TIDMEPIC
RNS Number : 5222D
Ediston Property Inv Comp PLC
29 October 2020
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 30 September 2020
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the
'Company') announces its unaudited NAV at 30 September 2020, the
Company's year-end.
Quarter Summary
-- Completed five lease transactions securing GBP495,500 of rent
per annum, including an Agreement for Lease (AFL) on a 15,000 sq.
ft. unit at Kingston Retail Park, Hull.
-- Post-period end completed three further leases on the
finished developments at Barnsley and Coatbridge, generating
GBP232,500 of new income per annum.
-- Commenced construction of the Haddington Retail Park
development which, on completion in June 2021, will provide
GBP875,000 of additional income per annum.
-- Rent collection was up on quarter 2, with 91% of rents due for quarter 3 collected.
-- Rent collection for quarter 4 is projected to reach 93%,
assuming those tenants paying monthly continue to do so.
-- EPRA Vacancy rate fell to 5.1% (30 June 2020: 6.0%).
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-- Fair value independent valuation of the property portfolio at
30 September 2020 of GBP273 million, a like-for-like decrease of
2.9% compared to the valuation at 30 June 2020.
-- NAV per share at 30 September 2020 of 86.01 pence (30 June
2020: 90.24 pence), a decrease of 4.7%, taking into account the
impact of capital expenditure and the Company's borrowings.
-- NAV total return (including dividends) for the quarter of -3.6%.
-- Material Uncertainty Clause removed from the portfolio valuation.
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-- Monthly dividends maintained during the quarter at an
annualised rate of 4.00 pence per share.
-- Dividends for quarter 3 were fully covered at a rate of 139% (on a cash basis).
-- Share price total return for the quarter of -3.9%. The share
price remains at a substantial discount to NAV.
Net Asset Value
The unaudited NAV of the Company at 30 September 2020 was
GBP181.8 million, or 86.01 pence per share, a decrease of 4.7% on
the Company's NAV per share as at 30 June 2020.
Pence Per Share GBP million
NAV at 30 June 2020 90.24 190.70
---------------- ------------
Valuation of property portfolio (3.82) (8.08)
---------------- ------------
Capital expenditure (0.80) (1.69)
---------------- ------------
Income earned 2.24 4.73
---------------- ------------
Expenses & finance costs (0.85) (1.79)
---------------- ------------
Dividends paid (1.00) (2.11)
---------------- ------------
NAV at 30 September 2020 86.01 181.76
---------------- ------------
The opening NAV was subject to a valuation Material Uncertainty
Clause which has now been removed.
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
30 September 2020 and undistributed income for the quarter but does
not include a provision for any accrued dividend.
Rent Collection for quarter 3
As at 20 October, 91% of the rent for quarter 3 2020 has been
collected. To date, no rent forgiveness has been agreed unless the
Company has received some benefit in return. On a cash basis, the
dividend cover for quarter 3 was 139%.
Update on rent collection for quarter 4
As at 20 October, 88% of the rent due by 1 October has been
collected across the portfolio. This compares to 69% collected at
the same point in quarter 2 and 74% in quarter 3. If the tenants
who paid their rent monthly in October continue to do so for
November and December, it is projected that the Company will
collect 93% of the rent due for quarter 4, rising to 96% once rent
deferment and repayment plans are factored in.
With this rent collection, on a cash basis, the current dividend
level would be 139% covered by rent collected for quarter 4 and
potentially as high as 148%, after taking into account deferred
rent covered by repayment plans.
Asset management update
During the period the Company has completed five lease
transactions which will secure GBP495,500 of income per annum. At
Widnes shopping park, Costa Coffee extended its occupation on the
park by signing a new five-year lease to expire in 2025, and KFC
signed a five-year lease extension, committing to the park until
2032. Further, the works to split the former Arcadia unit finished
ahead of schedule enabling the 10-year lease (five-year break
option) to JD Sports, on a newly created unit of 6,792 sq. ft., to
complete.
