REIT News - August 2022

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Welcome to Ince Corporate Finance’s REIT News update...

REIT Market Overview

July was a month of interim results announcements. On a sector basis, performance remained strong, within the logistics, warehousing and office sectors.

Capital & Regional completed the sale of its residential development project to Long Harbour for c. £21.65 million. Custodian REIT acquired two retail warehouses in Measham, Leicestershire, and Droitwich, Worcestershire, for an agreed purchase price of £8.9 million. Derwent London exchanged contracts to sell a 103,700-sqft freehold office building for £85 million. Primary Health Properties sold a portfolio of 13 smaller medical centres, located across England and Wales, for a price of £27.7 million. Supermarket Income REIT acquired three separate supermarkets in Chineham, Basingstoke, and one in Carcroft, Doncaster, for a total purchase price of £82.9 million.


Market Activity
(Ticker, Share Price, EPRA NAV per Share, Premium/Discount)


AEW UK REIT Plc (LON:AEWU, 119.4p, 126.5p, -5.6%)

AEW UK REIT, which directly owns a value-focused portfolio of 37 regional UK commercial property assets, announced its unaudited Net Asset Value and interim dividend for the three-month period ended 30 June 2022. Key details are:

  • NAV of £200.40 million or 126.50 pence per share as at 30 June 2022 (31 March 2022: £191.10 million or 120.63 pence per share);
  • NAV total return of 6.53% for the quarter (31 March 2022 quarter: 7.37%);
  • 4.49% like-for-like valuation increase for the quarter (31 March 2022 quarter: 4.74%), driven by a 17.62% like-for-like increase from the office sector associated with the anticipated sale of Eastpoint Business Park in Oxford;
  • EPRA earnings per share ("EPRA EPS") for the quarter of 1.50 pence (31 March 2022 quarter: 1.55 pence). This is expected to return to the Company's target level of 2.00 pence per quarter once the sales of both Eastpoint Business Park, Oxford and Bath Street, Glasgow complete during August and sales proceeds have been reinvested;
  • Interim dividend of 2.00 pence per share for the three months ended 30 June 2022, in line with the targeted annual dividend of 8.00 pence per share;
  • New £60 million debt facility with AgFe priced at a fixed total interest cost of 2.959% for five years. Following this refinancing, the existing RBSi loan facility has been repaid in full;
  • Loan to NAV ratio at the quarter end was 29.94% (31 March 2022: 28.26%). The Company had a cash balance of £4.51 million and its loan facility was fully drawn;
  • Acquisition of Railway Station Retail Park in Dewsbury for a purchase price of £4.70 million, a capital value of £82 per sqft. The price reflects a net initial yield of circa 9.4%;
  • Investment pipeline of value-orientated assets showing net initial yields between 6.75% and 10% is under exclusivity;
  • Post quarter end, contractually committed disposal of Eastpoint Business Park, Oxford for £29.0 million, a 16% premium to the asset's value within the published NAV. Completion of the sale will take place on 8th August 2022. As a result of the transaction having exchanged post quarter end, a further 2.5p is expected to be realised in the Company's Net Asset Value per share;
  • Post quarter end, exchanged contracts for disposal of Moorside Road, Swinton for £1.71 million, at a 58% premium to the acquisition price, reflecting a net initial yield of circa 6.6% and a capital value of £75 psft.


Assura Plc (LON:AGR, 68.7p, 57.2p, +20.1%)

Assura plc, the leading primary care property investor and developer, announced its Trading Update for the first quarter to 30 June 2022. Key details are:

  • Portfolio currently stands at 662 properties with annualised rent roll of £141.3 million;
  • 17 property additions (five development completions and 12 acquisitions); total cost of £110 million;
  • Two developments moved onto site taking total to 14; total cost of £150 million (March 2022: 17, £166 million);
  • Five lease regears completed in the period (£0.4 million of existing rent);
  • Completed three capital asset enhancement projects (total spend £1.2 million) and currently on site with a further five (total spend £6.8 million);
  • Immediate development pipeline of 18 schemes, totalling a further £154 million (March 2022: 20, £158 million);
  • Immediate acquisitions pipeline stands at £47 million;
  • 39 lease re-gears covering £5.8 million of existing rent roll in the current pipeline;
  • Pipeline of 19 capital asset enhancement projects (projected spend £11.5 million) over the next 2 years;
  • At 30 June 2022 net debt stood at £1,109 million with cash and undrawn facilities of £266 million;
  • All drawn facilities are unsecured with fixed interest (weighted average interest rate of 2.3%) and weighted average maturity 7.7 years.


Big Yellow Group Plc (LON:BYG, 1,425.0p, 1,034.6p, +37.7%)

Big Yellow Group, the UK's brand leader in self-storage, provided the following update on trading for the first quarter ended 30 June 2022. Key details are:

  • Occupancy across all 106 stores increased by 213,000 sqft compared to a gain of 289,000 sqft in the same quarter last year, a gain of 138,000 sqft in 2020 and a gain of 125,000 sqft in 2019;
  • Like-for-like closing occupancy was 88.3%, a decrease of 2.7 ppts from the same time last year. Closing occupancy for all stores was 86.5%, a decrease of 3.6 ppts from 90.1% last year, impacted by new store openings;
  • Closing net achieved rent per sqft for all stores was £30.33, an increase of 5% from the same time last year, with average rate up 3% on the same quarter last year. The regional Armadillo portfolio, acquired in July last year has lower average rents, which has impacted the year-on-year rate growth. The like-for-like closing net rent per sqft was up 12% compared to the same time last year, and the like-for-like average achieved rate was up 11%;
  • The Group's like-for-like store revenue increased by 9% compared to the same quarter last year. The total revenue increase compared to the same quarter last year of 24% includes the increasing impact of the recent Big Yellow store openings and a full quarter's contribution from the Armadillo stores.


