manager is in discussions with tenants looking to occupy units on the Company's retail parks.
From an investment perspective, the sentiment towards retail warehousing is improving and the sector is experiencing increased investor demand. It is anticipated that this positive momentum will continue as the year progresses and lockdown restrictions are eased further.
The immediate focus is on delivering the ongoing asset management initiatives which will help reduce the vacancy rate and improve the Company's income stream. The Investment Manager is also committed to reinvesting the Prestatyn sales proceeds in a higher yielding asset suited to the Investment Manager's intensive style of asset management.
William Hill, Chairman, commented:
"The continued high level of rent collection has enabled the Company to increase the dividend by 25% from May 2021, which will provide an attractive yield of 7.2%, based on the Company's last published share price. If the economy continues to move in the right direction the Board believes further dividend progression is a realistic aspiration given the additional income expected from the completion of its development at Haddington and other portfolio activities in the pipeline."
Portfolio sector weightings and tenant and locational exposure
Sector
|
Sector |
Exposure (%) |
|
Retail warehouse |
66.2 |
|
Office |
28.6 |
|
Development |
3.2 |
|
Other commercial/ Leisure |
2.0 |
Geography
The portfolio is diversified across the regional markets.
|
Region |
Exposure (%) |
|
Wales |
22.4 |
|
North East |
16.7 |
|
Scotland |
14.7 |
|
West Midlands |
14.0 |
|
North West |
12.9 |
|
Yorkshire |
12.2 |
|
East Midlands |
4.7 |
|
South West |
2.4 |
Top five tenants
|
Tenant |
Exposure (%) |
|
B&Q plc |
10.2 |
|
B&M Retail Limited |
7.1 |
|
AXA Insurance UK plc |
6.4 |
|
Marks & Spencer plc |
5.8 |
|
Ernst & Young LLP |
5.8 |
Forthcoming events
The Company expects to produce its unaudited interim results for the period to 31 March 2021 in May.
The next interim dividend announcement is expected to be made by 6 May 2021. The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank LLP as at 30 June 2021.
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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