abrdn Property Income Trust Limited Unaudited Net Asset Value as at 31 March 2023
May 11 2023 - 2:00AM
UK Regulatory
TIDMAPI
11 May 2023
abrdn PROPERTY INCOME TRUST LIMITED (LSE: API)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 March 2023
Net Asset Value and Valuations
· Net asset value ("NAV") per ordinary share was 82.4p (Dec 2022 - 84.8p), a
decrease of 2.8% for Q1 2023, resulting in a NAV total return, including
dividends, of -1.70% for the quarter;
· The portfolio valuation fell by 0.4% on a like for like basis during the
quarter, whilst the MSCI Quarterly Index fell by 1% over the same period.
Investment and letting activity
· Supermarket purchased for £18.29m at a yield of 6.35%
· Three rent reviews settled securing an increase in rent of £178,550pa
· One lease regeared securing £178,820pa.
Financial Position
· Robust balance sheet with financial resources available for investment of
£34.7 million (of which £30 million is in the form of the Company's revolving
credit facility) net of current cash after dividend and other financial
commitments.
Occupancy / Void / WAULT
The Company had a vacancy rate of 9.8% as at end Q1 2023 however several vacant
units are subject to a binding agreement for lease, and when those leases
complete the vacancy rate based on current fund position will be close to 5%.
The Company also has one development project that represents 2.5% of fund ERV.
The weighted average unexpired lease term of the portfolio is 6.5 years (5.7
years Q4 2022).
Debt Facility and Gearing
API currently has two facilities with RBSI, an £85m term loan (fully drawn) and
a £80m Revolving Credit Facility (RCF) of which £50m was drawn as at 1st May
2023 (as at 31st March the Company had £110m term loan and £25m RCF drawn).
These replaced the two previous facilities which expired in April 2023. Both
facilities are at a margin of 150bps over SONIA and an interest rate cap on
SONIA has been put in place at 4% over the term loan. As at 31 March 2023, the
Company had a Loan to Value (LTV) of 28.7%*.
*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 Q1 2023 is 88.6%. 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 has been reduced to 60bps of Gross Asset
Value ("GAV") below £500m, and 50bps above £500m.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share at 31 March 2023 was 82.4p. 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 2023 of £437.0 million.
Breakdown of NAV movement
Set out below is a breakdown of the change in the unaudited NAV calculated under
IFRS over the period 31 December 2022 to 31 March 2023.
+-------------+-----+------------+----------------------------------------+
| |Per |Attributable|Comment |
| |Share|Assets (£m) | |
| |(p) | | |
+-------------+-----+------------+----------------------------------------+
|Net assets as|84.8 |323.2 | |
|at 31 | | | |
|December 2022| | | |
+-------------+-----+------------+----------------------------------------+
|Unrealised |5.5 |20.9 |Includes purchases of Knowsley and |
|movement in | | |Welwyn Garden City. |
|valuation of | | | |
|property | | | |
|portfolio | | | |
+-------------+-----+------------+----------------------------------------+
|Purchases |-6.3 |-24.0 |Includes transaction costs (£1.7m) |
+-------------+-----+------------+----------------------------------------+
|CAPEX in the |-1.2 |-4.4 |Predominantly development spend at Glass|
|quarter | | |Futures, St Helens and Explorer, Crawley|
+-------------+-----+------------+----------------------------------------+
|Net income in|-0.1 |-0.4 |Rolling 12 month dividend cover 92.6% |
|the quarter | | |excl. one off SWAP break cost in 2022. |
|after | | | |
|dividend | | | |
+-------------+-----+------------+----------------------------------------+
|Interest rate|-0.4 |-1.5 |SWAP and CAP valuation movement |
|hedge mark to| | | |
|market | | | |
|revaluation | | | |
+-------------+-----+------------+----------------------------------------+
|Other |0.1 |0.2 |Movement relating to lease incentives in|
|movements in | | |the quarter |
|reserves | | | |
+-------------+-----+------------+----------------------------------------+
|Net assets as|82.4 |314.0 | |
|at 31 March | | | |
|2023 | | | |
+-------------+-----+------------+----------------------------------------+
+----------------------------------+-----------+-----------+
|European Public Real Estate |31 Mar 2023|31 Dec 2022|
| | | |
|Association ("EPRA") | | |
+----------------------------------+-----------+-----------+
|EPRA Net Tangible Assets |£311.5m |£319.8m |
+----------------------------------+-----------+-----------+
|EPRA Net Tangible Assets per share|81.7p |83.9p |
+----------------------------------+-----------+-----------+
The Net Asset Value per share is calculated using 381,218,977 shares of 1p each
being the number in issue on 31 March 2023.
