Standard LifeInvProp Unaudited Net Asset Value as at 30 September 2020
November 04 2020 - 2:00AM
UK Regulatory
TIDMSLI
4 November 2020
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 30 September 2020
Net Asset Value and Valuations
· Net asset value ("NAV") per ordinary share was 78.8p (Jun 2020 - 79.6p), a
decline of 1.0%, resulting in a NAV total return, including dividends, of -0.1%
for Q3 2020;
· The portfolio valuation (before CAPEX) reduced by 0.4% on a like for like
basis, whilst the MSCI Monthly Index dropped by 0.7% over the same period.
Investment and letting activity
· On 4 September, the Company completed the purchase of a B&Q Retail
Warehouse in Halesowen for GBP19.5 million, financed by its low cost revolving
credit facility. The purchase reflects an initial yield of 7.5% and is let to B
&Q Ltd for a further 11 years to lease expiry, providing secure income given
the strong tenant covenant and good unexpired lease term.
· 2 new lettings were completed in the quarter securing GBP185,000pa, with a
further letting securing GBP82,500 in October.
· 6 lease regears were agreed on leases with a rental value of GBP1.17m pa.
· 2 rent reviews were completed, on a food store and an industrial unit with
increases of 13% and 38% respectively.
Financial Position and Gearing
· Strong balance sheet with significant financial resources available of GBP20
million (GBP35 million currently drawn from GBP55 million low cost, revolving
credit facility).
· As at 30 September 2020, the Company had a Loan to Value ("LTV") of
29.4%*. The debt currently has an overall blended interest rate of 2.43% per
annum.
*LTV calculated as debt less cash divided by portfolio value
Rent collection
Rent collection remains challenging, given the varied levels of restrictions
which makes it difficult for tenants to accurately understand the trading
environment they are operating in. Our Investment Manager is continuing to find
that most of our tenants seek to honour their lease contract where they can. Of
those who can't, the majority are open to dialogue to agree a solution, from
waiving rent for some of the smallest and most impacted tenants, to deferments,
or rent free periods in return for lease extensions. Some tenants, however, can
pay but won't, or are unwilling to engage to find a solution. The Government
restrictions on enforcing lease covenants currently restrict us from taking
action to recover these arrears, but our Investment Manager will do so as soon
as they are permitted.
Rental Quarter % collected as at 29 October 2020
Q2 2020 90%
Q3 2020 84%
Q4 2020 70% (A further 13% is expected from
monthly payments and where tenants
have said payment is being made)
It is worth noting that the rental collection figures continue to improve, and
with deferral agreements, and payment from tenants who have the ability to pay
but have chosen not to, we expect each quarter to end with a collection rate of
90+%.
Dividends
The Board recognises the importance of dividends to its shareholders especially
when the COVID-19 crisis has forced many companies, across multiple sectors of
the economy, to cancel or suspend their dividends. The Board has taken the
decision to maintain the same level of quarterly dividend as paid last quarter
equating to 0.714p per share which represents 60% of last year's level for the
same quarter. The Board continues to believe this rate balances the need for
shareholders to continue receiving income during this difficult period while
maintaining a prudent approach given current rent collection rates.
The Board will continue to monitor closely the evolution of COVID-19, together
with its impact on rent receipts, recurring earnings and the requirement of the
REIT rules to distribute at least 90% of its annual property income.
Share Buybacks
The Company intends to begin a share buyback programme to purchase shares in
the Company.
The Board believes that investment in SLIPIT's shares at the prevailing price
and discount to net asset value offers an attractive investment opportunity for
its shareholders given the financial resources the Company has at its disposal.
The Company will also continue to focus on the existing portfolio and the
opportunities this presents through both sales, a number of which are in the
pipeline and also acquisitions and asset management.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 30 September 2020 was 78.8p. 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 30 September 2020 of GBP464.9 million and did not contain a material
uncertainty clause.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 1 July 2020 to 30 September 2020.
Per Share Attributable Comment
(p) Assets (GBPm)
Net assets as at 30 June 79.6 323.8
2020
Unrealised decrease in -0.5 -1.9 Like for like reduction of 0.4%
valuation of property in property valuations.
portfolio
CAPEX in the quarter -0.5 -1.9 Predominantly CAPEX at Hagley
Road, Birmingham and purchase
costs in relation to the
acquisition of B&Q at
Halesowen.
