Standard LifeInvProp Unaudited Net Asset Value as at 31 December 2021
February 02 2022 - 2:00AM
UK Regulatory
TIDMSLI
2 February 2022
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 December 2021
Net Asset Value and Valuations
* Net asset value ("NAV") per ordinary share was 101.0p (Sep 2021 - 93.1p),
an increase of 8.5% for Q4 2021, resulting in a NAV total return, including
dividends, of 9.5% for the quarter;
* The portfolio valuation (before CAPEX) increased by 6.9% on a like for like
basis, whilst the MSCI Monthly Index increased by 6.6% over the same
period.
Investment and letting activity
* Two purchases completed in Q4, both in the Industrial sector. £7.8m was
invested into a completed let unit in Washington, Tyne and Wear, and £2.8m
on a site purchase in St Helen's as part of a pre-let development that has
a total cost of £15m.
* Three new leases completed (£715,730pa of rent), three lease extensions /
renewals securing £1,158,859pa, and three rent reviews completed with an
uplift in rent of £94,430pa.
Financial Position and Gearing
* Strong balance sheet with significant financial resources available for
investment of £50 million in the form of the Company's low cost, revolving
credit facility of £55 million net of current cash after dividend and other
financial commitments.
* As at 31 December 2021, the Company had a Loan to Value ("LTV") of 19.2%*.
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 Q4, 2021 increased by 12% to 1p per share.
* Dividend cover for the year was 102%
Rent collection
During Q4 2021 we received payment of all arrears from the Company's tenant
with the largest arrears where legal action was being taken. Collection rates
for Q4 are currently 97.1% with a further 2% expected shortly from tenants that
have confirmed payment will be made, or have always paid, though often late.
That theme has continued into Q1 2022 with collections currently only at 84.9%
but anticipated to be similar to Q4 2021 shortly.
2021 Q1 96.0%
Q2 92.5%
Q3 95.3%
Q4 97.1%
2022 Q1 84.9%
Dividends
The Board fully recognises the importance of dividends to the Company's
shareholders and is pleased to announce a further increase in the dividend to
1p per share for the quarter. The new dividend level reflects continued
improvements in the Company's revenue account, with dividend cover 102% for the
financial year to December 2021.
The dividend cover for Q4 was 133% however this is impacted by two one offs.
These were a write-back of bad debt provisions following the payment of
historic arrears and a lease surrender premium received in the quarter.
Excluding the impact of these one offs would have given a Q4 dividend cover of
102%, and, on that basis, the Board considers the new dividend level of 1p per
share to be at a sustainable level.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 December 2021 was 101.0p. 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 2021 of £499.9 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 September 2021 to 31 December 2021.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 30 June 93.1 369.6
2021
Unrealised increase in 7.9 31.4 Like for like increase
valuation of property of 6.9% in property
portfolio valuations.
CAPEX in the quarter -0.4 -1.8 Principally works at
101 Princess Street
and Hagley Road,
together with
acquisition costs of
St Helens and
Washington.
Net income in the quarter 0.3 1.2 133% dividend cover.
after dividend Rolling 12 month
dividend cover of 102%
based on all dividends
paid in last 12 months
Interest rate swaps mark to 0.3 1.1 Decrease in swap
market revaluation liabilities in the
quarter following
interest rate
increase.
Other movements in reserves -0.2 -0.7 Movement relating to
lease incentives in
the quarter
Net assets as at 31 December 101.0 400.8
2021
European Public Real Estate
Association ("EPRA") 31 Dec 2021 30 Sep 2021
EPRA Net Tangible Assets £401.4m £371.2m
EPRA Net Tangible Assets per 101.1p 93.5p
share
The Net Asset Value per share is calculated using 396,922,386 shares of 1p each
being the number in issue on 31 December 2021.
Investment Manager Review and Portfolio Activity
The Company completed two purchases during the quarter. The first was a
development funding in St Helen's where the land was purchased for £2.8m, and
over the course of the next 18 months further payments will be made to fund the
developer totaling £15.1m until the building completes and the new lease to St
Helen's Council starts. The lease will be for a term of 15 years, and the
Council has sublet to Glass Futures, a not for profit organization, which
carries out research seeking to improve the environmental characteristics of
glass production. The second purchase was of an industrial unit in Washington,
Tyne and Wear, that is let for a further 14 years, which benefits from adjacent
vacant land for future development. The purchase price of £7.8m reflected an
income yield of 5.75%.
