TIDMUKCM
RNS Number : 2960E
UK Commercial Property REIT Ltd
05 November 2020
5 November 2020
UK Commercial Property REIT Limited ("UKCM" or "the
Company")
Net Asset Value & Dividend Statement at 30 September
2020
STRONG BALANCE SHEET, LOW LEVERAGE AND DIVERSIFIED PORTFOLIO
SUPPORT MAINTAINED DIVID
Net Asset Value
-- NAV per share of 84.0p (30 June 2020: 83.9p), resulting in a
NAV total return for the quarter of 0.7% with continued low net
gearing of 10.5%*.
-- Like-for-like portfolio capital value increased by 0.2%,
outperforming the MSCI monthly index which fell 0.7% over the same
period.
-- Portfolio value as at 30 September 2020 stood at GBP1.22
billion (30 June 2020: GBP1.22 billion). Following the successful
retail park sale referred to below it currently stands at GBP1.18
billion.
*Net gearing - Gross borrowing less cash divided by total assets
(excluding cash) less current liabilities
Positive Investment Activity
On 10 September 2020 the Company announced it had exchanged
contracts for the sale of Great Lodge Retail Park in Tunbridge
Wells, to M7 Real Estate for GBP46.25 million less rent guarantee
deductions. The transaction completed on 30 October at this
headline price, ahead of the June and September valuations; even if
all the rent guarantees have to be paid to the purchaser, the net
sale price will be in line with both valuations. The disposal
further progresses UKCM's strategy to reduce its retail exposure
and secure additional capital to invest in sectors with strong
underlying fundamentals. Following the sale, the Company's
portfolio now comprises 16.1% retail assets with no shopping centre
exposure.
Continued asset management progress
We continue to see a significant impact of the COVID-19 pandemic
on the economy and property market with ongoing uncertainty pushing
some areas of the economy into a second phase of disruption and
recent government lockdown measures. The Company's portfolio
occupancy rate has improved significantly over the last quarter to
94% compared with 90% at the end of the last quarter predominantly
due to the letting of the Company's largest void at XDock377, Magna
Park.
The current environment has, however, provided an added focus
for many tenants to engage with our asset management team on their
lease commitments to reach a mutually beneficial solution; where
merited some short term crisis-cashflow assistance has been
provided in return for extended leases. The team have had a
successful quarter completing a number of notable commercial
transactions, including:
-- Fully leasing XDock377, a 377,000 sq ft logistics unit at
Magna Park in Lutterworth to Armstrong Logistics, a pan-European
distribution company. Armstrong Logistics has signed a 15.5-year
lease with open market rent reviews at GBP6.50 per sq ft, in line
with ERV. This will add a further GBP2.45 million of annualised
income to the Company's rent roll after incentives that comprised a
capital contribution amounting to 14 month's rent free equivalent
(payable in three instalments subject to completion of lighting and
fit out) as well as 18 months' rent free from 1 September 2020
comprising 12 month's initial rent free followed by 12 months half
rent. This transaction filled the largest void in the Company's
portfolio which had accounted for 3.5% of portfolio ERV.
-- Completed lease re-gears with Odeon and David Lloyd at The
Rotunda, Kingston upon Thames. Odeon extended their lease from 7
years to 15 years in return for a 12-month incentive equivalent and
a lower fixed rental rebase in 2027 to a figure ahead of ERV. David
Lloyd extended their lease to 25 years without break at a rent of
GBP350,000 per annum subject to 5 yearly RPI linked reviews. This
has secured the scheme's two anchor tenants on long term lease
commitments.
-- Let Unit C , Dolphin Industrial Estate, Sunbury on Thames to
Avenue 51, a distribution operator on a 10 year lease with a break
at year 5 at a rent of GBP275,000 per annum which reflects GBP13.00
per sq ft, which is in excess of ERV. The estate is now fully let
and saw a valuation uplift of 4.6% over the quarter.
-- Completed lease extensions with Barker and Stonehouse and
Furniture Village at Junction 27 Retail Park, Leeds. Both tenants
agreed 5 year lease extensions giving 9.5 year and 8.75 year terms
respectively. The tenants were granted six months' rent free and
rents rebased to GBP25.00 per sq ft and GBP27.00 per sq ft
respectively, ahead of and in line with ERV. Tenant trading reports
from this retail park are, in the main, very positive.
Strong balance sheet with low gearing, significant covenant
headroom and flexibility
-- Significant financial resources of GBP232 million available.
