Warehouse REIT PLC — Earnings Release 2022

Feb 9, 2023

National Storage Mechanism | Additional information

RNS Number : 3551P

M7 Regional E-Warehouse REIT PLC

09 February 2023

M7 Regional E-Warehouse REIT plc

("M7 Regional E-Warehouse REIT" or the "Company")

9 February 2023

Q4 BUSINESS UPDATE

STRONG OPERATIONAL PERFORMANCE CONTINUES TO SUPPORT DIVIDEND

The Board of Directors of M7 Regional E-Warehouse REIT, which owns a diversified portfolio of e- warehouses across the UK (ticker: REW), provides a business update and declares an interim dividend for the quarter ended 31 December 2022.

James Max, Non-Executive Chairman of M7 Regional E-Warehouse REIT plc, commented:

"Our fourth quarter performance and continued strong rent collection helped drive further growth in operating profit and a further interim dividend, which provides investors with an attractive 7.2% dividend yield for the financial year (8 pence per share), in line with expectations.

"In our Q3 update we noted the significant headwinds facing the economy and the resultant impact on the commercial real estate sector. This led to a rerating of UK commercial property and a fall in values across the sector in general during Q4. However, the broad composition and strong income characteristics of M7 Regional E-Warehouse REIT's portfolio mitigate this with the Company reporting a 6% fall in the valuation over the period. We continue to closely monitor the financial performance of our tenants and to explore every opportunity to reduce costs and drive income as well as opportunistic disposals of particular assets."

"We have maintained the attractive dividend in 2022 and in light of anticipated increased cost of debt post refinancing in August 2023 will pay careful attention to the feasibility of maintaining this level of dividend in the short term. Despite this the portfolio has a strong income return and cash flow which in the current economic situation is a positive differentiating factor for the portfolio, which gives us confidence about the future prospects of the business."

Financial and operational highlights (unaudited)

	At 31 December 2022 (unaudited)	At 30 September 2022 (unaudited)	Change
Net Asset Value	£33.85 million	£41.33 million	-18.10%
Net Asset Value per share	88.71p	108.31p	-18.10%
Share price	111p	111p	-
Investment property fair value (based on external valuation)	£106.05 million	£112.78 million	-5.97%

	Quarter ended 31 December 2022 (unaudited)	Quarter ended 30 September 2022 (unaudited)	Change
Operating profit	£1.70 million	£1.59 million	+6.92%
Loss before tax	-£6.69 million	-£0.1 million	-6,790.00%
Adjusted EPS 1	1.41p	1.80p	-21.67%
Dividend cover based on Adjusted EPS 1	70.50%	86.96%	-16.46%
Dividend (per share)	2.00p	2.07p	-3.38%
Dividend yield 1	1.80%	1.87%	-0.07%

1 Considered to be an Alternative Performance Measure.  

•   Dividend 2.00 pence per share ("pps") for the quarter to 31 December 2022, in line with the annual 8 pence, or 8%, target dividend stated in the Company's Admission document.

•   Decrease in portfolio valuation to £106.05 million in the quarter to 31 December 2022, reflecting a net initial yield of 7.89%2 compared with 7.36% at 30 September 2022.

•    6.9% increase in operating profit to £1.7 million, with an IFRS loss before tax of £6.69 million primarily resulting from the market wide reduction in property value as discussed above.

•    Senior loan facility of £54.3 million and an unsecured loan note balance of £19.7 million, totalling £74.0 million, reflecting a combined loan to value ratio of 69.82% as at 31 December 2022 (30 September 2022: 66.65%). The Senior loan facility will mature in August 2023 and refinancing discussions are underway.

•    £2.17 million of rent recognised during the quarter in line with passing rent (quarter ended 30 September 2022: £2.10 million). Rent collection was 95.82% to 31 December 2022 (97.37% total collection rate from Admission).

