Net Asset Value(s)
April 25 2008 - 11:26AM
UK Regulatory
RNS Number:1677T
Standard Life Invs Property Inc Tst
25 April 2008
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED
31 March 2008 - Net Asset Value Announcement
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited at 31 March 2008 was 102.7 pence. This is a
decrease of 8.0 percentage points over the net asset value of 111.6 pence per
share at 31 December 2007.
The net asset value is calculated under International Financial Reporting
Standards ("IFRS") and includes a provision for payment of a proposed interim
dividend of 1.69p per ordinary share for the quarter to 31 March 2008.
The net asset value incorporates the external portfolio valuation by Jones Lang
LaSalle at 31 March 2008. The property portfolio will next be valued by an
external valuer during June 2008 and the next quarterly net asset value will be
published thereafter.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited net asset value per
share calculated under IFRS over the period 31 December 2007 to 31 March 2008.
Pence per % of opening
share NAV
Net Asset Value per share as at 31 December 111.6 -
2007
Decrease in valuation of property portfolio
(including the effect of gearing)
(8.3) (7.4%)
Decrease in interest rate swap valuation (0.4) (0.4%)
Other movement in reserves (0.2) (0.2%)
Net Asset Value per share as at 31 March 102.7 (8.0%)
2008
The ungeared decrease in the valuation of the property portfolio over the
quarter to 31 March 2008 was 4.9%.
Total asset analysis as at 31 March 2008 (unaudited)
+----------------------------+-----------+------------+
| |�m |% |
+----------------------------+-----------+------------+
|Office |46.8 |22.2 |
+----------------------------+-----------+------------+
|Retail |35.9 |17.1 |
+----------------------------+-----------+------------+
|Industrial |56.3 |26.8 |
+----------------------------+-----------+------------+
|Other |20.9 |9.9 |
+----------------------------+-----------+------------+
|Total Property Portfolio |159.9 |76.0 |
+----------------------------+-----------+------------+
|Cash |48.3 |23.0 |
+----------------------------+-----------+------------+
|Other Assets |2.1 |1.0 |
+----------------------------+-----------+------------+
|Total Gross Assets |210.3 |100.0 |
+----------------------------+-----------+------------+
Cash position
As at 31 March 2008, the Company has borrowings of �84.4m and a cash position of
�48.3m (excluding rent deposits) therefore cash as a percentage of debt was
57.2%.
Loan to value ratio
As at 31 March 2008 the loan to value ratio after taking account of the cash
offset is 22.5%. The gearing level was 27.3% (bank borrowings plus zero dividend
preference share liability less cash divided by property portfolio).
Breakdown in valuation movements over the period 31 December 2007 to 31 March
2008
+---------------------------+-------------+-------------+---------+
| | Exposure as |Capital Value| �m |
| | at 31 March | Movement on | |
| | 2008 (%) | Standing | |
| | |Portfolio (%)| |
+---------------------------+-------------+-------------+---------+
|External Valuation at 31/12| | | 178.2 |
|/07 | | | |
+---------------------------+-------------+-------------+---------+
|Sub Sector Analysis: | | | |
+---------------------------+-------------+-------------+---------+
|RETAIL | | | |
+---------------------------+-------------+-------------+---------+
|South East Standard Retail | 15.0 | -1.5 | -0.4 |
+---------------------------+-------------+-------------+---------+
|Retail Warehouses | 18.1 | -4.8 | -1.5 |
+---------------------------+-------------+-------------+---------+
| | | | |
+---------------------------+-------------+-------------+---------+
|OFFICES | | | |
+---------------------------+-------------+-------------+---------+
|Central London Offices | 10.6 | -8.9 | -19.6 |
+---------------------------+-------------+-------------+---------+
|South East Offices | 6.5 | -4.8 | -0.5 |
+---------------------------+-------------+-------------+---------+
|Rest of UK Offices | 12.1 | -5.8 | -1.2 |
+---------------------------+-------------+-------------+---------+
| | | | |
+---------------------------+-------------+-------------+---------+
|INDUSTRIAL | | | |
+---------------------------+-------------+-------------+---------+
|South East Industrial | 7.2 | -7.3 | 6.4 |
+---------------------------+-------------+-------------+---------+
|Rest of UK Industrial | 28.0 | -3.2 | -1.5 |
+---------------------------+-------------+-------------+---------+
| | | | |
+---------------------------+-------------+-------------+---------+
|OTHER | 2.5 | -2.4 | |
+---------------------------+-------------+-------------+---------+
| | | | |
+---------------------------+-------------+-------------+---------+
|External Valuation at 31/03| 100 | -10.3 | 159.9 |
|/08 | | | |
+---------------------------+-------------+-------------+---------+
Investment Manager Commentary
UK Property Market
2008 started in much the same manner as 2007 finished with the pricing
correction continuing to play out. Encouragingly, the pace of decline in capital
values has decelerated and pricing looks to be moving closer to a floor and
nearer to fair value. At the end of March, the IPD monthly total return on All
Property at -0.8% has recovered from the -3.7% record monthly low recorded in
December 2008. With annual returns to the end of March running at -10.7% p.a.
and prices falling at a slower rate, this year is likely to record similar
returns to last years low negative single digits.
