Standard LifeInvProp Net Asset Value
May 03 2019 - 2:00AM
UK Regulatory
TIDMSLI
3 May 2019
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 March 2019
Key Highlights
Solid Performance
* Net asset value ("NAV") per ordinary share was 91.1p (Dec 18 - 91.0p), a
rise of 0.1%, resulting in a NAV total return, including dividends, of
1.4% for Q1 2019;
* The portfolio valuation (before CAPEX) increased by 0.3% on a like for like
basis, whilst the IPD/MSCI Monthly Index dropped by 0.8% over the same
period.
* NAV adversely impacted by the movement in the Company's interest rate swap,
which now has a negative worth of GBP1.86 million (Q4 2018: GBP804,000). This
value will revert to GBPnil on maturity of the swap in 2023.
Investment and letting activity
* No purchases or sales were made during the quarter
* Three lettings were completed during the quarter securing a total of GBP
132,000pa
* Lease to Tesco renewed for a term of 15 years with tenant break at year 10
securing a rent of GBP107,250pa (same as previous rent).
* After the quarter end three rent reviews totalling GBP703,000 were agreed on
industrial assets, securing an uplift of GBP135,000pa, (23.8%), on the
previous rent.
* Also after the quarter end, the Company took a surrender of a lease over an
office in Staines and simultaneously re-let it on a 10 year lease at GBP
715,000pa, which was above the previous rental level.
Strong balance sheet with prudent gearing
* Prudent LTV* of 24.4% at the quarter end, one of the lowest in the
Company's peer group and the wider REIT sector.
Attractive dividend yield
* Dividend yield of 5.3% based on a quarterly dividend of 1.19p and the share
price of 90.4p as at 31 March 2019 compares favourably to the yield on the
FTSE All-Share REIT Index (4.3%) and the FTSE All-Share Index (4.2%) as at
the same date.
*LTV calculated as Debt less cash 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 March 2019 was 91.1p. 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 March 2019.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 1 January 2019 to 31 March 2019.
Per Share Attributable Comment
(p) Assets (GBPm)
Net assets as at 1 January 91.0 369.4
2019
Unrealised increase in 0.4 1.7 Like for like increase
valuation of property of 0.3% in property
portfolio portfolio
CAPEX in the quarter -0.1 -0.3 CAPEX predominantly at
Kings Business Park,
Bristol and Basinghall
Street, London
Net income in the quarter 0.1 0.2 Dividend cover of 104%
after dividend in the quarter with GBP
14m of RCF still
available for
investment
Interest rate swap - mark -0.2 -1.0 Increase in swap
to market revaluation liabilities in the
quarter as expectations
of an upward move in
interest rates continue
to be muted.
Other movements in reserves -0.1 -0.4 Movement in lease
incentives in the
quarter
Net assets as at 31 March 91.1 369.6
2019
European Public Real Estate 31 Mar 2019 31 Dec 2018
Association ("EPRA")*
EPRA Net Asset Value GBP371.5m GBP370.2m
EPRA Net Asset Value per 91.5p 91.2p
share
The Net Asset Value per share is calculated using 405,865,419 shares of 1p each
being the number in issue on 31 March 2019.
* 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
It is no surprise that the Brexit negotiations dominated Q1 and investment
transaction levels in UK real estate, along with take up, were well below
average.
In this environment we were pleased to complete three new lettings and a lease
renewal. Despite all the market commentary about the retail sector, one letting
was of a retail unit that previously had been let to Maplin. We also renewed a
lease to Tesco that was due to expire in 2020 to give an extra 10 years income
security.
The familiar theme of industrials being the best performing sector, and retail
the worst, continued into the first quarter of 2019 and looks set to remain the
case for some time yet. The structure of the Company's investment portfolio
remains supportive for continued outperformance compared to the IPD / MSCI
index, and holding a large exposure to industrial / logistics and small
exposure to retail remains the correct balance.
After the quarter end we also completed on the surrender and re-letting of an
office in Staines. This exemplifies our active approach to asset management -
following one of our regular tenant meetings we became aware that the tenant
wanted to downsize in the building and would probably exercise their break
clause in 2021. We agreed to jointly market the building with them, so that our
experience in that market could be utilised, and we quickly identified a new
tenant, who wanted the whole building on a new ten year lease. A three-way deal
is never easy, but by working together we were able create a transaction that
worked for all parties.
During the quarter we experienced an increase in voids notwithstanding the new
lettings (7.4% compared to 5.9% at end of December 2018), as a distribution
warehouse became vacant on lease expiry. We are currently marketing the unit,
which is in Rugby, part of the "Golden Triangle" for industrials.
Market commentary
* Looking at the UK it is clear that Brexit-related uncertainty is now
weighing very heavily on the economy and is responsible for much of the
recent slow-down. However, assuming a 'no deal' Brexit is avoided and
uncertainty around the terms of exit is not prolonged for too long, the
economy is poised for a recovery into 2020.
* Recent patterns in the occupier market have changed little, setting aside
the short-term turbulence caused by Brexit-related uncertainty, which is
making leasing deals more difficult to complete. Structural trends are the
key drivers of industrial strength and retail weakness, while strong office
fundamentals are being tempered by the uncertain climate as well as the
rapid growth of the flexible office sector.
