TIDMEPIC
RNS Number : 8136N
Ediston Property Inv Comp PLC
23 January 2019
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ("NAV") as at 31 December 2018
Ediston Property Investment Company plc (LSE: EPIC) (the
"Company") announces its unaudited NAV as at 31 December 2018.
Quarter highlights
-- The NAV total return (including dividends) for the quarter
was 0.5%, resulting in a NAV total return for the year to 31
December 2018 of 8.3%.
-- NAV per share at 31 December 2018 of 114.43 pence (30
September 2018: 115.30 pence), a decrease of 0.75%.
-- Secured a 53% rental uplift from rent review at Prestatyn Retail park.
-- Agreed new lease at an increased rent at Pallion Retail Park, Sunderland.
-- Fair Value independent valuation of the property portfolio as
at 31 December 2018 of GBP332 million, a decrease of 0.6% compared
to the valuation at 30 September 2018.
-- Annualised dividend yield of 5.4% based on an annual dividend
per share of 5.75 pence and share price of 106.5 pence (31 December
2018).
-- Fully covered dividend with cover of 119% for the quarter to 31 December 2018.
The positive NAV total return of 0.5% for the quarter was
achieved despite the negative sentiment towards the retail sector.
The quality, and defensive characteristics of the Company's retail
park portfolio, such as affordable rents, good locations and the
right planning consents helped to minimise the valuation fall.
Further, the successful completion of asset management initiatives,
which secured income for the Company, and good performance from the
office assets, ensured a positive NAV total return. The Company
continues to be engaged in interesting initiatives to enhance the
quality of the existing portfolio.
Net Asset Value
The unaudited NAV of the Company at 31 December 2018 was
GBP241.83 million, or 114.43 pence per share, a decrease of 0.75%
on the Company's NAV per share as at 30 September 2018.
Pence Per Share GBP million
NAV at 30 September 2018 115.30 243.67
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Valuation of property portfolio (1.05) (2.23)
---------------- ------------
Capital expenditure (0.09) (0.20)
---------------- ------------
Income earned 2.50 5.29
---------------- ------------
Expenses & finance costs (0.79) (1.66)
---------------- ------------
Dividends paid (1.44) (3.04)
---------------- ------------
NAV at 31 December 2018 114.43 241.83
---------------- ------------
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 2018 and undistributed income for the quarter but does
not include a provision for any accrued dividend.
Dividends Paid
The Company paid a dividend of 0.4792 pence per share in each of
October, November and December 2018, resulting in a cumulative
dividend payment in the quarter of 1.4376 pence per share. The
monthly dividend rate of 0.4792 pence per share equates to an
annualised dividend of 5.75 pence per share.
The Board remains committed to paying a monthly dividend which
is covered and sustainable, and looks to grow dividends over the
longer term. The annual dividend is expected to be fully covered,
in the absence of unforeseen circumstances, with cover for the
quarter to 31 December 2018 of 119%.
Asset Management Activity
During the quarter, the Investment Manager continued to execute
asset management initiatives.
The lease to Wallpaper Warehouse at Pallion Retail Park in
Sunderland was successfully renewed. A new five-year lease at a
rent in excess of the old passing rent was completed, supporting
the general tone of rents on the park.
At Prestatyn Retail Park the Investment Manager completed the
rent review of the Next lease increasing the passing rent by 53%.
This increase is in addition to those secured in quarter three
2018, where the annual rents received from River Island and Card
Factory increased by 24% and 18% respectively. Other rent review
negotiations are ongoing, using this rental evidence. These
successes prove that securing rental growth is still possible in
the current retail environment.
At Plas Coch Retail Park in Wrexham, unconditional planning
consent was received for the construction of a Costa Coffee
Drive-Thru unit. Construction of the unit will commence by the end
of January 2019 and is expected to be complete by the end of July
2019. Costa has signed an Agreement for Lease for a 1,800 sq. ft.
unit. On completion of the unit they will enter into a 15-year
lease, without break, at a rent of GBP63,000 per annum. A rent free
of 12 months has been granted. The rent will be reviewed
five-yearly in accordance with RPI, compounded annually but applied
five-yearly, with a collar and cap of 1% and 3% per annum
respectively. The anticipated yield on cost is c. 9%.
The completion of these initiatives continues the progress the
Company made in the year to 30 September 2018, when it completed 13
lease transactions in the office and retail warehouse portfolios.
These initiatives secured GBP3.1 million of rental income per annum
for the Company.