Net income in the quarter 0.3 0.9 Rolling 12 month dividend cover
after dividend of 97%
Interest rate swaps mark to 0.0 0.0 No change in swap liabilities
market revaluation in the quarter as interest
rates remained similar to last
quarter.
Other movements in reserves -0.1 -0.4 Movement in lease incentives in
the quarter
Net assets as at 30 78.8 320.5
September 2020
European Public Real Estate 30 Sep 30 Jun
Association ("EPRA")* 2020 2020
EPRA Net Asset Value GBP324.6m GBP327.9m
EPRA Net Asset Value per share 79.8p 80.6p
The Net Asset Value per share is calculated using 406,865,419 shares of 1p each
being the number in issue on 30 September 2020.
* 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. The Company notes the new best practice
recommendations (BPR) for financial guidelines on its definitions of NAV
measures issued by EPRA in October 2019 and will look to report these measures
in its 2020 Annual Report.
Investment Manager Review and Portfolio Activity
Q3 continued to be dominated in every aspect by COVID-19. The relaxing of
restrictions through July and August started to be tightened again as the
optimism about a quicker return to normality has faded. As this is written,
severe restrictions on large parts of the UK are in place, probably for the
remainder of this year, and quite possibly until next spring/summer. Many
leisure venues will remain unavailable and working from home will remain the
norm. Travel overseas will be very limited. Sadly, for many people, job
security will be a major concern and unemployment will rise. This is a
difficult environment for real estate, and in this context we are delighted to
have agreed two rent reviews showing uplifts of 13% and 38% on the previous
rent as well as completing two new leases (one industrial and one office) with
a further office letting just after the quarter end. In addition, we agreed six
lease regears with tenants to provide them with a rent free period now, in
return for extending their lease commitments. The Company's occupancy rate as
at the end of September remained strong at 92.0%.
We also completed the purchase of a B&Q retail warehouse in Halesowen
(Birmingham) for GBP19.5m, reflecting a yield of 7.5%. The property trades well
for B&Q and has a further 11 years on the lease, providing the Company with an
attractive income stream.
In a situation of great uncertainty, and changing ways of life, we need to
ensure that the assets we were happy to hold at the beginning of the year
remain relevant and that we remain confident of their ability to provide an
appealing place to work or visit. In this regard we have a particular focus on
offices, as a large degree of change is expected even when we return to more
normal times.
Overall, the portfolio underperformed the market substantially over the first
quarter of 2020 with all assets written down but has out-performed over
quarters 2 and 3 compared to the MSCI monthly index, although not sufficiently
to overcome the first quarter's performance. The market decline of 6.9% year to
date compares to the Company's portfolio valuation fall of 8.4% over the first
9 months.
The LTV of 29.4% provides sufficient headroom against banking covenants (values
can fall by 43% and rent by 69% before the covenants are under pressure based
on 30 September covenants). The Company's interest rate swap liability remained
relatively stable in the quarter at GBP4.07 million (June 20: GBP4.05 million).
This liability will unwind to GBP0 on maturity in 2023.
Investment Manager Market review
· The UK economy shrank by an unprecedented 19.8% during the second quarter
of 2020, although the nadir for GDP was reached in April and the economy has
grown robustly since then. However, the re-escalation of the COVID-19 infection
rate, and a tightening of restrictions on social contact are set to depress
growth over the coming months.
· The retail and leisure sectors continue to suffer at the hands of
COVID-19. The office outlook has also darkened, with an increasing likelihood
that workers will be urged to work from home throughout the winter.
Availability rates are rising in nearly all major markets and most sharply of
all in Central London.
· Online retailing is driving strong logistics demand, although the supply
response has been healthy enough to slow rental growth rates. Across multi-let
estates, however, there is evidence of more financial distress among smaller
occupiers.
· Early indications of investment volumes in Q3 suggest a total of around GBP6
billion, after only GBP4.6 billion was transacted in Q2. That second quarter
total was the lowest since the depths of the financial crisis in the first
quarter of 2009.
· Strong competition for industrials is showing signs of driving inward
yield shift in September valuations. The focus for many investors is becoming
ever narrower with little interest in discretionary retail and nervousness
around the office outlook.
Investment Manger Market outlook
· We expect market capital values to fall by more than 12% this year,
leading to a total return of -7.6%, although this is predicated on substantial
write-downs to year-end valuations, with total returns set to be in the region
of -3.5% across the first three quarters.