Capital & Regional Plc (LON:CAL, 57.2p, 102.0p, -43.9%)

Capital & Regional, the UK convenience and community focused shopping centre REIT, announced that it completed the sale of the residential development project at its 17&Central community shopping centre in Walthamstow, London, to specialist residential developer Long Harbour for c. £21.65 million. The development is in line with the Company's strategy of seeking ways to create value from its portfolio assets through the reconfiguring or repurposing of underutilised space for other uses, which also help drive footfall and operational performance. The Company plan to use the majority of the proceeds received to further reduce its loan facility within The Mall Limited Partnership.

In recent months, the Company has secured vacant possession of the units required to unlock the Long Harbour residential site, including JD Sports, Deichmann, Timpsons and Costa Coffee, who have all been successfully relocated within the centre. In parallel, the Company has been progressing various enabling works, including utility and infrastructure diversions that will facilitate the start of the residential construction, which is expected to commence imminently.

As part of the transaction, the Company has been granted new 250-year head leases over the entire site from the London Borough of Waltham Forest.


Custodian REIT Plc (LON:CREI, 108.8p, 119.7p, -9.1%)

Custodian REIT, the UK property investment company focused on smaller lot sizes, announced the disposal of a retail unit in Weston-super-Mare at auction for £0.7m, in line with the most recent valuation. A five-year lease renewal had recently been completed with Superdrug with annual rent decreasing from £124k to £60k.

Custodian REIT also announced the purchase of two drive-through restaurants on Clifton Moor Retail Park, York, adjacent to York’s northern bypass, which connects to both the A1(M) and M62. The units are occupied by Burger King and KFC franchisees with a weighted average unexpired term to first break or expiry of 9.7 years. The units have an aggregate passing rent of £163,250 per annum, reflecting a net initial yield of 5.07%. The agreed purchase price of £3.025 million was funded from the Company’s existing debt facilities, moving net gearing to 22.5% loan to value.

Custodian REIT announced two further property purchases. The Company acquired two retail warehouses in Measham, Leicestershire, and Droitwich, Worcestershire, occupying an aggregate 40,077 sqft. The units are both let to DFS Furniture with a weighted average unexpired term to first break or expiry of eight years and an aggregate passing rent of £894,103 per annum, reflecting a net initial yield of 9.43%. The agreed purchase price of £8.9 million was funded from the Company’s existing debt resources, increasing net gearing to 23.4% loan to value, which remains within the Company’s target range. Following this acquisition the Company’s diversified portfolio’s weighting to retail warehouses has increased to 24%, with 38% industrial, 16% office, 11% high street retail and 11% other, comprising 164 properties located in strong economic areas across the UK.

Custodian REIT announced the acquisition of a 47,882 sqft industrial facility, which is fully let, to Container Components Limited with 20 years remaining on the lease for £3.5 million. The property produces an index linked passing rent of £227,440 per annum, reflecting a net initial yield of 6.10%, and is located two miles from junction 29 of the M1 near Chesterfield, Derbyshire. The acquisition was funded from the Company’s existing debt facilities, increasing net gearing to 23.8% loan to value, which remains within the Company’s target range. This acquisition increases the industrial weighting within the Company’s diversified portfolio of 165 properties to 38%, with the balance comprising 24% retail warehouse, 16% office, 11% high street retail and 11% other, all of which are in strong economic areas across the UK.


Derwent London Plc (LON:DLN, 2,868.0p, 3,959.0p, -27.6%)

Derwent London announced that it has exchanged contracts to sell Bush House, South West Wing WC2, a 103,700-sqft freehold office building. The disposal price is £85m before costs, reflecting a premium to December 2021 book value. The building is being sold with vacant possession. This sale further reduces the Company’s low loan-to-value ratio and provides additional funds to invest in its development pipeline.

Ediston Property Investment Company Plc (LON:EPIC, 78.6p, 96.1p, -18.2%)

Ediston Property Investment Company plc has completed the sale of its leisure asset at Southwater Square, Telford, which is let to Rank Group Gaming Division Limited on a lease that expires on 28 September 2022. The sale price of £5m and is 67% above the most recent valuation of the property (31 March 2022). The property was acquired by an owner-occupier.

The sale is in line with the Company's revised investment strategy, announced in Q3 2021, to sell its office and leisure assets and to reinvest the proceeds in retail warehouses. Southwater Square was the last non-retail warehouse property in the portfolio.


