Standard LifeInvProp Unaudited NAV as at 30 September 2021
November 04 2021 - 3:00AM
UK Regulatory
TIDMSLI
4 November 2021
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 30 September 2021
Net Asset Value and Valuations
* Net asset value ("NAV") per ordinary share was 93.1p (Jun 2021 - 88.3p), an
increase of 5.4% for Q3 2021, resulting in a NAV total return, including
dividends, of 6.5% for the quarter;
* The portfolio valuation (before CAPEX) increased by 4.7% on a like for like
basis, whilst the MSCI Monthly Index increased by 3.3% over the same
period.
Investment and letting activity
* During the quarter, the Company disposed of a small office in Bishops
Stortford for £3.75m as part of our future-fit portfolio strategy and
acquired 1,440 hectares of open moorland in the Scottish highlands as part
of the Company's net zero carbon strategy.
* Two lease renewals completed securing £286,500pa, and a new letting
securing £137,400pa.
Financial Position and Gearing
* Strong balance sheet with significant financial resources available for
investment of £73 million in the form of the Company's low cost, revolving
credit facility of £55 million plus uncommitted cash after dividend and
other financial commitments of £18 million.
* As at 30 September 2021, the Company had a Loan to Value ("LTV") of 18.1%*.
The debt currently has an overall blended interest rate of 2.725% per
annum.
*LTV calculated as debt less cash divided by portfolio value
Dividend
* Dividend for Q3, 2021 maintained at 0.8925p.
Rent collection
Rent collection remains a challenge with some tenants paying rent monthly,
despite it being billed quarterly as per the lease terms. There are very few
new "non-payers" with the majority of arrears coming from tenants who have
previously not paid. Although there is one particular tenant (with the most
significant arrears) that is open, trading, and has paid rent to some
landlords, where we have taken legal action, most of the Company's tenants are
at least paying part of their rent, and those with repayment plans are keeping
to them.
Collection rate for Q3 2021 currently stands at 91%, but this is expected to
increase still further. The Company has made prudent provisions against
arrears, and in Q3 these reduced slightly due to recovery of rent previously
provided for.
Dividends
The Board recognises the importance of dividends to the Company's shareholders
especially when the COVID-19 crisis forced many companies, across multiple
sectors of the economy, to cancel or suspend their dividends.
Following the 25% increase to the Q1 2021 dividend, the Board continues to
consider this rate to be sustainable. The Board will keep the quarterly
dividend under review as rental collection levels improve further and the
reinvestment of proceeds from asset sales takes place.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 30 September 2021 was 93.1p. 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 30 September 2021 of £457.7 million.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 30 June 2021 to 30 September 2021.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 30 June 2021 88.3 350.3
Unrealised increase in 4.8 19.1 Like for like increase
valuation of property of 4.7% in property
portfolio valuations.
CAPEX in the quarter -0.1 -0.2 Limited CAPEX in
quarter
Net income in the quarter -0.1 -0.6 83.3% dividend cover.
after dividend Rolling 12 month
dividend cover of 107%
based on all dividends
paid in last 12 months
Interest rate swaps mark to 0.2 0.8 Decrease in swap
market revaluation liabilities in the
quarter as interest
rate expectations rose.
Other movements in reserves 0.0 0.2 Movement in lease
incentives in the
quarter
Net assets as at 30 September 93.1 369.6
2021
European Public Real Estate
Association ("EPRA") 30 Sep 2021 30 Jun 2021
EPRA Net Tangible Assets £371.2m £352.7m
EPRA Net Tangible Assets per share 93.5p 88.9p
The Net Asset Value per share is calculated using 396,922,386 shares of 1p each
being the number in issue on 30 September 2021.
Investment Manager Review and Portfolio Activity
Q3 marked a period of improved sentiment in the UK real estate market with a
relaxation of Covid restrictions, and better weather. With that though, we
noticed a slowdown in activity over the summer holiday period as many people
had a good break from work - perhaps the change in work life balance will last
beyond Covid?
The summer break certainly slowed down letting deals, however the quality of
enquiries improved with lots of viewings. We completed a lease renewal on a
logistics unit securing a rent of £255,000pa (a 30% increase on the previous
rent), as well as on an office suite at Hagley Road, Birmingham where the
previous rent was maintained. Viewings at Hagley Road (our largest asset, with
our largest vacancy) have been encouraging, with several more suites under
offer, with particularly strong interest in our fitted suites. Encouragingly,
just after the reporting period we completed a letting of a third of a vacant
office building in Crawley, within three months of the lease expiry, without
needing to refurbish the asset. We also completed the lease of a vacant office
floor in our City office, demonstrating again the appeal of our fitted suites.
