REIT News - September 2021
REIT Market Overview
The month of August has been a very dynamic period in terms of investment activity. As seen in previous months, industrial, office and retail parks have been the most popular types of assets.
Regional REIT announced its acquisition of a major portfolio of 31 high quality, predominately multi-let office, assets for £236.0m. Custodian REIT has announced that it has acquired an industrial unit on Wester Gourdie Industrial Estate for a purchase price of £1.9m. Stenprop announced the acquisition, in two separate transactions, of Whitacre Industrial Park and of a portfolio of five industrial estates located across the UK for a total consideration of £15.9m. LondonMetric Property announced that it sold its retail park in Kirkstall to a UK institutional investor for £25.2 million.
(Ticker, Share Price, EPRA NAV per Share, Premium/Discount)
Aberdeen Standard European Logistics Plc (LON:ASLI, 125.9p, 106.1p, +18.7%)
Aberdeen Standard European Logistics Income announced its unaudited results for the quarter ended 30 June 2021. Key details are:
- NAV per share up 1.6% to 123.6c (GBp - 106.1p) (31 March 2021: 121.6c (GBp - 103.6p));
- NAV total return of 14.7% (in Euro terms) for the 12 months to 30 June 2021;
- Portfolio valuation up 1.9%, or €8.7m (on a like for like basis and using Lodz purchase price) to €473.9m, reflecting further modest yield compression;
- 100% of the rent due for the quarter ended 30 June 2021 collected;
- €18.8m acquisition of a modern urban logistics warehouse in Polinyà, Barcelona, Spain, completed in July 2021;
- Portfolio now comprises 16 strategically located, modern and diversified European logistics assets across five countries;
Long-term solar panel leases at the Company's Ede and Den Hoorn assets have delivered a capital uplift of approximately €1m.
Civitas Social Housing Plc (LON:CSH, 103.9p, 108.4p, -4.2%)
Civitas Social Housing updated its interim results as at 30 June 2021. Key details are:
- Rents received as normal with no COVID-19 impact during the quarter;
- IFRS NAV per share of 108.42p resilient as expected (31 March 2021: 108.30p);
- 1.3875p quarterly dividend declared in line with new full year target of 5.55p;
- 28 additional properties acquired for £22 million;
- M&G facility now invested or reserved for existing pipeline projects;
Strong and diverse pipeline of new and accretive investment opportunities being considered.
Custodian REIT Plc (LON:CREI, 97.6p, 101.7p, -4.1%)
Custodian REIT has announced that it has sold a 31,062 sq ft retail warehouse unit in Galashiels for £4.5m, £1.8m (67%) ahead of the 30 June 2021 valuation, representing a NIY of 5.73%. The property was purchased in May 2017 for £3.1m and has a current WAULT of 3.3 years. Following the disposal, net gearing has decreased to 23.7%.
Custodian REIT has announced that it has acquired a 29,676 sq ft industrial unit on Wester Gourdie Industrial Estate, Dundee, adjacent to the A90. The unit is occupied by Menzies Distribution Limited with an unexpired term to first break or expiry of 5.2 years. The unit has a passing rent of £117,500 pa, reflecting a NIY of 5.89%. The purchase price of £1.9m was funded from the Company's existing debt facilities, resulting in net gearing increasing to 23.7% LTV.
Derwent London Plc (LON:DLN, 3,799.0p, 3,864.0p, -1.7%)
Derwent London announced the acquisition of the seven year head lease interest in Bush House, South West Wing WC2 for £13.5m before costs. The Group already owns the freehold of this 103,700 sq ft office building facing the Strand. It is being acquired with vacant possession. Combining this purchase and the December 2020 valuation of the Group's freehold interest equates to £51.8m or c. £500 per sq ft.
Derwent London announced interim results for the half year ended 30 June 2021. Key details are:
- Total return of 2.7%, -0.1% in H1 2020, -1.8% in FY 2020;
- EPRA NTA 3,864p per share, up 1.4% from 3,812p at 31 December 2020;
- Net rental income of £90.1m, up from £84.4m in H1 2020;
- EPRA earnings of £60.6m or 54.0p per share, up 10.5% from 48.9p in H1 2020;
- Net debt of £999.7m (£1,049.1m at 31 December 2020);
- Loan-to-value ratio 17.3% (18.4% at 31 December 2020);
- Undrawn facilities and cash of £527m (£476m at 31 December 2020);
- Portfolio valued at £5.4bn, an underlying value increase of 1.4%;
- True equivalent yield of 4.65%, tightening 9bp since December 2020;
- Total property return of 3.2%, outperforming our benchmark index2 of 2.3%;
- EPRA vacancy rate rose from 1.8% to 3.3% in H1 (subsequently reduced to 2.4%);
- Exchanged contracts to acquire two freeholds for £214.6m;
- Exchanged contracts to sell Angel Square EC1 for £86.5m before costs;
- Resolution to grant consent for the redevelopment of Network Building W1;
- Second half lettings to date £3.8m, 2.2% above ERV;
- Potential pipeline now c. 2.5m sq ft.
