2 February 2023
abrdn PROPERTY INCOME TRUST LIMITED (LSE: API)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at
31 December 2022
Net Asset Value and Valuations
· Net asset value (“NAV”) per ordinary share
was 84.8p (Sep 2022 – 106.1p), a
decrease of 20.1% for Q4 2022, resulting in a NAV total return,
including dividends, of -19.33% for the quarter;
· The portfolio valuation decreased by 13.9%
on a like for like basis during the quarter (15.4% excluding
CAPEX), whilst the MSCI Monthly Index decreased by 15.6% over the
same period.
Investment and letting activity
· Three sales completed (two
offices and one logistics unit) for a total of £33.725m
· Two new leases agreed securing
£286,000 pa with terms agreed on two more.
· Four new EV charging hub leases
agreed serving retail assets
Financial Position
· Robust balance sheet with financial
resources available for investment of £57.8 million (of which £55
million is in the form of the Company’s revolving credit facility)
net of current cash after dividend and other financial
commitments.
Debt Facility and Gearing
API currently has two facilities with RBSI, a £110m term loan
(fully drawn) and a £55m Revolving Credit Facility (RCF) which is
undrawn. Both facilities are due to expire in April 2023 at which time a new facility with RBSI
commences with a term loan of £85m and an RCF of £80m. The new
facility is at a margin of 150bps over SONIA and an interest rate
cap on SONIA has been put in place at 4%. As at 31 December 2022, the Company had a Loan to Value
(LTV) of 22.6%*.
*LTV calculated as debt less all cash divided by investment
portfolio value
Dividends
Following the dividend being maintained at an annualised rate of
4p per share since December 2021, the
dividend cover for Q4 2022 is 5.1%. This reflects the one off Swap
break costs incurred in Q4. The dividend cover on a recurring basis
was 98.5% for Q4 2022, reflecting the improved rental collection
rate of 99.2% in Q4 and 98.4% for the year. The Board has provided
guidance of its intention to maintain the current dividend level
which it believes will be substantially covered in 2023 and
2024.
Reduction of Investment Manager
Fee
The Board is focussed on controlling the costs of the Company
and, to this end, has agreed a 10bps reduction in the fee payable
to the investment manager, effective from 1
January 2023. The fee will reduce to 60bps of Gross Asset
Value (“GAV”) below £500m, and 50bps above £500m. The fee reduction
would have had the effect of increasing dividend cover by 3.3% on
the basis of the last published GAV.
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of abrdn
Property Income Trust Limited (“API”) at 31
December 2022 was 84.8p. 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
2022 of £416.2 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 2022 to 31 December
2022.
|
Per Share
(p) |
Attributable Assets
(£m) |
Comment |
Net assets as at 30
September 2022 |
106.1 |
404.3 |
|
Unrealised movement in
valuation of property portfolio |
-17.6 |
-67.1 |
Like for like decrease
of 13.9% in property valuations. |
Loss on sale |
-0.5 |
-1.9 |
Loss on sales of Marsh
Way - Rainham, Kirkgate – Epsom, and Queen Square,
Bristol |
CAPEX in the
quarter |
-2.0 |
-7.6 |
Predominantly
development spend at Glass Futures, St Helens. |
Net income in the
quarter after dividend |
-0.0 |
-0.1 |
Rolling 12 month
dividend cover 96.3% excl. one off SWAP break cost |
One-off finance
costs |
-0.9 |
-3.6 |
SWAP break costs |
Interest rate hedge
mark to market revaluation |
-0.2 |
-0.9 |
SWAP and CAP valuation
movement |
Other movements in
reserves |
0.0 |
0.1 |
Movement relating to
lease incentives in the quarter |
Net assets as at 31
December 2022 |
84.8 |
323.2 |
|
European Public Real Estate
Association (“EPRA”) |
31 Dec 2022 |
30 Sept 2022 |
EPRA Net Tangible
Assets |
£319.8m |
£402.5m |
EPRA Net Tangible
Assets per share |
83.9p |
104.6p |
The Net Asset Value per share is calculated using 381,218,977
shares of 1p each being the number in issue on 31 December 2022.
