abrdn Property Income Trust Limited
(an
authorised closed-ended investment company incorporated in Guernsey
with registration number 41352)
LEI Number:
549300HHFBWZRKC7RW84
(The
“Company”)
1 February 2024
Unaudited
Net Asset Value as at 31 December
2023
Net
Asset Value and Valuations
-
Net asset
value (“NAV”) per ordinary share was 78.4p (Sep 2023 – 82.2p), a decrease of 4.6% for Q4
2023, resulting in a NAV total return, including dividends, of
-3.5% for the quarter;
-
The
Company saw an increase in the value of its industrial assets
(which make up 57% of the portfolio) of £6.9m (excluding sales),
whilst its office assets (16.5% of the portfolio) fell by £7.5m.
Retail and “Other” assets fell slightly by £1.0m and £2.4m
respectively.
-
The
portfolio again outperformed the MSCI monthly index with a capital
value decline of 2.2% on a like for like basis during the quarter,
compared to the MSCI Monthly Index decline of 2.6% over the same
period.
-
The
portfolio ERV of £34.2m is £7.0.m (25.7%) above the current
contracted rent, demonstrating the significant reversionary
potential.
-
Rent
Collection remained robust with 99% collected so far for Q4. Since
the beginning of 2021 quarterly rent collection has been
consistently at or above 99%.
-
EPRA
Earnings have increased by £132,000 (4.3%) compared to Q3 (£274,000
increase in Q3 over Q2).
Investment
and letting activity
-
Four
lettings completed over the quarter totalling £1.14m pa rent along
with a lease extension for 5 years securing £160,000pa.
-
Three rent
reviews settled on logistics assets providing an uplift in annual
rent of £236,487 (52% above the previous rent passing, and 12%
above the valuation assumption).
Financial
Position
-
Robust
balance sheet with financial resources available for investment of
£25.0 million (from 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 7.6% as at end Q4 2023 (Q3
8.0%).
Although
new leases were completed that would have reduced the vacancy rate
to 4.4% on a like for like basis, we had a new vacancy on a
logistics unit in late November. That unit is now under offer to
sell.
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 £56.9m
was drawn as at 31st December. 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 (all-in rate of
5.5%).
As at
31 December 2023, the Company had a
Loan to Value (LTV) of 30.8%*.
*LTV
calculated as debt less all cash divided by investment portfolio
value
Dividends
A dividend
of 1p will be paid for the quarter which means that the dividend is
therefore being maintained at an annualised rate of 4p per share.
The dividend cover for Q4 2023 is 83.4% (Sep
23 - 79.9%).
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 31 December 2023 was 78.4p. 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 December 2023 of
£439.2 million.
Breakdown
of NAV movement
Set out
below is a breakdown of the change in the unaudited NAV calculated
under IFRS over the period 30 September
2023 to 31 December
2023.
|
Per
Share (p)
|
Attributable
Assets (£m)
|
Comment
|
Net assets
as at 30 September 2023
|
82.2
|
313.6
|
|
Unrealised
movement in valuation of property portfolio
|
-1.0
|
-3.9
|
Like for
like decrease of 2.2%.
|
Loss on
sale
|
-0.1
|
-0.4
|
|
CAPEX in
the quarter
|
-2.0
|
-7.5
|
Predominantly
development spend at Washington and Knowsley, including the two
large PV schemes at those assets.
|
Net income
in the quarter after dividend
|
-0.2
|
-0.6
|
Rolling 12
month dividend cover 81%.
|
Interest
rate hedge mark to market revaluation
|
-0.3
|
-1.2
|
CAP
valuation movement
|
Other
movements in reserves
|
-0.2
|
-0.9
|
Movements
in lease incentives.
|
Net assets
as at 31 December 2023
|
78.4
|
299.1
|
|
European
Public Real Estate
Association
(“EPRA”)
|
31
Dec 2023
|
30
Sep 2023
|
EPRA Net
Tangible Assets
|
£297.6m
|
£310.8m
|
EPRA Net
Tangible Assets per share
|
78.1p
|
81.5p
|
The Net
Asset Value per share is calculated using 381,218,977 shares of 1p
each being the number in issue on 31
December 2023.
