Ediston Property Inv Comp PLC Net Asset Value as at 31 December 2017 (7149C)

TIDMEPIC

RNS Number : 7149C

Ediston Property Inv Comp PLC

24 January 2018

Ediston Property Investment Company plc

(LEI: 213800JRL87EGX9TUI28)

Net Asset Value ("NAV") as at 31 December 2017

Ediston Property Investment Company plc (LSE: EPIC) (the "Company") announces its unaudited NAV as at 31 December 2017, following a positive first quarter of the new financial year.

Quarter highlights

-- The dividend will increase by 4.5% to 5.75 pence per share, commencing in January 2018, payable in February 2018. It is expected that future dividends will remain fully covered.

-- GBP88.7 million of new equity raised, which increased the Company's equity base by 60%. The new equity, existing cash resources and additional debt were used to finance a substantial acquisition of new properties ("the Acquisition").

-- Four retail warehouse assets were acquired for GBP144 million, in a cost-efficient transaction, diversifying the portfolio and its tenant exposures, and increasing the scale of the Company.

-- An additional debt facility of GBP54.2 million, maturing in 2027, was negotiated and drawn down at an 'all-in' fixed rate of 2.73%, leaving the Company with aggregate debt of GBP111 million and gearing of 32% of total assets.

   --    Total assets of the Company increased by 70.5% to GBP347.3 million. 

-- Fair Value independent valuation of the property portfolio as at 31 December 2017 of GBP319.3 million, a like-for-like increase of 1.39% on the valuation at 30 September 2017.

-- NAV per share at 31 December 2017 of 111.02 pence (30 September 2017: 111.32 pence), a modest decrease of 0.27%, after taking into account capital expenditure and costs of the Acquisition.

Net Asset Value

The unaudited NAV of the Company at 31 December 2017 was GBP233.52 million, or 111.02 pence per share, a decrease of 0.27% on the Company's NAV per share as at 30 September 2017. Property valuations increased by 0.76 pence per share supported by capital expenditure of 0.25 pence per share. The principal movement was the incurring of a one-off transaction cost of 1.14 pence per share relating to the acquisition of a GBP144 million property portfolio, a capital raise of GBP88.7 million and a new debt facility of GBP54.2 million.

 
                                   Pence Per Share   GBP million 
--------------------------------  ----------------  ------------ 
 NAV at 30 September 2017                   111.32        145.82 
--------------------------------  ----------------  ------------ 
 Valuation increase in property 
  portfolio                                   0.76          1.59 
--------------------------------  ----------------  ------------ 
 Capital expenditure (excluding 
  costs of the Acquisition)                 (0.25)        (0.53) 
--------------------------------  ----------------  ------------ 
 Income earned                                1.66          3.50 
--------------------------------  ----------------  ------------ 
 Expenses & finance costs                   (0.63)        (1.33) 
--------------------------------  ----------------  ------------ 
 Dividends paid                             (0.86)        (1.80) 
--------------------------------  ----------------  ------------ 
 Equity raised                                0.16         88.66 
--------------------------------  ----------------  ------------ 
 Costs of issuing new equity                (0.67)        (1.40) 
--------------------------------  ----------------  ------------ 
 Costs of the Acquisition                   (0.47)        (0.99) 
--------------------------------  ----------------  ------------ 
 NAV at 31 December 2017                    111.02        233.52 
--------------------------------  ----------------  ------------ 
 

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 2017, and undistributed income for the quarter, but does not include a provision for any accrued dividend.

Dividends Paid and Dividend Increase

The Company paid dividends of 0.4587 pence per share in October and 0.4583 pence per share in November and December 2017, resulting in a cumulative dividend payment in the quarter of 1.3753 pence per share.

As a result of an improvement in dividend cover, it was announced on 15 November 2017 that it was the Company's intention to increase the annualised dividend level by 4.5% to 5.75 pence per share, from 5.5 pence per share, being a monthly rate of 0.4792 pence per share. This increased dividend level is to commence in respect of the month ending 31 January 2018 and will be paid in late February 2018.

The Board remains committed to paying a monthly dividend which is progressive and sustainable in its cover.

Transactional Activity - A Significant Step Forward

Growth in the Company was a strategic priority of the Board in 2017 providing it could be achieved in a manner that was advantageous to shareholders.

The Company acquired four retail warehouse parks for GBP144 million in an off-market transaction in December 2017. The Acquisition has had a positive impact on the Company, increasing its total assets by 70.5% to GBP347.3 million. The Acquisition has significantly improved the Company in terms of total assets, equity base and the structure of the portfolio.

The Acquisition was part funded by the issue of 79.3 million new shares at a price of 111.75 pence per share, raising GBP88.7 million and enlarging the capital base of the Company by 60%. 32.7 million of the new shares (GBP36.5 million) were issued to the vendor as part consideration for the portfolio. The balance of the consideration was met from a new debt facility, existing cash resources, and the cash raised by issuing new shares to other parties.

