Revised Banking Arrangements
July 01 2009 - 4:34AM
UK Regulatory
TIDMSLI
RNS Number : 8802U
Standard Life Invs Property Inc Tst
01 July 2009
RNS ANNOUNCEMENT
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED
1 July 2009
Revised banking arrangements
The Board is pleased to announce that it is entering into revised banking
arrangements with its lender, RBS, that will provide the Company with greater
flexibility to invest its existing cash resources. This will allow the Company
to take advantage of opportunities to purchase attractively priced commercial
properties over the coming months. Once the cash has been invested the Company's
dividend cover should be enhanced further from its current strong level. The new
arrangements have been agreed in principle and are currently being documented.
The Company has held high levels of cash following the sale of a portfolio in
July 2007, and its largest asset in December 2007. For most of 2008 holding the
cash was beneficial to returns, however in the current low interest rate
environment and the lack of flexibility to invest the cash under the previous
banking arrangements the new arrangement will allow returns to be maximised. The
Company has current cash holdings of GBP31m following the recent purchase and
lease regears of Capital Court Uxbridge.
RBS has agreed that the loan to value ratio can be increased to 65% from its
current maximum level of 55% and that the covenant calculation will be amended
to provide for a full cash offset against borrowings. The LTV covenant will be a
maximum of 65% calculated as borrowings less cash divided by the value of
properties. Property values could fall by 34% from end March 2009 levels before
an LTV breach will occur.
The Company has agreed to increase the margin on the debt from 60bps to 150bps,
along with a 50bps arrangement fee. As a result of these changes the Company's
all in cost of debt will be approximately 6%. The new margin of 150 bps compares
very favorably with margins being agreed on other new or rollover facilities
which are currently in the range of 250 bps to 300 bps for commercial property
loans. All other terms of the facility remain unchanged.
In April 2009 the Company completed on the purchase of Capital Court
Uxbridge for GBP10.98m. The property had a yield on purchase of 9.8%. Since
purchase a number of leases have been regeared so that the average lease length
has increased to 12.7 years from just under 8 years, the vacant space has been
let, and the outstanding rent reviews agreed at GBP23.75psf. The upward /
downward rent review provisions in some of the leases have also been removed, so
the building is fully let on normal institutional upward only rent review
leases. As a result of these initiatives the value has increased by a net
GBP620,000 (5.6%) from the purchase price, and the future income stream has been
further improved.
Jason Baggaley, fund manager of SLIPIT commented "The new arrangement allows us
to maximize returns by utilizing some of the cash currently deposited with RBS.
The purchase made in April demonstrates the type of opportunity available and we
would like to make similar purchases, as that property has appreciated in value
since purchase following asset management initiatives and has strengthened the
revenue account. We sold property and repaid some debt at the beginning of the
cycle, and held high levels of cash since mid 2007 waiting for the recovery. I
now look forward to re-investing this money back into the property market at a
time where we see some very attractive opportunities".
Enquiries
Gordon Humphries, Standard Life Investments
Tel. 0131 245 2735
Nigel Russell, Graeme Caton, Graham Reaves, G&N Collective Funds Services
Tel. 0131 226 4411
This information is provided by RNS
The company news service from the London Stock Exchange
END
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