Standard LifeInvProp Unaudited Net Asset Value as at 31 December 2020
February 03 2021 - 2:00AM
UK Regulatory
TIDMSLI
3 February 2021
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 December 2020
Net Asset Value and Valuations
* Net asset value ("NAV") per ordinary share was 82.0p (Sep 2020 - 78.8p), an
increase of 4.1%, resulting in a NAV total return, including dividends, of
5.0% for Q4 2020;
* The portfolio valuation (before CAPEX) increased by 3.3% on a like for like
basis, whilst the MSCI Monthly Index increased by 0.6% over the same
period.
Investment and letting activity
* In late December the Company completed the sale of four multi-let
industrial estates for £37.75m in-line with the previous valuation.
* Sales completed of a small office for £4.30m and small retail warehouse
investment for £3.55m which taken together represented an increase on the
previous valuation of £150,000.
* Office suite in Edinburgh let to secure £82,580 p.a. rent.
Financial Position and Gearing
* Strong balance sheet with significant financial resources available for
investment of £55 million in the form of the Company's low cost, revolving
credit facility plus cash of £9.4 million.
* As at 31 December 2020, the Company had a Loan to Value ("LTV") of 23.0%*.
The debt currently has an overall blended interest rate of 2.725% per
annum.
*LTV calculated as debt less cash divided by portfolio value
Rent collection
Q4 was a quarter that saw renewed restrictions of operation for many tenants as
the summer lull from Covid-19 reversed. The extension of Government
restrictions on rental collection continues to impact, with several tenants
withholding payment but accepting they will have to pay at some point. We
continue to chase those companies that can pay rent, and work with those that
cannot, through repayment plans, lease alterations/ extensions, or rent frees.
For 2020 as a whole 91% of rent due was collected, and we expect this figure to
improve slightly with time. The Company has made prudent assumptions as to
providing for bad debts in the accounts with a provision of £2.58m as at 31
December 2020 (versus £139,000 at 31st December 2019)
Rental Quarter % collected as at 29/001/2020
Q1 2020 99%
Q2 2020 91%
Q3 2020 91%
Q4 2020 87%
Q1 2021 74% increasing to over 79% with
tenants paying monthly but billed
quarterly.
Although we are encouraged by the rental collection figures, we are very aware
that restrictions at the beginning of 2021 are having a significant impact on
many companies and that impact is likely to remain well into Q2.
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 Company has continued to
pay out a dividend during the pandemic with payments made in 2020 totalling
3.8p per share which equates to 80% of the 2019 level.
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 recent asset sales (as well as some proposed sales)
will reduce rental income until reinvestment occurs. Although the investment
manager has an interesting pipeline of potential purchases, the timing and
amount of future income from these is uncertain. The Board has also decided to
bring forward the payment of this fourth interim dividend and it will now be
paid at the end of February 2021 instead of the end of March 2021. The Board
will keep the quarterly dividend rate under review in the expectation that the
vaccination programme allows lockdown measures to be eased and economic
activity and rental collection levels in 2021 return to close to pre Covid-19
levels.
The Board also recognises the requirement of the REIT rules to distribute at
least 90% of its annual property income within 12 months of the year end. It
therefore expects to pay a further, fifth interim dividend in May 2021, of at
least 0.25p per share once the audited financial statements of the Company are
completed in April 2021.
Share Buybacks
The Board believes that investment by the Company 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. To date the Company has bought back £1.45m of
shares.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 December 2020 was 82.0p. 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 2020 of £437.7 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 30 September 2020 to 31 December 2020.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 30 September 78.8 320.5
2020
Unrealised increase in 3.3 13.5 Like for like increase
valuation of property of 3.3% in property
portfolio valuations.
Loss on sale -0.2 -0.5 Loss on sale of
Industrial portfolio
after costs
CAPEX in the quarter -0.5 -2.2 Predominantly CAPEX at
Hagley Road, Birmingham
Net income in the quarter 0.6 2.0 Rolling 12 month
after dividend dividend cover of 108%
Interest rate swaps mark to 0.1 0.3 Decrease in swap
market revaluation liability in the quarter
as interest rates rose
Other movements in reserves -0.2 -0.6 Movement in lease
incentives in the
quarter
Share buybacks 0.1 -1.5 Investment in own shares
at discounts to NAV
Net assets as at 31 December 82.0 331.5
2020
European Public Real Estate 31 Dec 30 Sep
Association ("EPRA") 2020 2020
EPRA Net Tangible Assets £335.2m £324.6m
EPRA Net Tangible Assets per 82.9p 79.8p
share
The Net Asset Value per share is calculated using 404,316,422 shares of 1p each
being the number in issue on 31 December 2020.