Derwent London also announced three off-market West End transactions with Lazari Investments. Lazari has exchanged contracts to acquire two properties in London's Knowledge Quarter, totalling 182,100 sq ft for £214.6m inclusive of costs. The combined rent is £5.3m p.a., or c. £30 per sq ft, reflecting a net initial yield of 2.5%. The two acquisitions offer considerable opportunities for asset management and longer- term development opportunities. In addition, Derwent London has signed a detailed memorandum of understanding with Lazari Investments to establish a new 50:50 joint venture which is expected to acquire three properties already owned by them in Baker Street W1 totalling 122,200 sq ft. Derwent London's initial consideration for the joint venture will be £64.4m inclusive of costs and its share of passing rent will initially be £2.6m.
Ediston Property Investment Company Plc (LON:EPIC, 74.9p, 96.2p, -22.1%)
Ediston Property Investment Company has announced that it has acquired Springkerse Retail Park, Stirling, for £21.85m, in an 'off market' transaction. The price reflects an initial yield of 9.54%. The retail park was purchased from clients of LaSalle Investment Management. The asset is the dominant retail park in Stirling and extends to 162,593 sq ft across 12 units. It is let to ten tenants and produces a passing rent of £2.23m pa. The park is anchored by B&Q, with other tenants including Wren Kitchens, DFS, Pets at Home and Halfords represented on the site. Planned upgrades should improve the lettability of the two vacant units (13% by ERV), providing an opportunity to increase the income stream and drive capital value. On completion of the letting of these two vacant units, the yield is expected to rise to 10.8%. The acquisition was funded using the proceeds from the sale of the Tesco Superstore in Prestatyn, which was sold for a 5.2% yield. The net operating income from the new acquisition is 35% higher than the rent received from Tesco and is therefore accretive to dividend cover.
Empiric Student Property Plc (LON:ESP, 96.5p, 106.2p, -9.1%)
Empiric Student Property, the owner and operator of premium student accommodation across the UK, reported its interim results for the six months ended 30 June 2021. Key details are:
- Revenue of £25.9 million (H1 2020: £34.0 million), as occupancy for this half year is 65% (H1 2020: 84%). The like for like rental growth for AY 2020/21 was 1.3%, down from the 1.8% previously reported as we prioritised occupancy levels over rental growth;
- Property expenses at £10.9 million (H1 2020: £10.6 million). This increase was primarily driven through higher council tax liabilities due to lower occupancy;
- Overall gross margin of 57.9% (H1 2020: 68.8%);
- Maintained focus on controlling administrative expenses, which were £5.3 million (H1 2020: £5.2 million);
- Disposal completed of four assets for £18.1 million, generating a profit on disposal of £1.7 million;
- Operating profit was £13.2 million (H1 2020 loss: £8.0 million), including a fair value gain of £1.8 million (H1 2020 loss: £26.2 million);
- Net financing costs for the period were £6.2 million, net of interest earned (H1 2020: £6.4 million);
- Profit before tax was £7.0 million (H1 2020 loss: £14.4 million). No corporation tax was charged in the period, as the Group fulfilled all its obligations as a REIT;
- The operating business continues to generate cash despite reduced occupancy rates. Adjusted earnings for H1 2021 are £3.5 million (H1 2020: £12.0 million);
- As at 30 June 2021, the Group owned 91 assets representing 9,170 beds (31 December 2020: 9,396 beds). The portfolio included 87 revenue-generating properties at the period end, with 8,543 beds;
- Property portfolio valued at £994 million at 30 June 2021 (31 December 2020: £1,005 million), reflecting the asset disposals completed. The portfolio valuation has remained stable since the year end on a like for like basis. The COVID-19 valuation deduction made by CBRE as at 30 June 2021 reduced to £20 million compared to £21.4 million at the year-end;
- Underlying valuation yield of 5.59% (31 December 2020: 5.61%) has improved slightly, reflecting an improvement in rental growth on our super prime assets, partially offset by a reduction in secondary assets;
- EPRA NTA per share was 106.2 pence (31 December 2020: 105.0 pence);
- Total Return in the period was 1.1% (30 June 2020: (2.1%);
- At the period end, the Group had committed investment debt facilities of £420 million, of which £375 million (31 December 2020: £390 million) had been drawn down, resulting in an LTV of 34.5% (31 December 2020: 35.4%), in line with long term target of 35%;
- Bookings of 70% for the 2021/22 academic year at 11 August, compared to 65% as at 12 August 2020.
