UK Commercial Property REIT posted a NAV total return for the year ended 31 December 2022 of -18.1%, due to market yield expansion following increased interest rates and macro-economic position.
NAV was down 21.9% to 79.7p in the year, with the value of its portfolio down 15.4% to £1,275.6m.
Over the longer term, the group’s 10 year NAV total return is 77.9% (2021: 114.9%) compared to the AIC peer group of 52.6% (2021: 54.6%).
Reflecting the strong operational performance of the company, EPRA earnings per share was up 19% to 3.15p per share, while the company paid dividends of 3.25p (up from 2.92p in 2021). In addition, a 1.92p special dividend was paid in August 2022. The annual dividend cover was 97%.
The company has a low loan to value ratio of 20.0% and a blended interest cost of 3.68% per annum, of which 68% is at a fixed rate.
On the outlook, the company said: “Looking forward, and despite the poor performance in 2022, the outlook is more positive for the industrial sector where the company has a weighting of 59.1%. The size and speed of capital value correction in 2022 means the sector now looks better value relative to other real estate sectors. The sector continues to benefit from structural tailwinds and a positive supply/demand dynamic, with the UK-wide vacancy rate at 3.3%, (according to CoStar), a near historic low.
“Overall, we expect a recovery in UK real estate performance in 2023. The pace of repricing for UK real estate in 2022 means opportunities will arise over the course of 2023, particularly as the path of monetary policy turns more accommodative. Those sectors that benefit from longer-term growth drivers, such as the industrial and living sectors, will see greater demand return, attracted by re-based yields and rental value growth prospects. We believe that market pricing for these areas of UK real estate is finding a floor more quickly than we have seen in previous cycles.”
UKCM : Tough year for UK Commercial Property REIT as interest rates bite