* Capital values have fallen for five consecutive months, according to the
MSCI Monthly Index in March 2019. Liquidity in the market remains impaired,
with evidence growing that appetite for risk has diminished. A high
proportion of deals for alternative assets, in a quarter of otherwise muted
investment activity, emphasises that lower risk income focus.
* In our base case we expect a low return environment over the next three
years for the commercial real estate market, with total returns of just
1.9% per annum over the period 2019-21. We also expect the current wide
spread in sector level returns to endure in the short term and performance
to be dispersed across the risk spectrum.
* In the current environment, we believe it is prudent to secure income as a
priority over pushing for the highest immediate rent and to crystallise
profits from recent asset management success. The listed market continues
to build in large discounts for retail, although a rising wider equity
market has narrowed discounts to NAV for generalists and a number of stocks
focused on industrial and alternatives continue to trade at a premium.
* The first quarter is usually a busy time in the real estate lending market
but a combination of factors has brought it almost to a standstill in 2019.
While there are some active debt funds, appetite is at the low risk end of
the spectrum and willingness to lend against retail is almost non-existent.
Difficulty in refinancing shopping centres could be a trigger for
distressed sales.
Investment themes
* The UK market is being weighed down by Brexit and, at the time of writing,
numerous outcomes remain possible, including a hard 'no deal' scenario. The
risk to market pricing and of occupier distress is greatest in that
scenario but, even if it is averted, it does not mean an end to the
uncertainty around the UK's future trading relationships.
* Passage of the EU Withdrawal Agreement merely moves the Brexit process on,
but with no clear visibility of the eventual nature of the long term UK-EU
relationship. Meanwhile, an extension of the Article 50 process offers no
resolutions and prolongs the current uncertainty.
* With the only definitive scenario - a 'no deal' Brexit - being the most
disruptive, in ASI's view, and more prolonged uncertainty being the
alternative, we do not expect risk to be rewarded in the short term.
Dividends
The Company paid total dividends in respect of the quarter ended 31 December
2018 of 1.19p per Ordinary Share, with a payment date of 29 March 2019.
Net Asset analysis as at 31 March 2019 (unaudited)
GBPm % of net assets
Industrial 260.5 71.3
Office 160.5 43.9
Retail 45.8 12.5
Other Commercial 34.0 9.3
Total Property Portfolio 500.8 137.0
Adjustment for lease -4.2 -1.2
incentives
Fair value of Property 496.6 135.8
Portfolio
Cash 9.0 2.5
Other Assets 8.2 1.1
Total Assets 513.8 139.4
Current liabilities -12.0 -3.3
Non-current liabilities -132.2 -36.1
(bank loans & swap)
Total Net Assets 369.6 100.0
Breakdown in valuation movements over the period 1 January 2019 to 31 March
2019
Portfolio Exposure as Like for Capital
Value as at at 31 Mar Like Capital Value Shift
31 Mar 19 2019 (%) Value Shift (incl
(GBPm) (excl transactions
transactions (GBPm)
& CAPEX)
(%)
External valuation at 499.1
31 Dec 2019
Retail 45.8 9.1 -1.6 -0.7
South East Retail 2.1 -2.7 -0.3
Rest of UK Retail 0.0 0.0 0.0
Retail Warehouses 7.0 -1.2 -0.4
Offices 160.5 32.1 0.6 0.9
London City Offices 2.6 0.8 0.1
London West End Offices 2.9 2.8 0.4
South East Offices 18.0 0.7 0.6
Rest of UK Offices 8.6 -0.5 -0.2
Industrial 260.5 52.0 0.5 1.3
South East Industrial 14.9 0.5 0.4
Rest of UK Industrial 37.1 0.5 0.9
Other Commercial 34.0 6.8 0.7 0.2
External valuation at 500.8 100.0 0.3 500.8
31 Mar 2019
Top 10 Properties
31 Mar 19 (GBPm)
Hagley Road, Birmingham 20-25
Denby 242, Denby 15-20
Symphony, Rotherham 15-20
The Pinnacle, Reading 15-20
New Palace Place, London 10-15
Chester House, Farnborough 10-15
Hollywood Green, London 10-15
Marsh Way, Rainham 10-15
Timbmet, Shellingford 10-15
Atos,Birmingham 10-15
Top 10 tenants
Name Passing % of passing rent
Rent GBP
BAE Systems plc 1,257,640 4.5%
Technocargo Logistics Limited 1,242,250 4.4%
Public sector 1,158,858 4.1%
The Symphony Group PLC 1,080,000 3.8%
Timbmet Limited 799,683 2.8%
Bong UK Limited 771,752 2.7%
ATOS IT Services Ltd 750,000 2.7%
Ricoh UK Limited 696,995 2.5%
CEVA Logistics Limited 652,387 2.3%
GW Atkins 625,000 2.2%
Total 9,034,565 32.0%
Regional Split
South East 38.0%
East Midlands 17.0%
West Midlands 13.6%
North West 10.5%
North East 7.2%
Scotland 4.6%
South West 3.6%
London West End 2.9%
City of London 2.6%
The Board is not aware of any other significant events or transactions which
have occurred between 31 March 2019 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
at: www.slipit.co.uk
For further information:-
Jason Baggaley - Real Estate Fund Manager, Aberdeen Standard Investments
Tel +44 (0) 131 245 2833 or jason.baggaley@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Aberdeen Standard 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 3Q
Tel: 01481 745001
END
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