TIDMSTP
RNS Number : 9721C
Stenprop Limited
23 October 2020
STENPROP LIMITED
(Registered in Guernsey with registration number 64865)
LSE share code: STP JSE share code: STP
ISIN: GG00BFWMR296
23 October 2020
MLI TRADING UPDATE Q2 FY21: VACANCY FALLS AND RENTS RISE
Stenprop Limited ("Stenprop" or the "Company"), the UK multi-let
industrial property company, today publishes a trading update on
its UK multi-let industrial ("MLI") portfolio for the period from 1
July 2020 to 30 September 2020 and up-to-date information on
transactions and rent collections across the Company's whole
portfolio.
Commenting on the trading update Paul Arenson, CEO of Stenprop,
said:
"The continued high demand for our product, which reflects the
quality of our MLI portfolio and our asset management team, has
enabled us to deliver a trading update today that is characterised
by strong rental growth, high levels of rent collection and a
further reduction in vacancy. Whilst we draw confidence from this
performance over recent months, we are also aware of the threat
from the pandemic and Brexit and the uncertainty this brings,
particularly as we enter the winter months.
"Our transition to a 100% MLI company by March 2022 remains on
track, with our portfolio exceeding five million sq ft for the
first time during the quarter following several significant
acquisitions. We were also pleased to complete the first disposal
of a German retail park which was achieved at a premium to book
value and have the remaining German retail assets under offer."
Continued strong demand for MLI driving rental growth and
improving occupancy
-- Further improvement in occupancy across the MLI portfolio to
93.3% as at 30 September 2020 (30 June: 92.0%, 30 March:
91.0%).
-- Like-for-like passing rent up 2.5% during the quarter
(previous quarter: 1.0%) and 5.1% over 12 months.
-- GBP1.48 million per annum of new rental income (1) contracted
through 58 new lettings (previous quarter: 25) and 19 lease
renewals (previous quarter: 17) over 205,299 sq ft.
-- 16% average uplift on the previous passing rent on new
lettings (previous quarter: 22%) and 16% on lease renewals
(previous quarter: 20%).
-- Average rental incentives on all new lettings and renewals
was 2.5 months on an average lease term of 3.6 years (2.6 years to
earliest break) (previous quarter: 3.1 months on term of 4.2 years
(3.4 years to earliest break)).
-- As at 30 September 2020, the average passing rent of the
portfolio was GBP5.34/sq ft, compared to an estimated rental value
of GBP5.87/sq ft. This reflects a 9.9% premium to the average
passing rent at quarter end, illustrating the built-in reversion
within the portfolio.
-- The most significant transactions completed were a new
letting on 16,600 sq ft at Poulton Close Business Centre in Dover,
on a five-year term certain.
-- We have also supported several customers requiring more space
during the pandemic, most notably at Coningsby Business Park in
Peterborough, where we let an additional 28,300 sq ft to two
existing customers.
Our Industrials.co.uk portal experienced significant gains in
traffic and enquiries
-- 31% increase in direct leasing calls on our own portal (previous quarter: +36%).
-- Total direct enquiries received across all channels (e.g.
portals, website, calls and emails) up 37% versus the previous
quarter.
-- Industrials.co.uk website user numbers up 19% versus the
previous quarter, with the number of pages maintained from last
quarter indicating a higher quality of visitor with strong buying
intent.
Strong leasing momentum continues into third quarter
-- 49 deals were under offer at the end of the quarter over a
total of 208,000 sq ft of space (previous quarter: 44 deals on
131,000 sq ft).
-- A further nine deals had exchanged and were awaiting
completion on a total of 20,000 sq ft (previous quarter: 11 deals
over 48,000 sq ft).
Rent collections continue to improve
As at close of business on 21 October 2020, Stenprop can report
the following rent collection statistics:
Monthly Rents (2020) Quarterly Rents Total
(2020)
========================================================= ========================= ======
County April May June July August September October Apr Jul Oct
/ Sector - Jun - Sep - Dec
====== ==== ===== ===== ======= ========== ======== ======= ======= ======= ======
UK MLI 88% 84% 85% 85% 86% 81% 68% 92% 90% 70% 84%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
UK Urban
Logistics 100% 100% 97% 99%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
Guernsey
Office 100% 100% 100% 100%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
Germany 86% 87% 92% 98% 97% 99% 99% 94%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
Switzerland 0% 0% 50% 50% 50% 100% 100% 50%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
Total 81% 81% 86% 89% 89% 91% 84% 95% 94% 80% 88%
------ ---- ----- ----- ------- ---------- -------- ------- ------- ------- ------
Across the MLI portfolio the October quarterly rents collected
as at 21 October (22 days after the due date) reflected 70% of
rents billed. As at the equivalent date after the March and June
quarter days the rent collections stood at 64% and 66% of rents
billed respectively, illustrating the improving picture of
payment.
Stenprop has now collected 88% of rents due since April 2020 to
date and has agreed to defer a further 1% until a later date.
Strong progress in building MLI portfolio and non-core asset
sales
Stenprop took advantage of disruption in the investment market
to secure four new MLI acquisitions during the quarter totaling
GBP36 million and 436,000 sq ft of MLI space, taking the total MLI
portfolio to over five million sq ft for the first time. We also
completed the sale of the first of our Berlin retail centres, which
collectively means that MLI now comprises approximately 63% of
Stenprop's total property portfolio.
