Standard LifeInvProp Net Asset Value(s)
February 01 2017 - 2:00AM
UK Regulatory
TIDMSLI
1 February 2017
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
Unaudited Net Asset Value as at 31 December 2016
Key Highlights
* Net asset value per ordinary share was 81.0p (Sep 2016 - 79.0p), a rise of
2.5%, resulting in a NAV total return, including dividends, of 4.1% for Q4;
* The portfolio valuation increased by 0.9% on a like for like basis, whilst
the IPD/MSCI Monthly Index rose by 1.1% over the same period;
* Strong share price performance in the quarter with share price total return
of 7.0% resulting in the Company's shares trading at a premium to NAV of
6.8% as at 31 Dec 2016;
* Successful asset management initiatives up to the date of this announcement
included
* Two new lettings completed, securing a total rent of GBP258,000 per annum
(p.a.)
* 4 lease renewals / regears completed securing GBP534,000 p.a. of rent
* Low void rate of 3.3% as at 31 Dec 2016;
* Dividend yield of 5.5% based on a quarterly dividend of 1.19p as at 31 Dec
2016 compares favourably to the yield on the FTSE All-Share REIT Index
(3.7%) and the FTSE All Share Index (3.5%) as at the same date.
* Interplex 16, Bristol and, after the quarter end, Quadrangle, Cheltenham
sold for a combined GBP16.8m. The sale proceeds were used to reduce the
Revolving Credit Facility with the LTV now standing at 24.1%.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 December 2016 was 81.0p. 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 2016.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 1 October 2016 to 31 December 2016.
Per Share Attributable Comment
(p) Assets (GBPm)
Net assets as at 1 October 2016 79.0 300.7
Unrealised increase in 1.0 3.9 Like for like increase of 0.9%
valuation of property portfolio in property portfolio
Gain on sale at Interplex, 0.2 0.8
Bristol
Capital expenditure in quarter -0.2 -0.6 Predominantly relates to
refurbishment of vacant unit at
Oldham
Net income in the quarter after 0.3 1.2 Continued strong income
dividend generation with annual dividend
cover of 117% for 2016.
Interest rate swaps mark to 0.8 3.0 Decrease in swap liabilities as
market revaluation longer term interest rates moved
higher in the quarter.
Other movement in reserves -0.1 -0.5 Movement in lease incentives
Net assets as at 31 December 81.0 308.5
2016
31 Dec 2016 30 Sep 2016
European Public Real Estate Association ("EPRA")
*
EPRA Net Asset Value GBP312.1m GBP307.3m
EPRA Net Asset Value per share 82.0p 80.7p
The Net Asset Value per share is calculated using 380,690,419 shares of 1p each
being the number in issue on 31 December 2016.
* 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 fourth quarter of 2016 saw a number of asset management initiatives come to
fruition. The strategy over the second half of the year was to reduce future
risk by selling assets where we could do so at an attractive valuation. As a
result, we sold an industrial investment in Bristol that was predominantly
vacant and was going to require future capex for GBP5.75m, (bought in 2015 for GBP
4.6m) and a 58,900 sqft office in Cheltenham that is single let with an expiry
in 2018 and required significant capital expenditure for GBP11.075m (bought in
Dec 15 as part of the Pearl portfolio for GBP10.05m). The office sale completed
just after the quarter end.
Reducing voids and extending leases remains a major focus, and we completed two
new lettings to reduce the void to 3.3% which compares favourably to the IPD
benchmark void rate of 8.2%. One of these was an industrial unit in Birmingham
where the old lease expired in December and we had a new tenant ready before
expiry. Our major void remains a logistics unit in Oldham, representing about
half the total void in the portfolio and where we have just completed a
refurbishment to ensure the building presents favourably to potential tenants.
We also regeared / renewed four leases, including a retail warehouse unit in
Bradford where we secured a 10 year term at the passing rent, and an industrial
unit in Horsham where we secured a further 6 year term just above the old rent.
The Company has reduced further the balance outstanding on the Revolving Credit
facility and the Company's overall LTV at 31 December 2016 was 26.0%. Since
that date the balance of the RCF has been reduced by a further GBP10m utilising
the sale proceeds of Cheltenham, reducing the LTV to 24.1%. Having had two
quarters of negative movement in the interest rate SWAP valuation the fourth
quarter was positive, with the swap liability now valued at GBP3.6million.
Market Commentary
2017 is expected to be an eventful year in the UK and abroad. The UK's economic
landscape is expected to be dominated by the continued political wrangling over
the Article 50 process for exiting the European Union, and the twists and turns
of politics are expected to dominate the headlines elsewhere in the world as
the year progresses. UK economic growth post the referendum was stronger than
anticipated, and December's Markit PMI's for manufacturing, construction and
the service sector finished 2016 on a high note - although as a note of
caution, firms are planning widespread price rises in the year ahead which is
likely to translate into inflationary pressures in 2017. Consumers have been
resilient to date, with strong retail sales reported, with discounting likely
to be a key factor. There are also suggestions that consumers may be using
credit to bring forward big-ticket purchases in anticipation of higher
inflation in 2017.
Over the twelve months to end December, IPD/MSCI Monthly Index recorded a total
return of 2.6% against a 3.2% total return in the twelve months to end
September. The main contributor to the fall in returns was the sharp capital
decline following the EU Referendum although market conditions and sentiment
have stabilised in recent months. Capital values fell by -2.8% p.a. in the year
to end December but perhaps of greater concern, rental growth fell to 2.0% p.a.
compared to 2.7% p.a. in the twelve months to end September. This suggests
that occupational demand might be weakening.
