Standard LifeInvProp Unaudited Net Asset Value as at 31 March 2022
May 03 2022 - 2:00AM
UK Regulatory
TIDMSLI
3 May 2022
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 March 2022
Net Asset Value and Valuations
* Net asset value ("NAV") per ordinary share was 106.6p (Dec 2021 - 101.0p),
an increase of 5.5% for Q1 2022, resulting in a NAV total return, including
dividends, of 6.6% for the quarter;
* The portfolio valuation (before CAPEX) increased by 4.4% on a like for like
basis, whilst the MSCI Monthly Index increased by 4.4% over the same
period.
Investment and letting activity
* Six new lettings completed in the quarter, four in the office sector, one
industrial and one retail warehouse unit relet as a gym. A total of £
608,100pa of new rent was secured.
* Refurbishment / PV schemes progressing on three industrial / logistics
assets to provide operational net zero units.
* Purchase of £5m car showroom asset completed after quarter end at a yield
of 6.5%.
Financial Position and Gearing
* Strong balance sheet with significant financial resources available for
investment of £45 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 March 2022, the Company had a Loan to Value ("LTV") of 18.6%*. The
debt currently has an overall blended interest rate of 2.725% per annum.
*LTV calculated as debt less cash divided by investment portfolio value
Dividends
Following the dividend increase announced for the prior quarter, to 1p per
share, dividend cover for Q1 2022 is 103%. and the Board continues to consider
this rate to be sustainable.
The Board fully recognises the importance of dividends to the Company's
shareholders and will keep the quarterly dividend of 1p per share under review
as rental collection levels improve further and the Company deploys available
resources to acquire further investment property.
Rent collection
Rent collection is beginning to normalise, although disappointingly a number of
tenants continue to pay late and require a lot of chasing, or pay monthly
despite the lease terms being quarterly. The table below shows the rent
collection as at 17 April, and we fully expect both Q1 and Q2 2022 to increase
in line with prior quarters.
Year Quarter TOTAL % Received
2020 1 99%
2 98%
3 98%
4 96%
2020 FY 98%
2021 1 96%
2 94%
3 96%
4 97%
2021 FY 96%
2022 1 90%
2 79%
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 March 2022 was 106.6p. 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 March 2022 of £521.8 million.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated in
accordance with IFRS over the period 31 December 2021 to 31 March 2022.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 31 December 101.0 400.8
2021
Unrealised increase in 5.5 21.9 Like for like increase
valuation of property of 4.4% in property
portfolio valuations.
CAPEX in the quarter -0.1 -0.4 Principally works at
New Palace Place and
101 Princess Street.
EPRA net income in the 0.0 0.1 103% dividend cover.
quarter after dividend
Interest rate swaps mark to 0.3 1.0 Interest rate swap has
market revaluation now become an asset of
£0.5m reflecting
market movements,
following interest
rate increases.
Other movements in reserves -0.1 -0.4 Movement relating to
lease incentives in
the quarter
Net assets as at 31 March 106.6 423.0
2022
European Public Real Estate
Association ("EPRA") 31 Mar 2022 31 Dec 2021
EPRA Net Tangible Assets £422.6m £401.4m
EPRA Net Tangible Assets per 106.5p 101.1p
share
The Net Asset Value per share is calculated using 396,922,386 shares of 1p each
being the number in issue on 31 March 2022.
Investment Manager Review and Portfolio Activity
No new purchases completed during the quarter, although since quarter end the
Company completed the purchase of a small car showroom for £5m at a yield of
6.25%. The asset is let on a 25 year lease with rent reviews every five years
linked to CPI.
Six new leases were completed during the quarter securing £608,100pa, with the
vacancy rate falling to 8.6%. During Q1 a logistics unit in Bolton became
vacant and we are preparing a refurbishment that will make it operational net
zero carbon. Terms have already been agreed to relet the unit. Two small
industrial units in Aberdeen were also let in the quarter - following a period
of little tenant activity in that market. Four of the new leases were on office
suites in three different multi let properties.