Great Portland Estates Plc (LON:GPE, 619.5p, 835.0p, -25.8%)

Great Portland Estates plc published a trading update for the quarter to 30 June 2022. Key details are:

  • £6.0 million of new annual rent signed, including £1.9 million of Flex space and £1.7 million of retail space;
  • Market lettings 2.6% ahead of March 2022 ERV;
  • £9.5 million of further lettings under offer (up from £9.4 million at May), 1.9% ahead of March 2022 ERV;
  • c.£33 million of new annual rent in negotiation, demonstrating demand for prime offices and best in class flexible spaces;
  • Sale of 6/10 Market Place, W1 for £28.2m, 4.1% net initial yield, 3% above March 22 book value;
  • Acquisition of 6/10 St Andrew Street, EC4 completed for £30.0 million;
  • Acquisition of 2 Cathedral Street, SE1 for £7.1 million, 4.4% net initial yield;
  • Total liquidity of £343 million;
  • LTV of 22.2%, weighted average interest rate of 2.4% (fully drawn), cash & undrawn facilities of £343 million;
  • Total prospective capex of c. £970 million (including refurbishments), including £15.1 million to complete pre-let 50 Finsbury Square development and a further £267.0 million to deliver prospective scheme at 2 Aldermanbury Square, EC2.
Hammerson Plc (LON:HMSO, 25.0p, 64.0p, -61.0%)

Hammerson reported half-year results. Key highlights are:

  • Adjusted earnings up 154% to £51m (H1 21: £20m) reflecting:
    • Stronger LFL GRI (+16%) and LFL NRI (+48%);
    • Gross administration costs reduced 20%, 2023 cost reduction target (vs 2019) delivered 18 months early;
    • Net finance costs 25% lower year-on-year;
    • A strong year-on-year contribution from Value Retail (+£16m).
  • IFRS profit of £50m (H1 21: £376m loss);
  • Adjusted earnings per share up 0.7p to 1.1p;
  • Group portfolio value of £5.3bn;
  • Completed £194m of disposals and anticipate delivering a further c. £300m by end of 2023;
  • EPRA NTA increased by £34m to £2,874m (FY21: £2,840m);
  • EPRA NTA per share -2p to 62p reflecting scrip;
  • Net debt down 6% to £1.7bn at 30 June 2022 (FY21: £1.8bn);
  • Total liquidity of £1.2bn including undrawn committed facilities, and £0.5bn of cash;
  • No Group debt maturities not covered by current cash holdings until 2025;
  • Headline LTV 37% (FY21: 39%), fully proportionally consolidated (FPC) LTV 45% (FY21: 47%);
  • Footfall strengthening to end Q2 at 90% of 2019 levels;
  • Sales approaching 2019 levels overall, and ahead of 2019 levels in Q2;
  • £10.5m leasing deals concluded in H1 22, with headline leasing 31% above previous passing, net effective rent +1% vs ERV;
  • Improved rent collection: FY21 now at 94%; H1 22 92%; Q3 22 84%;
  • Footfall and brand sales recovery continues at Value Retail, spend per visit +7% above 2019 levels.

The Board has declared an interim cash dividend of 0.2 pence per share. Subject to shareholder approval, the Board intends to provide an enhanced scrip dividend alternative of 2.0 pence per share. This is currently expected to be the last enhanced scrip dividend alternative for discharging the Company's remaining SIIC obligation of approximately €57m arising from the profit on disposal of 75% of Italie Deux in 2019. Both the cash dividend and the enhanced scrip dividend alternative will be paid as a non-Property Income Distribution ("Non-PID") and treated as an ordinary UK company dividend


Home REIT Plc (LON:HOME, 119.0p, 111.2p, +7.0%)

Home REIT plc, which funds the acquisition and creation of high-quality properties across the UK that are dedicated to providing accommodation to homeless people, announced that it has deployed £84.9 million of the net proceeds raised in the Company's significantly oversubscribed £263 million equity issue in May 2022.

The purchase of the Properties was made from the Company's c. £300 million acquisition pipeline, which has been under due diligence and legal negotiation since earlier this year. This pipeline was in an advanced stage of preparation ahead of the equity raise and assembled through the Investment Adviser's network of relationships, according to the specific need within each local authority area.

In addition to this, the Company acquired 33 additional properties located in England for an aggregate purchase price of £7.4 million (including acquisition costs) shortly prior to the Subsequent Placing.


Impact Healthcare REIT Plc (LON:IHR, 117.6p, 114.9p, +2.3%)

Impact Healthcare REIT plc, the real estate investment trust that provides investors with exposure to a diversified portfolio of UK healthcare real estate assets, in particular care homes, announced that its Placing and Offer for Subscription have raised total gross proceeds of approximately £22.3 million.


Industrials REIT Plc (LON:MLI, 168.0p, 177.0p, -5.1%)

Industrials REIT, the UK multi-let industrial property company, announced that it has completed the sale of Rose Kiln Court, Reading for a total consideration of £5.88 million. The sale price represents a £0.135 million or 2.2% discount to the 31st March 2022 valuation of £6.015 million. The property, which comprises 31,687 sqft of hybrid office/industrial accommodation on a 1.88-acre site, is currently vacant following the expiry of a lease across the entire building to Thames Water in April 2022. Rose Kiln Court is located close to Reading town centre and presents an attractive repositioning and redevelopment opportunity for a variety of commercial and residential uses.