Empiric Student Property is making good progress on the disposal of non-core assets, and plan to use these proceeds to invest an estimated £44 million on the refurbishment of properties, with a targeted IRR of 9% to 11%, and also spend approximately £30 million over the period to 2025 on work to ensure its buildings comply with forthcoming changes in fire and safety legislation.
- The latest data from UCAS, as of 30 June 2021, underlines that the UK student market is growing:
- Student applications to UK Universities for AY 21/22 have grown 4% and university offers have increased 3% year on year.
- UCAS predicts that these increases will see a record number of students starting university in the autumn. It is encouraging to see applications from the UK up 7% and Non-EU international Students up 14%, with application from China and India, two key markets for the Group, up 17% and 30%, respectively.
- The Education Secretary has recently announced the end of restrictions on face to face teaching, and almost all universities are now planning a blended approach to learning, with a mix of face to face teaching and online lectures.
Great Portland Estates Plc (LON:GPOR, 784.0p, 779.0p, +0.6%)
Great Portland Estates has announced that it has pre-let 121,800 sq ft at 50 Finsbury Square, EC2 to telecommunications company Inmarsat Global (Inmarsat). The Group's refurbishment will extend the office floor plates within the existing envelope of the building, create a large reception as well as improve the retail, leisure and amenity offer. Practical completion is scheduled for late 2022.
Ground Rents Income Fund Plc (LON:GRIO, 75.8p, 104.5p, -27.5%)
Ground Rents Income Fund announced that it has sold its wholly-owned subsidiary, which owns the freehold interest in Beetham Tower in Manchester, to a private investor for nominal consideration. The disposal releases GRIO and its subsidiaries from all current litigation and freeholder obligations relating to the Property that was originally acquired in 2012.
Hammerson Plc (LON:HMSO, 36.8p, 69.0p, -46.7%)
Hammerson reported its half year results. Key details are:
- Adjusted earnings up 14% to £20.1m (2020: £17.7m) benefitting from recovery in Value Retail and lower net finance costs;
- IFRS loss: £376m (2020: £1,088m loss) due to £361m Group portfolio deficit;
- Group portfolio value of £5.5bn, total capital return -6.4% (FY 2020 -20.9%):
- Managed portfolio value of £3.6bn; capital return -9.0%;
- Value Retail portfolio £1.9bn; capital return -0.4%.
- EPRA net tangible assets (NTA) per share reduced 16%, or 13p, to 69p;
- Net debt reduced by 16% to £1.9bn with ample liquidity of £1.5bn in undrawn committed facilities and cash;
- £403m gross proceeds from disposals including exit of UK retail parks sector;
- Refinanced near term debt maturities with the issuance of €700m 1.75% sustainability-linked bond:
- Repaid €500m 2022, and 53% of €500m 2023 bonds, and £297m of private placement notes.
- No significant unsecured refinancing required until 2025;
- Footfall across our cities is currently averaging 80% of 2019 level;
- Group rent collection for FY20 now at 90%, H1 2021 71% and Q3 at 65%;
- Flagship leasing: recovery in volume to £9.8m, up 123% on H1 2020; up 17% on H1 2019;
- Group occupancy of 93% (FY20 94%);
- Managed portfolio -4.1% on a like-for-like basis;
- Issued €700m sustainability-linked bond;
- Connected Les Terrasses du Port to the Thassalia geothermal system to further reduce carbon emissions;
- Committed to Net Positive targets for carbon, water, resource use and socio-economic impacts by 2030.
