Standard LifeInvProp Net Asset Value(s)
May 01 2018 - 2:00AM
UK Regulatory
TIDMSLI
1 May 2018
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 March 2018
Key Highlights
Solid Performance
* Net asset value ("NAV") per ordinary share was 89.4p (Dec 2017 - 87.6p), a
rise of 2.1%, resulting in a NAV total return, including dividends, of 3.4%
for Q1 2018;
* The portfolio valuation increased by 1.9% on a like for like basis, whilst
the IPD/MSCI Monthly Index rose by 1.0% over the same period.
Portfolio activity
* 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.
* Purchase of the Grand National Retail Park in Aintree for a price of GBP
6.125m, reflecting an initial yield of 6.85%. The park is adjacent to the
race course, and consists of 4 units let as a leisure park to Premier Inn,
Pure Gym, Mitchells and Butler, and KFC. The investment benefits from
strong trade associated with the race course and provides opportunity for
asset management to extend leases from the current 8.1 years.
* Purchase of an industrial complex in Sandy, Bedfordshire for GBP6.02m,
reflecting a yield of 6.25%. The property is located immediately adjacent
to a junction of the A1, approximately 40 miles north of central London,
and is let for an unexpired term of 19 years at a rent of GBP3.17psf, subject
to indexed increases in rent every five years.
Sales
* Completion of the sale of Elstree Tower in Borehamwood for GBP20m previously
announced in September 2017.
* Post the period end completed the sale of Charter Court, a multi let office
in Slough for GBP13.25m, 9.6% ahead of the end December valuation.
The transactions above have continued the process of selling assets where
future returns are expected to come under pressure and reinvesting into assets
in favoured sectors that offer secure income and better future performance
characteristics.
Successful asset management activity
* Completed the letting of 1 Marsh Way, Rainham, the Company's largest void.
The property has been let on a 15 year lease (with tenant break option in
the tenth year) at a starting rent of GBP636,200pa.
* Voids rate as at 31 March 2018 was 5.8% (Dec 2017 - 7.7%).
Strong balance sheet with prudent gearing
* LTV* of 14.3% and uncommitted cash of GBP44.1m post the quarter end
transactions with RCF of GBP35m also still available for investment in future
opportunities.
* Two year extension of existing GBP35million Revolving Credit facility ("RCF")
secured with Royal Bank of Scotland. While the margin over LIBOR on the RCF
will increase from 1.2% to 1.45% this extension will mean the RCF will now
expire at same time as the term loan in April 2023 providing the Company
with increased certainty of both availability and cost of financing to this
date. The interest rate on the Company's GBP110 million term loan remains
fixed at 2.725%.
Premium rating
* Continued strong demand for the Company's shares with 8.25m shares issued
in the quarter raising proceeds of GBP7.6m. As at 24 Apr 2018 the share price
was 94.2p - a premium to the 31 March NAV of 5.4%.
Attractive dividend yield
* Dividend yield of 5.1% based on a quarterly dividend of 1.19p as at 24 Apr
2018 compares favourably to the yield on the FTSE All-Share REIT Index
(3.8%) and the FTSE All Share Index (3.7%) as at the same date.
*LTV calculated as Debt less cash (after sale of Charter Court) divided by
portfolio value (excl Charter Court)
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 Mar 2018 was 89.4p. The net
asset value is calculated under International Financial Reporting Standards
("IFRS").
The net asset value incorporates the external portfolio valuation by Knight
Frank LLP at 31 Mar 2018.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 1 Jan 2018 to 31 Mar 2018.
Per Share (p) Attributable Comment
Assets (GBPm)
Net assets as at 31 Dec 2017 87.6 346.0
Unrealised increase in 1.9 7.6 Mainly relates to like for
valuation of property like increase of 1.9% in
portfolio property portfolio
Loss on sales 0.0 -0.2 Loss on sale of Bathgate
CAPEX & purchase costs in the -0.4 -1.7 Predominantly acquisition
quarter costs plus CAPEX
Net income in the quarter -0.2 -0.7 Dividend cover for the
after dividend quarter of 86% with
uncommitted cash resources
of GBP44m plus GBP35m RCF still
available for investment
which when utilised will
allow the Company to move
back towards a covered
dividend.
