TIDMEPIC
RNS Number : 3210O
Ediston Property Inv Comp PLC
31 January 2023
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 31 December 2022
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the
'Company') announces its unaudited NAV at 31 December 2022.
Quarter Headlines
-- NAV per share at 31 December 2022 of 80.93 pence (30
September 2022: 94.86 pence), a decrease of 14.7% in the
quarter.
-- Fair value independent valuation of the property portfolio at
31 December 2022 of GBP203.1 million, a like-for-like decrease of
12.3% on the audited financial year end valuation at 30 September
2022.
-- NAV total return (including dividends) for the quarter of
-13.4% (30 September 2022 quarter: -2.5%).
-- NAV total return of -5.8% for the year ended 31 December 2022.
-- NAV decline of 10.7% for the year ended 31 December 2022.
-- Portfolio weighted average unexpired lease term (WAULT) of
5.1 years and EPRA Vacancy Rate of 6.7%.
-- Dividends totalling 1.25 pence per share (5.00 pence per
share annualised) paid in the quarter.
--------------------------------------------------------------------------------------
-- Four asset management deals completed, in line with or ahead
of the independent valuer's ERVs, securing GBP829,500 of rental
income per annum.
--------------------------------------------------------------------------------------
Net Asset Value
The unaudited NAV of the Company at 31 December 2022 was
GBP171.02 million, or 80.93 pence per share, a decrease of 14.7% on
the Company's NAV per share as at 30 September 2022.
Pence Per GBP million
Share
NAV at 30 September 2022 94.86 200.48
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Valuation of retained property
portfolio (13.41) (28.36)
---------- ------------
Capital expenditure (0.14) (0.30)
---------- ------------
Income earned 1.90 4.01
---------- ------------
Expenses & finance costs (1.03) (2.17)
---------- ------------
Dividends paid (1.25) (2.64)
---------- ------------
NAV at 31 December 2022 80.93 171.02
---------- ------------
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 2022 and undistributed income for the quarter, but does
not include a provision for any accrued monthly dividend.
Overview
During the period, commercial property values fell across all
sub sectors. The market continued to adjust to the repriced gilt
market, rising interest rates and general negative economic
conditions and outlook.
According to the MSCI UK Monthly Index, 'All Property' capital
values declined by 16.5% over Q4 2022. This was driven by 'All
Industrial' falling by 21.8% and 'All Offices' by 13.3%. According
to this index, retail warehousing fell in value by 13.0% in the
period.
The Company was unable to buck this negative trend and saw its
property portfolio decline in value by 12.3%, to GBP203.1 million
as at 31 December 2022. The decline was driven by outward yield
movement, partially offset by the completion of asset management
activity and the fact that there were no new voids or rental value
falls within the portfolio.
After adjusting for gearing, capital expenditure and Company
costs, the Company's NAV declined by 14.7% in the period.
Asset management activity
Four asset management deals were completed during the period,
securing GBP829,500 of income per annum.
At Widnes Shopping Park, the Company signed an Agreement for
Lease (AFL) with Poundland, an existing tenant that is increasing
its trading footprint from 4,998 sq. ft. to 11,295 sq. ft. To
facilitate the deal, the Company has served notice to break on New
Look, a tenant that was paying below the market rent following its
most recent Company Voluntary Arrangement (CVA).
The new rent is 43% ahead of the rent being paid by New Look and
12% ahead of the independent valuer's estimated rental value (ERV)
of the unit. On completion of the five-year lease, which is subject
to vacant possession and the completion of landlord works, the
Company will have one unit of 4,998 sq. ft. available to let. Given
its location on the terrace and the strong tenant line-up, the
Investment Manager is confident it will secure a new tenant to
lease it.
At Kingston Retail Park, Hull, Mamas and Papas signed a
five-year lease extension on its 4,693 sq. ft. unit. The rent,
which is in line with the valuer's ERV, remains unchanged.
At Wombwell Lane Retail Park, Barnsley, B&M extended its
lease by 10-years. It now expires in September 2037. The passing
rent increased by 6.0% and is in line with the valuer's ERV.
