4 February 2020
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE:
SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at
31 December 2019
Key highlights of the quarter
Continued Portfolio outperformance
- Net asset value (“NAV”) per ordinary share was 89.9p
(Sep 19 – 90.3p), a decline of 0.4%,
resulting in a NAV total return, including dividends, of 0.9% for
Q4 2019;
- The portfolio valuation (before CAPEX) was flat on a like for
like basis, whilst the IPD/MSCI Monthly Index dropped by 1.0% over
the same period.
Investment and letting activity
- In November 2019 the Company
disposed of its second largest investment, a logistics unit in
Denby, for £19.1m. The property was let until 2025 and the rental
income represented 4.4% of the Company’s income. The sale price was
at the September valuation and reflected a total return of 12.6%
per annum since purchase in 2014.
- In December 2019, the Company
reinvested part of the sale proceeds of Denby by completing the
purchase of an industrial unit in Badentoy North, Aberdeen for £13.55m. The property is let to
Schlumberger Limited, the world’s largest oilfield services company
for a further 8 years to break and 10 years to lease expiry, with
fixed rent increases in February 2020
and 2025, based on 2.75% per annum compounded. The purchase
reflects an initial yield of 6.9%, rising to 7.9% in February 2020.
- Post the quarter end the Company has completed the sale of a
single let office building in Staines for a net price of £10.7m
reflecting an equivalent yield of 5.7%. The asset was disposed of
after completing a successful asset management initiative which
maximised the return on the asset.
- Five lettings were completed during the quarter securing a
total rent of £939,884 per annum, along with two lease renewals
securing £216,500 per annum (an increase of 19.7% on previous
rent).
- The Company completed four rent reviews securing an increase of
£50,612 per annum (12.7% above the previous rental level)
- .Overall, dividend cover of 100% for the whole of 2019 (2018:
89%)
Strong balance sheet with prudent
gearing
- Prudent LTV* of 24.6% at the quarter end.
- As at 31 December 2019 the
Company had £18m drawn from its existing revolving credit facility
with £37m still available for investment to take advantage of
suitable opportunities that become available in the near future. In
early January, following the sale of Staines, a further £10m of the
RCF was repaid.
Attractive dividend yield
- Dividend yield of 5.2% based on a quarterly dividend of 1.19p
and the share price of 91.0p as at 31
December 2019 compares favourably to the yield on the FTSE
All-Share REIT Index (3.9%) and the FTSE All-Share Index (4.1%) 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 December 2019 was 89.9p. 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 December
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
October 2019 to 31 December
2019.
|
Per Share (p) |
Attributable Assets (£m) |
Comment |
Net assets
as at 1 October 2019 |
90.3 |
366.7 |
|
Unrealised
decrease in valuation of property portfolio |
0.0 |
-0.1 |
Portfolio
like for like movement flat in the quarter |
CAPEX in the quarter |
-0.5 |
-2.0 |
Predominantly transaction costs and also Capex at One Station
Square, Bracknell and Fleming Way, Crawley |
Net income
in the quarter after dividend |
0.1 |
0.2 |
Dividend
cover of 100% in the year ended 31 December 2019 with £37m of RCF
still available for investment. |
Interest
rate swaps mark to market revaluation |
0.3 |
1.1 |
Decrease
in swap liabilities in the quarter as expectations of an upward
move in interest rates increased due to UK general election
result. |
Other
movements in reserves |
-0.3 |
-1.1 |
Movement
in lease incentives in the quarter |
Net assets
as at 31 December 2019 |
89.9 |
364.8 |
|
|
|
|
|
|
|
|
European Public Real Estate
Association (“EPRA”)* |
31 Dec 2019 |
30 Sep 2019 |
|
|
|
|
|
|
|
EPRA Net Asset
Value |
£366.1m |
£370.0m |
|
|
EPRA Net Asset Value per
share |
90.2p |
91.2p |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Net Asset Value per share is calculated using 405,865,419
shares of 1p each being the number in issue on 31 December 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 crystallize in normal
circumstances, such as the fair value of financial derivatives, are
therefore excluded.
Investment Manager commentary
The final quarter of 2019 was dominated by the UK General
Election, with many investors and occupiers wanting to wait for
clarification on the outcome before making any significant
investment. Notwithstanding this, the Company had another busy
quarter of asset management, purchases and sales.
