TIDMEPIC
RNS Number : 8189T
Ediston Property Inv Comp PLC
23 July 2020
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ('NAV') as at 30 June 2020
And Trading Update
Ediston Property Investment Company plc (LSE: EPIC) (the
'Company') announces its unaudited NAV at 30 June 2020.
Quarter Summary
-- 96% of the Company's let retail warehouse portfolio by floor area is now open and trading.
-- Two pre-let development projects progressing delivering
GBP232,500 of new income per annum secured on long leases with a
projected return on cost of 9%.
-- Three lease renewals have completed securing GBP392,130 of income per annum.
-- 79% of rents for Q2 have been collected, including 100% of
the rent from office tenants. Rent collection for Q3 is on track to
reach 88%.
-- EPRA Vacancy rate of 6.0% (31 March 2020: 5.7%).
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-- Fair value independent valuation of the property portfolio at
30 June 2020 of GBP281.1 million, a like-for-like decrease of 4.3%
compared to the valuation at 31 March 2020. The valuation remains
subject to a Material Uncertainty Clause.
-- NAV per share at 30 June 2020 of 90.24 pence (31 March 2020:
96.23 pence), a decrease of 6.2%, taking into account the impact of
capital expenditure and the Company's borrowings.
-- NAV total return (including dividends) for the quarter of -5.0%.
--------------------------------------------------------------------------------------
-- Monthly dividends maintained during the quarter but at an
annualised rate of 4.00 pence per share from May 2020 to reflect a
reduced level of rent collection.
-- Dividends, at the new level, were fully covered over the quarter at a rate of 112%.
-- Share price total return for the quarter of +21%, but remains
at a substantial discount to NAV.
Net Asset Value
The unaudited NAV of the Company at 30 June 2020 was GBP190.7
million, or 90.24 pence per share, a decrease of 6.2% on the
Company's NAV per share as at 31 March 2020.
Pence Per Share GBP million
NAV at 31 March 2020 96.23 203.36
---------------- ------------
Valuation of property portfolio* (6.03) (12.75)
---------------- ------------
Capital expenditure (0.09) (0.19)
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Income earned 2.28 4.81
---------------- ------------
Expenses & finance costs (1.00) (2.11)
---------------- ------------
Dividends paid (1.15) (2.42)
---------------- ------------
NAV at 30 June 2020 90.24 190.70
---------------- ------------
* As a result of the ongoing material impacts the COVID-19
emergency is having on the economy and all markets, the Company's
valuer has continued with a Material Uncertainty Clause in its
valuation of the Company's portfolio.
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 2020 and undistributed income for the quarter but does not
include a provision for any accrued dividend.
Rent Collection
As at 21 July 79% of the rent for Q2 2020 has been collected.
100% of the rent due from the office tenants has been collected. A
further 7% has been deferred and will be paid by tenants in
instalments. To date, no rent forgiveness has been agreed unless
the Company has received some benefit in return.
As at 21 July, 78% of the rent for Q3 2020 which was due by 1
July has been collected across the portfolio. This is a higher
collection rate than for the same data point in the previous
quarter when the impact of COVID-19 first emerged. Several tenants
now pay their rent monthly and are not required to make further
payments until 1 August and 1 September. These payments will be
monitored closely as the quarter progresses, with further updates
provided with future dividend announcements.
If tenants who paid monthly for July continue to make payments
for August and September, and if deferred rent is paid, it is
anticipated that the Company will collect 88% of the rent due for
Q3.
On this basis, the current dividend level would be 130% covered
by rent collected for Q3 and potentially as high as 137%, after
taking into account deferred rent covered by repayment plans due
from the previous quarter.
Following the easing of restrictions, the percentage of the let
retail warehouse accommodation that has re-opened has risen to 96%.
Footfall is returning to retail warehousing faster than to high
streets and shopping centres. The British Retail Consortium's
Shopper Track data for the three weeks to 5 July, a period covering
the opening of non-essential retailers, shows a year on year
decline in footfall of 26.3% compared to 58.4% for the high street.
This is not surprising, given the general attributes of retail
warehousing providing more spacious units, open-air settings, free
car parking and room for shoppers to queue safely. It may also
partly explain the success the Company has had with securing recent
lease renewals on units let to Next, River Island and Boots at its
retail warehouse park in Widnes. Encouragingly, a number of tenants
are reporting trading levels ahead of their forecasts.
Asset management and post period end activity
The Company continues to complete transactions to protect or
enhance value in the portfolio. The Investment Manager has a strong
record from before the crisis in being able to convert what might
appear to be an occupational adversity into occupational
opportunity.
During the period and post period end the Company has completed
three lease renewals at Widnes Shopping Park. Boots, Next and River
Island have extended their occupation on the park by signing new
five-year leases. These transactions secure GBP392,130 of income
per annum gross of lease incentives and ensure that 25,459 sq. ft.
of space remains let. The rental achieved is in line with the
independent valuer's estimated rental values.
