Q2 2023 BUSINESS UPDATE

M7 Regional E-Warehouse REIT PLC

28 July 2023

 

M7 Regional E-Warehouse REIT plc

("M7 Regional E-Warehouse REIT" or the "Company")

28 July 2023

Q2 2023 BUSINESS UPDATE

OPERATIONAL RESILIENCE AND UPDATE ON REFINANCING

The Board of Directors of M7 Regional E-Warehouse REIT, which owns a diversified portfolio of e- warehouses across the UK (IPSX ticker: REW), provides a business update for the quarter ended 30 June 2023.

James Max, Non-Executive Chairman of M7 Regional E-Warehouse REIT plc, commented:

We continue to be encouraged by the operational resilience of the portfolio and the longer-term strength of its rental income.  Occupancy remains high at 98.35% and with gross rental income of £8.90 million, the Group continues to benefit from strong quarterly rental collections which were 92.5% for the current quarter, and 93.3% for the 2023 year to date, helping drive a 6.69% uplift in the adjusted EPS to 1.97p.

Following the significant rerating of most commercial property sectors in the second half of 2022, valuations began to stabilise early in 2023. This continued into the second quarter and, while we have reported a small decline of 2.46% in Net Asset Value per share, the value of the portfolio remained broadly flat with marginal +0.02% uplift to £106.13 million during the period.

The Group's senior loan facility of £54.34 million and mezzanine loan note of £19.70 million will mature on 17 August 2023 and 27 July 2023, respectively. The Board has approved the refinancing of the senior loan with a prominent lender and the Company is working with both the existing and new lenders to complete the refinancing by end of August 2023. The Group has successfully extended the term of the mezzanine loan notes to July 2026.

The current economic uncertainty and increases in inflation and interest rates have caused a significant increase in financing costs. Accordingly, and together with the refinancing activity being progressed above, the Board has decided to pause dividend payments in relation to the quarter ended 30 June 2023 while debt negotiations are ongoing. The Board will continue to review the Company's capacity to pay future dividends for the remainder of 2023 and into 2024, which will be largely dependent on the speed with which interest rates settle at a sustainable level. 

Financial and operational highlights for the three months to 30 June 2023

	At 30 June 2023 (unaudited)	At 31 March 2023 (unaudited)	Change
Net Asset Value	£32.06 million	£32.85 million	-2.41%
Net Asset Value per share	84.01p	86.08p	-2.41%
Share price	111p	111p	-
Investment property fair value (based on external valuation)	£106.13 million	£106.11 million	+0.02%
Loan to Gross Asset Value 1	67.05%	66.66%	+0.39%
Loan to value (covenant) 1	49.09%	49.09%	-

	Quarter ended 30 June 2023 (unaudited)	Quarter ended 31 March 2023 (unaudited)	Change
Adjusted EPS 1	2.02p	1.18p	71.19%
Dividend cover based on Adjusted EPS 1	-	118.00%	-
Dividend (per share)	-	1.00p	-
Dividend yield (year to date) 1	0.90%	0.90%	-
Operating profit before fair value changes	£1.11 million	£1.69 million	-3.43%
(Loss)/ profit after tax	(£0.40) million	£0.31 million	-2.90%
Ongoing charges	3.85%	3.88%	-0.03%

¹ Considered to be an Alternative Performance Measure.  

•     The fair value of the Group's portfolio of 17 properties increased by 0.02% to £106.13 million (31 March 2023: £106.11 million), reflecting a net initial yield of 7.73%² as compared with 7.51% as at 30 June 2023.

Loss after tax of £0.40 million for the quarter (31 March 2023: Profit £0.31 million) is driven primarily by the impairment of trade receivables of £0.60 million which is due to a tenant entering into CVA.

•     Total debt of £74.0 million comprising a £54.3 million senior loan facility and an unsecured loan note balance of £19.7 million, reflecting a combined loan to value ratio of 69.77% as at 30 June 2023 (31 March 2023: 69.78%). There continues to be significant headroom with all debt covenants.

•     Occupancy across the portfolio remained high at 98.35% as at 30 June 2023 (31 March 2023: 98.21%).

•     £2.08 million of rent was recognised during the quarter in line with passing rent (quarter ended 31 March 2023: £2.04 million).

•     Rent collection remained high at 92.49% (31 March 2023: 94.06%).

•     As at 30 June 2023, there were 55 tenants with a weighted average unexpired lease term of 4.99 years to breaks and 5.82 years to expiries (31 March 2023: 4.55 years to breaks and 5.37 years to expiries).

^{2 Including purchaser's costs of 6.65%.}                        

Net Asset Value

The table below sets out the movement in NAV during the quarter. 

	Pence per share	£ million
NAV at 31 March 2023	86.08	32.85
Valuation movement in property portfolio	0.09	0.03
Income earned for the period	5.69	2.18
Expenses for the period	(2.79)	(1.07)
Net finance costs for the period	(3.75)	(1.43)
Current tax	(0.31)	(0.12)
Interim dividend paid	(1.00)	(0.38)
NAV at 30 June 2023	84.01	32.06

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the United Kingdom and incorporates both the Group's property portfolio individually valued on a 'Red Book' basis as at 30 June 2023 and net income for the quarter ended 30 June 2023. 

Valuation

The value of the portfolio was broadly flat at £106.13 million over the quarter to 30 June 2023 (31 March 2023 £106.11 million). The independent fair valuation of the portfolio was undertaken by Avison Young.

At 30 June 2023, the net initial yield of the portfolio was 7.51% (31 March 2023: 7.73%).

Debt Covenant

There continues to be significant headroom in the debt covenants. The senior debt loan to value is 49.09% (default level is greater than 70%) and the interest cover ratio is 280.55% (default level is less than 225%). The Group is therefore well within its covenants at the latest interest payment date.

ENQUIRIES

M7 Regional E-Warehouse REIT plc
James Max - Chairman	via FTI Consulting below
M7 Real Estate Ltd Richard Croft	[phone]
Dickson Minto (Lead Adviser)	[phone]
FTI Consulting (Communications Adviser)	[phone]
Richard Sunderland Eve Kirmatzis	[e-mail]
Alter Domus (UK) Limited (Company Secretary)	[phone]

The Company's ISIN is GB00BLN7H037.

Further information on M7 Regional E-Warehouse REIT plc is available at www.rewreit.co.uk¹.

NOTES

M7 Regional E-Warehouse REIT plc is a property investment company, listed on the International Property Securities Exchange offering shareholders with a sustainable level of income together with the potential for income and capital growth by investing in diversified portfolio of enhanced warehouse (e-warehouse) properties across the United Kingdom.

An enhanced warehouse (e-warehouse) is defined, by M7, as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future. They are typically large regular shaped industrial units with retail frontages that could easily be converted to pure industrial use, and they are typically located with good accessibility and sufficient car parking that could be used for yard space in the event of conversion. It is these types of characteristics which in M7's opinion underpins the value of the asset.

The Company's asset manager is M7 Real Estate Limited ("M7"), a leading specialist in the pan-European, regional, multi-tenanted real estate market. M7 has over 230 employees in 15 countries and territories. The team manages c. 620 assets with a value of circa €6.9 billion.

¹Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

 

END