Ediston Property Inv Comp PLC Net Asset Value ('NAV') as at 30 June 2021 (1019G)

TIDMEPIC

RNS Number : 1019G

Ediston Property Inv Comp PLC

22 July 2021

Ediston Property Investment Company plc

(LEI: 213800JRL87EGX9TUI28)

Net Asset Value ('NAV') as at 30 June 2021

Trading and Strategy Update

Ediston Property Investment Company plc (LSE: EPIC) (the 'Company') announces its unaudited NAV at 30 June 2021, and strategy update.

Quarter Summary

-- NAV per share at 30 June 2021 of 87.19 pence (31 March 2021: 84.26 pence), an increase of 3.48%.

-- Fair value independent valuation of the property portfolio at 30 June 2021 of GBP253.4 million, a like-for-like increase of 2.66% compared to the valuation at 31 March 2021.

-- Increase driven by improving investment and tenant demand within the retail warehouse sector. Retail warehousing constitutes 70.20% of the portfolio. Office valuations were stable.

   --    NAV total return (including dividends) for the quarter of 4.9% (31 March 2021 0.7%). 

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-- The development of Haddington Retail Park finished on time and budget, and the leases have completed. It will deliver an income return on capital invested of c. 8.00%.

-- Completed the sale of a 1.6-acre site at Clwyd Retail Park, Rhyl, to an owner occupier. The net price of GBP1.2m was 140% ahead of the 31 March 2021 valuation.

-- The lease to Jack's at Kingston Retail Park in Hull has completed, securing GBP195,000 of new rent per annum.

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-- Following an investment review by the Investment Manager, in conjunction with the Board, the focus of the Company's next phase of investment will be on the retail warehouse sector.

-- A portfolio of office assets has been offered to the market for sale, and a new retail warehouse park is under offer to purchase.

-- Occupier demand for the Company's vacant retail warehouse assets is encouraging, with several units under offer.

-- Continued good rent collection has ensured the 25% increase in the dividend announced in April 2021 remains well-covered. It is the Board's expectation that it will be able to increase the dividend further, and it will review the dividend level after the Company's year-end.

Net Asset Value

The unaudited NAV of the Company at 30 June 2021 was GBP184.26 million, or 87.19 pence per share, an increase of 3.48% on the Company's NAV per share as at 31 March 2021.

 
                                    Pence Per Share   GBP million 
 NAV at 31 March 2021                         84.26        178.04 
                                   ----------------  ------------ 
 Valuation of property portfolio               3.07          6.49 
                                   ----------------  ------------ 
 Capital expenditure                         (0.71)        (1.49) 
                                   ----------------  ------------ 
 Profit on sale of investment 
  properties                                   0.47          0.99 
                                   ----------------  ------------ 
 Income earned                                 2.01          4.27 
                                   ----------------  ------------ 
 Expenses & finance costs                    (0.74)        (1.57) 
                                   ----------------  ------------ 
 Dividends paid                              (1.17)        (2.47) 
                                   ----------------  ------------ 
 NAV at 30 June 2021                          87.19        184.26 
                                   ----------------  ------------ 
 

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 June 2021 and undistributed income for the quarter, but does not include a provision for any accrued dividend.

Strategy update

The Investment Manager, in conjunction with the Board, has undertaken an internal review of the Company's investment objectives and strategy. It was concluded that the Company should maintain its scope as a generalist UK commercial property investment company with a focus on income. However, for the foreseeable future, given its attractive investment potential, the Company will focus on the retail warehouse sector. This sector already accounts for 70.2% of the property portfolio.

When appropriate, in terms of value and timing, the Company intends to sell offices and recycle the investment proceeds into retail warehouse assets. As an initial step in this strategy, a portfolio of three office assets has been offered to the market for sale and a retail warehouse park has been placed under offer to purchase, using the proceeds from the Prestatyn Tesco sale.

The Company believes that there is value and opportunity in the retail warehouse sector. It has proved to have been the most resilient retail sub-sector during the COVID-19 pandemic, with favourable rent collection figures and an active tenant market. However, following the sell down across all retail markets, the retail warehouse sub-sector now looks oversold. Yields look attractive when compared to other property sub-sectors, often with income secured on high quality companies. The anticipated recovery in consumer spending will likely favour many of the retailers that trade from retail warehouses. The format works well alongside on-line retailing, supporting retailers' omnichannel strategies. In short, retail warehousing is the segment of the retail market which appears to have been mis-priced.

The Investment Manager can capitalise on this opportunity through its extensive knowledge and expertise as an investor, developer, and asset manager of UK retail warehouse assets, along with its access to investment opportunities.