Investment Manager Review and Portfolio Activity
The Company had an active Q4 with several sales. The most significant sale (in
late December) was of four multi-let industrial estates for £37.75m. Industrial
is a favoured sector but we wanted to realise the performance we have enjoyed
on these assets, recognising that future performance within the industrial
sector is likely to be more polarised, with logistics performing better than
small unit multi-let. This will especially be the case if, as we expect, an
increasing number of small businesses fail due to the economic impact of
Covid-19. We also sold a small non air conditioned office in Derby for £4.3m
following a regear of the lease, and a standalone retail warehouse let to
Smyth's Toys for £3.55m. Both of these sales reflect our changing expectations
for some assets following Covid-19.
Sales proceeds were used to repay the £35m drawn under the Revolving Credit
Facility (RCF) and also means the Company has cash for investment and share buy
backs. Buy backs were limited during the quarter, as the share price improved
after they were commenced. During a closed period the Board cannot change any
instructions on buy backs given to the broker, which reduced flexibility. Buy
backs will remain under review and considered as an investment decision
alongside further asset purchases and sales.
Lettings were naturally thin on the ground with ongoing lockdown restrictions,
however we did complete the letting of an office suite in Edinburgh for £
82,500pa.
The LTV of 23.0% provides sufficient headroom against banking covenants (Bank
LTV covenant is 55% and interest rate cover required is 175% v 595% achieved).
The Company's interest rate swap liability fell in the quarter at £3.74 million
(Sep 20: £4.07 million). This liability will unwind to £0 on maturity in 2023.
Investment Manager Market review
* The fourth quarter saw a modest improvement in investment volumes when
compared with the previous quarter. Despite the occupational uncertainties,
offices accounted for 40% of the £10.6 billion transacted. Positive
industrial sentiment resulted in the sector accounting for over 30% of
total investment volumes in the final quarter of 2020.
* Investor interest remains largely focused on the most secure income streams
with supermarkets, logistics assets and other industrials in the South East
the key areas of focus. But sectors dependent on discretionary consumer
spending remain out of favour; the leisure sector recording its weakest
quarterly investment since Q4 2008.
* In mid-December, the furlough scheme was extended to the end of April,
which gives greater time for business planning and decision-making around
redundancies following the March budget. But it also means all the main
business support measures are in place until at least the end of March,
which should shield much of the economy from the effects of the renewed
lockdown.
* Brexit negotiations went right to the wire but a chaotic no deal was
averted. As we have previously flagged, the ASI Research Institute believes
the very narrow deal agreed will be a drag on UK economic growth over the
longer term. Many unknowns remain, including the impact on financial
services, which are not covered by the deal.
* Trading for the consumer-facing retail, leisure and hospitality sectors
remains challenging in the face of Covid-19 restrictions. However,
supermarkets remain the clearest exception, enjoying record sales growth
during the final quarter of 2020.
* The office occupational market remains weak, with availability rates rising
steeply. In central London, the availability rate has doubled during 2020
to stand at close to 10%, although this has been largely driven by
second-hand space. In complete contrast, logistics enjoyed a record year
for take-up in 2020 and requirement levels remain very high.
* According to the MSCI Monthly index All Property total return for 2020 was
-1.0%, with a huge sector & segment variance, with industrial SE delivering
10.3% and shopping centres delivering -19.9%, with values declining -26.6%
over the year. At a sector level retail returned -10.8% over 2020, with
industrial at 8.7%. The office sector was marginally negative at -0.9%.
Investment Manager Market outlook
* The MSCI Monthly All Property total return in December of 1.0% was the
highest single monthly return since December 2017, and the quarterly return
of 2.0% was the strongest since Q2 2018 with each consecutive monthly
return improving since the weak point in March 2020.