Investment Manager Review and
Portfolio Activity
Despite the distractions of the mini budget and changes of Prime
Ministers we managed to undertake several transactions in Q4,
including completing on the sale of three assets (one logistics and
two offices) as previously reported. Even more encouraging was the
momentum on increasing income. Rent collection has continued to
improve at 99.2% for Q4 and 98.4% for 2022. In addition to that a
further £45,400pa was secured from rent review settlements at the
office at 54 Hagley Rd, and £286,050 pa secured through two new
lettings. We have terms agreed on two more office lettings,
demonstrating continued demand for our office stock. Four new
leases were signed on EV charging hubs where we have agreed terms
across several retail sites for an operator to install and manage
chargers with the Company receiving a modest base rent and share of
operating profit. As a result of the focus on growing income,
dividend cover for the quarter was 98% on a recurring basis (and
96.3% for the year) although with the one off cost of breaking the
swap (details below) that fell to 5% and 73% respectively.
As previously reported in December
2022, as a result of the change in the interest rate
environment since completion, the Company took the decision to
break the swap at a cost of £3.56m and replace it with an interest
rate cap at a rate of 3.96%, retaining the attractive margin of
150bps previously agreed. The interest rate cap enables the Company
to benefit from lower interest costs as SONIA falls, whilst
providing protection in a rising rate environment such that, should
SONIA increase, the maximum all-in financing rate of the term loan
is capped at 5.5%. At the current, SONIA rate of 3.43% the Company
will pay interest of 4.75% on the term loan. The cost of the
interest rate cap was £2.51m which will be amortised over the
three-year tenor of the loan.
The cost of breaking the swap is a one-off charge to the income
account impacting dividend cover in Q4 2022. This charge is the
same as the fair value mark-to-market loss through other
comprehensive income that the Company would have suffered if the
swap had been left in place, and there was therefore no material
effect on the Company’s net asset value from breaking the swap.
UK Real Estate Market Outlook – Q1 2023
· UK real estate generated a positive total
return of 9.6% in the first six months of 2022, however after June
there was a 5.1% fall in capital values through Q3 and an
accelerated 15.6% fall in Q4, meaning the total return for the year
as measured by the MSCI Monthly index was -10.1%. Capital
value falls in October and November were the biggest and second
biggest monthly falls in the history of the index although the rate
of change slowed in December (-6.8%, -5.9% and -3.7%
respectively).
· The reason for this rapid repricing of real
assets was the considerable repricing of Gilts (the risk free rate)
along with higher interest rates. Yields on real estate had fallen
over several years whilst gilts and interest rates yielded close to
zero, and the repricing of assets was unusual in so much as Yields
moved out across all real estate sectors, with lower yielding areas
of the market, such as the industrial sector and long income,
experiencing greater outward yield movements than the wider
market.
· While prime and secondary prices moved out
in tandem during 2022, prime pricing is expected to stabilise in
2023 whilst secondary pricing is expected to see further capital
value declines. While this trend has occurred in previous market
cycles, we expect the divergence in pricing for some sectors to be
more pronounced this time as occupier and investor demand
narrows.
· The UK consumer price index (CPI) moderated
slightly in December, falling from 10.7% to 10.5%, in line with
expectations. Headline inflation has now very likely peaked in the
UK, as powerful base effects combined with global goods
disinflation act to pull inflation down in 2023. However,
underlying inflation pressures remain high. Core inflation was
unchanged at 6.3%, while services inflation, which is a good proxy
for domestically generated inflation, rose from 6.3% in November to
6.8% in December. aRI expects headline inflation to moderate
throughout 2023, reaching 5.9% by the end of the year, before
falling to 2.4% in 2024.
· The pace of repricing for UK real estate
will mean opportunities will arise over the course of 2023,
particularly as the path of monetary policy turns more
accommodative. Those sectors that benefit from longer- term growth
drivers, such as the industrial and living sectors, will see
greater demand return and at more attractive pricing levels. The
repricing of long-income real estate investments will also provide
an attractive opportunity for investors, particularly when yields
for gilts and inflation-linked bonds move lower in line with the
expected policy rate cuts from the BoE. However, as the UK
enters a weaker economic environment, it is important that risk is
reduced in portfolios wherever possible with a focus on
occupational strength and resilience of income at an asset level to
best protect returns during 2023.
· Tight supply levels in many areas of the
market – helped in part by rising development costs during 2022,
leading to delays or even the cancellation of development projects
– will continue to support prospects for rental value growth.