-- Disposal of Neuc lln Carrée Retail Park in Berlin at above
book value - on 30 September 2020 we completed the disposal of Neuc
lln Carrée Retail Park for EUR27 million, releasing approximately
EUR15.5 million of sales proceeds. The sale reflected a EUR3.6
million (15%) premium to the 31 March 2020 book value.
-- Acquisition of Tunstall Trade Park in Stoke-on-Trent - on 14
September 2020 we completed the purchase of this asset for
GBP5,900,000, reflecting a net initial yield of 6.25% and a capital
value of GBP104 psf.
-- Acquisition of Excelsior Industrial Estate in Glasgow - on 9
September 2020 we completed the purchase of Excelsior Industrial
Estate for GBP5,200,000, reflecting a net initial yield of 6.95%
and a capital value of GBP85 psf.
-- Acquisition of St Andrews Industrial Estate in Glasgow - on
31 July 2020 we completed the purchase of St Andrews Industrial
Estate for GBP5,500,000, reflecting a net initial yield of 7.3% and
a capital value of GBP75 psf.
-- Acquisition of Bowthorpe Park Industrial Estate in Norwich -
on 21 July 2020 we completed the purchase of Bowthorpe Park for
GBP19,600,000, reflecting a net initial yield of 6.35% and a
capital value of GBP80 psf.
The above transactions have already been announced as and when
they happened. For full details please visit
https://stenprop.com/investors/regulatory-news-service/
Significant cash balances and low LTV
As at close of business on 30 September 2020, Stenprop's
loan-to-value ratio (LTV) was 38% on drawn facilities, and
approximately 31% when allowing for free cash(2) .
Other assets performing well
-- Europa Drive, Sheffield - renewed a lease on a 41,000 sq ft
industrial property to John Menzies plc. The lease is for a term of
10 years which is subject to tenant break options after years 3 and
5. The new rent is GBP260,000 per annum, reflecting a 4% premium to
the previous passing rent.
-- Trafalgar Court, Guernsey - settled a 1 July 2020 rent review
at GBP36.50 psf, reflecting a 0.7% uplift and delivering additional
rental income of GBP21,700 per annum. We also completed a lease
renewal on a small office suite at an annual rent of GBP9,423 per
annum, reflecting a 4.7% uplift on previous passing rent.
Julian Carey, Managing Director, commented:
"Over the last quarter we saw the strong MLI demand witnessed in
June convert into lettings and bring our MLI vacancy down
significantly. The strength of demand has allowed us to maintain,
and in some cases increase our quoting rents without giving away
higher incentives. It has also helped us in our dealings with
current customers and progress the collection of historic rent
arrears. Against this backdrop of strong tenant demand, we have
also started to facilitate the natural rotation of new businesses
which are well placed to thrive in the current climate in place of
those that are experiencing difficulties and needing to downsize or
leave.
"Our Industrials platform continues to develop rapidly,
providing us with invaluable live insight on market conditions and
portfolio performance, and enabling us to react and transact
quickly via the use of our digital Smart Lease. Enquiry levels over
the quarter reached record highs as demand for industrial space
grew in the aftermath of the first wave of Coronavirus. Whilst we
successfully capitalised on this opportunity to bring our vacancy
rate down over the period, we remain cautious and prepared for new
challenges as we enter the second wave of the pandemic.
"Rent collections remain resilient, with levels stabilising
around the 90% collection mark. UK Government intervention prevents
significant additional action against the remaining debtors, but we
believe that a material percentage of these will pay given their
continued trade from the premises when normal landlord/tenant
relations resume. Our strategy remains to maintain regular dialogue
and to closely monitor the situation.
"The pipeline of potential acquisitions is the strongest it has
been for over 12 months, and with over 60% of our portfolio now in
the multi let industrial sector, we remain on course for our target
100% weighting in around 18 months' time."
Notes
The financial information on which this trading update is based
has not been reviewed or reported on by the Company's external
auditors.
(1) Contractual Rental Income represents the annual income
secured from a lease contract ignoring any incentives and break
options in the lease.
(2) Calculated as gross borrowing less unrestricted cash,
divided by gross asset value based on our 31 March 2020 valuations
adjusted for subsequent acquisitions and disposals and changes in
foreign exchange rates.
To receive details of all future announcements made by Stenprop,
please add your name and email address to our Investor News email
list at https://stenprop.com/media/stenprop-investor-news/
For further information:
Stenprop Limited 44(0)20 3918 6600
Paul Arenson ( paul.arenson@stenprop.com )
Julian Carey ( julian.carey@stenprop.com )
James Beaumont ( james.beaumont@stenprop.com )
Numis Securities Limited (Financial Adviser) 44(0)20 7260
1000
Hugh Jonathan
Vicki Paine
FTI Consulting (PR Adviser) 44(0)20 3727 1000
Dido Laurimore
Richard Sunderland
Richard Gotla
Neel Bose
Stenprop@fticonsulting.com
Java Capital 27 (0)11 722 3050
(JSE sponsor)
About Stenprop:
Stenprop is a UK REIT listed on the LSE and the JSE. The
objective of the Company is to deliver sustainable growing income
to its investors. Stenprop's investment policy is to invest in a
diversified portfolio of UK multi-let industrial (MLI) properties
with the strategic goal of becoming the leading MLI business in the
UK. For further information, go to www.stenprop.com .
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END
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