Industrials REIT published a trading update on its MLI portfolio for the period 1 April 2022 to 30 June 2022. Key details are:

  • The average passing rent increased by 27% on the aggregate of all new lettings and lease renewals, the highest growth rate achieved to date, driven by average uplifts of 30% and 23% for renewals and new lettings, respectively (previous quarter: 16% on renewals, 34% on new lettings and 22% overall). This is the seventh successive quarter of +20% average uplifts and is driven by a combination of the strong reversionary potential within the portfolio, with average passing rents now lagging estimated market values by 19.0% (previous quarter: 12.4%), and the continued occupier demand for affordable space;
  • 89 letting transactions completed during the quarter across £2.1 million of leases, with the average lease at just £23,600 per annum representing a small proportion of customers' overall cost base (previous quarter: 86 lettings and £2.9 million).  This comprised 62 lease renewals, itself a record, with a further 27 new lettings across a total of 307,226 sqft.  A further 11 lettings exchanged during the quarter across 19,350 sqft, taking the total number of leases exchanged or completed during the quarter to the second highest period on record at 326,576 sqft;
  • ERV growth was also strong over the quarter, with like-for-like growth of 6.4% for the period and 11.4% over the past year (previous quarter: 1.2% for the quarter and 4.3% over the year).  These new ERV highs reflect the fact that the average letting was concluded at a premium of 10.1% to March 2022 ERVs and that demand continues to outstrip supply of available units (previous quarter: 8.3% premium to December 2021 ERVs);
  • At 30 June 2022 there were 388,000 sqft of lettings under offer across 81 transactions, of which 148,000 sqft related to new lettings and 240,000 sqft to existing customer renewals; 
  • The average lease signed during the quarter was for 4.6 years with a tenant break option after 3.4 years, whilst the average leasing incentive fell to a new low of 0.9 months' rent free on average (previous quarter: 4.9 years, 3.7 years and 1.2 months respectively);
  • Like-for-like rental growth over 12 months was 3.2%, rising to 4.5% when excluding an outstanding rent-free incentive at one of the Group’s single-let assets in Ashby-da-la-Zouch which runs until November 2022 having recently renewed the lease (previous quarter: 4.4%); 
  • Like-for-like passing rents across the whole portfolio grew 1.5% during the quarter, thereby tracking in line with target revenue growth of 4-6% per annum, rising to 2.6% for the quarter when excluding Ashby-de-la-Zouch;
  • 62% of completed leases were contracted through Industrials REIT's short-form digital 'Smart Leases' (previous quarter: 53%);
  • 76% of leases signed included at least a 3% annual uplift in rent throughout the term of the lease (previous quarter: 65% of leases signed);
  • Occupancy across the MLI portfolio remained stable at 93.7% (previous quarter: 93.8%);
  • website users were up 7.8% over the year (previous quarter: +8.3%), which coincided with several user experience enhancements aimed at improving traffic and conversion rates;
  • 87% of rents due in the quarter ended 30 June 2022 had been collected by 26 July 2022;
  • 95% of rents due for the financial year ended 31 March 2022 had been collected by 26 July 2022;
  • 98% of rents due for the financial year ended 31 March 2021 had been collected by 26 July 2022, equalling normal pre-Covid collection levels;
  • Anticipated rent collections for the financial year to 31 March 2023 are expected to be at normalised pre-Covid levels of 98%+.


LXi REIT Plc (LON:LXI, 148.4p, 142.6p, +4.1%)

LXi REIT plc, the specialist inflation-protected very long income REIT, announced that, following the completion of the merger with Secure Income REIT and the drawing of the £385 million acquisition facility ("the Acquisition Facility"), the Company has fully hedged the cost of the Acquisition Facility using an interest rate cap. As a result, 100% of the enlarged group's debt is either fixed or capped, with the same maximum all-in rate of 4.1% pa.


NewRiver REIT Plc (LON:NRR, 87.7p, 134.0p, -34.6%)

NewRiver REIT provided the following trading update in respect of the first quarter ended 30 June 2022. Key updated are:

  • Fourth consecutive quarter of positive leasing spreads to ERV, with Q1 leasing achieved +1% vs March 2022 ERV;
  • Strong Q1 rent collection of 96%, which is tracking in line with Q4 FY22 (currently at 98%);
  • Occupancy increased to 96.5% from 95.6% at 31 March 2022;
  • Balance sheet strength maintained with interest rate fixed on drawn debt and no maturity on drawn debt until March 2028;
  • Cash position improved to £93m at 30 June 2022 from £88m at 31 March 2022;
  • Completed head office relocation to net zero carbon building unlocking £0.5m of annual admin cost savings.


Palace Capital Plc (LON:PCA, 281.0p, 390.0p, -27.9%)

Palace Capital, the Main Market property investment company that has a diversified portfolio of UK commercial real estate in selected locations outside of London, announced that it is commencing a share buyback programme to repurchase up to 2.3m ordinary shares of 10 pence each in the capital of the Company representing approximately 5% of the Company's Ordinary Shares. The aggregate purchase price of all Ordinary Shares acquired under the Programme will be no more than approximately £7 million (excluding stamp duty and expenses).

Palace Capital provided an update on the Company's strategy. In light of shareholder feedback the Board will focus on maximising cash returns to shareholders, whilst continuing to remain mindful of consolidation in the Real Estate sector as part of its considerations.