During the quarter we embarked on several small building upgrades with the
intention of moving the EPC ratings to a C, and also made progress with several
of our rooftop PV schemes and electric charge point projects.
The Company's Loan to Value fell to 18.6% as the value of the portfolio
increased. This is lower than our target level and we continue to progress
several investment opportunities to utilise unallocated resources.
Investment Manager Market review
Economic Outlook
* GDP grew by 0.1% in February 2022, down from 0.8% in January, according to
the latest data published by ONS. Growth in GDP for February was
predominantly driven by strong recovery in travel agencies, tour operators
and hotels as consumers become more confident booking holidays in the UK
and abroad. Tour operation and accommodation output grew by 33% and 23%,
respectively. This was partially offset by a reduction in Covid-19 Test and
Trace vaccination programmes. This was a major contributor to UK GDP growth
at the start of the year but contributed to a 5.1% contraction across the
health sector in February.
* UK GDP growth is expected to weaken from here as the recovery in consumer
spending fades, largely as inflationary pressures squeeze household
incomes. Growth is likely to slow sharply through this year, albeit
remaining above the long-term trend: aRI forecasts UK GDP growth of 3.8% in
2022, before moderating to 1.1% in 2023.
* UK inflation rose to 7.0% in the year to March 2022, up from 6.2% in
February. The most recent reading exceeded the 6.7% forecast by economists
polled by Reuters and marks the highest level of consumer price index
inflation since March 1992 as higher fuel, energy and food prices. aRI
expects inflation to reach a peak of 8.5% in April 2022, before falling
back to 6.2% by the end of the year. Inflation is expected to remain high
for a prolonged period, largely as a result of rising prices in the
wholesale energy markets.
* The UK labour market continued to tighten in the three months to February.
While employment growth has slowed; the unemployment rate fell and now sits
at 3.8%. The tighter labour market is being reflected in nominal pay growth
data which increased by 5.4% in the 12 months to February 2022, according
to the ONS. However, real wages are falling as pay growth is currently
below inflation, with households likely to face falling income through much
of this year.
* At its meeting on 16 March 2022, the Bank of England's Monetary Policy
Committee (MPC) voted by a majority of 8-1 to increase the Bank Rate by
0.25% to 0.75%. aRI now expects the Bank of England to hike rates to 1.25%
by the end of this year, and to start to run down its balance sheet by
selling the bonds it has built up in its Quantitative Easing (QE) processes
by mid-year. Two further hikes are then expected in 2023, taking rates to
1.75%. As such, UK monetary policy will be actively slowing the economy by
the end of the forecast period.
Occupier Trends
* Office demand has been relatively robust in difficult market conditions,
but very focused on the best quality accommodation as employers seek to
encourage workers to return to the office. Looking forward, we expect
occupational demand to continue to narrow on best-in-class office
accommodation, as wellness and ESG factors become increasingly important
factors in occupier decision making. The weaker economic environment is
also likely to lead to poorer business sentiment and reduced job growth,
leading to a fall in overall office demand. These factors will serve to
expedite the polarisation of the office sector and secondary office
accommodation is likely to suffer as a result.
* The industrial and logistics sector continues to benefit from a positive
supply/demand dynamic and, according to CoStar data, UK leasing activity
topped 110m square feet in 2021, 20% higher than the previous year. With
the UK-wide vacancy rate understood to be around 3% and development
availability remaining constrained, we expect robust rental growth to
continue within this sector.
* The retail sector surprised to the upside in January 2022 as total retail
sales rose by 1.9%, despite the impact of the Omicron variant. The
proportion of non-food online retail sales continued to trend downwards
falling to 21.4% in February 2022, down from the February 2021 peak of 43%.
However, rising inflation and the cost-of-living increases are likely to
impact consumer spending and this will be most patently felt in the
discretionary end of the market. In contrast, budget and discount retailers
are in line to benefit. We expect occupier sentiment to weaken as a result
and the prospect for rental value growth remains remote.