* Unfortunately, the rapid escalation of cases and hospitalisations since
mid-December has necessitated another national lockdown akin to that of
last spring, including school closures. Measures to combat the new variant
- and evidence that other strains, such as that first detected in South
Africa, may be even more infectious - are set to cause a further
contraction in GDP in Q1 2021. With vaccines now being rolled out, it is a
case of 'the darkest hour just before the dawn' and we continue to expect a
strong rebound in the second half of the year as the vaccines start to
deliver herd immunity.
* Typically, it is during the emergence from crises that performance by risk
profile diverges the most. In particularly challenging market conditions,
investors can be less discerning about relative risks; as the market begins
to recover, it becomes clearer where those risks have been both over- and
understated. It is the office sector where such mispricing is most likely
to appear during 2021, as the true nature of post-Covid occupational
requirements gradually becomes more distinct.
* It is easy to believe that the vaccine will bring an end to the misery many
people have been suffering, and with that a return to growth, however
performance across the different sectors, and indeed within the sectors is
likely to remain very polarised.
* We continue to expect outperformance from logistics and supermarkets, with
fashion retail continuing to lag. Offices remain an area of significant
change, where there will undoubtedly be winners and losers.
Net Asset analysis as at 31 December 2020 (unaudited)
£m % of net
assets
Industrial 211.2 63.8
Office 142.7 43.0
Retail 51.2 15.4
Other Commercial 32.6 9.8
Total Property Portfolio 437.7 132.0
Adjustment for lease incentives -5.9 -1.7
Fair value of Property Portfolio 431.8 130.3
Cash 9.4 2.8
Other Assets 18.4 5.6
Total Assets 459.6 138.7
Current liabilities -14.8 -4.4
Non-current liabilities (bank loans & swap) -113.3 -34.3
Total Net Assets 331.5 100.0
Breakdown in valuation movements over the period 1 October 2020 to 31 December
2020
Portfolio Exposure as Like for Like Capital Value
Value as at at 31 Dec Capital Value Shift (incl
31 Dec 2020 2020 (%) Shift (excl transactions
(£m) transactions & (£m)
CAPEX)
(%)
External valuation at 30 464.9
Sep 20
Retail 51.2 11.7 0.4 -3.3
South East Retail 1.9 0.0 0.0
Rest of UK Retail 0.0 0.0 0.0
Retail Warehouses 9.8 0.5 -3.3
Offices 142.7 32.6 0.3 0.4
London City Offices 3.0 -0.8 -0.1
London West End Offices 3.1 0.0 0.0
South East Offices 14.6 -3.0 -2.0
Rest of UK Offices 11.9 5.0 2.5
Industrial 211.2 48.2 6.5 -24.9
South East Industrial 10.6 5.7 -14.7
Rest of UK Industrial 37.6 6.7 -10.2
Other Commercial 32.6 7.5 1.7 0.6
External valuation at 31 437.7 100.0 3.3 437.7
Dec 20
Top 10 Properties
31 Dec 20 (£m)
Hagley Road, Birmingham 25-30
B&Q, Halesowen 15-20
Symphony, Rotherham 15-20
Marsh Way, Rainham 15-20
The Pinnacle, Reading 10-15
Timbmet, Shellingford 10-15
Hollywood Green, London 10-15
New Palace Place, London 10-15
Atos Data Centre, Birmingham 10-15
Badentoy, Aberdeen 10-15
Top 10 tenants
Tenant name Passing Rent % of total Passing
Rent
B&Q Plc 1,560,000 5.6%
BAE Systems plc 1,257,640 4.5%
The Symphony Group Plc 1,225,000 4.4%
Public sector 1,158,858 4.1%
Schlumberger Oilfield UK plc 1,138,402 4.1%
Jenkins Shipping Co Ltd 843,390 3.0%
Timbmet Group Limited 799,683 2.9%
Atos IT Services UK Ltd 772,710 2.8%
CEVA Logistics Limited 692,117 2.5%
ThyssenKrupp Materials (UK) 643,565 2.3%
Ltd
10,091,365 36.2%
Regional Split
South East 30.4%
West Midlands 18.5%
East Midlands 14.2%
Scotland 10.1%
North West 9.4%
North East 7.0%
South West 4.4%
London West End 3.0%
City of London 3.0%
The Board is not aware of any other significant events or transactions which
have occurred between 31 December 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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