KCR Residential REIT Plc (LON:KCR, 24.6p, 48.9p, -39.8%)
KCR Residential REIT has announced that it has completed the refinancing of its freehold property at Heathside, Golders Green, London. The Heathside asset forms part of KCR's Osprey Retirement Living portfolio. The strategy at the building, where KCR holds 29 of the 37 residential units on long leasehold, is to selectively acquire long-leasehold units in the block, subject to pricing, refurbish the units to a high level and let them in the open market subject to assured short hold tenancies (minimum six months tenancies). A new five year debt facility of £2.375m has been provided by Secure Trust Bank with a variable interest rate (currently 3.70%). Funding has been used to refinance the existing Proplend facility and provide additional capital to support ongoing Group activities, including the acquisition of an additional flat at Heathside.
LondonMetric Property Plc (LON:LMP, 262.4p, 190.3p, +37.9%)
LondonMetric Property announced that it has sold its retail park in Kirkstall, Leeds, for £25.2 million, to a UK institutional investor. The 120,000 sq ft Kirkstall Bridge Shopping Park was developed by LondonMetric in 2015 after acquiring the site in 2011. Following the recent re-letting of a 21,000 sq ft unit to The Range, the 18 unit park is fully let to occupiers including Home Bargains, Smyths Toys, Iceland, Pets at Home and JD Sports, with a WAULT of eight years (six years to first break). The sale price represents a 15% premium to the 31 March 2021 book valve and crystallises a total return on cost of 27%.
LondonMetric Property has announced that it has exchanged on the sale of its distribution warehouse in Thrapston, Northamptonshire, to EQT Exeter for £102.0m, reflecting a NIY of 4.1%. The 785,000 sq ft warehouse is let to Primark for another 11 years at a rent of £4.4m pa. LondonMetric acquired the property in 2013 for £60.5m, reflecting a NIY of 6.4%. Since acquisition, it has delivered a total return of 123% and an ungeared IRR of 12%. Completion of the sale will take place in February 2022, generating an additional £2.2m of income. Total proceeds are 8% above the 31 March 2021 book value. LondonMetric retains its other Primark logistics warehouse which totals 1.1m sf and is let for a further 19 years. On completion of the sale, the portfolio's weighting towards mega distribution will fall from 13% to 10% and its rental income exposure to Primark will fall from 8% to under 5%.
LXI REIT Plc (LON:LXI, 149.4p, 125.7p, +18.9%)
LXi REIT has announced acquisitions totalling £80m, reflecting an accretive 5.25% average NIY (versus a current portfolio value of 4.7%), which benefit from a long WAULT to first break of 23 years, high-quality tenants, robust sectors and inflation-linked rental uplifts, following the Company's £100 million placing in July this year.
The Company is also in solicitors' hands on a range of pre-let forward fundings and sale and leasebacks, which will deploy the balance of the net equity proceeds of the Placing. Key details are:
- Acquired a substantial Life Science and Biotech campus in York, which extends to 382,000 sq ft of highly specialist, world-class facilities across 82 acres. The campus is fully let to Capita plc on a long lease with 25 years unexpired until first break. The rent increases on a five-yearly basis in line with RPI inflation (capped at 3.5% pa);
- Acquired STV's media studios and HQ facility in Pacific Quay, which was purpose-built for STV and comprises 63,000 sq ft over four floors, along with 150 car parking spaces. The facility benefits from a new, unbroken 20-year lease to STV plc. The current rent reflects a low £16.25psf, which is highly reversionary;
- Acquired a waste recycling and storage facility in Aberdeen let to Biffa plc on a long lease with 14 years unexpired to first break. The rent increases on an annual basis in line with CPI inflation, with a collar of 2% pa and a cap of 4% pa;
- Sold a Lidl food store in Chard, Somerset for £7.8m, reflecting a low exit yield of 3.8% and a premium of 38% to the acquisition price paid by the Company and generates an attractive geared IRR of 26% pa. The Company acquired the property as a forward funding, at a 5.5% NIY, in 2017.
Primary Health Properties Plc (LON:PHP, 169.7p, 115.4p, +47.1%)
Primary Health Properties has announced that it has acquired the Townside Primary Care Centre and adjacent office building in Bury, Lancashire for £40m. The Townside Primary Care Centre is a substantial purpose-built primary care hub which is fully let to NHS Property Services and a pharmacy. The office accommodation is also fully let with 90% of the income secured against Bury Council. The combined WAULT for the two adjacent buildings is 10.8 years with 91% of the contracted rent secured against government backed tenants. The acquisition will increase PHP's portfolio to a total of 515 assets, of which 19 are in Ireland, with a contracted rent roll of over £138m.