As reported last quarter, the Company is splitting the former
Arcadia unit in two having signed an Agreement for Lease ('AFL')
with JD Sports, who will lease a unit of 6,792 sq. ft. Works are
progressing on schedule and practical completion is anticipated by
the end of July 2020 after which the lease to JD Sports will
complete.
The Company is back on site at Coatbridge progressing the pod
developments. The units have been pre-let to Costa Coffee and
Burger King and on completion will provide a combined rental income
of GBP160,000 per annum.
At Barnsley East Retail Park, Barnsley, the Company has started
construction work on a drive-thru unit for Costa Coffee. Costa has
signed an AFL for a 1,800 sq. ft. unit and on completion of the
construction works will enter into a 15-year lease (no break).
Costa will pay a rent of GBP72,500 per annum.
Company Voluntary Arrangements (CVAs), administrations and
vacancy rate
The Company has been negatively affected by one CVA and two
administrations during the quarter. The expected loss in rent from
these equates to 3.6% of the contracted rent roll. These tenants
did not pay rent in the March quarter and it was assumed that they
would not pay in the June quarter, therefore the rent collection
projections are not affected by these events.
The EPRA Vacancy Rate has risen marginally from 5.7% at 31 March
2020 to 6.0% at 30 June.
Dividends
The Company has continued to pay a monthly dividend. The first
payment in the period was at 0.4792 pence per share relating to
income received during the December to March quarter. Dividend
payments in May and June were at a reduced 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 1.1458 pence
per share and fully covered.
The Board considered that it was not prudent to distribute
uncollected rent, given the uncertainties caused by the COVID-19
crisis, and reduced the monthly dividend rate accordingly. 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 21 July the Company had approximately GBP11.5m of cash for
operational purposes and GBP10.7m of cash under its debt facility
ring fenced specifically for investment. The importance of
maintaining cash levels to protect the Company's balance sheet,
given the illiquidity of the underlying assets is clear. The
Company has cut back on expenditure. No new capital commitments,
outside those within the current portfolio, will be made until
market conditions are more certain, unless the Company is investing
proceeds from any future asset sales.
Debt and loan covenants
The Company's debt is provided by Aviva Commercial Finance
Limited through two facilities, totalling GBP111.1 million of which
GBP100 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 June valuation, the average
loan-to-value across both facilities was 35.7%, 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.
Summary and outlook
The challenges for the real estate sector are evolving from the
practicalities of working with measures to prevent the spread of
the virus to managing the implications for the sector of a severe
economic downturn, as well as continued restrictions on daily
life.
Despite some recent improvement from the depths of the first
quarter of 2020, it remains appropriate to recognise the
possibility of further tenant failures and additional declines in
values until confidence in the future business environment
improves.
Notwithstanding this, it is important to note that the Company's
portfolio has been relatively resilient to what has been thrown at
it to date, particularly in income terms. Initial signs show that
rent collection for Q3 is on track to beat Q2 at 88% of the rent
that has been billed. In addition, the Company has continued to
achieve lease renewals at the valuation ERV.
Protecting and growing income remains a top priority. Active
asset management is also key to this and the Company is well placed
to capitalise on opportunities which are identified given the
Investment Manager's track record of delivering asset management.
Of course, COVID-19 has changed the perspective and our effort is
focussed on being on the front foot to move quickly and make things
happen, rather than wait for the recovery to occur.
William Hill, Chairman, commented:
"The Board is encouraged by the above average rent collection
statistics and the ability of the Investment Manager to protect the
rental base as well as creating new sources of revenue.
Nevertheless, it is under no illusion that the road ahead remains
bumpy. The Board therefore remains focussed on the Company's
income, its NAV and efforts to improve the rating of the Company's
shares in this 'liquidity shy' market. However, the Company's
ambitions remain high and this approach does not detract from
ensuring the Company is in the right place at the right time to
seize the opportunities that lie ahead from the acceleration of
change brought on by the crisis."
Portfolio sector weightings and tenant and locational
exposure
Sector
Sector Exposure
(%)
Retail warehouse 60.4
---------
Office 27.3
---------
Supermarket 9.3
---------
Other commercial/
Leisure 1.9
---------
Development 1.1
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Geography
The portfolio is diversified across the regional markets.
Sector Exposure
(%)
Wales 30.1
---------
North East 15.7
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West Midlands 13.7
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North West 12.3
---------
Scotland 10.9
---------
Yorkshire 10.8
---------
East Midlands 4.1
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South West 2.4
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Top five tenants
Tenant Exposure (%)
B&Q plc* 8.9
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Tesco Stores Limited* 7.2
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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 5.0
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* Denotes a tenant providing 'essential services' which could
stay open for trade during lockdown.
Forthcoming events
The next interim dividend announcement is expected to be made by
6 August 2020. The next scheduled independent quarterly valuation
of the property portfolio will be conducted by Knight Frank LLP as
at 30 September 2020, with the unaudited NAV per share at that date
expected to be announced in October 2020.
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 Properties
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
This information is provided by RNS, the news service of the
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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