Standard LifeInvProp Unaudited Net Asset Value

 
TIDMSLI 
 
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 GBP165million through 
    the acquisition of a Jersey Property Unit Trust ("JPUT") resulting in a 
    portfolio now valued at GBP452million, an increase of 46% from 30 September 
    2015 
  * The acquisition was financed through the issue of 92.3million shares 
    raising GBP74.2million after costs, additional debt of GBP55million and GBP 
    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 GBP 
    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 Attributable           Comment 
                                    (p)  Assets (GBPm) 
 
Net assets as at 1 October         80.9        233.2 
2015 
 
Unrealised increase in              1.4          5.4 Like for like increase of 
valuation of property                                1.8% in standing property 
portfolio                                            portfolio. 
 
Gain on sale of assets              0.3          1.3 Sale of assets in Cheltenham 
                                                     and Rickmansworth. 
 
Acquisition costs during the       -0.5         -1.9 Relates to costs on 
period                                               successful acquisition of 
                                                     new portfolio of 22 assets 
                                                     in December 2015. 
 
Share Issuance (net of              0.0         74.2 Issue of 92.3 million shares 
issuance costs)                                      at a premium of 2.84% to the 
                                                     underlying NAV 
 
Net income in the quarter           0.1          0.6 Equates to dividend cover of 
after dividend                                       117% in the quarter boosted 
                                                     by a one-off reduction in 
                                                     management fees following 
                                                     the portfolio acquisition 
 
Interest rate swaps mark to         0.1          0.5 Decrease in swap 
market revaluation                                   liabilities 
 
Other movement in reserves         -0.1        (0.5) Movement in lease incentives 
                                                     and CAPEX 
 
Net assets as at 31 December       82.2        312.8 
2015 
 
 
 
European Public Real Estate Association            31 Dec 2015   30 Sep 2015 
("EPRA")* 
 
EPRA Net Asset Value                                   GBP314.9m       GBP235.8m 
 
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 GBP28.7million. Both offices had delivered exceptional performance 
for the Company, having been bought for a combined GBP18.3m 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 GBP165m. The 
Company raised GBP74.2m 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 GBP139.4million and a cash 
position of GBP12.4million (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 GBP84.4million to GBP139.4million. The 
additional borrowing was in the form of an additional term loan of GBP40.6million 
and a revolving credit facility of GBP14.4million (with the potential to draw a 
further GBP15.6million 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)
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