10 February
2016
STANDARD LIFE INVESTMENTS PROPERTY
INCOME TRUST LIMITED (the “Company”)
(LSE: SLI)
Unaudited Net Asset Value as at
31 December 2015
Key Highlights
- Net asset value per ordinary share was 82.2p as at 31 December 2015, an increase of 1.6% from
30 September 2015 resulting in a NAV
total return of 3.0% for Q4
- Completion of the purchase of 22 real estate assets for
£165million through the acquisition of a Jersey Property Unit Trust
(“JPUT”) resulting in a portfolio now valued at £452million, an
increase of 46% from 30 September
2015
- The acquisition was financed through the issue of 92.3million
shares raising £74.2million after costs, additional debt of
£55million and £35million of existing cash resources
- The standing property portfolio (portfolio excluding the JPUT
acquisition) produced a total return of 3.8%, outperforming the
3.1% total return on the MSCI (formerly IPD) Monthly Index over the
same period
- The Company sold two assets in the quarter for a combined value
of £28.7million, both assets being sold at a price above that of
the most recent valuation;
- Dividend increase announced of 2.5% to 1.19p per share
commencing from the quarter end 31 March
2016 (payable in May 2016 and
subject to any unforeseen circumstances);
- Based on the proposed new dividend rate, dividend yield of 5.5%
based on share price of 87.0p (4 February
2016) comparing favourably to the yield on the FTSE
All-Share REIT Index (3.2%) and the FTSE All Share Index (4.0%) as
at the same date.
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of Standard
Life Investments Property Income Trust Limited (“SLIPIT”) at
31 December 2015 was 82.2p. This is
an increase of 1.6% over the net asset value of 80.9p per share at
30 September 2015. The net asset
value is calculated under International Financial Reporting
Standards (“IFRS”).
The net asset value incorporates the external portfolio
valuation by Jones Lang LaSalle and
Knight Frank at 31 December 2015.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV
per share calculated under IFRS over the period 30 September 2015 to 31
December 2015.
|
Per
Share (p) |
Attributable Assets (£m) |
Comment |
Net assets as at 1
October 2015 |
80.9 |
233.2 |
|
Unrealised increase in
valuation of property portfolio |
1.4 |
5.4 |
Like for like increase
of 1.8% in standing property portfolio. |
Gain on sale of
assets |
0.3 |
1.3 |
Sale of assets in
Cheltenham and Rickmansworth. |
Acquisition costs
during the period |
-0.5 |
-1.9 |
Relates to costs on
successful acquisition of new portfolio of 22 assets in December
2015. |
Share Issuance (net of
issuance costs) |
0.0 |
74.2 |
Issue of 92.3 million
shares at a premium of 2.84% to the underlying NAV |
Net income in the
quarter after dividend |
0.1 |
0.6 |
Equates to dividend
cover of 117% in the quarter boosted by a one-off reduction in
management fees following the portfolio acquisition |
Interest rate swaps
mark to market revaluation |
0.1 |
0.5 |
Decrease in swap
liabilities |
Other movement in
reserves |
-0.1 |
(0.5) |
Movement in lease
incentives and CAPEX |
Net assets as at 31
December 2015 |
82.2 |
312.8 |
|
European Public Real Estate
Association (“EPRA”)* |
31 Dec 2015 |
30 Sep 2015 |
|
EPRA Net Asset Value |
£314.9m |
£235.8m |
|
EPRA Net Asset Value per share |
82.8p |
81.8p |
|
|
|
|
|
|
|
|
|
The Net Asset Value per share is calculated using 380,690,419
shares of 1p each being the number in issue on 31 December 2015.
* The EPRA net asset value measure is to highlight the fair
value of net assets on an on-going, long-term basis. Assets and
liabilities that are not expected to crystallise in normal
circumstances, such as the fair value of financial derivatives, are
therefore excluded.
Investment Manager Commentary
The final quarter of 2015 saw continued capital growth, boosted
in part by increasing rental growth. According to the IPD MSCI
monthly index this resulted in a total return of 3.1% for the
quarter. The Company had a total return at a portfolio level of
2.7% and a NAV total return to investors of 3.0% over the
same period. The portfolio return was distorted by the end of year
purchase of the JPUT and the acquisition costs thereon with the
standing portfolio producing a like-for-like total return of 3.8%
in the quarter.
The Company had a very busy end to 2015. It completed the sale
of two offices for a total of £28.7million. Both offices had
delivered exceptional performance for the Company, having been
bought for a combined £18.3m in 2012 / 13. The sale proceeds were
reinvested at the end of the quarter into the JPUT acquisition,
which consisted of a total of 22 assets at a cost of £165m. The
Company raised £74.2m of new equity after costs and entered into a
new debt facility with RBS to finance the portfolio, resulting in a
Loan to Value (“LTV”) at the end of December of 28.1% and an all in
cost of debt of 2.7%.
The new portfolio is obviously a major acquisition for the
Company. This portfolio is a great fit with the “old” portfolio,
and provides opportunity to enhance the income return through asset
management. As a result of the purchase, the Board was able to
announce an increase in the dividend by 2.5% to 1.19p per share
with effect from the first quarter of 2016. Based on the share
price of 87p as at 4th February
2016 this will provide shareholders with an attractive
annual dividend yield of 5.5%.
We expect the first quarter of 2016 to be just as busy as we bed
down the new portfolio, and get to know our new tenants. We believe
there is plenty of asset management to undertake this year along
with a debt refinancing as detailed below.