At 0.7%, returns from listed stocks also improved markedly in the first quarter
of 2008 as the sector staged a bounce back from the double digit negative
returns recorded in the last quarter of 2007. Similarly, the offshore sector
posted less negative returns at -1.4%, on average, in the first quarter of 2008
although there was a wide variation of returns across the sector.
In contrast to last quarter, total returns from the office sector at -3.2% over
the quarter were above the returns from the other two sectors. Despite this
outperformance, we continue to hold the view that the cyclical office sector
looks to be past the peak of this cycle and we expect offices to underperform
the other sectors in the near term. The credit market problems are likely to
accelerate the steepness of the downswing if the problems are prolonged and we
expect financial and business service office occupiers to bear the brunt of the
expected fall-out. In the context of the pricing correction, capital values in
the office sector, at -4.5% have been more resilient to price falls over the
quarter. In a reversal of last quarter's results, prices within the industrials
sector at -5.4% have fallen at a faster rate than the other sectors over the
last three months. Retail values falling -4.8% over the quarter were roughly in
line with the average for All Property. Tenant demand moderated across the
sectors this quarter as a consequence of the economic softening. In this
environment, incentives and rent free periods have increased and this is most
marked in areas of oversupply that are most susceptible to slowing tenant
demand. As alluded to last quarter, speculative development has been relatively
restrained in this cycle although there are exceptions such as the City and some
of the regional office markets. Economic forecasts continue to edge downwards
but at this stage the economy does not look to be moving towards recessionary
levels of growth. Although moderating, positive economic growth will continue to
underpin the occupier markets.
Investment Outlook
Our view remains that there will be several more challenging months of negative
returns over the course of 2008 as the pricing correction continues to run its
course. As witnessed in the first quarter, the pace of capital value declines
has slowed and we expect the magnitude of price falls to continue to moderate
over the next few months. We believe the strong performance of the office market
is coming to an end and will likely be accelerated by falling demand from
financial companies. We therefore expect retail, particularly prime quality
retail, to offer the strongest opportunities for rental growth over the next few
years.
The fundamentals supporting the market have been relatively resilient so far
although there has been some weakening over the quarter. The downside risk of a
contracting economy, although still relatively low at present, has increased
over the quarter. The banking sector remains key as to whether the downside
risks crystallize significantly. Inter-bank lending markets have yet to return
to normal and the longer they remain non-functioning the greater the risk that
rationed credit will cause problems in other parts of the economy. We continue
to expect the market to provide healthy single digit returns over the next few
years with the caveat that tenant demand, although robust currently, may be
susceptible to accelerated softening if financial markets continue in their
present cautious state.
Strategy Update
Whilst the direct property market continues to see falling capital values and
the general outlook remains difficult the Board is content to hold cash whilst
continually considering the various investment options available to it. The
�48.2m of cash is held in a AAA account that provides secure returns in excess
of the UK commercial property market, along with the flexibility to invest in
the best interest of shareholders as opportunities arise.
Portfolio Activity
Purchases and Sales:
During the quarter the Company completed on the purchase of a well let
industrial unit in the Thames Gateway for �7.5m, which shows an initial yield of
6.5%. The purchase was delayed following exchange in November 2007 for the
vendor to undertake some works to the property. The Company also completed on
the sale of Wellington House, London for �17.65m. The property had been the
largest in the portfolio, and had a lease expiry in 2011 that gave cause for
concern over the security of income at a time that rental values in Central
London are forecast to fall.
Asset Management:
Hollywood Green, London: Following the agreement to lease with Cineworld, and
agreement to surrender with Hoyts an application was made to the OFT, who
unfortunately referred the application to the competition commissioner. As a
result the deal did not complete. The Company continues to receive rent from
Hoyts but will continue to look for alternative opportunities.
Storage Land, Witham: A planning consent has been achieved on a half acre site,
and discussions are ongoing over its sale.
Ocean Trade Centre, Aberdeen: We completed a new lease on unit 17 at a rental
level of �7.50 per sq ft. The estate is now fully let.
All Enquiries:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Ltd
Trafalgar Court
Les Banques
GY1 3Q1
Tel: 01481 745439
Fax: 01481 745085
APENDIX 1
Historical NAV per Ordinary Share are as follows:
Adjusted IFRS NAV Adjusted UK GAAP NAV
31/03/08 102.71p 107.47p
31/12/07 111.60p 115.96p
30/09/07 130.70p 133.47p
30/06/07 137.16p 137.79p
31/03/07 134.42p 137.23p
31/12/06 132.68p 136.47p
30/09/06 129.51p 134.37p
30/06/06 130.20p 134.87p
31/03/06 124.28p 130.46p
31/12/05 116.46p 124.00p
30/09/05 107.12p 114.31p
30/06/05 103.88p 111.82p
31/03/05 101.34p 106.63p
31/12/04 99.00p 105.16p
This information is provided by RNS
The company news service from the London Stock Exchange
END
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