We had one significant lease expiry in the quarter where the tenant vacated
(three floors of offices in Bracknell - and one of the floors is now under
offer.
Although the reduction in voids over the quarter was limited (with the void
level at 11.8%) we anticipate this reducing back under 10% with completion of
lettings under offer.
Progress of deploying capital has been slow - we have several investments under
offer, and the vendor of a warehouse let to B&Q where we had agreed terms
decided not to proceed at the last minute, which was very disappointing.
COP 26 is underway, and ESG forms part of just about every conversation we
have. The Company completed the purchase of 1,440 hectares of open moorland on
the Ralia estate in the Scottish highlands for reforestation and peatland
restoration. Although the land will not provide the Company with an income
there is scope for capital appreciation, and it plays an important part in the
Company's net zero carbon strategy. The main focus however is in reducing the
environmental impact of our assets.
The Company's LTV of 18.1% is below the sector average but will increase as
cash is deployed and debt drawn down. The target level is 25% - 35% by
mid-2022. The Company's interest rate swap liability fell in the quarter to £
1.7 million (June 2021: £2.4 million) as the market anticipated rising interest
rates. This liability will unwind to nil on maturity in April 2023.
Investment Manager Market review
Economic Outlook
* UK GDP grew by more than previously thought in the April-to-June period,
increasing by 5.5% in the second quarter. This means that the UK economy is
now 3.3% below its level in the fourth quarter of 2019, before the pandemic
struck. The underlying pace of recovery is expected to slow from here but
remain positive.
* Despite the upward revision to second-quarter GDP, more timely monthly
figures showed that the recovery had largely stalled in July. Hesitation
caused by the spread of the Delta variant of Covid-19 and the 'pingdemic'
kept many workers at home self-isolating. Despite a slowdown in recovery in
July, the abrdn Research Institute (aRI) forecasts GDP growth of 6.8% for
the calendar year 2021.
* Pricing pressures are building in the UK, with headline and core CPI
inflation increasing to 3.1% and 2.9%, respectively, in September. Some of
the increase reflected the withdrawal of coronavirus schemes that were
introduced the previous summer to help support the economy. These included
'eat out to help out', which lowered prices temporarily. Cost pressures on
businesses, supply chain issues and a tight labour market are expected to
keep inflation at higher levels for the remainder of 2021. We expect UK
inflation to reach a peak of around 5% heading into 2022, before gradually
returning to more normalised levels.
* The Bank of England has given clear signals that interest rates may have to
be increased gradually in 2022 to bring inflation back closer to the 2%
target rate. One hike in 2022 is looking increasingly likely, but rates
will remain very low in a historical context.
Occupier Trends
* There is little indication that demand for industrial space is waning, with
the sector continuing to record impressive take-up numbers. As a result,
the vacancy rate for the sector is now below 3%, according to CoStar data.
The industrial sector has experienced a supply response. But with increased
build-cost inflation, and supply chain difficulties presenting a major
headwind, it is widely anticipated that some of this supply pipeline will
face delays in completion. This will benefit up-and-built assets.
* Workers in the UK have been gradually returning to offices throughout the
third quarter after coronavirus restrictions were lifted. Levels of
occupation remain significantly below pre-pandemic levels and it is clear
that there is no one-size-fits-all approach applied by employers. The
long-term impact on the way that offices are utilised, and how much space
businesses will require in the future, remains highly uncertain at present.
Although vacancy rates are higher, they have shown tentative signs of
stabilisation - particularly for Grade A offices in central London.
* Retail footfall data is recovering as restrictions have been lifted across
the UK, but it remains below pre-Covid-19 levels. High street footfall is
being supported by a move back to the office, demonstrated by a greater
increase in central London and large city centres outside the capital.
However, with inflation increasing and National Insurance contributions set
to increase by 1.25% in April 2022, there is a risk that consumer spending
will be detrimentally affected heading into next year. This presents a
headwind for the retail sector.
Investment Trends
* Investment volumes picked up considerably during the second quarter of
2021, reaching £15.8 billion. Despite a modest slowdown during the summer,
the trend has continued into the third quarter; investment volumes were
over £10 billion, according to property data. Sentiment towards UK real
estate has improved markedly, which is now feeding through into the
investment market.
* The demand for prime office assets was evident once again this quarter,
with offices accounting for six of the top-ten deals recorded. Overseas
investors continue to play a very important role in terms of demand in this
area of the market.