At Kingston Retail Park in Hull, Costa Coffee signed a five-year
lease extension meaning its lease will now expire in 2025. In
addition, an AFL has been signed with Jack's, Tesco's value food
fascia. It will enter into a 10-year lease with a five-year break
option on the 15,000 sq. ft. unit which was vacated by Mothercare
earlier this year. The AFL is conditional on Jack's obtaining a
liquor licence and planning consent for minor works to the unit.
The rental values achieved are in line with the independent
valuer's estimated rental values.
Post period end the Company finished its developments at
Coatbridge and Barnsley. At Coatbridge the leases to Costa Coffee
(15 years with a 10-year break option) and Burger King (20 years
with a 15-year break option) have completed, and at Barnsley the
lease to Costa Coffee (15 years, no break option) has also
completed. This secures GBP232,500 of new income per annum for the
Company. All the tenants are currently on site fitting out the
units.
During the period, the EPRA Vacancy Rate has reduced from 6.0%
at 30 June 2020 to 5.1% at 30 September 2020.
Haddington development update
In August, construction started on the 48,000 sq. ft. retail
park and petrol filling station in Haddington, East Lothian.
The site, which is adjacent to several new housing developments,
is 97% pre-let to national retailers Aldi, Home Bargains, The Food
Warehouse, Costa Coffee and Euro Garages. One unit of 1,500 sq. ft.
is available to lease, and it is anticipated that this will be let
prior to the projected development completion date of June
2021.
Once completed and fully occupied, the retail park will provide
the Company with additional rental income of GBP875,000 per annum
and will have a weighted average unexpired lease term of 14.4
years, assuming the vacant unit is let for a term of
five-years.
Costs to completion will be c. GBP7.5m. This will be funded
through a combination of the Company's existing debt facilities and
cash resources. The development should generate an income return on
cost of capital employed of c. 8.00% per annum.
Company Voluntary Arrangements (CVAs)
The Company was affected by two CVAs during the period. First,
fashion retailer New Look completed its second CVA in September.
The Company has two units let to this tenant, at Widnes and
Prestatyn. In both locations the tenant will continue to trade, but
with the rents changed to a turnover only basis. This means the
rental income received by the Company will be linked to the
performance of the individual stores. The Company voted against the
CVA.
The expected loss in rent from the CVA equates to 0.96% of the
Company's contracted rent roll. The tenant did not pay its full
rent in the March or June quarters and it was assumed that it would
not pay the full rent in the September quarter either, therefore
the rent collection projections are not affected by this event.
Under the CVA there are mutual break options which give the
Company an opportunity to terminate the leases at regular intervals
over the next three years. The intention is to do so when new
tenants for the space can be identified. The Investment Manager is
exploring options for each location and will report on these in due
course.
The second CVA affecting the Company was completed by Pizza Hut.
The Company's exposure to this tenant is at Clwyd Retail Park in
Rhyl. The unit was 'Category 1' and will be retained by Pizza Hut
with the rent maintained at the pre-CVA level (and not linked to
turnover). The only change is a move from quarterly to monthly rent
payment terms.
Dividends
The Company continues 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 cumulative dividend payments in the quarter
were 0.9999 pence per share and were fully covered.
As shown in the monthly dividend announcements, the Company's
rental income receipts have been sufficient for the Company to hold
the reduced dividend with a growing margin of cover. The Board is
looking for an opportunity to start the process of building the
dividend back up again as soon as it is prudent to do so, ensuring
that it meets the REIT distribution requirements.
In the meantime, the Board will do what it can to continue to
pay the Company's shareholders monthly dividends from the income it
is able to collect, having ensured that the Company can meet its
running costs, which have been reduced where practical, and other
financial commitments over the medium term.
Cash and cash management
As at 20 October the Company had approximately GBP13.7m of cash
for operational purposes. It also has GBP8.2m of cash under its
debt facility ring fenced specifically for investment. This figure
has reduced over the period as GBP2.5m was used to fund the
developments at Coatbridge and Barnsley, and the works at Widnes.
The development at Haddington will be funded using a combination of
debt and equity, in a 60/ 40 split.
