abrdn Property Income Trust Limited
(an
authorised closed-ended investment company incorporated in Guernsey
with registration number 41352)
LEI Number:
549300HHFBWZRKC7RW84
(The
“Company”)
9 August 2023
Unaudited
Net Asset Value as at 30 June
2023
Net
Asset Value and Valuations
-
Net asset
value (“NAV”) per ordinary share was 83.8p (Mar 2023 – 82.4p), an increase of 1.7% for Q2
2023, resulting in a NAV total return, including dividends, of
2.96% for the quarter;
-
The
portfolio valuation increased by 0.4% on a like for like basis
during the quarter, whilst the MSCI Quarterly Index fell by 0.8%
over the same period.
Investment
and letting activity
-
Three previously reported
agreements to lease completed (development funding and agreements
for lease) totaling £954,811pa, along with two new leases completed
for £199,200 and three new agreements for lease completed for
£668,090. One lease regeared securing £160,00pa (6.7% above
previous rent and ERV) and one lease renewal of £535,00pa, showing
an increase of 30.2% over the previous rent and 19% above December
ERV.
-
Rent received in Q2
increased by £400,000 compared to Q1 (6.3%)
Financial
Position
-
Robust
balance sheet with financial resources available for investment of
£28.1 million (of which £30 million is currently 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 8.2% as at end Q2 2023 (Q1
9.8%).
Several
substantial 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 under 5%. The Company also has one
speculative development project due to complete at the end of the
year that represents 2.5% of fund ERV.
The
weighted average unexpired lease term of the portfolio is 6.3 years
(6.5 years Q1 2023).
Debt
Facility and Gearing
API
currently has two facilities with RBSI, an £85m term loan (fully
drawn) and an £80m Revolving Credit Facility (RCF) of which £50m
was drawn as at 30th
June. 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 30 June 2023, the Company had a
Loan to Value (LTV) of 28.1%*.
*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 Q2 2023 is 72.7%.
The Board
has provided guidance of its intention to maintain the current
dividend level.
Net
Asset Value (“NAV”)
The
unaudited net asset value per ordinary share at 30 June 2023 was 83.8p. 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 30 June 2023 of £445.0
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 March
2023 to 30 June
2023.
|
Per
Share (p)
|
Attributable
Assets (£m)
|
Comment
|
Net assets
as at 31 March 2023
|
82.4
|
314.0
|
|
Unrealised
movement in valuation of property portfolio
|
2.1
|
8.0
|
Like for
like increase of 0.4%.
|
CAPEX in
the quarter
|
-1.0
|
-3.9
|
Predominantly
development spend at Washington Rainhill Road and
Knowsley.
|
Net income
in the quarter after dividend
|
-0.3
|
-1.0
|
Rolling 12
month dividend cover 87.4% excl. one off SWAP break cost in
2022.
|
Interest
rate hedge mark to market revaluation
|
0.6
|
2.4
|
SWAP and
CAP valuation movement
|
Net assets
as at 30 June 2023
|
83.8
|
319.5
|
|
European
Public Real Estate
Association
(“EPRA”)
|
30
June 2023
|
31
Mar 2023
|
EPRA Net
Tangible Assets
|
£315.2m
|
£311.5m
|
EPRA Net
Tangible Assets per share
|
82.7p
|
81.7p
|
The Net
Asset Value per share is calculated using 381,218,977 shares of 1p
each being the number in issue on 30 June
2023.
Investment
Manager Review and Portfolio Activity
The
inflation print in May certainly caused some turmoil in the
investment market with a noticeable change in sentiment as interest
rate expectations changed. The Company was not involved in any
investment transactions during the quarter but continued to have a
busy time of asset management, with encouraging progress on
lettings and securing future income.
The
lease renewal of a logistics unit in Glasgow completed in early June with a 10-year
lease at a rent of £535,000pa, an uplift of 30.2% from the previous
rent. As part of the renewal terms, a Photo Voltaic (PV)
installation on the roof was agreed which we are progressing and
will help further improve the ESG credentials of the
unit.
An early
renewal was completed on a leisure unit in London. The lease was due to expire next year
but has been extended by five years to enable us to work towards a
block date for all the leases and a potential redevelopment of the
site in the future. The increase in rent of 6.7% above the passing
rent (and above valuation assumptions) is a reflection of the
strong trading at the location where we expect to complete several
other lease regears shortly.
Several
new leases were signed over the quarter. The largest was with St
Helens Borough Council on our newly developed industrial facility –
a 15-year lease with indexation at a starting rent of £657,040pa.