Investment Manager Review and Portfolio Activity
After the turmoil of Q4 2022, and with renewed concern about the banking sector
and general economic outlook in Q1 2023 it was pleasing to continue to make
progress with asset management initiatives during the first three months of
2023. As expected, we completed the development of our prelet industrial unit in
St Helens at the end of the quarter with the new 15 year lease to the local
authority completing in early April at a rent of £657,040pa. We also completed
an agreement for lease on the last remaining floor of our office in Crawley
securing a rent of £132,000pa, and then after the quarter end we concluded a
long negotiation to sign an agreement for lease on 21,500sqft of office space at
Hagley Road Birmingham to secure a rent of £408,000pa. The industrial sector
continues to show strong rental performance, as evidenced by a rent review
settlement in Birmingham showing a 40% increase in rent, and a regear and rent
review in Scotland, providing a 20% uplift in rent. We also benefited from an
RPI linked rent review on a hotel showing a 26% increase in rent.
During Q1 we took advantage of market dislocation to purchase a purpose built
food store and petrol filling station let to Morrison's by way of a sale and
leaseback for £18.29m at an initial yield of 6.35%. The asset is in Welwyn
Garden City and we believe it will perform well for the Company with a 25 year
lease and CPI linked rent reviews (yearly for the first 5 years). The purchase
was funded from the RCF, and although initially the cost of servicing that debt
is high the income from the asset is higher, and that differential is expected
to increase as rates decline and the rent continues to grow.
The Company achieved planning consent for the development of a 110,000sqft
logistics unit on the site at Knowsley, and commenced construction in April,
with an anticipated completion date in December 2023. The development will
provide the Company with another high quality logistics asset and the demand /
supply balance remains favourable for the Company as we seek a tenant for the
unit.
UK Real Estate Market Outlook - Q2 2023
· UK inflation fell back to 10.1% in March 2023 following an unexpected jump
in February to 10.4%, well above both consensus and the Bank of England's
forecasts. However, powerful base effects and falling energy prices suggest
headline inflation should start to decline rapidly over the remainder of the
year according to abrdn's research team.
· The Bank of England's Monetary Policy committeevoted 7-2 to hike rates by
25bps to 4.25% in March. The format of the Bank's forward guidance means that
the market's pricing of the near-term policy path will be extremely sensitive to
incoming inflation and wage data. On balance, abrdn thinks 4.5% will represent
the peak in interest rates for this cycle, with the Bank implementing a further
25bps hike in May. The debate will increasingly focus on the shape of the
eventual cutting cycle.
· There are some very early signs that economic weakness is starting to feed
through into the labour market. Job vacancies continue to decline, pointing to a
slightly more balanced job vacancy per person looking for a job. However, with
the unemployment rate at 3.7%, the labour market remains extremely tight. The
participation rate is still well below the pre-pandemic level, and the shortage
of labour is driving private sector wage growth to a level that suggests
inflation could remain above the target rate of inflation of 2%.
· Despite narrowly avoiding a technical recession in the second half of 2022,
the UK economy is set to endure recession-like conditions for much of 2023.
Underlying inflation pressure is proving `sticky' and may be harder to tackle
than first forecast. That is why we still think an economic slowdown is a
necessary condition for sustainably returning inflation to target in the UK.
· Despite a weak start to the year, UK real estate performance was broadly
flat in Q1 2023 according to the MSCI monthly index, with all property
recording a total return of 0.2%. This was helped by the first month of positive
performance in March 2023 since June 2022, with monthly performance increasing
from -0.3% in February to 0.7% in March. This demonstrated a continued recovery
in UK real estate performance.
· Offices continued to be the worst performing sector over Q1 2023 with a
total return of -1.8%, while the residential sector produced the best
performance at 2.9%. Other areas of the market which demonstrated robust
performance and outperformed the market average were retail warehousing, hotels
and south east industrial.
