The office landlord’s portfolio valuation fell 9.3% on a like-for-like basis to £700.7m, as high interest rates impacted on the portfolio yield.
Rent roll for the year was also down, from £71.8m in 2022 to £67.8m in 2023 as occupancy fell from 83.4% to 80.0%.
EPRA earnings per share was 5.23p for the year, down substantially from 6.6p in 2022. This did not quite cover its dividend for the year of 5.25p (2022: 6.6pps).
The group’s net LTV was 55.1% at the end of 2023, up from 49.5% and above the target of 40%. The cost of debt (incl. hedging) remained low at 3.5%, the same for the previous period, with 100% of this fixed, swapped or capped.
The weighted average debt duration was 3.5 years, with the earliest maturity being August 2024 for the £50m retail bond. The company said that significant preparatory work has been undertaken to date in respect of both debt and equity refinancing options – with a rights issue being considered.
The board said that it was confident the company would raise the finance necessary to refinance the retail bond.
Operational highlights
- 144 properties (2022: 154), 1,483 units (2022: 1,552) and 978 tenants (2022: 1,076)
- Completed 88 new lettings, equating to gross rental income of £3.8m
- Energy Performance Certificate (EPC) ratings have improved from 56.9% to 73% EPC C and above
- Disposals during the year totalled £25.0m, reflecting an average net initial yield of 4.5% (7.9% excluding vacant properties)
- Post period end, the company has completed eight disposals and two part sales for an aggregate total of £13.4m, in line with the 2023 year end valuation.
The company hopes to raise £130m from a disposal programme that comprises 58 assets, with the proceeds being used to reduce debt. £22m of sales are under offer and in legal due diligence; a further nine totalling £20m are in negotiation; 24 further disposals totalling c. £42m are on the market; and 14 potential disposals totalling c. £46m are being prepared for the market.
Stephen Inglis, chief executive of London and Scottish Property Investment Management, the asset manager, commented: “2023 was another active period for the company, in which we completed 88 new lettings, 7.1% above the company’s external valuer’s estimated rental value (ERV) as at the 2023 year end. In addition, as part of the company’s asset disposal programme to reduce the LTV, disposals during the year amounted to £25m (net of costs).
“Since 31 December 2023, the company has completed eight disposals and two part sales for an aggregate total of £13.4m (before costs), in line with 2023 year end valuation. Currently, there are some 58 assets at various stages of disposal amounting to some £130m.
“Significant preparatory work has been undertaken to date in respect of both the debt and equity options for the refinancing of the £50m August 2024 retail bond. We look forward to providing an update in due course.”