Standard LifeInvProp Net Asset Value(s)
January 30 2018 - 2:00AM
UK Regulatory
TIDMSLI
30 January 2018
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 December 2017
Key Highlights
Solid Performance
* Net asset value ("NAV") per ordinary share was 87.6p (Sep 2017 - 86.0p), a
rise of 1.9%, resulting in a NAV total return, including dividends, of 3.3%
for Q4;
* The portfolio valuation increased by 1.7% on a like for like basis, whilst
the IPD/MSCI Monthly Index rose by 2.0% over the same period.
Portfolio activity - Selling assets with limited future return prospects and
reinvesting into assets in favoured sectors that provide secure income
Sales
* Sale of two retail warehouse units let to DSG in Preston for GBP16.35m. The
sale was 5.4% ahead of the end September valuation.
* Sale of a further retail unit let to Matalan at Kings Lynn, for GBP4.4m,
marginally ahead of the previous valuation.
* Sale of office building at 1 Dorset Street, Southampton for GBP5.2m, in-line
with previous valuation. This sale enables the Company to avoid future
capital expenditure and re-letting risk on the building.
* Post the quarter end, sale of Bathgate Retail Park in Scotland for GBP5.2m,
further reducing the Company's retail exposure.
* Purchase of a multi let office at 1 Station Square, in Bracknell for GBP12m,
reflecting a yield of 6.9% on the topped up rent. The office has had a
substantial refurbishment and is located adjacent to Bracknell train
station and close to the newly opened town centre retail scheme which
should provide scope for rental growth.
* Post the quarter end purchase of a 216,180 sq ft logistics facility in
Shellingford, Oxfordshire on the established White Horse Business Park, for
GBP11.5m, reflecting an initial yield of 6.5%. The unit is let for 25 years
without a break, and is subject to five yearly upwards only rent reviews
fixed at 2.5%pa.
Overall the above transactions have reduced risk in the portfolio by selling
assets, particularly in the retail sector, where future returns are expected to
come under pressure. Proceeds have been reinvested into assets in favoured
sectors that offer secure income and better future performance characteristics.
Successful asset management activity
* The Company's largest void at year end was an industrial unit in Rainham,
which became vacant in June 2017 on lease expiry. In January, we signed an
agreement on the unit for a new 15 year lease with a tenant break in year
10. Post this new lease, the void rate, which stood at 7.5% at the quarter
end drops to 5.4%.
Strong balance sheet with prudent gearing
* LTV of 18.0%* with uncommitted cash (post quarter end transactions) of GBP
18.3m and RCF of GBP35m still available for investment in future
opportunities.
Premium rating
* Continued strong demand for the Company's shares with 2.25m shares issued
in the quarter raising proceeds of GBP2.0m. As at 31 Dec 2017 the share price
was 93.25p - a premium to the 31 December NAV of 6.4%.
Attractive dividend yield
* Dividend yield of 5.1% based on a quarterly dividend of 1.19p as at 31 Dec
2017 compares favourably to the yield on the FTSE All-Share REIT Index
(3.6%) and the FTSE All Share Index (3.4%) as at the same date.
*LTV calculated as Debt less cash (incl cash held by solicitors) divided by
portfolio value
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 Dec 2017 was 87.6p. The net
asset value is calculated under International Financial Reporting Standards
("IFRS").
The net asset value incorporates the external portfolio valuation by Knight
Frank at 31 Dec 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 Oct 2017 to 31 Dec 2017.
Per Share (p) Attributable Comment
Assets (GBPm)
Net assets as at 30 Sept 2017 86.0 337.5
Unrealised increase in 1.7 6.9 Mainly relates to like for
valuation of property like increase of 1.7% in
portfolio property portfolio
Gain on sales 0.3 1.1 Gains on sale of DSG,
Matalan, Kings Lynn and
Dorset Street, Southampton
CAPEX & purchase costs in the -0.3 -1.0 Predominantly acquisition
quarter costs incl SDLT plus CAPEX
at Explorer 1 & 2 and Unit
6 Broadgate, Oldham
Net income in the quarter 0.0 0.0 Dividend cover for the
after dividend quarter of 100% (104% for
the full year) with
uncommitted cash resources
of GBP18.3m plus GBP35m RCF
still available for
investment.