· Capital value declines also showed signs of slowing, with capital values
rising 0.2% in March 2023, resulting in capital value declines over Q1 2023 of
-1.2%. Whilst remaining negative, this was a significant improvement on a fall
of -15.6% recorded in Q4 2022 (the largest quarterly fall in the history of the
MSCI monthly index).
· That being said, improved performance is set to be largely derived from the
direction of the Bank of England's monetary policy, and the speed at which any
rate cutting cycle is implemented. At present, the BoE is expected to begin a
cutting cycle in late 2023 although markets remain turbulent, and uncertainty
persists on the timing.
· Any recovery in performance is likely to be asymmetric, with those sectors
which benefit from positive underlying fundamentals - and which experienced the
largest correction in capital values in late 2022 - likely to see a more
pronounced recovery. As a result, our outlook and forecasts for the industrial
and logistics, supermarket and retail warehouse sectors have improved.
· We anticipate further capital value declines in those sectors which are yet
to experience significant outward yield movements, and which remain under
structural pressure, with the office sector likely at greatest risk of further
pricing declines. Best in class offices are expected to remain more resilient,
particularly in supply constrained locations, whereas the outlook for secondary
office assets is poor. Anecdotal evidence suggests that secondary office assets
are now beginning to see material discounts to pricing, but a wide gap remains
between buyer/seller pricing aspirations.
Net Asset analysis as at 31 March 2023 (unaudited)
+-------------------------------------------+------+---------------+
| |£m |% of net assets|
+-------------------------------------------+------+---------------+
|Industrial |233.5 |74.3 |
+-------------------------------------------+------+---------------+
|Office |85.5 |27.2 |
+-------------------------------------------+------+---------------+
|Retail |72.4 |23.0 |
+-------------------------------------------+------+---------------+
|Other Commercial |38.3 |12.2 |
+-------------------------------------------+------+---------------+
|Land |7.5 |2.4 |
+-------------------------------------------+------+---------------+
|Total Property Portfolio |437.0 |139.2 |
+-------------------------------------------+------+---------------+
|Adjustment for lease incentives |-8.2 |-2.6 |
+-------------------------------------------+------+---------------+
|Fair value of Property Portfolio |428.8 |136.6 |
+-------------------------------------------+------+---------------+
|Cash |9.7 |3.1 |
+-------------------------------------------+------+---------------+
|Other Assets |16.9 |5.4 |
+-------------------------------------------+------+---------------+
|Total Assets |455.4 |145.0 |
+-------------------------------------------+------+---------------+
|Current liabilities |-7.2 |-2.3 |
+-------------------------------------------+------+---------------+
|Non-current liabilities (bank loans & swap)|-134.2|-42.7 |
+-------------------------------------------+------+---------------+
|Total Net Assets |314.0 |100.0 |
+-------------------------------------------+------+---------------+
Breakdown in valuation movements over the period 01 January 2023 to 31 March
2023
+----------+---------+--------+---------------------------+-------------------+
| |Portfolio|Exposure|Like for Like Capital Value|Capital Value Shift|
| |Value as |as at |Shift (excl transactions & |(incl transactions |
| |at 31 Mar|31 Mar |CAPEX) |(£m) |
| |2023 (£m)|2023 (%)| | |
+----------+---------+--------+---------------------------+-------------------+
| |(%) |
+----------+---------+--------+---------------------------+-------------------+
|External | | | |416.2 |
|valuation | | | | |
|at 31 | | | | |
|Dec 22 | | | | |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Retail |72.4 |16.6 |0.6 |18.8 |
+----------+---------+--------+---------------------------+-------------------+
|South East| |1.8 |0.0 |0.0 |
|Retail | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Retail | |14.8 |0.7 |18.8 |
|Warehouses| | | | |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Offices |85.5 |19.5 |(3.4) |(3.1) |
+----------+---------+--------+---------------------------+-------------------+
|London | |2.6 |(0.9) |(0.1) |
|City | | | | |
|Offices | | | | |
+----------+---------+--------+---------------------------+-------------------+
|London | |2.2 |(2.6) |(0.3) |
|West End | | | | |
|Offices | | | | |
+----------+---------+--------+---------------------------+-------------------+
