MLI trading update Q2 FY21: Vacancy falls and rents rise
STENPROP LIMITED
(Registered in Guernsey with registration number 64865)
LSE share code: STP JSE share code: STP
ISIN: GG00BFWMR296
23 October 2020
MLI TRADING UPDATE Q2 FY21: VACANCY FALLS AND RENTS RISE
Stenprop Limited (“Stenprop” or the “Company”), the UK multi-let industrial property company, today
publishes a trading update on its UK multi-let industrial (“MLI”) portfolio for the period from 1 July
2020 to 30 September 2020 and up-to-date information on transactions and rent collections across
the Company's whole portfolio.
Commenting on the trading update Paul Arenson, CEO of Stenprop said:
“The continued high demand for our product, which reflects the quality of our MLI portfolio and our
asset management team, has enabled us to deliver a trading update today that is characterised by
strong rental growth, high levels of rent collection and a further reduction in vacancy. Whilst we draw
confidence from this performance over recent months, we are also aware of the threat from the
pandemic and Brexit and the uncertainty this brings, particularly as we enter the winter months.
“Our transition to a 100% MLI company by March 2022 remains on track, with our portfolio exceeding
five million sq ft for the first time during the quarter following several significant acquisitions. We were
also pleased to complete the first disposal of a German retail park which was achieved at a premium
to book value and have the remaining German retail assets under offer.”
Continued strong demand for MLI driving rental growth and improving occupancy
- Further improvement in occupancy across the MLI portfolio to 93.3% as at 30 September 2020
(30 June: 92.0%, 30 March: 91.0%).
- Like-for-like passing rent up 2.5% during the quarter (previous quarter: 1.0%) and 5.1% over
12 months.
- £1.48 million per annum of new rental income1 contracted through 58 new lettings (previous
quarter: 25) and 19 lease renewals (previous quarter: 17) over 205,299 sq ft.
- 16% average uplift on the previous passing rent on new lettings (previous quarter: 22%) and
16% on lease renewals (previous quarter: 20%).
- Average rental incentives on all new lettings and renewals was 2.5 months on an average lease
term of 3.6 years (2.6 years to earliest break) (previous quarter: 3.1 months on term of 4.2
years (3.4 years to earliest break)).
- As at 30 September 2020, the average passing rent of the portfolio was £5.34/sq ft, compared
to an estimated rental value of £5.87/sq ft. This reflects a 9.9% premium to the average
passing rent at quarter end, illustrating the built-in reversion within the portfolio.
- The most significant transactions completed were a new letting on 16,600 sq ft at Poulton
Close Business Centre in Dover, on a five-year term certain.
- We have also supported several customers requiring more space during the pandemic, most
notably at Coningsby Business Park in Peterborough, where we let an additional 28,300 sq ft
to two existing customers.
Our Industrials.co.uk portal experienced significant gains in traffic and enquiries
- 31% increase in direct leasing calls on our own portal (previous quarter: 36%).
- Total direct enquiries received across all channels (e.g. portals, website, calls and emails) up
37% versus the previous quarter.
- Industrials.co.uk website user numbers up 19% versus the previous quarter, with the number
of pages maintained from last quarter indicating a higher quality of visitor with strong buying
intent.
Strong leasing momentum continues into third quarter
- 49 deals were under offer at the end of the quarter over a total of 208,000 sq ft of space
(previous quarter: 44 deals on 131,000 sq ft).
- A further nine deals had exchanged and were awaiting completion on a total of 20,000 sq ft
(previous quarter: 11 deals over 48,000 sq ft).
Rent collections continue to improve
As at close of business on 21 October 2020, Stenprop can report the following rent collection statistics:
Monthly Rents (2020) Quarterly Rents (2020) Total
Apr - Jul – Oct -
April May June July August September October
Jun Sep Dec
County / Sector
UK MLI 88% 84% 85% 85% 86% 81% 68% 92% 90% 70% 84%
UK Urban
100% 100% 97% 99%
Logistics
Guernsey Office 100% 100% 100% 100%
Germany 86% 87% 92% 98% 97% 99% 99% 94%
Switzerland 0% 0% 50% 50% 50% 100% 100% 50%
Total 81% 81% 86% 89% 89% 91% 84% 95% 94% 80% 88%
Across the MLI portfolio the October quarterly rents collected as at 21 October (22 days after the due
date) reflected 70% of rents billed. As at the equivalent date after the March and June quarter days
the rent collections stood at 64% and 66% of rents billed respectively, illustrating the improving picture
of payment.
Stenprop has now collected 88% of rents due since April 2020 to date and has agreed to defer a further
1% until a later date.
Strong progress in building MLI portfolio and non-core asset sales
Stenprop took advantage of disruption in the investment market to secure four new MLI acquisitions
during the quarter totaling £36 million and 436,000 sq ft of MLI space, taking the total MLI portfolio
to over five million sq ft for the first time. We also completed the sale of the first of our Berlin retail
centres, which collectively means that MLI now comprises approximately 63% of Stenprop’s total
property portfolio.
