24 October
2017
STANDARD LIFE INVESTMENTS PROPERTY
INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at
30 September 2017
Key Highlights
Solid Performance
- Net asset value (“NAV”) per ordinary share as at 30 Sep was
86.0p (30 Jun 2017 – 83.9p), a rise
of 2.5% over the period, resulting in a NAV total return, including
dividends, of 4.0% for Q3;
- The portfolio valuation increased by 1.5% on a like for like
basis, whilst the MSCI/IPD Monthly Index rose by 1.3% over the same
period.
Positive portfolio activity
- Purchases of multi-let offices in Reading for £13.24m,
reflecting an initial yield of 6.75% and in Manchester for £8.1m,
reflecting an initial yield of 6.4% both of which provide
opportunity for asset management;
- Purchase of a 46,800sqft industrial unit in Birmingham for a
price of £4.58m, reflecting an initial yield of 5.75% for a 15 year
lease in place with no breaks.
Sales
- Sale of a 25,600sqft office on York Science Park for £4.35m,
just ahead of the June 2017 valuation
figure, to reduce the Company’s out of town office exposure;
- Sale of a small industrial unit in Cheltenham to the tenant for
£2.175m, reflecting a yield of 4.8%. The sale price was 8% ahead of
the valuation as at 30 June;
- Sale of a stand-alone retail warehouse in Southend on Sea at a
price of £5m, 5% ahead of the end June valuation and reducing
exposure to the retail sector;
- Exchanged contracts to sell Elstree Tower in Borehamwood for
£20m. The 80,700sqft office was valued at the end of June at £18m.
The sale removes risk relating to the break clause in 2020 while
the delayed completion until Feb
2018, which is unconditional, provides the Company with
additional income, and reduces cash drag while opportunities to
reinvest the proceeds are being investigated.
Overall, the portfolio activity is in line with the strategy of
disposing of assets at a profit where this also reduces risk to the
Company and reinvesting in higher yielding assets in favoured
sectors that offer the opportunity for successful asset
management.
Strong balance sheet with prudent
gearing
- LTV of 21.6% as at 30 Sep with uncommitted cash of £10m and the
RCF of £35m still available for investment in future
opportunities.
Premium rating
- Continued strong demand for the Company’s shares with the share
price sitting at a premium to NAV of 7.0% as at 30 Sep.
Attractive dividend yield
- Dividend yield of 5.3% based on a quarterly dividend of 1.19p
and the share price of 92p as at 30 Sep compares favourably to the
yield on the FTSE All-Share REIT Index (3.6%) and the FTSE All
Share Index (3.7%) 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
30 Sep 2017 was 86.0p. The net asset
value is calculated under International Financial Reporting
Standards (“IFRS”).
The net asset value incorporates the external portfolio
valuation by Knight Frank as at 30 Sep
2017.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV
calculated under IFRS over the period 1 Jul
2017 to 30 Sep 2017.
|
Per Share (p) |
Attributable Assets (£m) |
Comment |
Net assets
as at 30 June 2017 |
83.9 |
326.4 |
|
Unrealised
increase in valuation of property portfolio |
2.2 |
8.6 |
Mainly
relates to like for like increase of 1.5% in property
portfolio |
Gain on
sales |
0.1 |
0.4 |
Total
gains on sale of York, Cheltenham and Southend on Sea |
CAPEX
& transaction costs in the quarter including SDLT on
purchases |
-0.5 |
-1.8 |
Predominantly costs of sales and acquisitions incl SDLT plus CAPEX
at Gavin Way, Birmingham and Kings Business Park, Bristol |
Net income
in the quarter after dividend |
0.0 |
-0.2 |
Dividend
cover of 97% in the quarter but uncommitted cash resources of £10m
plus £35m RCF still available for investment. |
Interest
rate swaps mark to market revaluation |
0.2 |
0.7 |
Decrease
in swap liabilities in the quarter due to increased expectations of
a rise in interest rates |
Share
issues |
0.1 |
3.4 |
NAV
accretive issue of 3.8m shares in the quarter raising £3.4m |
Net assets
as at 30 Sep 2017 |
86.0 |
337.5 |
|
|
|
|
|
|
|
|
European Public Real Estate Association (“EPRA”)* |
30 Sep 2017 |
30 Jun 2017 |
|
|
EPRA Net Asset
Value |
£339.4m |
£329.0m |
|
|
EPRA Net Asset Value per
share |
86.4p |
84.6p |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Net Asset Value per share is calculated using 392,615,419
shares of 1p each being the number in issue on 30 Sep 2017.