|South East| |6.1 |(4.3) |(1.2) |
|Offices | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Rest of UK| |8.6 |(3.7) |(1.5) |
|Offices | | | | |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Industrial|233.5 |53.4 |0.8 |6.0 |
+----------+---------+--------+---------------------------+-------------------+
|South East| |8.7 |(0.5) |(0.2) |
|Industrial| | | | |
+----------+---------+--------+---------------------------+-------------------+
|Rest of UK| |44.8 |1.1 |6.2 |
|Industrial| | | | |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Other |38.3 |8.8 |(2.3) |(0.9) |
|Commercial| | | | |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|Land |7.5 |1.7 |0.0 |0.0 |
+----------+---------+--------+---------------------------+-------------------+
| | | | | |
+----------+---------+--------+---------------------------+-------------------+
|External |437.0 |100.0 |(0.4) |437.0 |
|valuation | | | | |
|at 31 | | | | |
|Mar 23 | | | | |
+----------+---------+--------+---------------------------+-------------------+
Yields
+---------+-----------------+----------+
| |Initial Yield (%)|Equivalent|
| | | |
| | |Yield (%) |
+---------+-----------------+----------+
|Portfolio|5.76 |6.83 |
+---------+-----------------+----------+
Top 10 Properties
+--------------------------------------+--------------+
| |31 Mar 23 (£m)|
+--------------------------------------+--------------+
|Halesowen, Mucklow Hill, B&Q |20-25 |
+--------------------------------------+--------------+
|Birmingham, 54 Hagley Road |20-25 |
+--------------------------------------+--------------+
|Rotherham, Symphony |20-25 |
+--------------------------------------+--------------+
|Welwyn Garden City, 40 Black Fan Road |15-20 |
+--------------------------------------+--------------+
|Shellingford, Timbmet |15-20 |
+--------------------------------------+--------------+
|Birmingham, Atos Data Centre |15-20 |
+--------------------------------------+--------------+
|London, Hollywood Green |10-15 |
+--------------------------------------+--------------+
|Corby, CEVA Logistics |10-15 |
+--------------------------------------+--------------+
|Swadlincote, Tetron 141 |10-15 |
+--------------------------------------+--------------+
|St. Helens, Glass Futures, Stadium Way|10-15 |
+--------------------------------------+--------------+
The top ten assets represent 39% of portfolio value
Top 10 tenants
+-------------------------------+------------+-----------------------+
|Tenant Name |Passing Rent|% of total Passing Rent|
+-------------------------------+------------+-----------------------+
|B&Q Plc |1,560,000 |5.8% |
+-------------------------------+------------+-----------------------+
|Public Sector |1,343,936 |5.0% |
+-------------------------------+------------+-----------------------+
|WM Morrisons Supermarkets Ltd |1,252,162 |4.6% |
+-------------------------------+------------+-----------------------+
|The Symphony Group Plc |1,225,000 |4.5% |
+-------------------------------+------------+-----------------------+
|Schlumberger Oilfield UK plc |1,138,402 |4.2% |
+-------------------------------+------------+-----------------------+
|Timbmet Limited |904,768 |3.4% |
+-------------------------------+------------+-----------------------+
|CEVA Logistics Limited |840,000 |3.1% |
+-------------------------------+------------+-----------------------+
|Atos IT Services UK Limited |838,910 |3.1% |
+-------------------------------+------------+-----------------------+
|Jenkins Shipping Co Ltd |816,390 |3.0% |
+-------------------------------+------------+-----------------------+
|ThyssenKrupp Materials (UK) Ltd|643,565 |2.4% |
+-------------------------------+------------+-----------------------+
| |10,563,133 |39.2% |
+-------------------------------+------------+-----------------------+
Regional Split
+---------------+-----+
|South East |24.0%|
+---------------+-----+
|West Midlands |19.7%|
+---------------+-----+
|North West |13.6%|
+---------------+-----+
|East Midlands |12.8%|
+---------------+-----+
|Scotland |11.7%|
+---------------+-----+
|North East |10.2%|
+---------------+-----+
|South West |3.2% |
+---------------+-----+
|City of London |2.6% |
+---------------+-----+
|London West End|2.2% |
+---------------+-----+
The Board is not aware of any other significant events or transactions which
have occurred between 31 March 2023 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
Craig Gregor - Fund Controller, abrdn
Tel: 07789676852 or craig.gregor@abrdn.com (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
This information was brought to you by Cision http://news.cision.com
END
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