•    As at 31 December 2022, there were 54 tenants with a weighted average unexpired lease term of 5.83 years to break and 6.16 years to expiry (30 September 2022: 4.94 years to break and 5.81 years to expiry).

•   Occupancy across the portfolio remained at 98.17% at 31 December 2022 (30 September 2022: 98.17%)

2 Including purchaser's costs of 6.65%.                       

Net Asset Value

The table below sets out the movement in NAV during the quarter. 

	Pence per share	£ million
NAV at 1 September 2022	108.31	41.33
Valuation movement in property portfolio	(17.64)	(6.73)
Fair value movement in financial instrument	5.68	(0.34)
Income earned for the period	(1.07)	2.17
Expenses for the period	(1.21)	(0.53)
Net finance costs for the period	(3.29)	(1.26)
Interim dividend paid	(2.07)	(0.79)
NAV at 31 December 2022	88.71	33.85

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the United Kingdom and incorporates both the Group's property portfolio individually valued on a 'Red Book' basis at 31 December 2022 and net income for the quarter, but does not include a provision for the interim dividend declared today (see below) for the quarter ended 31 December 2022. 

Valuation

The value of the portfolio decreased by £6.73 million, in the quarter to £106.5 million as at 31 December 2022. This represents a 5.97% reduction against the property valuation at 30 September 2022 (£112.78 million). This reflects a rerating of UK commercial property values, primarily as a result of the interest rate increases in 2022 and wider economic situation. The independent fair valuation of the property was undertaken by Avison Young.

At 31 December 2022, the net initial yield of the property was 7.89% (30 September 2022: 7.36%).

Dividend

The Board declares today a quarterly dividend of 2.00pps for the three months to 31 December 2022 (quarter ended 30 September: 2.07pps). On a pro-rata basis, the dividend is in line with the annual 8 pence target per share, or 8% target dividend, as stated in the Company's Admission document. The dividend, which will be a Property Income Distribution, will be paid on or around 3 March 2023. The ex-dividend date will be 16 February 2023 and the record date will be 17 February 2023.

Debt Covenant

There continues to be significant headroom in the debt covenants. The senior debt loan to value is 49.09% (default level is greater than 70%) and the interest cover ratio is 316.30% (default level is less than 225%). The Group is therefore well within its covenants at the latest interest payment date.

The current senior debt facility matures in August 2023 and refinancing discussions are underway.

ENQUIRIES

M7 Regional E-Warehouse REIT plc
James Max - Chairman	via FTI Consulting below
M7 Real Estate Ltd Richard Croft	+44 (0) 20 3657 5500
Dickson Minto (Lead Adviser)	+44 (0) 131 2254455
FTI Consulting (Communications Adviser)	+44 (0) 20 3727 1000
Richard Sunderland Eve Kirmatzis	M7regionale-warehousereit@FTIConsulting.com
Alter Domus (UK) Limited (Company Secretary)	+44 (0) 207 645 4800

The Company's ISIN is GB00BLN7H037.

Further information on M7 Regional E-Warehouse REIT plc is available at www.rewreit.co.uk1.

NOTES

M7 Regional E-Warehouse REIT plc is a property investment company, listed on the International Property Securities Exchange offering shareholders with a sustainable level of income together with the potential for income and capital growth by investing in diversified portfolio of enhanced warehouse (e-warehouse) properties across the United Kingdom.

An enhanced warehouse (e-warehouse) is defined, by M7, as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future. They are typically large regular shaped industrial units with retail frontages that could easily be converted to pure industrial use and they are typically located with good accessibility and sufficient car parking that could be used for yard space in the event of conversion. It is these types of characteristics which in M7's opinion underpin the value of the asset.

The Company's asset manager is M7 Real Estate Limited ("M7"), a leading specialist in the pan-European, regional, multi-tenanted real estate market. M7 has over 220 employees in 15 countries across Europe. The team manages over 600 properties with a value of circa €5.9 billion.

1    Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

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