As for the equity markets, the FTSE All Share and the FTSE 100 total returns
were 3.9% and 4.3% respectively over the final quarter. For listed real estate
equities, total returns delivered modest growth of 0.6% over the same period.
Retail was no longer the laggard sector in the twelve months to end December as
it crept marginally ahead of offices which recorded total returns of 1.0% p.a.
The industrial sector has continued to demonstrate most resilience generating a
total return of 7.0% p.a. in the same period. Industrial values remained
positive over the last twelve months to end December as opposed to capital
declines in both the other two sectors.
Investment Outlook
Despite the uncertainty associated with the political outlook, UK real estate
continues to provide an elevated yield compared to other asset classes.
Furthermore, lending to the sector is at a lower level than in 2007/2008 and,
unlike in the Financial Crisis, liquidity remains reasonable. Additionally,
development continues to be relatively constrained by historic standards and
existing vacancy rates are below long term average levels in most markets,
which should all help to stabilise the market.
In the environment where the economic fundamentals are expected to soften and
with uncertainty remaining above "normal" levels, we expect lower returns from
property than has been the case over the last few years. Location and asset
quality will be crucial determinants of how markets respond to pressures in the
year ahead. Furthermore, the steady secure income component generated by the
asset class is likely to be the key driver of returns going forward. The market
is likely to be sentiment driven in the short term as the politics continues to
evolve, which will further affect capital values, while the medium term impact
will continue to hinge on economic factors.
From a sector perspective, we continue to favour industrial and logistics and,
although they are not likely to be immune to any uncertainty, they are expected
to be comparatively resilient. As for the retail sector, inflationary pressures
may prove to be a significant headwind and further polarisation within the
market is likely to be more pronounced. We continue to expect Central London
offices to be the most adversely impacted sector given the linkages to European
markets via cross border trading.
Dividends
The Company paid total dividends in respect of the quarter ended 30 September
2016 of 1.19p per Ordinary Share, with a payment date of 30 November 2016.
Net Asset analysis as at 31 December 2016 (unaudited)
GBPm % of net assets
Office 150.5 48.8
Retail 97.7 31.7
Industrial 181.7 58.9
Total Property 429.9 139.4
Portfolio
Adjustment for lease -4.2 -1.4
incentives
Fair value of Property 425.7 138.0
Portfolio
Cash 13.1 4.2
Other Assets 7.3 2.4
Total Assets 446.1 144.6
Current liabilities -10.0 -3.2
Non-current liabilities -127.6 -41.4
(bank loans & swap)
Total Net Assets 308.5 100.0
Breakdown in valuation movements over the period 1 Oct 2016 to 31 Dec 2016
Portfolio Exposure as Like for Capital
Value as at at 31 Dec Like Value Shift
31 Dec 2016 2016 Capital (GBPm)
(GBPm) (%) Value Shift
(%)
External valuation at 431.1
30 Sep 2016
Retail 97.7 22.7 0.5 0.5
South East Retail 6.4 -0.4 -0.1
Rest of UK Retail 1.3 8.0 0.4
Retail Warehouses 15.0 0.3 0.2
Offices 150.5 35.0 -0.4 -0.6
London City Offices 4.4 -6.0 -1.2
London West End 2.6 0.0 0.0
Offices
South East Offices 22.4 -0.3 -0.3
Rest of UK Offices 5.6 3.9 0.9
Industrial 181.7 42.3 2.3 4.0
South East Industrial 11.6 4.7 2.2
Rest of UK Industrial 30.7 1.4 1.8
Sale of Interplex, -5.1
Bristol
External valuation at 429.9 100.0 0.9 429.9
31 Dec 2016
Top 10 Properties
31 Dec 16 (GBPm)
White Bear Yard, London 15-20
Elstree Tower, Borehamwood 15-20
Denby 242, Denby 15-20
DSG, Preston 15-20
Symphony, Rotherham 15-20
Chester House, Farnborough 15-20
Charter Court, Slough 10-15
3B - C Michigan Drive, Milton Keynes 10-15
Howard Town Retail Park, High Peak 10-15
Hollywood Green, London 10-15
Top 10 tenants
Tenant group Passing As % of total
rent rent
1 Sungard Availability Services 1,320,000 4.6
(UK) Ltd
2 BAE Systems 1,257,640 4.4
3 Techno Cargo Logistics Ltd 1,242,250 4.3
4 DSG 1,177,677 4.1
5 The Symphony Group Plc 1,080,000 3.8
6 Bong UK 727,240 2.5
7 Euro Car Parts Ltd 703,430 2.5
8 Royal Bank of Scotland Plc 700,000 2.4
9 Ricoh UK Limited 696,995 2.4
10 Matalan 696,778 2.4
9,602,010 33.4
Total Fund Passing Rent 28,666,652
Regional Split
South East 40.4%
East Midlands 15.4%
North West 12.1%
North East 8.8%
West Midlands 6.1%
South West 5.2%
Scotland 5.0%
London City 4.4%
London West End 2.6%
Blocklisting Facility
SLIPIT has recently been granted a blocklisting by the UK Listing Authority for
19,000,000 ordinary shares of 1p each in the Company (the "Shares") to be
admitted to the premium segment of the Official List and to trading on the Main
Market of the London Stock Exchange.
The Board is not aware of any other significant events or transactions which
have occurred between 31 Dec 2016 and the date of publication of this statement
which would have a material impact on the financial position of the Company.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014). Upon the publication of this announcement via Regulatory
Information Service this inside information is now considered to be in the
public domain.
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
Graeme McDonald - Real Estate Finance Manager, Standard Life Investments
Tel +44 (0) 131 245 3151 or graeme_mcdonald@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
END
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