- Disposal of Neucoelln Carrée Retail Park in Berlin at above book value – on 30 September 2020
we completed the disposal of Neucoelln Carrée Retail Park for €27 million, releasing approximately
€15.5 million of sales proceeds. The sale reflected a €3.6 million (15%) premium to the 31 March
2020 book value.
- Acquisition of Tunstall Trade Park in Stoke-on-Trent - on 14 September 2020 we completed the
purchase of this asset for £5,900,000, reflecting a net initial yield of 6.25% and a capital value of
£104 psf.
- Acquisition of Excelsior Industrial Estate in Glasgow - on 9 September 2020 we completed the
purchase of Excelsior Industrial Estate for £5,200,000, reflecting a net initial yield of 6.95% and a
capital value of £85 psf.
- Acquisition of St Andrews Industrial Estate in Glasgow - on 31 July 2020 we completed the
purchase of St Andrews Industrial Estate for £5,500,000, reflecting a net initial yield of 7.3% and a
capital value of £75 psf.
- Acquisition of Bowthorpe Park Industrial Estate in Norwich - on 21 July 2020 we completed the
purchase of Bowthorpe Park for £19,600,000, reflecting a net initial yield of 6.35% and a capital
value of £80 psf.
The above transactions have already been announced as and when they happened. For full details
please visit https://stenprop.com/investors/regulatory-news-service/
Significant cash balances and low LTV
As at close of business on 30 September 2020, Stenprop's loan-to-value ratio (LTV) was 38% on drawn
facilities, and approximately 31% when allowing for free cash2.
Other assets performing well
- Europa Drive, Sheffield – renewed a lease on a 41,000 sq ft industrial property to John Menzies
plc. The lease is for a term of 10 years which is subject to tenant break options after years 3
and 5. The new rent is £260,000 per annum, reflecting a 4% premium to the previous passing
rent.
- Trafalgar Court, Guernsey – settled a 1 July 2020 rent review at £36.50 psf, reflecting a 0.7%
uplift and delivering additional rental income of £21,700 per annum. We also completed a
lease renewal on a small office suite at an annual rent of £9,423 per annum, reflecting a 4.7%
uplift on previous passing rent.
Julian Carey, Managing Director, commented:
“Over the last quarter we saw the strong MLI demand witnessed in June convert into lettings and bring
our MLI vacancy down significantly. The strength of demand has allowed us to maintain, and in some
cases increase our quoting rents without giving away higher incentives. It has also helped us in our
dealings with current customers and progress the collection of historic rent arrears. Against this
backdrop of strong tenant demand, we have also started to facilitate the natural rotation of new
businesses which are well placed to thrive in the current climate in place of those that are experiencing
difficulties and needing to downsize or leave.
“Our Industrials platform continues to develop rapidly, providing us with invaluable live insight on
market conditions and portfolio performance, and enabling us to react and transact quickly via the use
of our digital Smart Lease. Enquiry levels over the quarter reached record highs as demand for
industrial space grew in the aftermath of the first wave of Coronavirus. Whilst we successfully
capitalised on this opportunity to bring our vacancy rate down over the period, we remain cautious
and prepared for new challenges as we enter the second wave of the pandemic.
“Rent collections remain resilient, with levels stabilising around the 90% collection mark. UK
Government intervention prevents significant additional action against the remaining debtors, but we
believe that a material percentage of these will pay given their continued trade from the premises
when normal landlord/tenant relations resume. Our strategy remains to maintain regular dialogue
and to closely monitor the situation.
“The pipeline of potential acquisitions is the strongest it has been for over 12 months, and with over
60% of our portfolio now in the multi let industrial sector, we remain on course for our target 100%
weighting in around 18 months’ time.”
Notes
The financial information on which this trading update is based has not been reviewed or reported on by the
Company's external auditors.
1. Contractual Rental Income represents the annual income secured from a lease contract ignoring any incentives
and break options in the lease.
2. Calculated as gross borrowing less unrestricted cash, divided by gross asset value based on our 31 March 2020
valuations adjusted for subsequent acquisitions and disposals and changes in foreign exchange rates.
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For further information:
Stenprop Limited 44(0)20 3918 6600
Paul Arenson (paul.arenson@stenprop.com)
Julian Carey (julian.carey@stenprop.com)
James Beaumont (james.beaumont@stenprop.com)
Numis Securities Limited (Financial Adviser) 44(0)20 7260 1000
Hugh Jonathan
Vicki Paine
FTI Consulting (PR Adviser) 44(0)20 3727 1000
Dido Laurimore
Richard Sunderland
Richard Gotla
Neel Bose
Stenprop@fticonsulting.com
Java Capital 27 (0)11 722 3050
(JSE sponsor)
About Stenprop:
Stenprop is a UK REIT listed on the LSE and the JSE. The objective of the Company is to deliver
sustainable growing income to its investors. Stenprop's investment policy is to invest in a diversified
portfolio of UK multi-let industrial (MLI) properties with the strategic goal of becoming the leading
MLI business in the UK. For further information, go to www.stenprop.com.
Date: 23-10-2020 08:00:00
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