Interest rate swaps mark to -0.1 -0.4 Increase in swap
market revaluation liabilities in the quarter
Share issues 0.0 2.0 NAV accretive issue of
2.25m shares in the quarter
raising GBP2.0m
Other movement in reserves 0.0 -0.1 Movement in lease
incentives in the quarter
Net assets as at 31 Dec 2017 87.6 346.0
European Public Real Estate 31 Dec 2017 30 Sep 2017
Association ("EPRA")*
EPRA Net Asset Value GBP348.2 GBP339.4m
EPRA Net Asset Value per share 88.2p 86.4p
The Net Asset Value per share is calculated using 394,865,419 shares of 1p each
being the number in issue on 31 Dec 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
The focus during 2017 was relatively simple - firstly, to reduce future risk of
capex/voids and to reduce exposure to retail warehousing, which we feel is
going to continue to face headwinds. Secondly, we wanted to control the void
level and secure future income at risk from lease expiry and void. The year
ahead is likely to have a similar theme, although we have more or less
completed the portfolio rebalancing, with the main focus being on maintaining
and growing the income stream.
Whilst 2017 surprised with the extent of capital growth (5.4%), we remain
cautious on the outlook for 2018. Initial indications are that tenant interest
in industrial and office property remains relatively strong, however the
prospect of mixed news on Brexit, and a slowing economy, means that we want to
continue to focus on reducing voids. We completed several lease renewals in Q4
2017 and an agreement for lease on our largest void in January 2018. We are
encouraged by the number of viewings on our largest remaining void - a
logistics unit in Oldham - and although we are aware of several future voids
over the course of 2018, early interest in them is also encouraging.
The last quarter of 2017 and the first weeks of 2018 saw continued rebalancing
of the portfolio, rotating out of retail warehouse units that had future risk
(Preston was over-rented and planning had recently been granted for a new park
on the opposite side of town) and buying into assets that we believe tenants
will want to occupy, such as well-located offices and industrial units.
The Company retains its undrawn Revolving Credit Facility (GBP35m) as well as
unallocated cash (GBP18.3m) for reinvestment, and had an LTV of 18% as at 31
December, reflecting the relatively cautious outlook we have. 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 GBP
2.2m held in the NAV. This will revert to GBP0 at maturity.
Market Commentary
As we move into 2018, economists generally expect relatively subdued economic
growth for the year ahead and then some further moderation in economic momentum
in 2019 as the impact of leaving the European Union becomes more pronounced.
Despite the relatively weak economic backdrop, UK real estate returns were
stronger than most analysts originally anticipated at the start of 2017. Up to
the end of December, UK real estate recorded total returns of 11.2% for the
year. Capital growth was relatively strong over the year also with values
rising by 5.4%, .an improvement on the 4.5% growth in the twelve months to end
September. Rents increased by 1.9% over the year which marginally improved from
the increase in the year to end September.
As for the equity markets, the FTSE All Share and the FTSE 100 both produced
total returns of 5% respectively over the period 30/09/17 to 31/12/17. Over the
same period, listed real estate equities delivered a return of 8.3%.
In sector terms, the industrial sector has continued to demonstrate its
strength, generating a total return of 21.1% in the twelve months to end
December. Retail was the laggard sector in the same period, recording total
returns of 7.7%. Despite the political uncertainty associated with the sector,
offices recorded a total return of 8.5% in the year to end December. Retail
capital growth continues to be the weakest with values increasing by 1.5% over
the twelve months to end December, whilst office values grew by 3.5% over the
same time frame. Rental growth remained positive over the last 12 months with
office rental growth of 1.4% and industrials at 4.9%. Retail rental growth, at
0.4% continued to be considerably weaker than the other sectors.
