abrdn Property Income Trust Limited Unaudited Net Asset Value as at 30 June 2022
August 04 2022 - 2:00AM
UK Regulatory
TIDMAPI
4 August 2022
abrdn PROPERTY INCOME TRUST LIMITED (LSE: API)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 30 June 2022
Net Asset Value and Valuations
* Net asset value ("NAV") per ordinary share was 110.7p (Mar 2022 - 106.6p),
an increase of 3.8% for Q2 2022, resulting in a NAV total return, including
dividends, of 4.8% for the quarter;
* The portfolio valuation (before CAPEX) increased by 3.2% on a like for like
basis during the quarter, whilst the MSCI Monthly Index increased by 2.4%
over the same period.
Investment and letting activity
* Two new lettings completed in the quarter, securing £168,377pa in rent.
* Lease renewed on logistics unit with a 40% increase in rent passing, to £
448,454pa.
* Agreement for lease exchanged on 150,000 sq. ft industrial unit at annual
rent of £591,500
* Purchase of £5m car showroom asset during the quarter at a yield of 6.5%.
Financial Position and Gearing
* Strong balance sheet with significant financial resources available for
investment of which £31 million is in the form of the Company's low cost,
revolving credit facility net of current cash after dividend and other
financial commitments.
* As at 30 June 2022, the Company had a Loan to Value ("LTV") of 21.05%*. 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 being maintained in Q1 2022 at 1p per share, the
dividend cover for Q2 2022 is 94% and the Board continues to consider the
current dividend level to be sustainable.
The Board fully recognises the importance of dividends to the Company's
shareholders and will keep the quarterly dividend under review as the Company
deploys available resources to acquire further investment property.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of abrdn Property Income Trust
Limited ("API") at 30 June 2022 was 110.7p. 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 June 2022 of £543.6 million.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 31 March 2022 to 30 June 2022.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 31 March 106.6 423.0
2022
Unrealised increase in 5.6 16.4 Valuation uplift. Like
valuation of property for like increase of
portfolio 3.2% in property
valuations.
CAPEX in the quarter -1.7 -1.2
Net income in the quarter -0.1 -0.3 94% dividend cover.
after dividend
Interest rate swaps mark to 0.1 0.5 SWAP is now deemed an
market revaluation asset.
Other movements in reserves -0.1 -0.6 Movement relating to
lease incentives in
the quarter
Share buybacks 0.3 -4.5 Investment in own
shares at a discount
to NAV
Net assets as at 30 June 110.7 433.3
2022
European Public Real Estate
Association ("EPRA") 30 Jun 2022 31 Mar 2022
EPRA Net Tangible Assets £432.3m £422.6m
EPRA Net Tangible Assets per 109.3p 106.5p
share
The Net Asset Value per share is calculated using 391,302,152 shares of 1p each
being the number in issue on 30 June 2022.
Investment Manager Review and Portfolio Activity
The investment portfolio continued to see capital growth in Q2, however as the
quarter closed out we began to see a softening in transaction pricing as
increased swap rates impacted debt purchasers, and talk of recession dampened
demand, mainly for the lowest yielding assets but also risk assets.
The impact of short working weeks due to bank holidays was evident during the
quarter with viewings and enquiries down on those weeks. We did however
complete two new lettings, both of fully fitted office suites, continuing the
theme of the last two years of benefitting from providing good quality
accommodation that is ready to move into. We also completed a lease regear on
a logistics unit where a new ten year lease was signed at a rent 40% above the
previous rent. As part of the new letting the Company made a financial
contribution to the cost of the building upgrades to achieve an EPC A rating.
The Company has two logistics units vacant following lease expiry (in both
cases the tenant moved to larger units). At each property we had agreed terms
with new tenants prior to the expiry of the leases (at rents substantially
ahead of the previous levels). Given that we may not have control of these
units again for 10-15 years, we are taking the opportunity to undertake
comprehensive refurbishments on both units (to include PV systems and ESG
enhancements) to improve and future proof them. During Q2, we exchanged on an
Agreement for Lease on the unit in Washington with Evri (formerly Hermes) at an
annual rent of £591,500 and expect to exchange on the unit in Bolton in Q3.