The Board will continue to pursue the sale of the Company's industrial portfolio of eight assets. Should a sale of the industrial portfolio be successful, it is intended that the net proceeds of the sale, after repayment of debt relating to the industrial portfolio, will be distributed to shareholders by either a special dividend or buyback via a tender offer.


Picton Property Income Plc (LON:PCTN, 92.4p, 122.9p, -24.8%)

Picton provided a trading update for the quarter ended June 2022. Key details are:

  • 2.0% increase in Net Asset Value;
  • Net assets of £670.0 million (31 March 2022: £657.1 million);
  • NAV/EPRA NTA per share increased by 2.0% to 122.9 pence (31 March 2022: 120.4 pence);
  • Total return for the quarter of 2.8% (31 March 2022: 7.6%);
  • LTV of 22.3% (31 March 2022: 21.2%);
  • Like-for-like portfolio valuation uplift of 1.9% over the quarter;
  • Completed three small lettings, in the office and retail sectors, and renewed / regeared three leases, all in the industrial sector, with a combined annual rent of £0.3 million, 6% ahead of the March 2022 ERV;
  • Secured an average increase of 12% against the previous passing rent from four rent reviews in the industrial and retail sectors, with a combined annual rent of £0.3 million, which was 14% ahead of the March 2022 ERV;
  • Purchased a multi-let mixed use London asset for £13.7 million;
  • Occupancy of 91%, principally reflecting the existing vacancy in the above acquisition (31 March 2022: 93%);
  • Interim dividend of 0.875 pence per share declared in respect of the period 1 April 2022 to 30 June 2022 and to be paid on 31 August 2022 (1 January 2022 to 31 March 2022: 0.875 pence per share);
  • Annualised dividend equivalent to 3.5 pence per share, delivering a dividend yield of 3.8%, based on 25 July 2022 share price;
  • Dividend cover for the quarter of 103% (31 March 2022: 103%).


Primary Health Property Plc (LON:PHP, 147.6p, 116.7p, +26.5%)

Primary Health Properties, one of the UK's leading investors in modern primary healthcare facilities, announced that it exchanged contracts to sell a portfolio of 13 smaller medical centres, located across England and Wales, for a price of £27.7 million. The sale price is 13% above PHP's 31 December 2021 book value, representing around 60bps of yield compression. Following completion of the sale, which is anticipated to take place later in July 2022, PHP's portfolio will comprise 511 assets, of which 20 are in Ireland, with a contracted rent roll of just under £143 million.

Primary Health Properties announced that it has acquired the Strawberry Hill Medical Centre, Newbury for a total consideration of £7.25 million. The property is fully let to two GP practices, providing 100% government backed income, with an unexpired term of 19 years; serving substantial patient lists; and benefiting from facilities for carrying out broader medical services such as minor operations and blood tests. Following completion, PHP's portfolio will comprise 512 assets, of which 20 are in Ireland, with a contracted rent roll of £143 million.

Real Estate Investors Plc (LON:RLE, 35.7p, 58.8p, -39.2%)

Real Estate Investors, the UK's only Midlands-focused REIT with a portfolio of commercial property across all sectors, provided an H1 trading update and capital return strategy for the six months ended 30 June 2022:

  • Disposed of 11 assets during H1 2022 totalling £5.7 million - an aggregate uplift of 27.9% on December 2021 valuations;
  • 2021 and 2022 asset sales to date of £23.2 million;
  • Further pipeline disposals in legals totalling approximately £10 million;
  • Disposal proceeds used to pay down £5.7 million of debt in H1 2022;
  • Average cost of debt of 3.5% with 94.5% of debt fixed (as at 30 June 2022);
  • Covered dividend for Q1 2022 of 0.8125p per share (Q1 2021: 0.75p per share);
  • Contracted rental income of £14 million p.a.;
  • Normalised rent collection levels of 95.16% (for current quarter);
  • Portfolio occupancy of 85.88%;
  • Total sales for 2021 and 2022 of £23.2 million, with further sales in legals of approximately £10 million;
  • No acquisitions were made during H1 2022 due to the lack of suitably priced assets. Management will continue to monitor the market place for attractive acquisition opportunities.

The Board believes the share price discount to the net tangible assets ("NTA") is unwarranted and that it is in the best interests of all shareholders to take steps to reduce this discount. Therefore, the Company continued with its opportunistic sales programme to satisfy high private investor demand at prevailing prices and advantageous yields and, subject to the completion of property sales, it intends to continue to repay debt. If the significant share price discount to NTA persists, the Company will consider a special dividend, share buyback or other form of capital return to shareholders, the structure and timing of which is yet to be decided. The quantum of any return of capital will be set to ensure that a prudent loan-to-value ratio is maintained, whilst also being mindful of the overall liquidity in the Company's shares. The Board recognises the need for market consolidation within the real estate and REIT market and remain alert to options that align with the interests of its shareholders.