Regional REIT Limited (LON:RGL, 91.2p, 98.6p, -7.5%)
Regional REIT has announced that it has completed on the previously announced disposal of a portfolio of industrial property assets for £45.0m. The disposal comprises seven industrial properties (801,787 sq ft) located in Bromborough, Erith, Nottingham, Scunthorpe, Telford, Winsford and Wisbech. The properties benefited from several asset management initiatives which assisted in improving occupancy rates, rental income and in turn capital values. The sale was completed 7.5% above the Company's 31 December 2020 valuation and at an uplift of 18.0% from the acquisition price after capital expenditure costs. It is anticipated that the proceeds from the disposal will be promptly recycled into the Group's strong pipeline of higher yielding regional office investments.
Regional REIT has announced that it is has acquired a major portfolio of 31 high quality, predominately multi-let office assets, from Squarestone Growth LLP, for £236.0m which will be satisfied by three components: the issuance of 84,230,000 new ordinary shares at 98.6p per share (being the EPRA NTV per share as at 31 December 2020) equivalent to £83.1m, £76.7m of existing cash resources and additional borrowings of £76.2m. The £236.0m portfolio comprises: 27 office assets providing over 1.6m sf for 192 tenants; two industrial units (120,020sf) with three tenants; a residential asset with 12 tenants (10,672sf); and a Tim Horton's Drive-Thru restaurant (2,010sf) for a single tenant. Regional offices (by value) constitute 93.3% of the portfolio; industrial 4.9%; residential 1.1%; retail 0.7% The portfolio is located entirely outside of the M25, 78.2% in England; 17.1% in Scotland; and the remaining 4.7% in Wales and provides a NIY of 7.8%, and a reversionary yield of 11.0%. The contracted rent roll amounts to £21.9m pa and the EPRA occupancy is 78.4%. The portfolio's WAULT to expiry is 4.0 years; to first break is 2.6 years; office WAULT is 3.9 years and WAULT to first break is 2.4 years. On completion of the Acquisition, the Group estimates (based on its own Consolidated Balance Sheet as at 31 December 2020) that it would have a net LTV-ratio of c. 43.8% (31 December 2020: 40.8%); and weighted average cost of debt of 3.3% (31 December 2020: 3.3%).
Shaftesbury Plc (LON:SHB, 655.0p, 583.0p, +12.3%)
Shaftesbury has issued a trading update for the period 1 April to 20 August 2021. Key details are:
- Weekly West End footfall has recovered to 50%-60% of pre-pandemic levels;
- Return of the West End's office-based working population anticipated from early autumn;
- Hospitality and leisure occupiers continue to enjoy a strong recovery in trading levels;
- Available-to-let vacancy at 31 July 2021 down to 4.6% (31 March 2021: 8.4%);
- Further decrease to 4.1% by 13 August 2021, reflecting continuing leasing momentum;
- Hospitality and leisure demand improved over the period, reflecting confidence in the long-term prospects for West End locations;
- Healthy occupier interest for shops, including online retailers looking for physical space;
- Office enquiries, viewings and lettings continue at a steady pace as occupiers prepare for the return of their workforces and look to improve the quality of their workspace;
- Marked and sustained increase in demand for apartments; rents have now stabilised;
- Letting terms generally in line with ERVs and expectations, but there is a greater degree of short-term income uncertainty in those retail leases which have a significant element of turnover-related rent;
- Rent collection recovering and expected to improve further. Amounts collected to date:
- Three months to 31 December 2020: 49% of contracted rent; 78% of rent billed (after allowing for rent waivers granted);
- Three months to 31 March 2021: 40% of contracted rent, despite continued trading restrictions; 77% of rent billed;
- Three months to 30 June 2021: 51% of contracted rent; 73% of rent billed;
- July 2021: 55% of contracted rent; 62% of rent billed.
- Sold one non-core building in Soho for £5.3m, 11% ahead of valuation at 31 March 2021;
- Contracted acquisitions of two buildings, adjoining existing ownerships in Seven Dials, for a combined £12.0m (plus purchase costs);
- Available liquidity at 30 June 2021: £330.7m;
£134.8m term loan interest cover covenant waiver extension agreed from July 2021 to January 2022.
