CRC.L Regulatory News (CRC)

14 July 2020

Circle Property Plc

("Circle" or the "Company")

Trading Update

Circle Property Plc (AIM: CRC), which invests in, develops and actively manages well-located regional office assets, is pleased to provide an update on trading further to the announcement on 14 April 2020.

Rent collection

A core part of our strategy to preserve long-term value has been to work closely with our tenants, supporting them through the period impacted by COVID-19. Our tenant base is diverse and while a select few businesses are currently more challenged than others resulting in a delay to rent collection, we have worked diligently to collect rent due.

As at the date of this announcement, the Company is pleased to report 91% rent collection for the quarter to March 2020. Current rent collection for the June 2020 quarter stands at 77% and, with agreed monthly payments, this figure increases to 91% of rent due. The Company remains in constant and constructive dialogue with all tenants and anticipates these rent collection numbers to continue to increase.

We place great value on the strong relationships we have with our tenants which has been demonstrated during this period.

Financing and liquidity

The Company has a financing facility in place with RBS and HSBC for £100 million. The senior revolving facility is for £65 million (of which the Company has drawn £62.3 million) with an 'accordion' option for a further £35 million. As at the date of this announcement, the Company has £4.3 million cash on balance, reflecting a gross LTV of 44.68%. In aggregate, the Company has £7.0 million of immediate liquidity at its disposal.

A flexible development and refurbishment pipeline has meant the Company has been able to defer expenditure in response to recent uncertainty. However, the Company will continue to focus on ensuring that it creates value through active asset management and development in the future and as and when the business environment becomes clearer.

Recent activity and the market

We have remained active across the portfolio during the period. A new letting was completed at 300 Pavilion Drive, Northampton to a consulting company on a 10-year lease (with 5-year break) at £34,000 p.a. Existing tenants at 135 Aztec West, Bristol have also decided to remain in occupation, committing to the end of 2020. Tenant interest at our newest asset, Concorde Park, Maidenhead continues to build pleasingly. This asset - purchased with 63% vacancy in August 2019 - has proved a resounding success with now only 33% of space left to lease.

More generally, whilst letting activity continues in our regions, albeit at a slower pace, we expect this to pick up as workforces gradually return to places of work. Whilst it is expected that working practices will adapt as a consequence of COVID-19, we remain confident that Circle's multi-tenanted buildings, designed for regional SMEs, and with flexibility and affordability at the heart, will remain attractive environments for employees to interact, work and socialise. 

Heading into this crisis, Circle had been benefiting from both structural demand growth and supply constraints in its chosen regional centres. Whilst disruptive in the short-term, we see no evidence that COVID-19 will fundamentally alter these underlying dynamics. In this respect, we remain positive that small, regional offices will continue to be attractive venues for work.

Publication of final results and dividend

As announced on 14 April 2020, the publication of Circle's final results and report and accounts for the year ended 31 March 2020 has been delayed until late September 2020 due to COVID-19. In addition, the Company is not yet in a position to provide guidance on expectations for its financial performance for the year ending 31 March 2021.

The Board currently expects that a final dividend for the year ended 31 March 2020 will be paid, however no final decision has yet been made. Given the wider impact of COVID-19, the Board believes it prudent to maintain a higher cash position ahead of greater visibility of market conditions and business progress in response to COVID-19.

John Arnold, CEO of Circle Property Plc, commented:

"Our ability to deliver a solid performance in current market conditions demonstrates not only the strong and constructive relationships we have with our tenants, but also the benefits of the size and flexibility of our space. The majority of our regional commercial lettings are 1,000 - 5,000 sq. ft., a sweet spot for regional lettings given that 70% of leases fall within this range.

"We continue to believe in the long-term market opportunity in regional offices despite a change in short-term working patterns and our team has been working tirelessly through this uncertain time in order to protect the value of our commercial properties and income attached. As lockdown eases, we expect workers to return to offices and we remain confident in the long-term demand for regional office space and the Group's prospects over the months and years ahead."

About Circle Property Plc

Circle is amongst the best performing quoted UK real estate companies by NAV total return (NAV growth and dividend) having delivered consistent returns with 101% NAV growth since IPO in 2016 in absolute terms.

Circle focusses on acquiring assets in regional cities, many of which have significant office supply constraints, and on office assets with active management potential (refurbishment opportunities, under-rented or vacant properties or short leases), rather than just maximising initial rental yields.

Circle is not a Real Estate Investment Trust (REIT) and can actively recycle proceeds from asset sales into its refurbishment and redevelopment pipeline, as well as future investment opportunities, therefore targeting a broader range of returns for shareholders, which are primarily driven by NAV growth.