Five new lettings were completed securing a total annual rent of
£939,884. This included completing a lease on the Company’s largest
void, a logistics unit in Rugby.
Despite this letting activity, voids increased slightly over the
quarter to 6.6% as a lease expired at Hagley Road, Birmingham. We have interest on part of this
and will undertake a refurbishment first in order to maximise
future rental income. Vacancy at Hagley Road now represents 2.7% of
fund ERV.
In addition to the new lettings four rent reviews were settled
with a total increase in rent of £50,612 per annum (an increase of
12.7% on the previous rent under these leases) and two lease
renewals securing £216,500 per annum, an increase of 19.7% on the
previous rents.
The Company disposed of one of its largest logistics units
(Denby 242) to capitalise on the strong investment market for
logistics whilst reducing exposure to the largest tenant in the
fund on a single let asset. The sale for £19.1m represented a yield
of 5.7%. Some of the sale proceeds were reinvested into an
industrial unit in Aberdeen let
for 5 years to a strong covenant, the price of £13.5m reflecting a
yield of 7.9% after a fixed rental increase in February 2020.
Shortly after the quarter end the Company also completed the
sale of an office building in Staines for £10.7m, reflecting a
yield of 5.7% after expiry of the rent free period following a new
letting. The sale proceeds were used to repay part of the RCF
whilst a suitable investment is sought to reinvest in.
Market commentary
Lagging indicators continue to show slowing momentum in the UK
economy, despite the initial positive reaction to the election of a
Conservative government with a large majority. We expect fiscal
stimulus to come through and steadily feed into growth, with a
boost to consumer spending. However, as the UK looks set to drift
further from EU economic and regulatory alignment, we do not
envisage a material pick-up in investment. With Conservatives
representing some constituencies for the first time in many years –
or, in some cases, ever – the focus of increased fiscal spending
and capital could be tilted more towards the regions.
Occupational markets have, so far, largely been unfazed by
prevailing uncertainty and a lack of clarity on the UK’s future
trading relationships. Take-up in the office sector remains strong,
with Central London leasing
volumes now marginally above the five-year quarterly average.
Regionally, headline rents have been steadily rising and vacancy
rates falling across the big six office markets, boosted by large
corporate occupier consolidation programs.
Retail, however, continues to suffer structural headwinds. While
the indications are that Christmas trading was not disastrous on
the whole, occupiers are still under significant margin pressure.
We have concerns that 2020 will bring about another wave of company
voluntary agreement (CVA) activity and further rental decline.
Industrials continue to report healthy take-up, especially for
well-connected areas in the M1 corridor, South East and
East Midlands. A pronounced
undersupply of logistics/industrial assets exists in the South East
which is driving strong rental growth and continued investor
appetite for prime assets in well-connected locations. However,
investor appetite seems to be more tepid in the rest of the UK,
where a supply shortage is less pronounced.
In the listed space, share prices have moved aggressively in
response to October’s value rotation and an encouraging
December 2019 election result for
real estate. And while retail names continue to trade at large
discounts to net asset value (NAV), London office developers are reporting better
than expected leasing activity and upward movement on rents.
Income-focused names continue to trade at premiums to NAV as
investors anticipate continued rental growth and/or yield
compression in these portfolios and fully price in expectations for
further performance.
‘All Property’ capital values declined by -1% in Q4 2019,
according to MSCI IPD Monthly Index, with declines in retail
offsetting positive growth in industrials and offices. The
investment market in UK real estate remained highly polarised last
year, with alternative sectors clearly in vogue. Alternative
property types accounted for close to 40% of investment activity in
Q4 2019. Total UK real estate investment volumes in 2019 reached
£48 billion, down on the £63 billion recorded in 2018, as Brexit
negotiations and the general election resulted in a more subdued
investment market for the UK.
Investment Manager outlook
The political clarity derived from the election result has
prompted a noticeable increase in the level of optimism from agents
in the market, particularly towards Central London offices. However, as we enter a
critical period for Brexit negotiations, we see very little
justification to be taking on unnecessary risk at this stage of the
UK real estate cycle. The focus remains on asset-level risk and
income prospects to identify attractive long term investment
opportunities in the UK real estate market.