Sirius Real Estate Limited (LON:SRE, 124.6p, 88.3p, +41.1%)
Sirius Real Estate has announced that it has notarised or completed the acquisition of four business park assets and one land parcel for a total of €84.8m (total acquisition costs). The acquisitions are located in Oberhausen, Frankfurt, Heiligenhaus and Öhringen and provide over 150,000 sqm of lettable space. In addition, the Company has acquired a land parcel adjacent to its existing asset in Neuruppin. The properties have been acquired using proceeds of the Company's inaugural €400.0m corporate bond issuance that successfully completed in June 2021. Together the acquisitions (excluding the land parcel) generate day one net operating income (NOI) of €3.4m pa, representing a blended EPRA NIY of 4.1% at occupancy of 59%. With 62,000sqm of vacant space, the assets provide an opportunity to grow income through the letting up of vacant space, accretive refurbishment and selective development.
Standard Life Investments Property Income Trust Limited (LON:SLI, 71.5p, 88.3p, -19.1%)
Standard Life Investments Property Income Trust announced its unaudited interim results as at 30 June 2021. Key details are:
- Net asset value (“NAV”) per ordinary share was 88.3p (Dec 2020 – 85.3p), an increase of 3.5% for Q2 2021, resulting in a NAV total return, including dividends, of 5.1% for the quarter;
- The portfolio valuation (before CAPEX) increased by 3.3% on a like for like basis, whilst the MSCI Monthly Index increased by 2.6% over the same period;
- Further restructuring to ensure the portfolio is fit for purpose in a post COVID-19 world with the completion of two sales – an office in Farnborough for £9.5m and an industrial unit in Kettering for £9.25m;
- Two lettings and a lease renewal completed securing £184,575 per annum in rent;
- A rent review completed on the Company’s data centre asset, resulting in a 10.3% increase in rent;
- Strong balance sheet with significant financial resources available for investment of £80 million in the form of the Company’s low cost, revolving credit facility of £55 million plus uncommitted cash after dividend and other financial commitments of £25 million;
- As at 30 June 2021, the Company had a Loan to Value (“LTV”) of 17.6%. The debt currently has an overall blended interest rate of 2.725% per annum.
Q1 2021 was the low point for rent collection, with an increase through Q2 and into Q3. The Company has served a court notice on the tenant with the greatest level of arrears as it declined offers for a rent free and regear of the lease but the manager believes it is quite capable of paying the rent. Several of the other tenants with arrears have agreed payment plans, and we expect continued progress with collecting arrears given that nearly all tenants can now trade again. The Company continues to make prudent provisions for bad debts (£3,861,898 as at 30 June v £3,268,084 as at 31 March). The amount of rent collected in respect of 2020 continues to edge up, now standing at 95.2% of rent due.
Stenprop Limited (LON:STP, 3,700.0p, 147.0p, +2,417.0%)
Stenprop announced that the sale of its freehold interest in the Hermann Quartier shopping centre in Berlin, Germany has been completed. The transaction takes Stenprop's portfolio to 83% MLI, based on March 2021 valuations.Stenprop has announced that is has acquired, in two separate transactions, Whitacre Industrial Park in Huddersfield and a portfolio (Duke portfolio) of five industrial estates located across the UK, for a total consideration of £15.9m. The combined purchase price reflects a NIY of 7.2% and a capital value of £64psf. It acquired the 24,730sf Whitacre Industrial Park for £2.3m. It currently generates a total annual passing rent of £170,166 across 14 fully let units, reflecting a passing rent of £6.88psf. Comprising five purpose built MLI estates, the Duke portfolio totals 225,139sf, with an average unit size of 3,300sf, and is currently 82% let to 54 tenants. The portfolio generates a total annual passing rent of £1,050,000, equating to an average rent of £5.69psf. Purchased from M&G Real Estate for £13.6 million, the individual assets are: Two estates both called Acorn Industrial Estate in Hull; Corringham Road Industrial Estate in Gainsborough; Motherwell Food Park in Bellshill; and Caldwellside Industrial Estate in Lanark.
