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 (p) |
Attributable Assets (£m) |
Comment |
Net assets as at 30
September 2020 |
78.8 |
320.5 |
|
Unrealised increase in
valuation of property portfolio |
3.3 |
13.5 |
Like for like increase
of 3.3% in property 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 after dividend |
0.6 |
2.0 |
Rolling 12 month
dividend cover of 108% |
Interest rate swaps
mark to market revaluation |
0.1 |
0.3 |
Decrease in swap
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 2020 |
82.0 |
331.5 |
|
European Public Real Estate
Association (“EPRA”) |
31 Dec
2020 |
30 Sep
2020 |
EPRA Net Tangible
Assets |
£335.2m |
£324.6m |
EPRA Net Tangible
Assets per share |
82.9p |
79.8p |
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 Value as at 31 Dec 2020 (£m) |
Exposure as at 31 Dec 2020 (%) |
Like
for Like Capital Value Shift (excl transactions &
CAPEX) |
Capital Value Shift (incl transactions (£m) |
|
(%) |
External valuation
at 30 Sep 20 |
|
|
|
464.9 |
|
|
|
|
|
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 Dec 20 |
437.7 |
100.0 |
3.3 |
437.7 |
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) Ltd |
643,565 |
2.3% |
|
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