Interest rate swaps mark to 0.4 1.8 Decrease in swap
market revaluation liabilities in the quarter
Share issues 0.2 7.6 NAV accretive issue of
8.25m shares in the quarter
raising GBP7.6m
Other movement in reserves -0.1 -0.2 Movement in lease
incentives in the quarter
Net assets as at 31 Mar 2018 89.4 360.2
European Public Real Estate 31 Mar 2018 31 Dec 2017
Association ("EPRA")*
EPRA Net Asset Value GBP360.7m GBP348.2m
EPRA Net Asset Value per share 89.5p 88.2p
The Net Asset Value per share is calculated using 403,115,419 shares of 1p each
being the number in issue on 31 Mar 2018.
* 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 first quarter is generally fairly quiet as investors and occupiers take
stock and plan for the year ahead. This year, however, activity seemed to
continue on from the end of 2017 with little change. The Company was no
exception, with several transactions rolling over from last year and some new
activity. It was pleasing to complete a new lease on the Company's largest
vacant building in January, and over the quarter we found inspection levels on
all the vacant units was higher than in Q4 last year. Although lettings are
taking longer to secure, the level of interest is encouraging and generally new
leases have been agreed on better terms than assumed in the Company's
valuations. The void level reduced over the quarter to 5.8%, and is likely to
be in a range between 5%-10% throughout the year as various leases expire and
new lettings are completed.
Three purchases were completed in Q1, with a total investment of just over GBP
23m. The two industrial / logistics units are let on long leases with
indexation, and although the units are older, they provide cost efficient
occupation for the tenants, with future potential for redevelopment. The
leisure scheme in Aintree is adjacent to the race course, and we are already
actively engaged in extending leases to give long term secure income. As a
result of two sales of offices with potentially large capex requirements the
Company has a larger than normal cash holding (c10%) at quarter end. This
larger than normal cash holding obviously has a short term impact on the level
of dividend cover given the low yield on cash holdings. We are, however,
considering several investment opportunities and will seek to invest the cash
over the next 6 months into assets with lower capex requirements and stronger
growth potential. Investing the cash in suitable investments will enable the
Company to move back towards a covered dividend.
Market Commentary
UK economic growth was 0.4% in the fourth quarter of 2017 and was revised down
to 1.7% for the year as a whole. Early data for the first quarter of 2018 has
been underwhelming, particularly for the services sector. Retail sales figures
have been particularly weak over the first quarter, however there are signs
that the economy will benefit from a recovery in household spending power later
this year as the tight labour market starts to feed through into stronger wage
growth. Regular pay growth reached 2.8% in February, while consumer price
inflation (CPI) fell to 2.5% in March. The Bank of England has signalled that
further rate rises are coming although the recent GDP announcement has cast
some doubt over the timing of these.
The UK property market produced a total return of 2.3% in Q1, according to the
MSCI Monthly Index. Over the 12 month period to 31 March the total return was
11.3% after a year of consistent capital growth resulting in 5.6% capital
growth over the 12 month period. The majority of this growth came from inward
yield shift, with rental value growth of only 2% over the 12 months.
Volatility in the financial markets in Q1 have been reflected in the negative
total returns of the FTSE All Share (-6.9%) and the FTSE 100 (-7.2%). The FTSE
All-Share REIT Index was also negative over the first quarter of 2018 at -3.5%.
Industrials remained the clear outperformer at a sector level, with a total
return of 4.3% over the quarter, led by strong returns in the South East and
rental growth of 1.0%. Office and retail total returns over the quarter were
more muted at 1.9% and 1.2% respectively, with a modest 0.4% growth in rents in
the former but flat rents in the latter. In the office sector, central London
underperformed the South East and the regions over the quarter with South East
offices now also the top performing office segment over the last five years.
Retail returns were weighed down by shopping centres, which returned just 0.4%
over the quarter but retail warehouse performance was healthier at 1.5%.
Investment Outlook
We envisage positive but low total returns over the next five years, with the
forecast annual total return being slightly below the market income return.
Aside from industrial valuations catching up with extremely strong pricing and
delivering appreciably stronger returns in the short term, we do not see yield
shift contributing positively to capital growth over the forecast period.