Target Healthcare REIT Plc (LON:THRL, 118.8p, 110.4p, +7.6%)
Target Healthcare REIT, the UK listed specialist investor in modern, purpose-built care homes, announced its unaudited quarterly results as at 30 June 2021. Key details are:
- EPRA NAV per share increased by 1.2% to 110.4 pence (31 March 2021: 109.1 pence) primarily reflecting valuation uplifts across the portfolio driven by modest yield compression and annual rental uplifts;
- NAV total return (including dividend) of 2.8% for the quarter;
- Available cash and undrawn debt in excess of £100 million, with a low net loan-to-value ("LTV") of 15.9% providing significant operational flexibility;
- £33 million of new investment commitments undertaken in the period, with the remaining capital available from the March 2021 equity raise allocated to Board-approved deals;
- 1.4% increase in the like-for-like value of the operational portfolio; total property portfolio value of £684.8 million and an EPRA "topped-up" net initial yield of 5.83%;
- 17 rent reviews were completed at an average uplift of 2.3% per annum, contributing a 0.6% increase to like-for-like contractual rent;
- Weighted average unexpired lease term across the portfolio increased to 28.8 years (31 March 2021: 28.6 years) and remains one of the longest in the listed real estate sector;
- Occupancy levels across the mature portfolio have commenced their anticipated recovery from the low points seen in Q1 2021, with encouraging growth in the quarter of c. five percentage points. This aligns with the strong enquiry levels from potential residents reported by our tenants in recent months. Reported COVID-19 cases across the portfolio remain very low;
- The Group has resolved the position with a tenant of two of its homes, which had already been in financial distress prior to the COVID-19 pandemic. Net income and valuation are each positively impacted immediately, with a partial settlement being received for arrears which had been provided for:
- One home (representing c.1% of portfolio by value) has been re-tenanted to a family-owned operator, a new tenant to the Group, on revised rental terms and a lengthened lease duration;
- Terms have been agreed with a new tenant for the second home, which is being progressed to complete shortly. Current rent is being waived on this home whilst the re-tenanting progresses, with the existing tenant continuing to care for residents and facilitate an orderly handover.
On June 3rd 2021, a pre-let development site subject to a forward funding agreement was acquired in Olney, Buckinghamshire. Construction on the home has commenced and is expected to complete in the first half of 2023.
On June 4th 2021, the Group acquired a well-established luxury care home in Scotland. The home is situated in a densely populated area and has spacious bedrooms with full en-suite wet room facilities, exceptional living space for the residents, and impressive outdoor space on all floors. Shortly after the quarter end, practical completion was achieved at the Group's development site in Rudheath, Cheshire, delivering a 68-bed care home and lease commencement with another of the Group's existing tenants. Each of the three homes noted above will be operated on fully repairing and insuring occupational leases, with terms of 30-years or longer, which include annual, upwards-only RPI-linked increases, subject to a cap and collar.
The British Land Company Plc (LON:BLND, 536.0p, 648.0p, -17.3%)
The British Land Company has issued an update saying its strategy is to more actively focus its capital on two strategic themes, Campuses and Retail & Fulfilment. Key details are:
- Exchanged on the acquisition of Peterhouse Technology Park, Cambridge and The Priestley Centre, Guildford, increasing our exposure to innovation sectors;
- Acquisition of the Finsbury Square Car Park and the Thurrock Shopping Park, creating development opportunities for urban logistics;
- Sold Virgin Active Chiswick and part sale of Woodfields Retail Park, Bury and under offer on the sale of Wardrobe Court, EC4
Triple Point Social Housing REIT Plc (LON:SOHO, 107.2p, 106.6p, +0.6%)
Triple Point Social Housing REIT announced the following updates:
- Group has put in place £195m of long dated, fixed rate, interest only sustainability-linked loan notes through a private placement with MetLife Investment Management clients and Barings respectively. The notes have a weighted average term of 13 years and a weighted average fixed rate coupon of 2.634%. They will enable the Group to refinance its existing floating rate RCF;
- Fitch Ratings has assigned the Company an Investment Grade Long-Term Issuer Default Rating of 'A-' with a stable outlook, and a senior secured rating of 'A' for the Group's new loan notes.
Tritax Big Box REIT Plc (LON:BBOX, 237.0p, 194.2p, +22.0%)
Tritax Big Box REIT reports its results for the six months from 1 January to 30 June 2021. Key details are:
- 23.6% increase in Adjusted EPS to 4.03p (H1 2020: 3.26p) driven by development completions, rental growth, and an increase in development management income;
- Increase in Total Accounting Return to 12.5% (H1 2020: 4.2%) reflecting successful strategic delivery within a strong market;
- Sustainability strategy driving improving ESG ratings:
- “Sustainalytics” improved from 14.6 to 9.0 (Negligible Risk), Management Score increased from 32.7 to 56.7 (Strong);
- Inclusion in FTSE4Good, increasing score from 2.3/5 to 3.2/5.