Vacancy increased slightly over the quarter to 10.2% despite the two lettings
completing, due to the lease expiry of the logistics unit in Washington, where
an agreement for lease has now been signed, and we expect the new lease to
start mid 2023 after a refurbishment.
ESG remained a key theme of the quarter as we completed several small upgrades
to air conditioning plant and lighting systems, to ensure all our offices are
at a minimum EPC C by the end of August 2022 (and therefore complying with
statute out to 2030).
As the discount to NAV widened during the quarter the Company restarted a share
buyback program. The decision whether to buy back shares or not is made as an
investment decision - it is not seen as a discount control program, but rather
a way to improve shareholder returns. The Company bought back 5.6m shares in
Q2, and a further 4.9m shares in the first three weeks of July.
The Company completed on one purchase during the quarter (reported previously)
- a car showroom let on a long lease and providing a yield of 6.5% on the £5m
purchase price.
The Company exchanged contracts on an office sale after the quarter end. The
single let office on the outskirts of Oxford, sold for £8.033m, 14.8% above the
end March valuation.
Investment Manager Market review
Executive summary
* The UK economy is now facing multiple headwinds and a US led recession
towards the end of 2023 is now the abrdn Research Institute's ("aRI") base
case. With an increased risk of a UK recession in late 2022 in response to
the cost of living crisis and tightening monetary policy by the Bank of
England aRI are forecasting a peak-to-trough decline in the level of GDP of
around 1.4%, although the growth in GDP in May reversed the declines seen
in March and April this year.
* The UK Consumer Price Index (CPI) rose from 9.1% in May to 9.4% in June, a
level last seen in 1982. Inflation is likely to move higher from here as
rising food and energy prices take hold, before falling thereafter as
challenging base effects and slowing economic growth weigh on headline
inflation. aRI are currently forecasting UK CPI to end the year at 8.5%,
before falling to 5.2% and 1.7% in 2023 and 2024 respectively.
* aRI expects the Bank of England to continue to hike interest rates over the
next few meetings, with the terminal interest rate reaching 2.25%, despite
the predicted slowdown in activity. The BoE is then likely to pause its
hiking cycle, and reverse the hikes with a cutting cycle starting in Q4
2023. Rising interest rates have had a material impact on the cost of debt,
with very volatile swap rates. This is beginning to feed through to the
investment market.
* In the first half of 2022, UK real estate recorded the strongest H1
investment volume since 2015. According to Real Capital Analytics, a total
of £31.2 billion was transacted over this period. However, approximately
two thirds of the activity occurred in Q1'22. In Q2'22 investment volumes
totalled £10.2 billion, down on the Q2 10 year average of £13.5 billion.
* Whilst the UK commercial real estate market had positive performance in H1
2022, the abrdn market outlook for the next 12-18 months has been revised
downwards. We expect an impact on pricing and capital values across all UK
real estate sectors, driven by a rate revaluation, the increased cost of
capital and a narrowing margin over other asset classes. The extent and
duration of this price correction is unclear, however API has a portfolio
that has focused on affordable assets that meet the needs of tenants, and
we believe that will help mitigate against the initial yield shift being
seen on the prime low yielding assets currently.
Occupier trends
* The industrial sector continues to benefit from very tight supply levels.
The UK vacancy rate sits at approximately 3% and this has helped support
rising rental values across the sector over the previous 24 months. Whilst
we expect industrial occupational demand to soften in response to the
weakening economic environment, rental value growth should remain positive
in response to tight supply levels, but with a return to more a normalised
growth rates.
* There have been increased reports of positive letting activity in the
office sector over Q2 2022 however overall office demand is expected to
fall as a poorer economic outlook weighs on job growth across the market,
placing additional pressure on occupational sentiment. Polarisation within
the sector is likely to accelerate, with demand remaining robust for best
in class accommodation, with strong ESG and wellness credentials, whilst
sentiment for secondary assets will cool. The sale of API's office asset in
Kidlington in the first week of August shows how demand has remained strong
for good quality assets.