* 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
At a property level performance has generally been in line with
the wider market. However, one of the more noticeable features of
the last 6 months for the fund has been the increase in voids, up
to the current level of 7.9% as at 30 September. This is higher
than we would like although it should be highlighted 3.3% of this
void is under offer to let or sell and 0.8% relates to a new
purchase where we received 18 months rental cover. Out of the 7.9%
void by income, 5% has been vacant for less than 6 months.
During Q3 the dividend was only covered 97%, however for the
year to date it is covered by 106%. The new voids, and having cash
to invest, means we are confident that cover will be maintained in
the future.
Sales and purchases over the quarter continued our strategy of
reducing future void and capex risk, and investing into multi let
assets that have strong potential for future performance. The sale
of our largest asset, Elstree Tower, has a delayed completion,
enabling the Company to continue to collect rental income until
February 2018, and the two office
purchases in Reading and Manchester offer plenty of asset
management opportunities in good quality well located
buildings.
The Company retains its undrawn Revolving Credit Facility (£35m)
as well as uncommitted cash (£10m) for reinvestment, and had an LTV
as at 30 September, of 21.6%. The cost of the debt has been hedged,
and is fixed at 2.7%, as compared to a running yield on the
investment portfolio of 5.6%. The interest rate swap has a
liability of £1.9m reflected in the NAV. This will revert to nil at
maturity in April 2023.
Market Commentary
Although forecasts for economic growth remain stronger than
immediately after the Brexit referendum, economists generally
expect a modest further slow-down in GDP growth for the UK economy
as we move into 2018. Despite the expected moderation in the
economy, returns from All Property remain robust at 10.4% p.a. in
the twelve months to end September. This compares to 5.1% p.a. in
the year to end June. Furthermore, UK property has recovered all of
the capital losses incurred immediately post the Brexit referendum.
Over the twelve months to end September, capital values rose by
4.5% p.a. Rental growth remains robust and at a market level rents
have increased by 1.8% p.a. over the past year.
As for the equity markets, the FTSE All Share and the FTSE 100
total returns rose by 2.1% and 1.8% respectively over the period
30/06/17 to 30/09/17. For listed real
estate equities, total returns were static over the quarter.
In sector terms, the industrial sector has continued to
demonstrate its strength, generating a total return of 18.6% p.a.
in the twelve months to end September. Retail was the laggard
sector in the same period, recording total returns of 7.6% p.a.,
although significantly ahead of the total returns delivered in the
twelve months to end June. Despite the uncertainty associated with
the sector as a result of Brexit, offices recorded a total return
of 8.1% p.a. in the year to end September. Industrial values
continued to rise strongly over the twelve months to end September
also although both the other two sectors have only experienced
modest capital growth. Retail capital growth continues to be the
weakest with values increasing by 1.4% p.a. over the twelve months
to end September, whilst office values grew by 3.1% p.a. over the
same time frame. Rents remained largely stable over the last twelve
months, but within sectors, retail rental growth, at 0.6% p.a.,
continued to be considerably weaker than the other sectors - below
office rental growth at 1.1% p.a. and industrials at 4.9% p.a. in
the twelve months to end September.
Investment Outlook
UK real estate continues to provide an elevated yield compared
to other assets and the market has fully recovered the capital
value losses that were sustained during the Brexit upheaval last
year. With continued capital growth comes concern about how long
this cycle will last. Several indicators remain supportive; lending
to the sector is at a lower level than in 2007/2008 and liquidity
remains reasonable. Additionally, development continues to be
relatively constrained by historic standards, and existing vacancy
rates are below average levels in most markets, which should all
help to maintain the positive returns the sector is currently
recording. In this environment, 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 continue to be
sentiment driven in the short term as the politics and economic
impact associated with the UK’s withdrawal from the European Union
continues to evolve. The retail sector continues to face a series
of headwinds that may hold back recovery in less strong locations
due to oversupply and structural changes. Given the backdrop of
continuing heightened macro uncertainty, investors are becoming
more risk averse and better quality assets are once again broadly
outperforming those of poorer quality. Prime/good quality assets
with stronger tenants on longer leases are likely to prove most
resilient in the weaker economic environment we anticipate as we
head into 2018.