This comprises uncommitted cash of GBP82 million plus GBP150
million unutilised credit available from UKCM's low cost, revolving
credit facility ("RCF"). The cash figure is net of an allowance for
future capital and revenue expenditure commitments and the November
2020 dividend; the available RCF figure takes account of a recent
repayment of the facility by the efficient use of surplus cash,
largely from the Tunbridge Wells sale, to reduce borrowings.
Together, these resources provide the Company with significant
liquidity and flexibility at both a corporate and portfolio level
and we are currently appraising a number of opportunities.
-- At 10.5% as at 30 September 2020, the Company's net gearing
continues to be one of the lowest in its peer group and the wider
REIT sector. The debt has an overall blended interest rate of 2.65%
per annum with a weighted maturity of 7.4 years. Post the quarter
end the repayment of GBP50 million of the RCF resulted in net
gearing reducing to 6.4%
The Company has three facilities in place and set out below are
the covenant tests as at the end of September 2020, reflecting the
rental collection position detailed further below. In addition, as
at 30 September 2020, the Company has over GBP390 million of
unencumbered property which provides further significant headroom
and flexibility with respect to the Company's covenant package.
Barclays RCF Barings 2027 Barings 2031
Actual ICR* 530% (Limit 175%) 356% (Limit 200%) 343% (Limit 200%)
------------------ ------------------ ------------------
Forecast ICR* 439% (Limit 175%) 395% (Limit 200%) 384% (Limit 200%)
------------------ ------------------ ------------------
LTV 13.3% (Limit 60%) 50% (Limit 75%) 41.8% (Limit 75%)
------------------ ------------------ ------------------
Rent Collection
As at close of business on 30 October 2020, the Company had
received payments reflecting 81% of rents due for the fourth
quarter of the year (collectively the 29 September and 1 October
English, and 28 August Scottish, quarterly billing dates) after
allowing for agreed rent deferrals and including those tenants who
have paid, by agreement, on a monthly basis. This is at
approximately the same level as when the Company provided rent
collection details for the previous quarters billed in March and
June. Rent Collection for March and June now stands at 77% and 83%
respectively which, taken with our September statistics, increase
our rental debtor number. Although the Government extended the
moratorium on lease forfeiture we continue to engage with tenants
to collect unpaid rents from the previous quarters and proactively
engage with tenants in order to provide assistance and restructure
leases where appropriate .
*Interest Cover Ratio
The table below sets out the rent collection in respect of Q4
2020 split between sectors:
Paid as %
Sector of sector billing
Industrial 90%
Office 84%
Retail 74%
Alternatives 52%
-------------------
TOTAL 81%
-------------------
Dividends
The Board has agreed to maintain the dividend of 0.46 pence per
share for the next quarter, due in November 2020. The Board will
continue to monitor the evolution of COVID-19 closely, together
with its impact on the economy, rent receipts and recurring
earnings, while balancing the income requirements of its
shareholders, and keep its future dividend policy under review. The
Board will have clear visibility of 2020 earnings at the time of
the dividend announcement in respect of Q4 and this will provide
the opportunity to review the total dividend distribution for 2020
and future dividend policy.
Ken McCullagh, Chair of UKCM, commented: "While there is no
doubt that the economic environment and outlook have remained at
the mercy of the COVID-19 pandemic, I am pleased with the
performance of the Company's portfolio over the third quarter. Rent
collection has remained above 70% and we have delivered a positive
NAV return. We have also undertaken a number of successful asset
management initiatives which have increased occupancy. These,
combined with our strong balance sheet and financial resources,
support our decision to maintain our dividend for this
quarter."
Will Fulton, Lead Manager of UKCM at Aberdeen Standard
Investments, said: " Against what remains a challenging backdrop,
we have secured a number of positive asset management outcomes
which make important contributions to the Company's future income
streams, most notably fully leasing our XDock logistics property in
Lutterworth which reduced UKCM's void rate by some 35%. We have
also progressed our strategy of selective rotation out of retail.
