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 £258,000
per annum (p.a.)
- 4 lease renewals / regears completed securing £534,000 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 £16.8m.
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 (p) |
Attributable Assets (£m) |
Comment |
Net assets
as at 1 October 2016 |
79.0 |
300.7 |
|
Unrealised
increase in valuation of property portfolio |
1.0 |
3.9 |
Like for
like increase of 0.9% in property portfolio |
Gain on
sale at Interplex, Bristol |
0.2 |
0.8 |
|
Capital
expenditure in quarter |
-0.2 |
-0.6 |
Predominantly relates to refurbishment of vacant unit at
Oldham |
Net income
in the quarter after dividend |
0.3 |
1.2 |
Continued
strong income generation with annual dividend cover of 117% for
2016. |
Interest
rate swaps mark to market revaluation |
0.8 |
3.0 |
Decrease
in swap liabilities as 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 2016 |
81.0 |
308.5 |
|
|
European Public Real Estate Association (“EPRA”)* |
31 Dec 2016 |
30 Sep 2016 |
|
|
EPRA Net Asset
Value |
£312.1m |
£307.3m |
|
|
EPRA Net Asset Value per
share |
82.0p |
80.7p |
|
|
|
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|
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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 £5.75m, (bought in 2015 for £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
£11.075m (bought in Dec 15 as part of
the Pearl portfolio for £10.05m). 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 £10m
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 £3.6million.
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)
|
£m |
% of
net assets |
Office |
150.5 |
48.8 |
Retail |
97.7 |
31.7 |
Industrial |
181.7 |
58.9 |
Total Property
Portfolio |
429.9 |
139.4 |
Adjustment for lease
incentives |
-4.2 |
-1.4 |
Fair value of
Property Portfolio |
425.7 |
138.0 |
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 (bank loans & swap) |
-127.6 |
-41.4 |
Total Net
Assets |
308.5 |
100.0 |
Breakdown in valuation movements over
the period 1 Oct 2016 to 31 Dec 2016
|
Portfolio Value as at 31 Dec 2016 (£m) |
Exposure
as at 31 Dec 2016
(%) |
Like for
Like Capital Value Shift (%) |
Capital Value Shift (£m) |
|
|
External valuation at
30 Sep 2016 |
|
|
|
431.1 |
|
|
|
|
|
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
Offices |
|
2.6 |
0.0 |
0.0 |
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,
Bristol |
|
|
|
-5.1 |
|
|
|
|
|
External valuation at
31 Dec 2016 |
429.9 |
100.0 |
0.9 |
429.9 |
Top 10 Properties
|
31 Dec 16 (£m) |
|
|
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 rent |
As % of total
rent |
1 |
Sungard Availability
Services (UK) Ltd |
1,320,000 |
4.6 |
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