It is the Investment Manager and Board's desire to increase the LTV of the
Company from the current 19% to a longer term range of 25% - 35%, and further
investments are under active consideration. Future purchases will be financed
through remaining cash on the balance sheet and from drawing down from the
revolving credit facility.
Over the course of Q4 three lettings were concluded, including that of the
Company's only industrial vacancy, securing £611,000pa of rent. This unit in
Dover was let to DEFRA and forms an important part of the Government's food
standard control. The two office lettings that completed were at 54 Hagley Rd
Birmingham, continuing the strong run at that asset, with £104,000 pa secured.
Since the quarter end two further lettings have completed (one office and a
retail unit let to a gym) securing £130,000pa. Two leases were extended
securing £319,000pa of rent, along with three rent reviews, one on a Bristol
office securing an uplift of £37,500pa (19%) and one industrial unit securing
an uplift of £47,000pa (10%) - in both cases well ahead of valuation
assumptions. The third review was of a leisure unit in London showing a 7%
uplift in rent. One lease renewal was completed, securing a rent of £840,000pa,
8.5% ahead of the September ERV.
Although the Company's vacancy rate fell to 9.7% over the quarter as the
lettings completed, it is still above our long-term average, and we want to
reduce it further. The closure of offices at the end of 2021 has slowed demand,
however early indications of a pick-up in office demand across the portfolio is
encouraging.
The Company's interest rate swap liability fell in the quarter to £568,000 as
the market anticipates rising interest rates. This liability will unwind to nil
on maturity in April 2023.
Investment Manager Market review
Economic Outlook
* Despite the emergence of Omicron and the subsequent economic and social
restrictions, the Bank of England (BoE) increased interest rates from 0.1%
to 0.25% in December. This was in response to strong inflation and labour
market data. Policymakers took note of the tight labour market, with rising
pressures on wages. Unemployment fell to 4.2% in the three months to
October 2021, while inflation surged to 5.1% year-on-year (y/y) in
November. This exceeded expectations, with rising energy prices, supply
chain disruption and a low base effect from 2020 contributing to inflation.
* With cases looking to have peaked and the government now rolling back
restrictions, the abrdn Research Institute (aRI) expects activity to
rebound relatively quickly through the rest of the quarter. Full-year 2021
growth is still expected to be relatively robust at 6.8%, with any slowdown
in late-2021 and early-2022 likely to be compensated for by slightly
stronger growth in late-2022.
* aRI expects interest rates to reach 1% by the end of 2022. This is low in a
historical context, but the risks remain skewed towards a faster tightening
cycle. aRI now expects inflation to peak slightly above 6% in April 2022,
given rising energy prices and ongoing supply bottlenecks. Inflation is
then expected to fall during the rest of the year, as challenging base
effects drag inflation lower. Real income growth will be squeezed by
inflation, but the build-up in household savings over the last two years
should cushion this impact.
Occupier Trends
* The long-term impact on office occupation remains difficult to assess, but
we expect occupiers to focus more on best-in-class accommodation, with
strong ESG and wellbeing credentials. Poorer-quality accommodation will
struggle to attract interest. This is seen in the most recent take-up
statistics, which show that over 90% of tenants are taking space in Grade A
office accommodation. We expect this trend to drive an increasing wedge
between rental value growth for the best and the rest in the office sector.
* Occupier demand for industrial and logistics space continues unabated and
we expect this to endure over the course of 2022. Supply remains tight and
the level of new development is unlikely to satisfy demand. According to
CBRE data, the UK-wide vacancy rate has fallen to below 2% and, as a
result, we anticipate robust rental value growth to continue within this
sector.
* Rising inflation and National Insurance contributions are also likely to
affect consumer spending over the course of the first half of 2022. As
such, we anticipate weaker occupier sentiment and downward pressure on
rental values across the retail sector over the first quarter of 2022.
Demand will be concentrated on well-located and well-specified retail
warehouse accommodation where footfall has remained more resilient.