Leases were also competed on two office floors in Crawley where we had previously signed an
agreement for lease. Completion followed landlord works and secured
£297,770pa. The Company’s largest office asset is 54 Hagley Rd in
Birmingham. It has seen
significant leasing activity in the quarter with two agreements for
lease completing with a future rent of £538,000pa once landlord
works complete (expected in Q3 2023). Another suite at 54 Hagley Rd
was let at £56,386pa as well as the last remaining office space at
Basinghall St London for £142,800pa. It is clear that the right
office space continues to attract occupiers. As a result of this
activity the Company’s vacancy rate taking account of the
agreements for lease, has fallen to under 5% from 10% at the
beginning of the year.
ESG is an
important part of how we approach managing the Company as we
believe it is an increasing driver of value. PV cells on building
roofs is one of the areas we have focused on as we can provide
onsite renewable energy that benefits the occupier and provides an
economic return for the landlord. Installing it is complex, with
grid capacity and structural constraints often impacting on
schemes, however we are having some great successes. In July we
will start on two more projects with a total of 855kWp. We are
currently on site with a scheme of 1,160kWp due to complete in
October, and have just completed two schemes totaling 263kWp. In
June we have completed two other schemes totalling 492kWp – to
date, these have helped to reduce CO2 emissions by 31.1 tonnes (as
at 12 July).
We have
also made progress with our carbon project at Far Ralia, now having
all approvals in place and a contract agreed with Scottish Forestry
to enable planting to commence in September. This will be a major
milestone for the project, more details of which can be seen in a
video on our website
www.abrdnpit.co.uk .
Obviously, we also need to continue to ensure our assets meet high
standards, and we continue to improve the EPC ratings, with 43% of
our properties rated A or B as at 30 June (25% June 2022).
UK
Real Estate Market Outlook – Q2 2023
-
In welcome news, the June
UK inflation report surprised to the downside as the headline rate
came in at 7.9%, while core inflation also declined, from 7.1% in
May to 6.9% in June
2023.
-
The Bank of England increased the Bank Rate by 50 basis
points (bps) to 5% in June 2023 and
subsequently by a further 25bps to 5.25% in July and in
August.
-
Total return performance
improved during the second quarter of 2023, with all property
posting a total return of 0.4% in the three months to June 2023 according to the MSCI Quarterly Index.
Real estate pricing began to stabilise in the second quarter of
2023, particularly in those areas of the market that saw the
greatest capital declines. Modest capital value growth was also
recorded in sectors that benefit from structural tailwinds however
any substantive improvement in real estate performance is now not
anticipated until early 2024, as the path of UK monetary policy is
likely to become more accommodative. The risks to the timing of
this recovery remain elevated given the strength of underlying
inflation and the consequent risk of higher interest
rates.
-
Transaction activity
remained muted in the second quarter of 2023 as investors took a
more cautious approach to UK real estate. Transaction volumes were
£5.6 billion over the quarter, down 64% on the same period a year
earlier, and 63% below the 10-year quarterly
average.
-
The office sector remains
under structural pressure as evolving working habits and economic
uncertainty weigh on the sector. Although office occupation has
been improving with more workers returning at least three days a
week, most requirements show a need for less space than currently
occupied, with a focus on getting location and amenity right to
attract workers. Investor demand for UK
offices remains weak amid a poor outlook for the sector. Headline
investment volumes hide a lack of real liquidity in the office
market, especially for secondary assets. Headline deals on core
Central London assets are not
reflective of the wider market.
-
Improved sentiment
returned to the industrial and logistics sector during the second
quarter of 2023, as pricing and performance demonstrated tentative
signs of stabilisation. While the longer-term outlook remains
positive, short-term caution is required as a slowing economy will
impact occupier demand. Major occupiers of logistics accommodation
are certainly focussed on ESG, and there is a noticeable change in
tenant requirements for the larger assets when looking for new
space.
-
The retail sector has
proven to be more resilient than many had expected over the first
half of 2023. According to the Office for National Statistics
(ONS), retail sales in the UK unexpectedly expanded in May, boosted
by spending on summer clothing and outdoor goods. However, it is
important to highlight the difference between the quantity of goods
purchased (volume) and the amount spent (value). Retail volumes are
now 0.8% lower than pre-Covid 19 levels, while retail values are
17% higher. It is a clear illustration that consumers are cutting
back on the number of items being purchased, while higher inflation
means it is costing more to purchase these
items.
-
API has always focussed on
affordable out of town retail, catering for the discount retailers,
and this has been an area on ongoing growth in demand – driven by
retailers such as B&M showing sales growth of 9.2% in its UK
business over the first quarter of 2023.
-
There has been an increase
in breadth of retailers taking new space, with several brand names
moving into their own stores to “own” the relationship with
clients, and although online retail continues to impact on retailer
models, it is clear that bricks and mortar stores remain an
important part of most retailers’ strategies.