Residential Secure Income Plc (LON:RESI, 110.5p, 107.9p, +2.4%)

Residential Secure Income, which invests in independent retirement living and shared ownership, announced its
unaudited third quarter net asset value as at 30 June 2022 and to update on recent corporate activity for the
period. Key details are:

  • Quarterly interim dividend of 1.29p paid out, in line with FY22 target of 5.16p per share, and a further 1.29p quarterly interim dividend declared;
  • Dividend 97% covered by recurring income during the quarter:
    • Dividend cover is stable after factoring in the February share issuance, with at least 96% expected for the full year;
    • Inflation-linked rental income provides ongoing platform for dividend progression.
  • >99% rent collection maintained, in line with historic and pre-pandemic levels;
  • EPRA Net Tangible Assets (NTA) total return for the quarter of 2.0% (2.2p);
  • Total property portfolio of 3,291 homes with a value of £389 million up 0.9% or £3.2 million on a like-for-like fair value basis in the quarter:
    • Movement driven by inflation-linked rental reviews growth of 6.1% on 1,142 properties in the quarter (36% of rent roll), driving 2.3% like-for-like rental growth;
    • Portfolio is focused on £223 million of independent retirement living and £135 million shared ownership homes.
  • ReSI maintains a robust balance sheet with a loan-to-value ratio of 44%. Total debt was £185 million at 30 June 2022 with an average 22-year maturity and low-weighted average cost of 2.2% (92% fixed or hedged); 
  • 59% of directly rented EPC D-rated properties upgraded to C in nine months, in line with target of achieving minimum EPC ratings of C for all directly rented properties by 2025;
  • £15 million equity raise in February 2022, fully committed to £28 million of shared ownership:
    • Over 180 occupied shared ownership homes acquired (£21 million) in April, with a further 39 committed in May (£7 million) to complete in a staggered manner over the next few months;
    • Occupancy increased to 96% as at June 22 (June 21: 95%);
    • Shared ownership portfolio now 100% occupied as at April 2022;
    • Retirement void loss is slightly below pre-COVID average at c. 6% on a trailing-twelve-month basis, following successful transfer of property management in-house.


SEGRO Plc (LON:SGRO, 1,095.0p, 1,249.0p, -12.3%)

Segro reported half-year results. Key highlights include:

  • Adjusted pre-tax profit of £216 million, up 29% compared with the prior year (H1 2021: £168 million). Adjusted EPS is 16.9 pence, up 22% (H1 2021: 13.8 pence) including 1.3 pence relating to recognition of performance fees from the SELP joint venture;
  • Adjusted NAV per share is up 10% to 1,249 pence (31 December 2021: 1,137 pence) driven by a 7.2% increase in the valuation of the portfolio, reflecting asset management initiatives, a 5.9% estimated rental value (ERV) growth and profitable development activity;
  • £55 million of new headline rent commitments during the period (H1 2021: £38 million), including £28 million of new pre-let agreements, and a 24 per cent average reletting spread on rent reviews and renewals;
  • Further growth in the development pipeline with 1.3 million sqm of projects under construction or in advanced pre-let discussions equating to £118 million of potential rent (31 December 2021: £82 million), of which 70% is associated with pre-lets, substantially de-risking the 2022-2023 pipeline;
  • £2.1 billion of new financing, including a €1.15 billion Green bond and €225 million US private placement helping to maintain long-term debt structure and providing high visibility on funding costs with no significant debt maturities until 2026. 94% of debt is fixed or capped;
  • Balance sheet positioned to support further, development-led, growth with access to over £2 billion of available liquidity (including the US private placement debt signed in July) and a low level of gearing reflected in an LTV of 23% at 30 June 2022 (31 December 2021: 23%);
  • Interim dividend increased by 9% to 8.1 pence (2021: 7.4 pence), in line with the usual practice of setting the interim dividend at one-third of the previous full year dividend.


Supermarket Income REIT Plc (LON:SUPR, 129.0p, 113.0p, +14.2%)

Supermarket Income REIT announced the acquisition of a Tesco superstore, M&S Foodhall and an Iceland store in Chineham, Basingstoke, along with the acquisition of an Asda supermarket in Carcroft, Doncaster, for a total purchase price of £82.9 million (excluding acquisition costs), reflecting a combined net initial yield of 4.9%. The 18.7-acre Chineham site has been acquired from Tellon Capital and comprises a 60,938-sqft net sales area Tesco superstore with a large omnichannel operation, a 16-pump petrol filling station and 878 parking spaces. The store is an online hub for Tesco, operating 13 home delivery vans and a dedicated Click & Collect facility in the car park. The property also includes an M&S Foodhall, Iceland store and further complementary non-food tenants. The Tesco store has a remaining lease term of 12 years and is subject to 5-yearly open market rent reviews. The Asda store in Carcroft comprises a 45,813-sqft net sales area omnichannel supermarket, which sits on a 5.2-acre site and includes 340 parking spaces. Asda has operated from the site since the 1970s with the store being fully refurbished in 2019. The store supports Asda's online fulfilment in the area through Click & Collect. The property was acquired via a direct sale and leaseback transaction with Asda under a new 100-year lease. The property is subject to 5-yearly rent reviews, which are upwards only and CPI-linked (subject to a 2.5% cap and a 0.0% floor).

The Company has arranged a new £412.1 million unsecured credit facility with a bank syndicate comprising Barclays, Royal Bank of Canada, Wells Fargo and Royal Bank of Scotland International. This is the first time the Company has accessed unsecured debt financing.