Dividends
The Company paid total dividends in respect of the quarter ended
30 September 2019 of 1.19p per
Ordinary Share, with a payment date of 29
November 2019.
Net Asset analysis as at 31 December 2019 (unaudited)
|
£m |
% of
net assets |
Industrial |
252.8 |
69.3 |
Office |
163.3 |
44.7 |
Retail |
42.3 |
11.6 |
Other Commercial |
34.8 |
9.5 |
Total Property
Portfolio |
493.2 |
135.1 |
Adjustment for lease
incentives |
-5.5 |
-1.5 |
Fair value of
Property Portfolio |
487.7 |
133.6 |
Cash |
6.5 |
1.8 |
Other Assets |
11.6 |
3.2 |
Total
Assets |
505.8 |
138.6 |
Current
liabilities |
-11.4 |
-3.1 |
Non-current
liabilities (bank loans & swap) |
-129.6 |
-35.5 |
Total Net
Assets |
364.8 |
100.0 |
Breakdown in valuation movements over
the period 1 October 2019 to
31 December 2019
|
Portfolio Value as at 31 Dec 19 (£m) |
Exposure as at 31 Dec 2019 (%) |
Like for Like Capital Value Shift (excl transactions &
CAPEX) |
Capital Value Shift (incl transactions (£m) |
|
(%) |
External valuation
at 30 Sep 19 |
|
|
|
498.8 |
|
|
|
|
|
Retail |
42.3 |
8.6 |
-3.7 |
-1.6 |
South East Retail |
|
2.1 |
-1.9 |
-0.2 |
Rest of UK Retail |
|
0.0 |
0.0 |
0.0 |
Retail Warehouses |
|
6.5 |
-4.3 |
-1.4 |
|
|
|
|
|
Offices |
163.3 |
33.1 |
-0.1 |
-0.1 |
London City
Offices |
|
2.8 |
0.4 |
0.1 |
London West End
Offices |
|
2.9 |
0.0 |
0.0 |
South East
Offices |
|
16.8 |
-0.9 |
-0.8 |
Rest of UK
Offices |
|
10.6 |
1.2 |
0.6 |
|
|
|
|
|
Industrial |
252.8 |
51.2 |
0.7 |
-3.9 |
South East
Industrial |
|
13.3 |
0.9 |
0.6 |
Rest of UK
Industrial |
|
37.9 |
0.6 |
-4.5 |
|
|
|
|
|
Other
Commercial |
34.8 |
7.1 |
0.0 |
0.0 |
|
|
|
|
|
External valuation
at 31 Dec 2019 |
493.2 |
100.0 |
0.0 |
493.2 |
Top 10 Properties
|
31
Dec 19 (£m) |
Hagley Road,
Birmingham |
20-25 |
Symphony,
Rotherham |
15-20 |
The Pinnacle,
Reading |
15-20 |
Hollywood Green,
London |
15-20 |
Marsh Way,
Rainham |
10-15 |
Timbmet,
Shellingford |
10-15 |
New Palace Place,
London |
10-15 |
Basinghall Street,
London |
10-15 |
Badentoy,
Aberdeen |
10-15 |
Atos Data Centre,
Birmingham |
10-15 |
Top 10 tenants
Name |
Passing Rent
£ |
% of passing
rent |
BAE Systems plc |
1,257,640 |
4.5% |
The Symphony Group
PLC |
1,225,000 |
4.4% |
Public sector |
1,158,858 |
4.2% |
Schlumberger Oilfield
UK PLC |
1,138,402 |
4.1% |
Jenkins Shipping
Group |
813,390 |
2.9% |
Timbmet Limited |
799,683 |
2.9% |
ATOS IT Services
Ltd |
771,581 |
2.8% |
CEVA Logistics
Limited |
671,958 |
2.4% |
GW Atkins |
625,000 |
2.2% |
P&O Ferries |
479,090 |
1.7% |
Total |
8,940,602 |
32.1% |
Regional Split
South East |
35.3% |
West Midlands |
14.4% |
East Midlands |
12.8% |
North West |
11.3% |
Scotland |
9.4% |
North East |
7.2% |
South West |
4.0% |
London West End |
2.9% |
City of London |
2.7% |
The Board is not aware of any other significant events or
transactions which have occurred between 31
December 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) 131 372 0134 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