However, any rental growth is likely to be restricted to the
logistics sector, residential including student accommodation, and
the prime end of the office market, where fundamentals for
best-in-class space remain more supportive. Income is expected to
be the predominant driver of real estate returns in the near
term.
Net Asset analysis as at 31 December
2022 (unaudited)
|
£m |
% of
net assets |
Industrial |
227.5 |
70.4 |
Office |
88.5 |
27.4 |
Retail |
53.6 |
16.6 |
Other Commercial |
39.2 |
12.1 |
Land |
7.5 |
2.3 |
Total Property
Portfolio |
416.2 |
128.8 |
Adjustment for lease
incentives |
-8.4 |
-2.6 |
Fair value of
Property Portfolio |
407.8 |
126.2 |
Cash |
15.9 |
4.9 |
Other Assets |
20.9 |
6.5 |
Total
Assets |
444.5 |
137.5 |
Current
liabilities |
-12.2 |
-3.8 |
Non-current
liabilities (bank loans & swap) |
-109.1 |
-33.8 |
Total Net
Assets |
323.2 |
100.0 |
Breakdown in valuation movements over the period 01 October 2022 to 31
December 2022
|
Portfolio Value as at 31 Dec 2022 (£m) |
Exposure as at 31 Dec 2022 (%) |
Like for Like Capital Value Shift (excl transactions &
CAPEX) |
Capital Value Shift (incl transactions (£m) |
|
(%) |
External valuation
at
30 Sept 22 |
|
|
|
518.5 |
|
|
|
|
|
Retail |
53.6 |
12.9 |
(13.1) |
(8.1) |
South East Retail |
|
1.9 |
(7.7) |
(0.7) |
Retail Warehouses |
|
11.0 |
(13.9) |
(7.4) |
|
|
|
|
|
Offices |
88.5 |
21.3 |
(14.5) |
(27.6) |
London City
Offices |
|
2.7 |
(13.8) |
(1.2) |
London West End
Offices |
|
2.3 |
(18.5) |
(2.2) |
South East
Offices |
|
6.8 |
(14.8) |
(13.1) |
Rest of UK
Offices |
|
9.4 |
(13.4) |
(11.1) |
|
|
|
|
|
Industrial |
227.5 |
54.7 |
(17.5) |
(62.3) |
South East
Industrial |
|
9.1 |
(17.8) |
(29.7) |
Rest of UK
Industrial |
|
45.5 |
(17.5) |
(32.6) |
|
|
|
|
|
Other
Commercial |
39.2 |
9.4 |
(10.2) |
(4.5) |
|
|
|
|
|
Land |
7.5 |
1.8 |
0.0 |
0.0 |
|
|
|
|
|
External valuation
at 31 Dec 22 |
416.2 |
100.0 |
(15.4) |
416.2 |
Top 10 Properties
|
31
Dec 22 (£m) |
Mucklow Hill,
Halesowen |
20-25 |
54 Hagley Road,
Birmingham |
20-25 |
Symphony,
Rotherham |
20-25 |
Atos Data Centre,
Birmingham |
15-20 |
Timbmet,
Shellingford |
15-20 |
Hollywood Green,
London |
10-15 |
Tetron 141,
Swadlincote |
10-15 |
CEVA Logistics,
Corby |
10-15 |
Walton Summit
Industrial Estate, 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% |
Public Sector |
1,343,936 |
5.3% |
The Symphony Group
Plc |
1,225,000 |
4.8% |
Schlumberger Oilfield
UK plc |
1,138,402 |
4.5% |
CEVA Logistics
Limited |
840,000 |
3.3% |
Atos IT Services UK
Limited |
838,910 |
3.3% |
Jenkins Shipping Co
Ltd |
816,390 |
3.2% |
Timbmet Limited |
799,683 |
3.2% |
ThyssenKrupp Materials
(UK) Ltd |
643,565 |
2.5% |
Adexa Direct
Limited |
560,997 |
2.2% |
|
9,766,883 |
38.6% |
Regional Split
South East |
21.2% |
West Midlands |
20.9% |
North West |
13.5% |
East Midlands |
13.4% |
Scotland |
12.0% |
North East |
10.5% |
South West |
3.4% |
City of London |
2.7% |
London West End |
2.3% |
The Board is not aware of any other significant events or
transactions which have occurred between 31
December 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:-
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
Craig Gregor - Fund Controller,
abrdn
Tel: 07789676852 or craig.gregor@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