The new unsecured facility consists of three tranches:

  • £250.0 million five year revolving credit facility (with two further one year extension options, up to a maximum term of seven years);
  • £100.0 million three year term loan (with two further one year extension options, up to a maximum term of five years); and a
  • £62.1 million eighteen month term loan (with one further 18 month extension option, up to a maximum term of three years).

The new unsecured facility will be used in part to refinance £255.0 million of existing secured commitments in addition to providing further debt capital to continue to fund the growth of the Company. The new unsecured facility has a margin of 1.5% over SONIA and a weighted average term of six years.


The PRS REIT Plc (LON:PRSR, 110.0p, 99.0p, +11.1%)

The PRS REIT, the closed-ended real estate investment trust that invests in high-quality, new build, family homes in
the private rented sector, provided an update on activity for the fourth quarter of its financial year ended 30 June
2022. Key details are:

  • During the fourth quarter of the financial year, 170 new rental homes were added to the Company's portfolio, taking the total number of homes added during the financial year to 802. This raised the number of completed homes in the portfolio to 4,786 as at 30 June, an increase of 20% year-on-year;
  • The estimated rental value ("ERV") of the 4,786 completed homes at 30 June 2022 was £47.8m per annum, a 27% increase on the same point last year (30 June 2021: 3,984 homes with an ERV of £37.5m per annum). A further 693 homes, with an ERV of £4.4m per annum, were contracted at 30 June 2022, and are at varying stages of the construction process;
  • During the period, the Company completed the acquisition of a contracted site and acquired an additional development site, utilising debt funding:
    • The contracted site is located at Baberton Grange, Nuneaton, and comprises 50 newly completed and let homes, with an ERV of £0.5m per annum. It was bought from Sigma Capital Group Limited after an independent valuation;
    • The new development site is at Drakelow Park, Burton-Upon-Trent, and will deliver 41 homes when fully completed, with an ERV of £0.4m, at a gross development cost of £7.3m.
  • The Company plans to acquire a further three sites in the first half of the new financial year.


Unite Group Plc (LON:UTG, 1,165.0p, 940.0p, +23.9%)

Unite Group, the UK's leading owner, manager and developer of student accommodation, announced an update
on current trading and quarterly property valuations for the Unite UK Student Accommodation Fund ('USAF') and the
London Student Accommodation Joint Venture ('LSAV') as at 30 June 2022. Key details are:

  • Good progress in sales during Q2, with strong demand from both UK and international students;
  • Across the Group's entire property portfolio, 90% of rooms are now sold for the 2022/23 academic year, ahead of pre-pandemic reservation levels (2021/22: 81%, 2020/21: 80%, 2019/20: 89%);
  • Positive progress in pricing, particularly in the second half of the sales cycle;
  • Given the strong sales performance to date, the Company is increasingly confident in delivering occupancy of 97% for the 2022/23 academic year and achieving rental growth at or just above 3.0-3.5%;
  • Demand also remains strong from international students across multiple markets;
  • Well protected, but not immune, from the impacts of inflation on the cost base. The Company has a high degree of visibility over its two largest costs, staff and utilities, which together account for around 60% of the combined operating costs and overheads. Utility costs are fully hedged through 2022 and 2023 and for a substantial portion of 2024;
  • Limited near-term refinancing requirements with less than 10% of see-though debt maturing before late 2024;
  • Interest rates are fixed or capped for 85% of the existing investment debt and. As a result of rising interest rates on the variable portion of its debt, the see-through borrowing cost has increased to 3.3% at the end of H1 (December 2021: 3.0%);
  • At 30 June 2022, USAF's property portfolio was independently valued at £2,967 million, a 3.5% increase on a like-for-like basis during the quarter. The valuation increase in USAF is driven by rental growth of 0.8% and a 13 basis point reduction in property yields. The portfolio comprises 29,042 beds in 71 properties across 19 university towns and cities in the UK. The average value per bed is approximately £102,000;
  • LSAV's investment portfolio was independently valued at £1,942 million, a 4.0% increase on a like-for-like basis during the quarter. The valuation increase in LSAV is driven by rental growth of 1.1% and a 12 basis point reduction in property yields. LSAV's investment portfolio comprises 9,716 beds across 14 properties in London and Aston Student Village in Birmingham. The average value per bed is approximately £200,000;
  • The USAF and LSAV portfolios are now valued at weighted average yields of 4.9% and 3.9% respectively;
  • Valuation growth in the quarter reflects the continued strong demand for high quality student accommodation assets from institutional investors, including the acquisition of Student Roost by GIC and Greystar announced in May;
  • During the second quarter, Unite increased its investment in USAF through the acquisition of £141 million of units through participation in an equity raise and acquisition of existing units in the secondary market. In aggregate, the purchases, which were priced in-line with USAF's March 2022 NAV, increase Unite's USAF ownership to 28.2% on a pro-forma basis (31 December 2021: 22.0%).