· Retail, hotels and leisure assets are expected to drag performance down at
the All Property level. Indeed, we continue to forecast record calendar year
declines in shopping centre values, with standard shops faring little better.
· Retail warehouses are also expected to deliver sharply negative returns
but there are signs that the value and convenience end of that market may be
stabilising. While supermarkets are still expected to be the strongest retail
performer over the forecast period - and by some distance in the short term -
the performance outlook for retail warehouses beyond the next 12 months is
healthier.
· With availability rising quickly and a combination of cyclical and
structural risks, we expect a substantially negative year for Central London
offices in 2021. While the debate about the future of offices rages on, survey
evidence from both employers and employees suggest home working is here to stay
and at a structurally higher level. The impact on requirements is hard to
discern and in the short term the impact of a sharp rise in unemployment and
challenges surrounding Brexit are likely to have the greatest impact.
· With all of the uncertainty currently prevailing, we remain firmly in a
risk off environment in real estate.
Net Asset analysis as at 30 September 2020 (unaudited)
GBPm % of net
assets
Industrial 236.1 73.7
Office 142.3 44.4
Retail 54.5 17.0
Other Commercial 32.0 10.0
Total Property Portfolio 464.9 145.1
Adjustment for lease incentives -5.6 -1.7
Fair value of Property Portfolio 459.3 143.4
Cash 8.2 2.5
Other Assets 16.4 5.1
Total Assets 483.9 151.0
Current liabilities -14.8 -4.6
Non-current liabilities (bank loans & swap) -148.6 -46.4
Total Net Assets 320.5 100.0
Breakdown in valuation movements over the period 1 July 2020 to 30 September
2020
Portfolio Exposure as Like for Like Capital Value
Value as at at 30 Sep Capital Value Shift (incl
30 Sep 2020 2020 (%) Shift (excl transactions
(GBPm) transactions & (GBPm)
CAPEX)
(%)
External valuation at 30 447.3
Jun 20
Retail 54.5 11.7 -5.2 17.6
South East Retail 1.8 -2.9 -0.3
Retail Warehouses 9.9 -5.8 17.9
Offices 142.3 30.6 -0.4 -0.6
London City Offices 2.8 -1.5 -0.2
London West End Offices 2.9 0.0 0.0
South East Offices 14.2 -1.8 -1.2
Rest of UK Offices 10.7 1.6 0.8
Industrial 236.1 50.8 0.2 0.5
South East Industrial 13.2 -0.1 -0.1
Rest of UK Industrial 37.6 0.4 0.6
Other Commercial 32.0 6.9 0.2 0.1
External valuation at 30 464.9 100.0 -0.4 464.9
Sep 20
Top 10 Properties
30 Sep 20 (GBPm)
Hagley Road, Birmingham 20-25
B&Q, Halesowen 15-20
Symphony, Rotherham 15-20
The Pinnacle, Reading 10-15
Marsh Way, Rainham 10-15
Timbmet, Shellingford 10-15
Hollywood Green, London 10-15
New Palace Place, London 10-15
Basinghall Street, London 10-15
Atos Data Centre, Birmingham 10-15
Top 10 tenants
Name Passing Rent % of passing rent
GBP
B&Q Plc 1,560,000 5.5%
BAE Systems plc 1,257,640 4.4%
The Symphony Group Plc 1,225,000 4.3%
Sec.State for CLG of Tribunal Services 1,158,858 4.1%
Schlumberger Oilfield UK plc 1,138,402 4.0%
Timbmet Group Limited 799,683 2.8%
Atos IT Services UK Ltd 779,970 2.7%
CEVA Logistics Limited 671,958 2.3%
Timeline Wholesale services (UK) Ltd 635,554 2.2%
G W Atkins & Sons Ltd 625,000 2.2%
Total 9,852,065 34.5%
Regional Split
South East 32.1%
West Midlands 18.7%
East Midlands 12.2%
North West 11.0%
Scotland 9.2%
North East 7.1%
South West 4.0%
London West End 2.9%
City of London 2.8%
The Board is not aware of any other significant events or transactions which
have occurred between 30 September 2020 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: 07801039463 or jason.baggaley@aberdeenstandard.com
Oli Lord - Real Estate Deputy Fund Manager, Aberdeen Standard Investments
Tel: 07557938803 or oli.lord@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Aberdeen Standard Investments
Tel: 07717543309 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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