Investment Outlook
UK real estate continues to provide an elevated yield compared to other assets
and market values are now ahead of the level they attained before the Brexit
upheaval in 2016. Furthermore, lending to the sector remains prudent 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, although there are pockets of oversupply
in some markets such as Central London. The positive fundamentals should help
to maintain positive returns. In this environment, the steady secure income
component generated by the asset class is likely to be the key driver of
returns. 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 issues. Within this sector, however, the
prospects for retail towards the South East and Central London are expected to
remain more robust. 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 provide the
best opportunities in the weaker economic environment we anticipate further
into 2018.
Dividends
The Company paid total dividends in respect of the quarter ended 30 September
2017 of 1.19p per Ordinary Share, with a payment date of 30 November 2017.
Net Asset analysis as at 31 Dec 2017 (unaudited)
GBPm % of net assets
Office 150.5 40.2
Retail 69.6 20.1
Industrial 213.1 64.9
Total Property 433.2 125.2
Portfolio
Adjustment for lease -3.7 -1.1
incentives
Fair value of 429.5 124.1
Property Portfolio
Cash 14.3 4.1
Other Assets 24.2 7.0
Total Assets 468.0 135.2
Current liabilities -10.5 -3.0
Non-current -111.5 -32.2
liabilities (bank
loans & swap)
Total Net Assets 346.0 100.0
Breakdown in valuation movements over the period 1 Oct 2017 to 31 Dec 2017
Portfolio Exposure as Like for Capital
Value as at at 31 Dec Like Capital Value Shift
31 Dec 2017 2017 (%) Value Shift (incl
(GBPm) (excl transactions
transactions (GBPm)
& CAPEX)
(%)
External valuation at 441.1
30 Sep 17
Retail 69.6 16.1 0.4 -20.6
South East Retail 5.7 1.2 0.3
Rest of UK Retail 0.0 0.0 0.0
Retail Warehouses 10.4 -0.1 -20.9
Offices 150.5 34.7 0.1 6.3
London City Offices 0.0 0.0 0.0
London West End 3.1 0.7 0.1
Offices
South East Offices 27.2 -0.5 5.6
Rest of UK Offices 4.4 3.2 0.6
Industrial 213.1 49.2 3.1 6.4
South East Industrial 13.1 5.9 3.2
Rest of UK Industrial 36.1 2.2 3.2
External valuation at 433.2 100.0 1.7 433.2
31 Dec 2017
Top 10 Properties
31 Dec 17 (GBPm)
Elstree Tower, Borehamwood 20-25
Denby 242, Denby 15-20
Symphony, Rotherham 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
Eden Street, Kingston Upon Thames 10-15
Top 10 tenants
Tenant group Passing As % of total
rent rent
1 Sungard Availability Services 1,320,000 5.0
(UK) Ltd
2 BAE Systems plc 1,257,640 4.7
3 Techno Cargo Logistics Ltd 1,242,250 4.6
4 The Symphony Group Plc 1,080,000 4.1
5 Bong UK 741,784 2.8
6 Euro Car Parts Ltd 736,355 2.8
7 Ricoh UK Limited 696,995 2.6
8 CEVA Logistics Limited 633,385 2.4
9 Thyssenkrupp Materials (UK) Ltd 590,000 2.2
10 Public Sector 559,148 2.1
8,857,557 33.3
Total Fund Passing Rent 26,654,667
Regional Split
South East 46.0%
East Midlands 15.1%
North West 11.0%
North East 8.4%
West Midlands 7.5%
Scotland 5.0%
South West 3.8%
London West End 3.2%
The Board is not aware of any other significant events or transactions which
have occurred between 31 Dec 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.slipit.co.uk
For further information:-
Jason Baggaley - Real Estate Fund Manager, Standard Life Investments
Tel +44 (0) 131 245 2833 or jason.baggaley@aberdeenstandard.com
Graeme McDonald - Real Estate Finance Manager, Standard Life Investments
Tel +44 (0) 131 245 3151 or graeme.mcdonald@aberdeenstandard.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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