The Board and Investment Manager monitor cash levels closely and
the Company is not making any capital commitments beyond
opportunities in the current portfolio. The Investment Manager
continues to review the composition of the portfolio and will look
for opportunities to sell assets where it believes the capital can
be redeployed more favourably. As a result, cash levels could
fluctuate during any sale and reinvestment process.
Debt and loan covenants
The Company's debt is provided by Aviva Commercial Finance
Limited through two facilities, totalling GBP111.1 million of which
GBP102.9 million is drawn. There are no imminent refinancing events
as GBP56.9 million matures in 2025 and GBP54.2 million matures in
2027. The facilities have a blended all-in fixed rate of interest
of 2.86%. At the date of the September valuation, the average
loan-to-value across both facilities was 37.7%, based on portfolio
asset values and in accordance with the loan agreements' covenants.
The Company is fully compliant with all debt covenants and has
significant headroom against income and asset cover covenants.
Sustainability
The Company updated its sustainability policy on 30 July. This
followed the completion of a Materiality Assessment (MA) and
consultation with key stakeholders on a wide range of
environmental, social and governance topics. The policy, details of
the MA and key objectives and targets can be found on the Company's
website.
The Company received a Gold award from EPRA under the
'Sustainability Best Practice Recommendations' and has been awarded
the trophy in the 'Most Improved' category.
Summary
During the period, the economy started to recover as the
restrictions from the nationwide lockdown were eased. Of relevance
to the Company were the improvements in retail sale values and
volumes which were both ahead of pre-pandemic levels, with sales of
food and household goods 9.9% ahead of February 2020 levels.
However, this trend may not endure, and further lockdowns could
distort matters. Encouragingly, footfall on retail parks is
approaching 90% of 2019 levels, which is in stark contrast to high
streets and shopping centres which continue to struggle.
It is entirely consistent with this data that tenants are
committing to new leases on the Company's retail warehouse assets,
despite the challenges in the wider retail market. This shows that
the underlying fundamentals of the property portfolio, including
retail parks, remain sound and are still attractive for tenants.
The average rent of the Company's retail warehouse portfolio is
GBP14.81 per sq. ft., a level from which tenants, with business
models relevant to today's market, can trade profitably.
The uncertainties arising from the pandemic are going to be
present for the foreseeable future. The short-term focus will
remain on income, not just in terms of rent collection which has
improved quarter on quarter, but also through active asset
management to retain existing occupiers and attract new ones.
However, the acceleration in the rate of change in real estate
markets is creating opportunity and perhaps none more than in the
retail warehouse sector where the resilience of income appears
mispriced. The Board is looking at ways in which the Company can
benefit from this opportunity.
William Hill, Chairman, commented:
"The improved rental position over the period is encouraging. It
is also pleasing that the Investment Manager has again demonstrated
its ability to complete asset management initiatives which help to
minimise vacancy, mitigate valuation declines and importantly
secure more income for the Company."
Portfolio sector weightings and tenant and locational
exposure
Sector
Sector Exposure
(%)
Retail warehouse 60.6
---------
Office 26.8
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Supermarket 9.6
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Other commercial/
Leisure 1.9
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Development 1.1
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Geography
The portfolio is diversified across the regional markets.
Sector Exposure
(%)
Wales 30.3
---------
North East 15.4
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West Midlands 13.2
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North West 12.0
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Scotland 11.4
---------
Yorkshire 11.1
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East Midlands 4.2
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South West 2.4
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Top five tenants
Tenant Exposure (%)
B&Q plc 9.0
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Tesco Stores Limited 7.3
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B&M Retail Limited 6.0
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Marks & Spencer
plc 5.1
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Ernst & Young LLP 5.1
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Forthcoming events
The next interim dividend announcement is expected to be made by
5 November 2020. The next scheduled independent quarterly valuation
of the property portfolio will be conducted by Knight Frank LLP as
at 31 December 2020, with the unaudited NAV per share at that date
expected to be announced in January 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 Company intends to publish its annual
report and accounts for the year ended 30 September 2020, in
December 2020.
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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