As we look through 2016 and beyond it is clear there are some
challenges ahead. Uncertainty with a vote over Britain’s membership
of the EU, combined with geo-political risk in Europe and a slowing China, overshadows the market. It feels as
though we are at a point of inflection where capital growth from
yield compression is coming to an end, and returns will be driven
by income and rental growth – an environment the Company is well
suited for. We have low voids (1.1%) and are seeing rental growth
in most markets as supply remains constrained and tenant demand is
good. With a continued expectation of “lower for longer” interest
rates, UK commercial real estate continues to look attractively
priced against other asset classes, and should be able to provide
an attractive level of income.
Cash position
As at 31 December 2015 the Company
had borrowings of £139.4million and a cash position of £12.4million
(excluding rent deposits).
Dividends
The Company paid a third interim dividend in respect of the
quarter ended 30 September 2015 of
1.161p per Ordinary Share, with ex-dividend and payment dates of
12 November 2015 and 27 November 2015 respectively.
In addition to the above the Company announced its intention to
split the final interim dividend in respect of the period to
31 December 2015 into: (i) a fourth
interim dividend for the period between 1
October 2015 and 20 December
2015 (the date immediately prior to Admission of the new
shares detailed above) and (ii) a fifth interim dividend for the
period between 21 December 2015 and
31 December 2015.
The Company therefore announced on 16
December 2015 that the fourth interim dividend will be 1.022
p with an ex-dividend date of 17 December
2015 and payment date of 31 March
2016.
The split of this dividend between a property income dividend
and ordinary dividend will be announced at the same time as the
announcement of the fifth interim dividend which is expected to be
in early March 2016.
Loan to value and interest rate
As part of the financing of the JPUT acquisition described
above, the Company increased its borrowing facilities from
£84.4million to £139.4million. The additional borrowing was in the
form of an additional term loan of £40.6million and a revolving
credit facility of £14.4million (with the potential to draw a
further £15.6million of the RCF). As at 31 December the loan
to value ratio (assuming all cash is placed with RBS as an offset
to the loan balance) was 28.1% (30 September
2015: 22.1%). The bank covenant level is 65%.
The weighted average interest rate on the loan as at
31 December 2015 is 2.7% compared to
3.7% as at 30 September 2015. The
main reason for this drop was a reduction in margin payable on the
existing facilities from 1.65% to 1.25%. The margin on the new
facilities is also 1.25% and these new facilities are unhedged
meaning the Company is benefiting from the current low interest
rate environment at the shorter end of the yield curve.
It is the intention of the Board to refinance all the borrowings
of the Company in the first half of this year and the managers are
currently in negotiations with a number of potential lenders in
order to achieve this.
Net Asset analysis as at 31 December 2015 (unaudited)
|
£m |
% of net assets |
Office |
164.1 |
52.5 |
Retail |
100.8 |
32.2 |
Industrial |
187.1 |
59.9 |
Total Property Portfolio |
452.0 |
144.6 |
Adjustment for lease incentives |
(3.4) |
(1.1) |
Fair value of Property
Portfolio |
448.6 |
143.5 |
Cash |
12.4 |
4.0 |
Other Assets |
6.2 |
2.0 |
Total Assets |
467.2 |
149.5 |
Non-current liabilities |
(141.1) |
(45.2) |
Current liabilities |
(13.3) |
(4.3) |
Total Net Assets |
312.8 |
100.0 |
Breakdown in valuation movements over
the period 1 Oct 2015 to 31 Dec 2015
|
Exposure as at 31 Dec
2015 (%) |
Capital Value
Movement on Standing Portfolio (%) |
|
|
|
IPD Sub Sector Analysis: |
|
|
RETAIL |
|
|
South East Retail |
7.5 |
1.2 |
Rest of UK Retail |
1.1 |
1.1 |
Retail Warehouses |
14.6 |
1.1 |
|
|
|
OFFICES |
|
|
London City Offices |
4.7 |
4.9 |
London West End Offices |
2.5 |
5.8 |
South East Offices |
22.6 |
0.8 |
Rest of UK Offices |
5.6 |
(0.7) |
|
|
|
INDUSTRIAL |
|
|
South East Industrial |
11.4 |
1.8 |
Rest of UK Industrial |
30.0 |
2.3 |
|
|
|
External Property Valuation at 31
Dec 2015 |
100.0 |
1.8 |
Top 10 Properties
|
31 Dec 15 (£m) |
|
|
White Bear Yard, London |
20-25 |
Elstree Tower, Borehamwood |
15-20 |
DSG, Preston |
15-20 |
Denby 242, Denby |
15-20 |
Symphony, Rotherham |
15-20 |
Chester House, Farnborough |
15-20 |
Charter Court, Slough |
10-15 |
3B - C Michigan Drive, Milton
Keynes |
10-15 |
Ocean Trade Centre, Aberdeen |
10-15 |
Hollywood Green, London |
10-15 |
The Board is not aware of any other significant events or
transactions which have occurred between 31
December 2015 and the date of publication of this statement
which would have a material impact on the financial position of the
Company.
Details of the Company may also be found on the Investment
Manager’s website which can be found at:
www.standardlifeinvestments.com/its
For further information:-
Jason Baggaley – Real Estate Fund
Manager Standard Life Investments
Tel +44 (0) 131 245 2833 or jason_baggaley@standardlife.com
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Ltd
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: 01481 745001
Fax: 01481 745085