The Board is confident that this strategy will ensure that the Company can fulfil its investment objective of providing investors with an attractive level of income and the potential for capital and income growth. At the same time, the Company retains the ability to reposition into other property sectors at the appropriate point in the future.

Asset management and development update

The development of Haddington Retail Park achieved practical completion on 24 June 2021, on time and on budget. The leases have now been completed, and the tenants are fitting out their units. The Retail Park is 97% pre-let to Aldi, Home Bargains, Food Warehouse, Costa Coffee and Euro Garages, with one unit of 1,500 sq. ft. available to let. Once fully occupied, the retail park will provide the Company with new contracted rental income of GBP875,000 per annum. The cost of the development was funded by a combination of drawn but uninvested debt from Aviva (60%) and the Company's own cash reserves (40%).

At Kingston Retail Park in Hull, Jack's, Tesco's value brand, has completed a 10-year lease with a five-year tenant break option. Jack's will pay an annual rent of GBP195,000. It opened for trade on 15 July 2021.

At Clwyd Retail Park in Rhyl, the Company has sold a 1.6 acre site to an owner occupier, having been granted planning permission for a food use. The net price of GBP1.2m was 140% ahead of the 31 March 2021 valuation, delivering a greater profit to the Company than would have been the case if it had completed the development of the site itself.

The Investment Manager is progressing several new lettings, lease regears and restructures across its office and retail warehouse assets, which will further improve the Company's income stream. These will be reported on when completed.

Rent Collection update and dividend

As at 14 July 2021, 98% of the rent due for Q2 2021 has been collected. At this high level of rent collection, which is forecast to continue, and with asset management deals in the pipeline, it is projected that the Company's rent roll will improve further. Therefore, following the 25% dividend increase announced in April 2021, which is fully-covered, it is the Board's expectation that it will be able to increase the dividend further in the coming months. As stated in the recent dividend declaration, it will review the dividend level after the Company's year end at 30 September 2021.

Cash and debt

As at 14 July 2021, and following the sale of the Tesco Superstore at Prestatyn, the Company had approximately GBP18.7m of cash available for investment and operational purposes. The Company also has GBP24.3m of cash under its debt facility ring fenced specifically for investment.

At the date of the June valuation the average loan-to-value across the Company's two debt facilities was 33.2%. The Company is fully compliant with all debt covenants and has significant headroom against income and asset value covenants.

Summary

Following the easing of lockdown restrictions, confidence has started to build in the retail warehouse sector. Valuations have started to increase, which has had a positive effect on the Company's NAV, and tenant demand for space has improved. These favourable conditions look set to continue.

Against this backdrop, and given the Investment Manager's expertise in the sector, the decision has been made to focus investment activity on retail warehousing for the foreseeable future. The immediate focus is on repositioning the property portfolio by selling office assets and investing into the retail warehouse sector, and on delivering asset management initiatives which will improve the Company's income stream.

William Hill, Chairman, commented:

"This is a strong statement showing significant progress over the quarter and a clear statement of intent on where the Company is directing its future investments. In this context the current dividend yield of 7.3% looks very attractive."

Calum Bruce, Investment Manager, commented:

"The retail warehouse market appears to be over the worst of the effects of the COVID-19 crisis. Tenant demand has improved, and some significant buyers are active in the sector. The Company provides good secure income underpinned by strong UK corporate covenants. It is anticipated that focusing on the retail warehouse sector will provide positive relative performance in the short to medium term."

Portfolio sector weightings and tenant and locational exposure

Sector

 
 Sector               Exposure 
                       (%) 
 Retail warehouse         70.2 
                     --------- 
 Office                   27.8 
                     --------- 
 Other commercial/ 
  Leisure                  2.0 
                     --------- 
 

Geography

The portfolio is diversified across the regional markets.

 
 Region           Exposure 
                   (%) 
 Wales                22.2 
                 --------- 
 North East           16.2 
                 --------- 
 Scotland             15.9 
                 --------- 
 West Midlands        13.6 
                 --------- 
 North West           12.8 
                 --------- 
 Yorkshire            12.1 
                 --------- 
 East Midlands         4.8 
                 --------- 
 South West            2.4 
                 --------- 
 

Top five tenants

 
 Tenant                Exposure (%) 
 B&Q plc               9.9 
                      ------------- 
 B&M Retail Limited    6.9 
                      ------------- 
 Marks & Spencer 
  plc                  5.7 
                      ------------- 
 Ernst & Young LLP     5.6 
                      ------------- 
 Boots UK Limited      4.1 
                      ------------- 
 

Forthcoming events

The next interim dividend announcement is expected to be made by 5 August 2021. The next scheduled independent quarterly valuation of the property portfolio will be conducted by Knight Frank LLP as at 30 September 2021, the Company's year-end.

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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July 22, 2021 02:00 ET (06:00 GMT)