Investment Trends
* Over Q1 2022, UK investment volumes reached approximately £16.1 billion,
according to RCA, which was 9% ahead of the 10-year quarterly average and
represented the highest Q1 volume since 2015. Overseas capital continued to
dominate, accounting for 59.1% of capital deployed in the quarter.
* Investor focus is showing signs of narrowing, particularly within the
office sector, where investors are primarily targeting prime central London
assets. Of the £5.35 billion invested in the office sector in Q1 2022,
49.9% was invested in just three central London assets, the largest of
which was NPS's purchase of 5 Broadgate for £1.21 billion. Therefore, while
the overall office investment numbers look positive, they do not tell the
full story.
* In the industrial sector, Q1 transaction volumes totalled £4.7 billion.
While this was slightly down on the same period in 2021, it is 103% higher
than the 10-year quarterly average, once again demonstrating the sector's
popularity. Yields have continued to tighten over the previous 12 months,
with prime industrial yields in Greater London now at 2.85%, according to
CBRE.
* The retail market continues to be driven by the retail warehouse sector,
where yields have come in between 150-275 basis points (bps) since March
2021. Investors have been primarily focused on discount and budget-led
schemes with little exposure to fashion retailers. However, as yields have
compressed markedly over the last 12 months and the income yield
differential between retail parks and other sought-after sectors has
narrowed, there is an indication that some investors are moving up the risk
curve in search of yield.
Net Asset analysis as at 31 March 2022 (unaudited)
£m % of net assets
Industrial 288.9 68.3
Office 127.0 30.0
Retail 61.0 14.4
Other Commercial 37.4 8.8
Land 7.5 1.8
Total Property Portfolio 521.8 123.3
Adjustment for lease -9.2 -2.2
incentives
Fair value of Property 512.6 121.1
Portfolio
Cash 14.6 3.5
Other Assets 21.6 5.1
Total Assets 548.8 129.7
Current liabilities -16.5 -3.9
Non-current liabilities -109.3 -25.8
(bank loans & swap)
Total Net Assets 423.0 100.0
Breakdown in valuation movements over the period 1 January 2022 to 31 March
2022
Portfolio Exposure as Like for Like Capital Value
Value as at 31 at 31 Mar Capital Value Shift (incl
Mar 2022 (£m) 2022 (%) Shift (excl transactions (£m)
transactions &
CAPEX)
(%)
External valuation at 499.9
31 Dec 21
Retail 61.0 11.7 7.9 4.5
South East Retail 1.6 0.0 0.0
Retail Warehouses 10.1 9.3 4.5
Offices 127.0 24.3 0.5 0.7
London City Offices 2.5 0.8 0.1
London West End 2.6 0.6 0.1
Offices
South East Offices 9.6 0.7 0.4
Rest of UK Offices 9.6 0.3 0.1
Industrial 288.9 55.4 5.6 15.3
South East Industrial 13.3 6.6 4.3
Rest of UK Industrial 42.1 5.3 11.0
Other Commercial 37.4 7.2 3.7 1.4
Land 7.5 1.4 0.0 0.0
External valuation at 521.8 100.0 4.4 521.8
31 Mar 22
Top 10 Properties
31 Mar 22 (£m)
B&Q, Halesowen 25-30
Hagley Road, Birmingham 25-30
Symphony, Rotherham 25-30
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 15-20
CEVA Logistics, Corby 15-20
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 819,390 3.2%
Timbmet Group Limited 799,683 3.1%
Atos IT Services UK Ltd 780,727 3.1%
Public Sector 732,210 2.9%
Time Wholesale Services (UK) 656,056 2.6%
Ltd
ThyssenKrupp Materials (UK) 643,565 2.5%
Ltd
9,195,033 36.0%
Regional Split
South East 27.4%
West Midlands 19.1%
East Midlands 12.9%
Scotland 11.4%
North West 10.7%
North East 8.9%
South West 4.5%
London West End 2.6%
City of London 2.5%
The Board is not aware of any other significant events or transactions which
have occurred between 31 March 2022 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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