Net
Asset analysis as at 31 March 2023
(unaudited)
|
£m
|
%
of net assets
|
Industrial
|
240.8
|
75.4
|
Office
|
85.1
|
26.6
|
Retail
|
73.4
|
23.0
|
Other
Commercial
|
38.2
|
12.0
|
Land
|
7.5
|
2.3
|
Total
Property Portfolio
|
445.1
|
139.3
|
Adjustment
for lease incentives
|
-8.2
|
-2.5
|
Fair
value of Property Portfolio
|
436.9
|
136.8
|
Cash
|
10.0
|
3.1
|
Other
Assets
|
19.5
|
6.1
|
Total
Assets
|
466.4
|
146.0
|
Current
liabilities
|
-12.7
|
-4.0
|
Non-current
liabilities (bank loans & swap)
|
-134.2
|
-42.0
|
Total
Net Assets
|
319.5
|
100.0
|
Breakdown
in valuation movements over the period 01
April 2023 to 30 June
2023
|
Portfolio
Value as at 30 Jun 2023 (£m)
|
Exposure
as at 30 Jun 2023 (%)
|
Like
for Like Capital Value Shift (excl transactions &
CAPEX)
|
Capital
Value Shift (incl transactions (£m)
|
|
(%)
|
External
valuation at 31 Mar 23
|
|
|
|
437.0
|
|
|
|
|
|
Retail
|
73.4
|
16.5
|
1.0
|
1.1
|
South East
Retail
|
|
1.8
|
0.0
|
0.0
|
Retail
Warehouses
|
|
14.7
|
1.1
|
1.1
|
|
|
|
|
|
Offices
|
85.1
|
19.1
|
(3.0)
|
(0.4)
|
London
City Offices
|
|
2.5
|
0.0
|
0.0
|
London
West End Offices
|
|
2.1
|
(2.6)
|
(0.3)
|
South East
Offices
|
|
6.3
|
(4.8)
|
0.9
|
Rest of UK
Offices
|
|
8.2
|
(2.7)
|
(1.0)
|
|
|
|
|
|
Industrial
|
240.8
|
54.1
|
1.6
|
7.3
|
South East
Industrial
|
|
8.7
|
1.7
|
0.6
|
Rest of UK
Industrial
|
|
45.4
|
1.6
|
6.7
|
|
|
|
|
|
Other
Commercial
|
38.2
|
8.6
|
0.0
|
0.0
|
|
|
|
|
|
Land
|
7.5
|
1.7
|
0.0
|
0.0
|
|
|
|
|
|
External
valuation at 30 Jun 23
|
445.0
|
100.0
|
0.4
|
445.0
|
Yields
|
Initial
Yield (%)
|
Equivalent
Yield
(%)
|
EPRA
NIY
(%)
|
Portfolio
|
5.4
|
7.0
|
4.8%
|
Top
10 Properties
|
30
Jun 23 (£m)
|
Halesowen,
B&Q
|
20-25
|
Birmingham,
54 Hagley Road
|
20-25
|
Rotherham,
Symphony
|
20-25
|
Welwyn
Garden City, Morrison’s
|
15-20
|
Shellingford,
Timbmet
|
15-20
|
Birmingham,
Atos Data Centre
|
15-20
|
London,
Hollywood Green
|
10-15
|
Swadlincote,
Tetron 141
|
10-15
|
Corby,
CEVA Logistics
|
10-15
|
Preston,
Walton Summit
|
10-15
|
The
top ten assets represent 38% of portfolio value
Top
10 tenants
Tenant
Name
|
Passing
Rent
|
%
of total Passing Rent
|
B&Q
Plc
|
1,560,000
|
5.8%
|
Public
Sector
|
1,364,226
|
5.1%
|
WM
Morrisons Supermarkets Ltd
|
1,252,162
|
4.7%
|
The
Symphony Group Plc
|
1,225,000
|
4.6%
|
Schlumberger
Oilfield UK plc
|
1,138,402
|
4.2%
|
Timbmet
Limited
|
904,768
|
3.4%
|
Atos IT
Services UK Limited
|
872,466
|
3.3%
|
CEVA
Logistics Limited
|
840,000
|
3.1%
|
Jenkins
Shipping Co Ltd
|
816,390
|
3.0%
|
ThyssenKrupp
Materials (UK) Ltd
|
643,565
|
2.4%
|
|
10,616,979
|
39.6%
|
Regional
Split
South
East
|
23.9%
|
West
Midlands
|
19.5%
|
North
West
|
13.7%
|
East
Midlands
|
12.8%
|
Scotland
|
11.6%
|
North
East
|
10.8%
|
South
West
|
3.1%
|
City of
London
|
2.5%
|
London
West End
|
2.1%
|
Except as
described above, the Board is not aware of any significant events
or transactions which have occurred between 30 June 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 – API Fund Manager, abrdn
Tel:
07801039463
or
jason.baggaley@abrdn.com
Mark Blyth – API 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