Relative differences in projected segment performance beyond that initial yield
shift for industrials are expected to be reasonably small, with no clear
outperforming segment beyond industrial in 2018. Whilst the downside risk is
greater as prices remain high in a long-term context, we do not see a specific
trigger for a correction. Fundamentals are positive in the industrial sector,
although retail is more polarised. Most office markets are well-balanced with
limited new supply, albeit we see more risk in London. Debt is accretive to
income returns and lending remains selective and prudent, with total debt much
lower than before the global financial crisis. There remains significant
capital targeting the asset class, both from overseas and domestic investors'
allocations, with the comparatively high income yield one of the attractions.
We would caution that property's required risk premium has likely increased
over time as leases have shortened and income has become riskier, while rental
growth prospects have diminished. With income expected to be the main driver of
returns over the forecast period, the degree of income risk - whether potential
tenant default or the durability of income at lease events - will be key to
asset performance. It remains our view that lower risk, higher quality assets
are likely to perform best over the medium term.
Dividends
The Company paid total dividends in respect of the quarter ended 31 December
2017 of 1.19p per Ordinary Share, with a payment date of 29 March 2018.
Net Asset analysis as at 31 Mar 2018 (unaudited)
GBPm % of net assets
Office 133.5 37.1
Retail 64.9 18.0
Industrial 235.9 65.5
Other 6.2 1.7
Total Property 440.5 122.3
Portfolio
Adjustment for lease -3.4 -0.9
incentives
Fair value of 437.1 121.4
Property Portfolio
Interest rate swap 0.1 0.0
Cash 36.0 10.0
Other Assets 6.9 1.9
Total Assets 480.1 133.3
Current liabilities -10.1 -2.8
Non-current -109.8 -30.5
liabilities (bank
loans & swap)
Total Net Assets 360.2 100.0
Breakdown in valuation movements over the period 1 Jan 2018 to 31 Mar 2018
Portfolio Exposure as Like for Like Capital Value
Value as at at 31 Mar Capital Value Shift (incl
31 Mar 2018 2018 (%) Shift (excl transactions (GBP
(GBPm) transactions & m)
CAPEX) (%)
External valuation 433.2
at 31 Dec 17
Retail 64.9 14.7 0.8 -4.7
South East Retail 5.7 2.8 0.7
Rest of UK Retail 0.0 0.0 0.0
Retail Warehouses 9.0 -0.4 -5.4
Offices 133.5 30.3 2.3 -17.0
London West End 3.1 0.0 0.0
Offices
South East Offices 22.7 2.7 -17.4
Rest of UK Offices 4.5 2.1 0.4
Industrial 235.9 53.6 1.9 22.8
South East 16.2 3.2 14.3
Industrial
Rest of UK 37.4 1.4 8.5
Industrial
Other Commercial 6.2 1.4 0.0 6.2
External valuation 440.5 100.0 1.9 440.5
at 31 Mar 2018
Top 10 Properties
31 Mar 18 (GBPm)
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
Hollywood Green, London 10-15
Charter Court, Slough 10-15
Howard Town Retail Park, High Peak 10-15
Timbmet, Shellingford 10-15
March Way, Rainham 10-15
Top 10 tenants
Name Passing Rent % of passing rent
BAE Systems plc 1,257,640 4.8%
Technocargo Logistics 1,242,250 4.8%
Limited
The Symphony Group PLC 1,080,000 4.1%
Hadleigh PVT Limited 799,683 3.1%
Bong UK Limited 756,620 2.9%
Euro Car Parts Limited 736,355 2.8%
Ricoh UK Limited 696,995 2.7%
CEVA Logistics Limited 633,385 2.4%
Thyssenkrupp Materials (UK) 590,000 2.3%
Ltd
Public Sector 559,148 2.1%
Total 8,352,076 32.0%
Total Passing Rent 26,024,462
Regional Split
South East 44.7%
East Midlands 16.4%
North West 12.5%
North East 8.2%
West Midlands 7.5%
Scotland 3.8%
South West 3.8%
London West End 3.1%
The Board is not aware of any other significant events or transactions which
have occurred between 31 Mar 2018 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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