UK Commercial Property REIT’s results for 2021 show the company generating an NAV return of 21.5% for the year (well up on 2020’s -0.9% following the effects of COVID). A 21.4% return on the portfolio was well ahead of the 16.8% return generated by the company’s MSCI benchmark. Returns were helped by much better rent collection of 97% versus 83% for 2020. Occupancy rates rose too, to 97.9% from 93.5%.
EPRA Earnings per share fell, however – from 2.71p to 2.65p. The problem was cash drag as the proceeds of sales made late in 2020 were not reinvested until the third quarter of 2021. Nevertheless, the dividend was increased from 2.3p to 2.923p. The chairman says that this reflects the board’s optimism about the outlook for the business. It also includes a top up dividend to reflect the problems in 2020. The new quarterly dividend rate has been set at 0.75p.
The return that shareholders received was impacted by a widening discount – they ended up with a total return of 12.5%. The discount went from 20.4% to 26.8% and the statement says that the board is “actively considering options to narrow the discount“.
During 2021, the company sold £74m of property, disposing of its final high street retail exposure as well as of Kew Retail Park, the latter at a price which reflected the residential opportunity presented on this site. The trust also sold two offices – Hartshead House, Sheffield and Network House, Hemel Hempstead, due to concerns around tenant covenant, and to remove the largest void that existed within the portfolio.
£216m was invested through five acquisitions completed during the year. The chair says that the market is becoming increasingly competitive in a narrower range of asset classes but the company has been able to source deals off-market as well as creating value through forward-funding development acquisitions. At the year end, the company has three ongoing developments; two student residential developments in Exeter and Edinburgh, as well as an industrial development near Gatwick. All are expected to be completed in the second half of 2022.
Fee cut
There has been a reduction in the investment management fee. From 1 April 2022, the annual fee is reduced from a rate of 0.60% of total assets up to £1.75bn, to 0.525% of total assets. The rate of 0.475% remains unchanged for total assets above £1.75bn. In addition, the company will not be charged for fees on excessive cash balances.
UKCM : UK Commercial Property hit by wider discount