The Board believes the Acquisition should bring benefits to the income and capital value of the Company over successive periods, as well as helping the secondary market for the Company's shares through greater liquidity, and reducing the Total Expense Ratio (TER) as a result of having a larger capital base.

The new assets, which are located in Hull, Prestatyn, Barnsley and Widnes, all have value-add potential and suit the investment style and experience of the Company's Investment Manager. The acquired properties improve tenant diversification, increase the weighted average unexpired lease term of the Company's property portfolio, and the additional income enhances dividend cover.

The Company acquired the four assets in a very cost-efficient manner, which considerably reduced the negative impact that transaction costs would usually have on the net asset value of the Company. Property costs of the Acquisition were just 0.7% of the purchase price. It is not uncommon for the costs of purchasing property assets to be 6.8% of the purchase price. This represents a saving to the Company of approximately GBP8.8 million.

The transaction is a significant step forward for the Company:

   --     it increased the Company's equity base by 60%; 
   --     total assets increased by 70.5% to GBP347.3 million; 
   --     contracted rent increased by 79.3%; and 

-- the TER, calculated on total assets, reduced to 0.85%, as at 31 December 2017 (30 September 2017: 1.06%).

Debt

During the period, to help fund the Acquisition, the Company secured an additional debt facility of GBP54.2 million, from Aviva Commercial Finance Limited. The facility, which matures in 2027, was drawn down at an 'all-in' fixed rate of 2.73%. The Company's total debt is now GBP111 million at a blended 'all-in' fixed rate of 2.86%. Gearing at 31 December was 32.0% of total assets and within investment policy limits.

Cash and Future Funding

The Company has approximately GBP25.8 million of cash available for investment on management initiatives within the enlarged property portfolio. The Investment Manager has identified uses for a significant proportion of the cash available over the coming months which should be accretive to NAV.

The Company also has shareholder approval for an annual equity placing programme of up to 60 million shares which could be used for significant property acquisitions, if appropriate to do so, further strengthening the equity base of the Company.

Outlook

Demand for UK real estate remains strong from both domestic and international investors. However, with the possibility of a further rise in interest rates, continuing geopolitical uncertainty and the prospect of a slowing economy, it seems likely that the market wide reduction in property yields we have seen over recent years could be at or close to an end.

It is expected that future returns will be generated from the resilience of portfolio income, the ability to grow income where there are supply /demand imbalances and the skill to generate new sources of income from management initiatives on assets in the portfolio. The Board believes the Company has an Investment Manager who can take advantage of this type of market and, following the Acquisition and capital raise, the Company has the asset base to exploit these opportunities to full advantage.

Portfolio Composition

Sector

 
 Sector              Exposure 
                      (%) 
------------------  --------- 
 Retail warehouse       75.34 
------------------  --------- 
 Office                 21.48 
------------------  --------- 
 Other commercial        3.18 
------------------  --------- 
 

Geography

The portfolio is diversified across the regional markets and has no exposure to Central London assets.

 
 Sector           Exposure 
                   (%) 
---------------  --------- 
 Wales               30.61 
---------------  --------- 
 North West          15.38 
---------------  --------- 
 North East          15.34 
---------------  --------- 
 Yorkshire           12.37 
---------------  --------- 
 West Midlands       11.03 
---------------  --------- 
 Scotland             9.22 
---------------  --------- 
 East Midlands        4.43 
---------------  --------- 
 South West           1.62 
---------------  --------- 
 

William Hill, Chairman, commented:

"The equity raise and portfolio purchase is a significant step forward in the development of the Company. Successfully executing this complex transaction in such a short space of time has significantly enhanced the Company, growing its total assets to more than GBP347 million and increasing the contracted rental income by over 79%. With a fully covered dividend, which is increasing by 4.5%, and an enlarged capital base, the Company is in an excellent position to progress during 2018."

Calum Bruce, Investment Manager, commented:

"Having refreshed the portfolio earlier in the year with two sales and an acquisition, it made sense to apply cash resources and use the opportunity to expand the Company's capital base by acquiring the four retail park assets. We are an experienced investor in, and developer of, retail parks and believe it is the right time to be investing in the sector.

The new assets have a strong income stream, and also offer the prospect of both rental growth and yield compression. We are working on a number of asset management initiatives on the new properties and continue to exploit value-add opportunities we have identified across the entire portfolio."

Forthcoming Events

The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank as at 31 March 2018 with the NAV per share at that date expected to be announced in April 2018.

The Company continues to have a placing programme for up to 60 million new shares in place, which it hopes to deploy if suitable property acquisition opportunities are sourced.

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 - Canaccord Genuity 0207 523 8000

Calum Bruce - Ediston Properties Limited 0131 225 5599

   Donald Cameron - Maitland Administration Services (Scotland) Limited           0131 550 3763 

David Masters - Lansons 0207 294 3687

Laura Cronin - Lansons 0207 294 3607

This information is provided by RNS

The company news service from the London Stock Exchange

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January 24, 2018 02:00 ET (07:00 GMT)