Investment Trends
* In 2021, UK real estate performance reached levels not seen since 2015,
with the industrial sector outperforming the all property average by a
significant margin. Indeed, the spread between the best and worst
performing sectors reached the highest level on record in 2021. However, we
anticipate that the spread in performance between sectors will begin to
converge, predominantly as a result of where we are in the UK real estate
cycle.
* The office sector was the worst performing sector in 2020. We think that
the structural headwinds facing the sector will result in offices
underperforming the wider market in 2022. But there will be a clear
polarization in performance between Grade A and secondary office buildings.
A divergence in performance by quality is beginning to emerge, particularly
in markets where vacancy rates are not significantly above historical
averages. Premiums are being paid for Grade A office stock that is truly
'future-fit' and possesses the necessary credentials: flexibility, amenity,
connectivity, technology and sustainability. Assets that score strongly on
these metrics will be best placed to capture and retain tenants during a
period of significant structural change for the sector.
* ESG considerations are crucial for all UK real estate sectors. This has
become increasingly pertinent following the implementation of the
government's Minimum Level of Energy Efficiency standard (MEES). By 2025,
MEES will make it unlawful for commercial landlords to lease space with an
EPC rating below E. By 2030, all commercial properties must have a rating
of EPC B or higher. This requires landlords to place a greater emphasis on
the ESG credentials of their commercial properties.
Net Asset analysis as at 31 December 2021 (unaudited)
£m % of net assets
Industrial 273.6 68.2
Office 126.2 31.5
Retail 56.5 14.1
Other Commercial 36.1 9.0
Land 7.5 1.9
Total Property Portfolio 499.9 124.7
Adjustment for lease -8.8 -2.2
incentives
Fair value of Property 491.1 122.5
Portfolio
Cash 13.8 3.4
Other Assets 21.7 5.5
Total Assets 526.6 131.4
Current liabilities -15.5 -3.9
Non-current liabilities -110.3 -27.5
(bank loans & swap)
Total Net Assets 400.8 100.0
Breakdown in valuation movements over the period 1 October 2021 to 31 December
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 457.7
30 Sept 21
Retail 56.5 11.3 4.7 2.6
South East Retail 1.7 1.2 0.1
Retail Warehouses 9.6 5.4 2.5
Offices 126.2 25.3 1.1 1.4
London City Offices 2.6 0.0 0.0
London West End 2.7 0.6 0.1
Offices
South East Offices 9.9 1.1 0.6
Rest of UK Offices 10.1 1.6 0.7
Industrial 273.6 54.7 11.1 37.1
South East Industrial 13.0 14.1 8.1
Rest of UK Industrial 41.7 10.1 29.0
Other Commercial* 36.1 7.2 3.4 1.1
Land* 7.5 1.5 0.0 0.0
External valuation at 499.9 100.0 6.9 499.9
31 Dec 21
*: The land on the Ralia estate is presented as 'Land', having previously been
presented as 'Other Commercial', now that MSCI has confirmed the
classification.
Top 10 Properties
31 Dec 21 (£m)
Hagley Road, Birmingham 25-30
B&Q, Halesowen 20-25
Symphony, Rotherham 20-25
Marsh Way, Rainham 20-25
Timbmet, Shellingford 15-20
Atos Data Centre, Birmingham 15-20
Tetron 141, Swadlincote 15-20
Walton Summit, Preston 15-20
Hollywood Green, London 10-15
The Pinnacle, Reading 10-15
Top 10 tenants
Tenant Name Passing Rent % of total Passing Rent
B&Q Plc 1,560,000 6.1%
The Symphony Group Plc 1,225,000 4.8%
Schlumberger Oilfield UK plc 1,138,402 4.4%
CEVA Logistics Limited 840,000 3.3%
Jenkins Shipping Co Ltd 843,390 3.3%
Timbmet Group Limited 799,683 3.1%
Atos IT Services UK Ltd 780,727 3.0%
Public Sector 732,210 2.9%
Time Wholesale Services (UK) 656,056 2.6%
Ltd
ThyssenKrupp Materials (UK) 643,565 2.5%
Ltd
9,219,033 35.9%
Regional Split
South East 27.5%
West Midlands 19.1%
East Midlands 12.7%
Scotland 11.6%
North West 10.6%
North East 8.7%
South West 4.5%
London West End 2.7%
City of London 2.6%
The Board is not aware of any other significant events or transactions which
have occurred between 31 December 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:-
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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