* As is the case with the retail sector, the polarisation in performance will
become more evident in the office sector, in our view. The best-quality
space will continue to experience more robust demand, providing greater
support for rents and pricing. However, for secondary office assets that
fail to comply with increasingly stringent ESG requirements and don't
possess the necessary amenity or flexibility credentials, the outlook is
far more challenging. This is yet to be shown in performance, but we expect
this to be more evident as we move into 2022.
* Polarisation within the retail sector is expected to continue, given recent
performance within the retail warehouse sector. The sector rebounded
strongly in the second half of 2021, with prime yields moving in by 75-100
basis points (bps). But this is narrowly focused on assets that are let on
affordable rents, and anchored by grocery, discount and DIY occupiers. The
outlook for fashion-oriented parks, high-street shops and shopping centres
remains more challenging, given their vulnerability to online retail sales.
* Despite a recent increase in gilt yields on the back of increased inflation
expectations, the pricing of secure, indexed real estate relative to
index-linked bonds offers a very large yield premium. While the margin for
conventional real estate over conventional gilts has also narrowed, the
margin remains healthy in a historical context.
Net Asset analysis as at 30 September 2021 (unaudited)
£m % of net assets
Industrial 236.5 64.0
Office 124.8 33.7
Retail 54.0 14.6
Other Commercial 42.4 11.5
Total Property Portfolio 457.7 123.8
Adjustment for lease incentives -7.1 -1.9
Fair value of Property 450.6 121.9
Portfolio
Cash 27.2 7.4
Other Assets 16.2 4.3
Total Assets 494.0 133.6
Current liabilities -13.0 -3.5
Non-current liabilities (bank -111.4 -30.1
loans & swap)
Total Net Assets 369.6 100.0
Breakdown in valuation movements over the period 1 July 2021 to 30 September
2021
Portfolio Exposure as Like for Like Capital Value
Value as at 30 at 30 Sep Capital Value Shift (incl
Sep 2021 (£m) 2021 (%) Shift (excl transactions (£m)
transactions &
CAPEX)
(%)
External valuation at 433.8
30 Jun 21
Retail 54.0 11.8 6.8 3.4
South East Retail 1.8 0.0 0.0
Retail Warehouses 10.0 8.1 3.4
Offices 124.8 27.2 0.7 -2.8
London City Offices 2.8 0.0 0.0
London West End 2.9 0.0 0.0
Offices
South East Offices 10.7 0.9 -3.3
Rest of UK Offices 10.8 0.9 0.5
Industrial 236.5 51.7 6.6 14.7
South East Industrial 12.4 9.2 4.8
Rest of UK Industrial 39.3 5.8 9.9
Other Commercial* 42.4 9.3 3.3 8.6
External valuation at 457.7 100.0 4.7 457.7
30 Sep 21
*: The land acquisition on the Ralia estate is currently shown under 'Other
Commercial' as we confirm classification with MSCI.
Top 10 Properties
30 Sep 21 (£m)
Hagley Road, Birmingham 25-30
B&Q, Halesowen 20-25
Symphony, Rotherham 20-25
Marsh Way, Rainham 15-20
Timbmet, Shellingford 15-20
Atos Data Centre, Birmingham 15-20
The Pinnacle, Reading 10-15
Hollywood Green, London 10-15
Walton Summit, Preston 10-15
Badentoy, Aberdeen 10-15
Top 10 tenants
Tenant Name Passing Rent % of total Passing Rent
B&Q Plc 1,560,000 6.2%
The Symphony Group Plc 1,225,000 4.9%
Schlumberger Oilfield UK plc 1,138,402 4.5%
Public Sector 962,106 3.8%
Jenkins Shipping Co Ltd 839,078 3.3%
Timbmet Group Limited 799,683 3.2%
Atos IT Services UK Ltd 780,727 3.1%
CEVA Logistics Limited 732,210 2.9%
Time Wholesale Services (UK) 656,056 2.6%
Ltd
ThyssenKrupp Materials (UK) 643,565 2.6%
Ltd
9,336,827 37.1%
Regional Split
South East 28.1%
West Midlands 19.9%
East Midlands 12.4%
Scotland 12.1%
North West 10.2%
North East 7.0%
South West 4.6%
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 2021 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:-
For further information:-
Jason Baggaley - Real Estate Fund Manager, abrdn
Tel: 07801039463 or jason.baggaley@abrdn.com
Mark Blyth - Real Estate Deputy Fund Manager, abrdn
Tel: 07703695490 or mark.blyth@abrdn.com
Gregg Carswell - Senior Fund Control Manager, abrdn
Tel: 07800898212 or gregg.carswell@abrdn.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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