Our asset management team continued to be busy over the quarter,
negotiating with tenants to find innovative and mutually beneficial
ways to work together in the face of the unprecedented impact of
the pandemic. Whilst we continue to take a firm line with regards
to those tenants that fall into the 'won't pay' rather than the
'can't pay' bracket"; I am pleased that in most cases we have been
able to find solutions that provide our occupiers with breathing
space in the near term while creating longer term value for UKCM's
portfolio.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited net
asset value per share calculated under International Financial
Reporting Standards ("IFRS") over the period from 1 July 2020 to 30
September 2020:
UK Commercial Property Per Share Attributable Comment
REIT Limited (p) Assets (GBPm)
Net assets as at 30
June 2020 83.9 1,090.50
---------- --------------- -----------------------
Unrealised increase Like for like increase
in valuation of property of 0.2% in property
portfolio 0.2 2.8 portfolio
---------- --------------- -----------------------
Income earned for the Dividend cover of 115%
period 1.1 13.9 year to date
-----------------------
Expenses for the period -0.6 -8.5
-----------------------
Dividend paid on 31
August 2020 -0.5 -6.0
---------- --------------- -----------------------
Movement in lease incentives -0.1 -1.7
---------- ---------------
Net assets as at 30
September 2020 84.0 1091.0
---------- --------------- -----------------------
The EPRA NAV per share is 84.0p* (30 June 2020: 83.9p) with EPRA
earnings per share for the quarter being 0.41p (30 June 2020:
0.75p).
* The EPRA net asset value measure is to highlight the fair
value of net assets on an on-going, long-term basis. Assets and
liabilities that are not expected to crystallize in normal
circumstances, such as the fair value of financial derivatives, are
therefore excluded. The Company notes the new best practice
recommendations (BPR) for financial guidelines on its definitions
of NAV measures issued by EPRA in October 2019 and will look to
report these measures in its 2020 Annual Report although there is
not expected to be any material change in the EPRA NAV reported
above.
Sector Analysis
Portfolio Exposure Like for Like Capital Value
Value as at as at 30 Capital Value Shift (including
30 Sep 20 Sep 20 Shift (excl sales, sales & purchases)
(GBPm) (%) purchases & CAPEX) (GBPm)
-------------------- ------------- --------------------
(%)
-------------------- ------------- ---------- -------------------- --------------------
Valuation as at
30 Jun 20 1,219.2
Industrial 674.4 55.2 1.5 10.3
South East 34.5 1.7 7.0
Rest of UK 20.7 1.3 3.3
Retail 234.7 19.2 -0.9 -2.1
High St - South
East 2.1 -4.7 -1.3
High St- Rest of
UK 2.4 -1.4 -0.4
Retail Warehouse 14.7 -0.2 -0.4
Offices 174.4 14.3 -1.9 -3.4
West End 2.3 0.0 0.0
South East 4.7 -3.2 -1.9
Rest of UK 7.3 -1.6 -1.5
Alternatives 138.5 11.3 -1.4 -2.0
External valuation
at 30 Sep 20 1,222.0 100.0 0.2 1,222.0
The independent valuation as at 30 September 2020 carried out by
CBRE did not have a Material Uncertainty clause applied to it.
Net Asset Value analysis as at 30 September 2020 (unaudited)
GBPm % of net assets
Industrial 674.4 61.8%
-------- ----------------
Retail 234.7 21.5%
-------- ----------------
Offices 174.4 16.0%
-------- ----------------
Alternatives 138.5 12.7%
-------- ----------------
Total Property Portfolio 1,222.0 112.0%
-------- ----------------
Adjustment for lease incentives -21.8 -2.0%
-------- ----------------
Fair value of Property Portfolio 1,200.2 110.0%
-------- ----------------
Cash 121.7 11.2%
-------- ----------------
Other Assets 44.9 4.1%
-------- ----------------
Total Assets 1,366.8 125.3%
-------- ----------------
Current liabilities -28.1 -2.6%
-------- ----------------
Non-current liabilities
(bank loans & swap) -247.7 -22.7%
-------- ----------------
Total Net Assets 1,091.0 100.0
-------- ----------------
The NAV per share is based on the external valuation of the
Company's direct property portfolio as at 30 September 2020. It
includes all current period income and is calculated after the
deduction of all dividends paid prior to 30 September 2020.
The NAV per share as at 30 September 2020 is based on
1,299,412,465 shares of 25p each, being the total number of shares
in issue at that time.
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.
Details of the Company may also be found on the Company's
website which can be found at: www.ukcpreit.com
For further information please contact:
Will Fulton / Tom Elviss / Graeme McDonald, Aberdeen Standard
Investments
Tel: 07801039483 / 07557800617 / 07717543309
Edward Gibson-Watt / Harry Randall, J.P. Morgan Cazenove
Tel: 020 7742 4000
Richard Sunderland / Claire Turvey / Eve Kirmatzis, FTI
Consulting
Tel: 020 3727 1000
The above information is unaudited and has been calculated by
Aberdeen Standard Investments^.
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