Net Asset Value(s)

RNS Number : 2589J

Ediston Property Inv Comp PLC

26 April 2022

 

Ediston Property Investment Company plc

(LEI: 213800JRL87EGX9TUI28)

Net Asset Value ('NAV') as at 31 March 2022

And Trading Update

Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces its unaudited NAV at 31 March 2022, which will form part of the unaudited interim accounts expected to be published in May 2022.

Quarter Summary

· NAV per share at 31 March 2022 of 96.08 pence (31 December 2021: 90.64 pence), an increase of 6.0% in the quarter.

· Fair value independent valuation of the property portfolio at 31 March 2022 of £238.8 million, a like-for-like increase of 6.5% on the valuation at 31 December 2021.

· NAV total return (including dividends) for the quarter of 7.4% (31 December 2021: 2.5%). 

· Fourth consecutive quarter of NAV growth.

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· Sale of St Philips Point, Birmingham completes successful period of investment in office assets, with retail warehouses representing the focus of the next phase of the Company's investment strategy.

· Four lease transactions completed, securing £377,500 of rent per annum.

· Strong levels of rent collection maintained. Expected to be 99.9% for Q1 2022.

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Net Asset Value

The unaudited NAV of the Company at 31 March 2022 was £203.05 million, or 96.08 pence per share, an increase of 6.0% on the Company's NAV per share as at 31 December 2021.

	Pence Per Share	£ million
NAV at 31 December 2021	90.64	191.54
Valuation of retained property portfolio	6.85	14.47
Reduction in value of the property portfolio as a result of Birmingham sale	(12.07)	(25.50)
Capital proceeds	11.19	23.65
Capital expenditure	(0.20)	(0.43)
Income earned	1.93	4.09
Expenses & finance costs	(1.01)	(2.13)
Dividends paid	(1.25)	(2.64)
NAV at 31 March 2022	96.08	203.05

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 2022 and undistributed income for the quarter, but does not include a provision for any accrued monthly dividend.

Investment activity

In seeking to identify and capitalise on attractive investment themes and opportunities as they emerge in the UK commercial property sector, the Investment Manager has been repositioning the portfolio to focus on the retail warehouse sector. This followed a review in July 2021 which concluded that this sector had the best prospects for asset value and income growth.

During the period, the Company completed the first phase of this change of focus by selling its final office asset, St Philips Point, Birmingham, for a headline price of £24.5 million.

The shift in focus coincides with a move from the office sector which has provided positive performance for the Company since its launch in 2014, with six office assets having been bought and sold during that time, delivering an IRR of 10.1%.

On 13 April the Company announced the sale of its leisure asset at The Lanyard, Hartlepool for a price of £2.6 million. The asset is let to Mecca Bingo Limited. The Investment Manager had completed a lease extension with the tenant in quarter four last year which extended the unexpired lease term by seven years. The Company now has one leisure asset remaining in the property portfolio.

The emphasis is now on redeploying the sale proceeds into retail warehouse assets. According to the IPF Consensus Forecast, published in February 2022, retail warehousing is forecast to be the top performing sub-sector, on a total return basis, over the period 2022 to 2026.

Asset management update

During the period four lease transactions were completed, securing £377,500 of income per annum, which is marginally ahead of the ERV of the units.

· At Kingston Retail Park in Hull, Greggs completed a lease on a 2,000 sq. ft. unit. Greggs signed a 10-year lease with a five-year tenant break option.

· At Widnes Shopping Park, Card Factory signed a five-year lease, without break, on a 1,590 sq. ft. unit.

· At Barnsley, Jysk completed a 10-year lease with a five-year break option on a 10,000 sq. ft. unit.

· At Stirling, Harry Corry signed a five-year lease extension on its 9,968 sq. ft. unit, meaning its lease will now expire in February 2027.

Post-period-end JD Sports completed a lease on a 7,623 sq. ft. unit, at Prestatyn Shopping Park, which was previously occupied by New Look. New Look was occupying the unit on a turnover rent basis, following the approval of its Company Voluntary Arrangement (CVA). Under the terms of the CVA landlords are entitled to break the leases.

The Investment Manager considered that the terms of the CVA were below market, so it took the opportunity to exercise its break clause and identified JD Sports as a more suitable tenant for the space. The rent from JD Sports is 44% higher than the turnover rent which was being paid by New Look.

The EPRA Vacancy Rate, at 31 March 2022 was 7.3%. This figure has subsequently fallen to 6.3% following the JD Sports letting mentioned above.

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, cash and debt

Rent collection continues to be strong, with 99.9% of the rent due for quarter one 2022 expected to be collected. The income received by the Company will fluctuate over the coming months as the rent lost through office sales is replaced by rent from new acquisitions.

At the date of this announcement, the Company has approximately £41.2 million of cash available for investment and operational purposes. The Company also has £36.3 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. These figures include the Hartlepool sale proceeds.

At the date of the March valuation, the average loan-to-value across the Company's two debt facilities was 32.4%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset value covenants.

Summary

The Company has now had four consecutive quarters of NAV growth, driven by continued valuation improvements in its retail warehouse portfolio. General market movement, and the completion of asset management initiatives have contributed to the positive direction of travel.

Good progress has been made with the revised strategy, with all offices assets now sold. The priority is to reinvest the sales proceeds into suitable retail warehouse stock.

Looking across the portfolio, there are other reasons to be positive. Rent collection remains strong, the EPRA vacancy rate has fallen, and the Investment Manager continues to identify and complete asset management projects across multiple properties.

William Hill, Chairman, commented:

"Another strong quarter of performance from the Company's retail warehouse portfolio provides further evidence of the merits of the Company's decision to target this sector. Following the sale of St Philips Point, we are now concentrating on reinvesting the proceeds into retail warehouse assets and growing the Company with a focus on retail warehousing."

Portfolio sector weightings and tenant and locational exposure

Sector 

Sector	Exposure (%)
Retail warehouse	97.7
Other commercial/ Leisure	2.3

Geography

The portfolio is diversified across the regional markets.

Region	Exposure (%)
Scotland	26.1
Wales	25.9
North West	16.3
Yorkshire	15.0
North East	9.2
East Midlands	6.2
West Midlands	1.3

Top five tenants

Tenant	Exposure (%)
B&Q Limited	14.7
B&M Retail Limited	7.7
Marks & Spencer plc	6.3
Boots UK Limited	4.6
Pets at Home Limited	3.8

Forthcoming events

The Company expects to produce its unaudited interim results for the period to 31 March 2022 in May.

The next interim dividend announcement is expected to be made by 5 May 2022. The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank LLP for 30 June 2022. The unaudited NAV per share at that date is expected to be announced in July 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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