* The retail sector, despite some initial green shoots of recovery appearing
at the start of the year, is under further pressure as the cost of living
crisis impacts heavily on consumer spending. ONS data suggests that
consumers are starting to alter their spending habits in response to rising
costs, a trend that is likely to persist for some time. API's retail
exposure is focused on affordable out of town retail and we believe that
will be most resilient.
Investment themes
* UK real estate carried some of its performance momentum from 2021 into the
early part of 2022. 2022 will likely be categorised as a year of two halves
with a weaker 2H. With sentiment towards UK real estate weakening,
investment volumes are expected to slow through the course of 2022.
* With rising inflation in the UK, there remain very few asset classes which
enable investors to capture inflation in their income streams. Real estate
as an asset class should enable investors to partially capture some
inflation, particularly in sectors where leases include indexation.
Net Asset analysis as at 30 June 2022 (unaudited)
£m % of net assets
Industrial 304.2 70.2
Office 126.0 29.1
Retail 62.2 14.3
Other Commercial 43.7 10.1
Land 7.5 1.7
Total Property Portfolio 543.6 125.4
Adjustment for lease -9.9 -2.3
incentives
Fair value of Property 533.7 123.1
Portfolio
Cash 8.3 1.9
Other Assets 24.1 5.6
Total Assets 566.1 130.6
Current liabilities -0.0 -0.0
Non-current liabilities -132.8 -30.6
(bank loans & swap)
Total Net Assets 433.3 100.0
Breakdown in valuation movements over the period 1 April 2022 to 30 June 2022
Portfolio Exposure as Like for Like Capital Value
Value as at 30 at 30 Jun Capital Value Shift (incl
Jun 2022 (£m) 2022 (%) Shift (excl transactions (£m)
transactions &
CAPEX)
(%)
External valuation at 521.8
31 Mar 22
Retail 62.2 11.5 1.9 1.2
South East Retail 1.6 1.2 0.1
Retail Warehouses 9.9 2.0 1.1
Offices 126.0 23.1 (0.7) (1.0)
London City Offices 2.3 (1.9) (0.2)
London West End 2.3 (8.1) (1.1)
Offices
South East Offices 9.2 (0.1) (0.1)
Rest of UK Offices 9.3 0.9 0.4
Industrial 304.2 56.0 5.3 15.3
South East Industrial 13.2 3.8 2.7
Rest of UK Industrial 42.8 5.8 12.6
Other Commercial 43.7 8.0 3.3 6.3
Land 7.5 1.4 0.0 0.0
External valuation at 543.6 100.0 3.2 543.6
30 Jun 22
Top 10 Properties
30 Jun 22 (£m)
B&Q, Halesowen 25-30
Symphony, Rotherham 25-30
Hagley Road, Birmingham 25-30
Marsh Way, Rainham 20-25
Timbmet, Shellingford 15-20
Tetron 141, Swadlincote 15-20
Atos Data Centre, Birmingham 15-20
Walton Summit, Preston 15-20
CEVA Logistics, Corby 15-20
Hollywood Green, London 15-20
Top 10 tenants
Tenant Name Passing Rent % of total Passing Rent
B&Q Plc 1,560,000 5.8%
The Symphony Group Plc 1,225,000 4.5%
Schlumberger Oilfield UK plc 1,138,402 4.2%
CEVA Logistics Limited 840,000 3.1%
Jenkins Shipping Co Ltd 825,390 3.1%
Timbmet Group Limited 799,683 3.0%
Atos IT Services UK Ltd 780,727 2.9%
Public Sector 746,476 2.8%
Time Wholesale Services (UK) 656,056 2.4%
Ltd
ThyssenKrupp Materials (UK) 643,565 2.4%
Ltd
9,215,299 34.2%
Regional Split
South East 26.9%
West Midlands 18.9%
East Midlands 12.9%
Scotland 11.1%
North West 10.9%
North East 10.3%
South West 4.4%
London West End 2.3%
City of London 2.3%
The Board is not aware of any other significant events or transactions which
have occurred between 30 June 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.abrdnpit.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
Michelle McKeown - Senior Fund Control Manager, abrdn
Tel: 07789676852 or michelle.mckeown@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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