At Springkerse Retail Park, Stirling, Bensons For Beds (Bensons)
'rightsized' from a unit of 11,916 sq. ft. to one of 9,977 sq. ft.
and signed a 10-year lease (without break). The annual rent being
paid by Bensons on the new unit is 48% higher than under its old
lease and is 11.5% higher than the valuer's ERV.
It is encouraging that the rental levels which have been secured
are in line with or ahead of the valuer's ERVs. It is also
significant that all four tenants currently trade from the
Company's parks and are validating them as trading locations by
taking new leases. 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
GBP50.5 million of cash available for investment and operational
purposes. The Company also has GBP31.2 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.
The Company has held its cash position for approaching a year.
It pulled back from purchasing assets in the middle of last year as
the market started to correct. It has evaluated several
opportunities since then, but none were deemed sufficiently
attractive at the prevailing pricing levels to merit
acquisition.
The Board is aware of the impact of holding cash on the coverage
of the dividend whilst cash remains uninvested. However, it
believes that continuing to pay the current level of dividend from
cash resources is sustainable, given that it is unlikely that
uninvested cash will be retained for the longer term.
The Board believes holding cash to invest is a positive for the
Company as it allows it to review repriced properties for
acquisition. However, this is in the context of ensuring that any
acquisition terms reflect market conditions, and that the financial
resilience of the Company remains secure.
Debt
As at 31 December 2022, the average loan-to-value across the
Company's two debt facilities was 39.4%. The Company is compliant
with its debt covenants and there are no imminent refinancing
events, with GBP56.9 million maturing in 2025 and GBP54.2 million
in 2027.
Summary
Despite the valuation readjustment and consequent NAV decline,
the Board and Investment Manager take considerable comfort from the
operational performance of the portfolio.
During the quarter the effect of the asset management
initiatives has been to improve the rental value of the portfolio
and increase the WAULT. In addition, rent collection remains strong
(99.9% of rent expected to be collected for the period) and there
are no new voids in the portfolio.
There is good tenant demand for the Company's assets, as
evidenced by ongoing discussions with multiple retailers across its
portfolio who want to lease vacant space or extend leases on
existing units. Completing these transactions should increase the
WAULT of the property portfolio and reduce the EPRA Vacancy
Rate.
Clearly there are concerns about the effect of a recession on
the Company's occupier base. However, the retail warehousing format
would appear to be working well and is a good platform for
delivering retailers' omnichannel strategies. The sector appears
less vulnerable, off its rebased rents, compared to other sectors
of the real estate market.
The Board and Investment Manager remain comfortable with the
Company's investment strategy in focusing on the retail warehouse
sector. The attraction of the sector is a view shared by others.
According to the IPF Consensus Forecast published on 30 November
2022, the retail warehouse sector is again forecast to be the top
performing property sub-sector, on a total return basis, over the
period 2022 to 2026.
Portfolio sector weightings and tenant and locational exposure
as at 31 December 2022
Sector
Sector Exposure
(%)
Retail warehouse 100.0
---------
Geography
The portfolio is diversified across the regional markets.
Region Exposure
(%)
Scotland 28.9
---------
Wales 23.5
---------
Yorkshire 16.4
---------
North West 16.4
---------
North East 8.6
---------
East Midlands 6.2
---------
Top five tenants (contracted income) as at 31 December 2022
Tenant Exposure
(%)
B&Q Limited 11.6
---------
B&M Retail Limited 7.9
---------
Marks & Spencer
plc 7.5
---------
Boots UK Limited 4.6
---------
Pets at Home
Limited 3.8
---------
Valuation yield profile as at 31 December 2022
Net Initial Yield 6.3%
Equivalent yield 7.2%
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Forthcoming events
The next interim dividend announcement is expected to be made by
2 March 2023. The next scheduled independent quarterly valuation of
the property portfolio will be conducted by Knight Frank LLP for 31
March 2023. The unaudited NAV per share at that date is expected to
be announced in April 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
- Ediston Investment Services
Calum Bruce 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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END
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