Dividends
On 31 August 2017, the Company
paid a dividend of 1.19p per Ordinary Share in respect of the
quarter ended 30 June.
Net Asset analysis as at 30 Sep 2017 (unaudited)
|
£m |
% of
net assets |
Office |
144.2 |
42.7 |
Retail |
90.2 |
26.7 |
Industrial |
206.7 |
61.3 |
Total Property
Portfolio |
441.1 |
130.7 |
Adjustment for lease
incentives |
-4.0 |
-1.2 |
Fair value of
Property Portfolio |
437.1 |
129.5 |
Cash |
14.6 |
4.3 |
Other Assets |
7.5 |
2.2 |
Total
Assets |
459.2 |
136.0 |
Current
liabilities |
-10.4 |
-3.1 |
Non-current
liabilities (bank loans & swap) |
-111.3 |
-32.9 |
Total Net
Assets |
337.5 |
100.0 |
Breakdown in valuation movements over
the period 1 Jul 2017 to 30 Sep 2017
|
Portfolio Value as at 30 Sep 2017 (£m) |
Exposure as at 30 Sep 2017 (%) |
Like
for Like Capital Value Shift (excl sales & purchases) |
Capital Value Shift (incl sales & purchases
(£m) |
|
(%) |
External valuation
at 30 June 17 |
|
|
|
418.1 |
|
|
|
|
|
Retail |
90.2 |
20.4 |
1.2 |
-3.7 |
South East Retail |
|
6.5 |
2.4 |
0.7 |
Rest of UK Retail |
|
1.2 |
2.0 |
0.1 |
Retail Warehouses |
|
12.7 |
0.5 |
-4.5 |
|
|
|
|
|
Offices |
144.2 |
32.7 |
1.4 |
20.6 |
London City
Offices |
|
0.0 |
0.0 |
0.0 |
London West End
Offices |
|
3.1 |
0.0 |
0.0 |
South East
Offices |
|
25.4 |
1.5 |
15.3 |
Rest of UK
Offices |
|
4.2 |
2.7 |
5.3 |
|
|
|
|
|
Industrial |
206.7 |
46.9 |
1.7 |
6.1 |
South East
Industrial |
|
12.2 |
3.7 |
1.9 |
Rest of UK
Industrial |
|
34.7 |
1.0 |
4.2 |
|
|
|
|
|
External valuation
at 30 Sep 2017 |
441.1 |
100.0 |
1.5 |
441.1 |
Top 10 Properties
|
30 Sep 17 (£m) |
|
|
Elstree Tower, Borehamwood |
20-25 |
Denby 242, Denby |
15-20 |
Symphony, Rotherham |
15-20 |
DSG, Preston |
15-20 |
Chester House, Farnborough |
15-20 |
The Pinnacle, Reading |
10-15 |
New Palace Place, London |
10-15 |
Howard Town Retail Park, High
Peak |
10-15 |
Hollywood Green, London |
10-15 |
Charter Court, Slough |
10-15 |
Top 10 tenants
|
Tenant
group |
Passing
rent |
As % of total
rent |
1 |
Sungard Availability
Services (UK) Ltd |
1,320,000 |
4.8 |
2 |
BAE Systems plc |
1,257,640 |
4.6 |
3 |
Techno Cargo Logistics
Ltd |
1,242,250 |
4.5 |
4 |
DSG Retail
Limited |
1,177,677 |
4.3 |
5 |
The Symphony Group
Plc |
1,080,000 |
3.9 |
6 |
Bong UK |
741,784 |
2.7 |
7 |
Euro Car Parts
Ltd |
736,355 |
2.7 |
8 |
Ricoh UK Limited |
696,995 |
2.5 |
9 |
CEVA Logistics
Limited |
614,937 |
2.2 |
10 |
Thyssenkrupp Materials
(UK) Ltd |
590,000 |
2.1 |
|
|
|
|
|
|
9,457,638 |
34.3 |
|
Total Fund Passing
Rent |
27,442,862 |
|
Regional Split
South East |
43.4% |
East Midlands |
15.3% |
North West |
12.8% |
North East |
9.6% |
West Midlands |
6.6% |
Scotland |
5.0% |
South West |
4.1% |
London West End |
3.2% |
The Board is not aware of any other significant events or
transactions which have occurred between 30
Sep 17 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 Cour
tLes Banques
St Peter Port
GY1 3QL
Tel: 01481 745001