Unite Group reported interim results for the six months ended 30 June 2022. Key highlights are:

  • Adjusted earnings up 32% to £96.0 million (H1 2021: £72.6 million);
  • Adjusted EPS up 32% to 24.0p (H1 2021: 18.2p);
  • IFRS profit before tax of £334.1 million (H1 2021: £130.4 million), driven by adjusted earnings and a valuation gain of £214.9 million in the period (H1 2021: £54.3 million);
  • EPRA NTA per share of 940p, up 7% (31 December 2021: 882p);
  • IFRS NAV per share up 8% to 948p (31 December 2020: 880p);
  • Total accounting return of 8.3% for H1 (H1 2021: 3.9%);
  • Interim dividend of 11.0p (H1 2021: 6.5p), targeting 80% payout of adjusted EPS for full year;
  • University applications for 2022/23 up 7% on pre-pandemic levels;
  • Record application rate for school leavers and significant demographic growth over the next decade;
  • Reservations ahead of pre-pandemic levels at 92% (2021/22: 83%, 2020/21: 82%, 2019/20: 91%);
  • Confident of achieving 97% occupancy and rental growth of 3.5-4.0% for 2022/23 (previously 3.0-3.5%);
  • Targeting rental growth of 4-5% for 2023/24;
  • Annual repricing of rents through multi-year nomination agreements and direct-let sales;
  • Cost protection through hedging, implemented platform efficiencies and growing fee income;
  • 5.0% increase in property values in H1 for like-for-like portfolio, reflecting strength of investor demand;
  • Secured pipeline of £1,032 million and 6,192 beds, generating a 6.0% yield on cost;
  • 2022 development completions fully let, adding 2p to adjusted EPS from 2023;
  • £42 million of asset management schemes completing for 2022/23, delivering 7% yield on cost, with growing pipeline of future opportunities;
  • LTV increased to 30% at 30 June 2022 (31 December 2021: 29%);
  • £236 million of disposals contracted in H1 (Unite share) at a blended yield of 5.7%;
  • Acquisition of £141 million of USAF units (equivalent to GAV of £181 million) at an effective yield of 5.1%.
Warehouse REIT Plc (LON:WHR, 151.0p, 173.8p, -13.1%)

Warehouse REIT, a specialist urban and 'last-mile' industrial warehouse investor, announced that to fund its acquisition of Bradwell Abbey Industrial Estate in Milton Keynes, it has drawn a further £63.0 million from its Revolving Credit Facility with its existing club of lenders comprising HSBC, Bank of Ireland, Royal Bank of Canada and Barclays. The Company's debt facilities carry a cost of SONIA plus a lending margin. In addition to the drawdown above, the Company has also taken out two additional interest rate caps of £100.0 million each for three and five years respectively which serve to cap the SONIA rate in the Company's debt facilities at 1.5%. These are in addition to the two existing £30.0 million interest rate caps, the Company has in place, which expire in November
2022 and 2023 and have caps at SONIA rates of 1.50% and 1.75% respectively.

Warehouse REIT has been granted outline planning permission from Cheshire East Council for a further 1,020,000 sqft of warehousing at its flagship logistics park development at Radway Green. The final phase of the scheme will see the Company develop five units ranging from 90,000 sqft to 400,000 sqft, whilst the result of the hybrid application also saw detailed permission for highway access to the site secured.

Since 2017, Warehouse REIT has assembled a 102-acre site in what is a premier logistics location in the North West, located less than 1.5 miles from J16 of the M6 motorway. In 2021, the Company announced that it had secured planning consent for a combined 803,000 sqft of modern warehouse space across six new high-bay units, ranging from 22,000 sqft to 340,000 sqft.

Earlier this year Warehouse REIT entered into a development agreement with Panattoni, the largest logistics real estate developer in Europe, who will be responsible for delivering the 1.8 million sqft scheme with Warehouse REIT funding and retaining the completed scheme.

The logistics market dynamics in the North West remain highly compelling, with vacancy rates at record lows (3%) and H1 take up of 103%, above the long-term H1 average. Savills recently highlighted a dearth of high-quality stock, suggesting that actual rental growth in the region will far exceed the forecast 19.4% over the next five years.


Workspace Group Plc (LON:WKP, 587.5p, 988.0p, -40.5%)

Workspace Group, London's leading provider of flexible offices, provided a business update for the first quarter ending 30 June 2022. Key details are:

  • Continued good underlying levels of customer enquiries, viewings and lettings;
  • Further improvement in pricing with like-for-like rent per sqft up 2.6% in the quarter to £38.07;
  • Like-for-like occupancy stable at 89.6%;
  • Like-for-like rent roll up 2.9% in the quarter to £93.8m;
  • Strong demand at recently completed projects, with overall occupancy on these schemes increasing by 5% to 74% in the quarter;
  • Integration of McKay assets progressing to plan with good traction on leasing activity;
  • Exchanged contracts for disposal of residential scheme at Riverside, Wandsworth, for £55m, in line with the March 2022 valuation. Completion expected December 2022;  
  • Progressing with the disposal of McKay non-core assets and continue to target completion by December 2022;
  • LTV at 32% on a proforma basis, before proceeds from planned disposal programme.

Workspace Group announced the simultaneous exchange and completion on the disposal of a medical centre in
Newbury, an asset from the McKay portfolio acquired in May 2022, for a total of £7.25m. The sale of the property is
at a premium of £1.15m to the March 2022 valuation.




Data sourced through the London Stock Exchange and RNS announcements.