- Highest H1 take-up on record of 21 million sq ft with a further 16 million sq ft of space currently under offer, of which 48% is for space > 500k sq ft;
- Limited development response relative to demand has led to record low 2% vacancy and strong rental growth across all regions;
- Positive outlook for logistics property has resulted in higher investor allocations into the sector, driving prime yields down further;
- Development gains, asset management and strong market conditions contributed to a portfolio value of £4.89 billion (31 December 2020: £4.41 billion), including a capital valuation surplus of 7.3%, net of capex;
- 100% rent collection achieved for FY 2020, 99.5% of rent due for H1 2021 collected and all arrears expected to be received by the end of the year;
- WAULT of 13.4 years as at 30 June 2021 (31 December 2020: 13.8 years), underpinning long-term security of income, and 0% vacancy rate in the portfolio;
- Significant development activity, expected to accelerate in H2 2021, with the potential to add a further £19.1 million rent:
- 0.7m sq ft of pre-lets practically completed adding £5.5 million to passing rent;
- 1.0 million sq ft of development assets under offer, with potential to add £8.2 million of rent;
- 0.6 million sq ft of speculative construction started, capable of delivering a further £4.4 million of rent;
- 0.9 million sq ft of further speculative construction expected to start in H2 2021, potentially adding an additional £6.5 million of rent.
- £8.9 million of other operating income delivered through Development Management Agreements (DMA):
- £21.6 million of DMA profit delivered to shareholders since acquisition of Tritax Symmetry.
- 2.4 million sq ft of further planning consent granted in the period - and maintaining 100% planning success to date;
- Near-term development pipeline of 10.4 million sq ft, of which 87.2% had planning consent at 30 June 2021;
- Targeting the delivery of 2-3 million sq ft of new space per year at 6-8% yield on cost;
- £8.5 million increase in contracted rent roll, including a £3.8 million contribution from rent reviews across 24.6% of the portfolio, achieving an 8.6% increase in passing rent. Like-for-like ERV growth of 3.8% over the last 12 months, with a 6.5% portfolio rental reversion at the period end;
- Acquired a 0.9 million sq ft facility in South West England, for £90 million at a net initial yield of 5.1%, securing long-term income and value creation opportunities;
- Progressing 18 MW of solar PV generation with customers enhancing environmental credentials and returns.
UK Commercial Property REIT Limited (LON:UKCM, 79.5p, 90.2p, -11.9%)
UK Commercial Property REIT provided the following updates:
- 2.5% growth in NAV per share to 90.2p (31 March 2021: 88.0p), resulting in a NAV total return of 4.0% for the second quarter;
- Continued low net gearing of 1.9% (gross gearing 14.6%);
- Like-for-like portfolio capital value, net of capital expenditure, increased by 3.2% to £1.21 billion, outperforming the MSCI monthly index, which increased 2.6% over the quarter;
- Rent collection has remained robust, improving into the third quarter. For the third quarter of 2021 it stood at 91% after allowing for agreed rent deferrals and including those tenants who have paid, by agreement, on a monthly basis. This figure is ahead of collection rates for the whole of 2020, underscoring the improving economic picture as restrictions are eased and the vaccination rollout progresses.
Warehouse REIT Plc (LON:WHR, 161.2p, 135.1p, +19.3%)
Warehouse REIT has issued an update covering the period since 25 May 2021. During the period it completed four acquisitions, in separate transactions, for a total consideration of £13.1m, reflecting a blended NIY of 5.0%. Generating £0.7m pa of contracted rent (with an ERV of £0.9m), the acquisitions take the portfolio past 8.5m sf and have increased its holdings in two existing key locations - in South Cambridge and Midpoint-18, Cheshire. In addition, contracts have been exchanged to acquire a further 16 acres of land immediately adjoining the existing Radway Green multi-let estate located at junction 16, M6 motorway, outside Crewe. The Company also completed 20 new lettings, achieved at 7.0% ahead of 31 March 2021 ERVs, totalling 112,000sf and generating £0.7m of contracted rent. 13 lease renewals also completed, achieving an uplift of 20.2% compared to the previous rent. Totalling 87,000sf of space, these transactions generate £0.6m pa of contracted rent. The portfolio's total occupancy decreased slightly to 94.2% (as at 31 July 2021) from 95.6%, however effective vacancy has reduced to just 2.0%, excluding units under refurbishment or under offer to let.
Data sourced through the London Stock Exchange and RNS announcements.