Market Outlook
At a macro level there is no doubt that the retail sector is
continuing to struggle and the effect of falling rents and rising
yields are now being seen in lower market valuations across the
sector. The Company's portfolio is not immune to the negative
sentiment that this brings. However, it is important to distinguish
winning retail assets from those suffering irreversible structural
decline. The asset management initiatives announced by the Company
in 2018, and the fact that there are several others ongoing,
clearly show that there is still an active occupational market for
retail warehouse parks, if they are well-located and let off
sensible rental levels.
The defensiveness of the portfolio is also evidenced by the way
in which it has performed against the background of CVAs and
administrations in the retail market. Only one unit of 5,000 sq.
ft. remains vacant following such events, representing a loss of
0.4% of the Company's previously contracted rent.
The volatility in capital markets at the end of 2018 has not yet
been seen in real estate. Domestic and international investors
still have an appetite for UK property. The longer-term investment
nature of the asset class allows investors to look beyond Brexit.
Nevertheless, the uncertainty is far from helpful and could cause
further adverse yield movement as the market reacts to near-term
events. The property portfolio will not be immune to this market
weakness, but it has defensive qualities which should help to
mitigate any downside. It is well-let to good covenants and has a
weighted average unexpired lease term of 6.4 years. Most
importantly, it also has asset management opportunities to exploit,
and the resources required to complete them, which should benefit
the Company in both capital and income terms.
Portfolio Composition
Sector
Sector Exposure
(%)
Retail warehouse 72.9
---------
Office 23.4
---------
Other commercial 2.9
---------
Development 0.8
---------
Geography
The portfolio is diversified across the regional markets and has
no exposure to Central London assets.
Sector Exposure
(%)
Wales 29.8
---------
North East 15.7
---------
North West 15.1
---------
West Midlands 12.0
---------
Yorkshire 11.6
---------
Scotland 9.6
---------
East Midlands 4.2
---------
South West 2.0
---------
Marketing
The Company continues to try and encourage greater retail demand
for its stock, particularly in light of its above average yield,
the fully covered dividend and the progress in the asset base since
the Company was launched at 100 pence, just over four years ago.
The 2019 ISA season may be challenging for all equity products, and
investment companies more generally, but it is hoped that the
Company's marketing efforts to widen the shareholder base,
particularly in tax protected wrappers, might develop increased
retail investment in the Company, with its attractive yield and
relatively defensive qualities.
William Hill, Chairman, commented:
"Despite being heavily invested in a relatively unloved sector
of the market the NAV total return of 8.3%, for the calendar year
2018, is a very satisfactory outcome and is comfortably ahead of
the reference MSCI UK All Balanced Property Fund return of 6.5%. It
clearly shows the contribution to returns from the intensive level
of active asset management in the portfolio and the benefit of
careful stock selection. The share price total return at 1.8% for
the same period is also well ahead of the -15% property equity
return also published by MSCI. The Company is not benchmark
correlated in how it approaches its investments but is cognisant of
general market direction in positioning the portfolio.
The outlook for markets, including UK commercial property, is
uncertain and there will be challenges ahead. However, investors
should be reassured of the ability of the Company to ride this out
delivering in the process a fully-covered dividend yield of 5.4%
secured on good covenants, and a WAULT of 6.4 years."
Calum Bruce, Investment Manager, commented:
"Even with the turmoil in the high street and shopping centre
markets our retail warehouse portfolio, which comprises good
quality assets, is proving to be resilient. The average rent across
these assets is just GBP15.35 per sq. ft., which provides a low
base from which to launch our asset management activities and has
allowed us to secure rental uplifts at rent review."
Forthcoming Events
The next scheduled independent quarterly valuation of the
property portfolio will be conducted by Knight Frank LLP as at 31
March 2019 with the unaudited NAV per share at that date expected
to be announced in April 2019.
The Company has shareholder approval for 'tap issuance' for up
to approximately 20 million shares, if issuance is appropriate.
This is subject to renewal at the Company's Annual General Meeting
which, as previously announced, will be held in London on 26
February 2019.
The Company intends to publish shortly a factsheet 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 - Canaccord Genuity
0207 523 8000
Calum Bruce - Ediston Properties Limited 0131 225 5599
Donald Cameron - Maitland Administration Services (Scotland)
Limited 0131 550 3763
Ben Robinson - Kaso Legg Communications 0203 137 7821
Stephanie Ross - Kaso Legg Communications 0203 137 7784
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END
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