Ediston Property Investment Company, which invests in retails parks in the UK, has reported a 5.9% increase in NAV in annual results to 30 September 2022.
Its EPRA NAV per share is now 94.9p (2021: 89.6p), the uplift driven by a 10.3% portfolio valuation gain in the year to £231.4m.
The increase was due falling yields in the retail warehouse portfolio, albeit there was a decrease in the property valuation in the final quarter as some of the yield improvement was reversed as a result of markets falling back on economic concerns, the general rise in borrowing costs and the political turmoil.
Despite the uplift in NAV, the group’s share price fell by 14.2% in the year and the company traded at an average discount of 17.9%.
The group’s NAV total return for the year (including dividends of 5.0p per share) was 11.5%. The dividend was 81.2% covered by earnings.
Earnings took a hit from the sale of six assets in the year (four offices and two leisure) for £69.5m as the company completed its transition to be fully focused on retail parks.
The company has total debt of £111.1m, at a blended all-in fixed rate of 2.9%. The loans do not mature until 2025 and 2027. Gearing on 30 September 2022 was 35.41% of total assets, within investment policy limits and covenants. As at 30 September 2022, the company held £81.2m of cash.
On the outlook for the company William Hill, chairman, said: “The decision to delay the reinvestment of the sales proceeds from the office and leisure disposals has undoubtedly put the Company in a better position to take advantage of the current market uncertainty and setback in asset valuations. We can expect some interesting and attractive opportunities to arise over the coming months, given the expected further falls in market valuations. Real estate markets are now much quicker to adjust than in the past so these opportunities could come quickly. However, the Investment Manager has no specific timetable in mind for the reinvestment and will be led by opportunity and to the extent that the market has re-priced. The timing will also be driven by the need to ensure the Company remains financially resilient to the effects of any sustained market downturn.
“However, it will mean the payment of an uncovered dividend in the meantime.
“The immediate focus is on managing the existing assets to protect the NAV per share and ensure the income is maximised to reduce the extent of the uncovered dividend. The Investment Manager did an excellent job in this regard during the COVID-19 Crisis and is well-positioned to do so during a period of economic difficulty.
“The attractiveness of large parts of the retail warehouse sector was recognised by investors in the early part of the year and the consequent increase in buying activity started to drive yields down and prices up. The general correction in the last quarter has brought this to an end for the moment. However, the fundamentals remain attractive with many of the tenants in the sector making money from the rebased rents, void levels are low and the click-and-collect model continues to grow in popularity.
“There is good prospect that investor interest will return when confidence improves and pressure on asset sales is reduced as open-ended property fund redemptions normalise. This will not only benefit the Company’s NAV but should also flow through to an improved share price and a reduction in the discount. Whether this will be evident in the second half of the new financial year will remain to be seen. Nevertheless, the Board is confident that the Company will be able to emerge from the current turbulence in a strong position to reap the benefits of better times ahead.”
EPIC : Ediston Property posts 11.5% NAV total return