Investment
Manager Review and Portfolio Activity
Following
new leases totalling £1.3m pa in Q3 further lettings completed in
Q4 totalling £1.1m pa. Despite these lettings the void rate only
reduced to 7.6% from the Q3 level of 8% as we had the tenant of a
logistics unit leave in late November. We have now placed the unit
under offer to sell to an owner occupier. The sale figure is
approximately 10% ahead of the end December valuation. The lettings
demonstrate the appeal of the API assets to occupiers, but office
demand remains muted, and no lettings were completed in this sector
during Q4.
Just
before Christmas we completed the construction of the speculative
logistics unit in Knowsley. The development provides a high-quality
logistics unit, and we have terms out to two parties, with several
more arranging an inspection – there is still good demand and
limited supply for this quality of building.
The rent
reviews settled during the quarter were on industrial units and
realised significant rental growth not only in real terms, but also
against valuation assumptions. Despite securing over £230,000 pa of
rental uplift from reviews and the lettings over the quarter the
Company’s portfolio still has £7m pa rental reversion based on the
Q4 valuation, which represents a potential increase in annual rent
of 25.7%.
Despite
having one of the lowest debt margins in the sector (150bps) the
Company is exposed to the high Sonia rate. The all-in cost of debt
for Q4 was 6.7% (Q3 6.7%). With expectations of lower interest
rates the value of the interest rate cap the Company holds on its
term loan fell over the quarter by £1.2m and although there are
expectations of further falls in interest rates the focus has been
to reduce borrowings. We completed the sale of a small industrial
estate in Livingston Scotland in December for £6.25m. The sale
price was £300,000 below valuation. Terms were also agreed for the
sale of our City of London office
and Manchester Office for a combined £14.75m (year-end valuation
£15.35m) reducing office exposure by 3.5% to 13%. Sales have also
been agreed of two industrial assets for a total of £24.4m
(year-end valuation £22.4m). We are also exploring the sale of the
open moorland at Far Ralia with encouraging indications of value
above the year-end valuation (£8.25m).
Investment
Manager’s UK Real Estate Market Outlook – Q4
2023
-
UK
inflation unexpectedly ticked higher in December, with the headline
CPI rate increasing from 3.9% year-on-year to 4%. The increase was
largely driven by an increase in tobacco duty, while food prices
were once again a drag on inflation. Underlying inflation pressures
were also slightly stronger than expected. Core inflation was flat
at 5.1% year-on-year. Inflation may move higher again in January,
following a slight uptick in the Ofgem price cap. However, the
bigger picture is that headline inflation is still set to fall
further over the next few months. It could be below 2% by the
second quarter of 2024, aided by favourable base effects.
Meanwhile, cooling wage growth should help to bring underlying
inflation pressure down too.
-
UK gross
domestic product (GDP) growth rebounded in November, expanding 0.3%
month-on-month, which was slightly better than the consensus of
0.2%. The monthly profile of GDP remains extremely volatile after a
contraction of 0.3% in October, with the broad trend remaining one
of sustained stagnation. Recession-like conditions look set to
continue into 2024, but the prospect of further fiscal easing to be
announced in March should help to limit the extent of the
downturn.
-
While UK
real estate capital values declined over the course of 2023, the
pace of decline has moderated. There are tentative signs of
stabilisation for some sectors but not all. There is a risk that
further price discovery in the first half of 2024 will result in
softer pricing, particularly for out-of-favour sectors. Performance
has been varied across sectors, with those benefiting from
structural and thematic tailwinds proving more resilient in the
face of a weaker macroeconomic environment. The logistics and
living sectors are a clear example of this trend, both
outperforming the wider market over the course of 2023.
-
UK real
estate capital values fell by 2.6% in the fourth quarter of 2023.
This resulted in value declines of 5.6% for the year, according to
the MSCI Monthly Index. In line with our expectations, the living
and logistics sectors outperformed the wider market, with capital
value growth of 1.9% and 0.1% during 2023. The office sector
remains the laggard. It recorded a capital decline of 16.6% over
the same period, as the sector struggles with changing working
habits, higher financing costs, and weak investor
sentiment.
-
At the
All-Property level, total returns for the calendar year 2023 were
-0.1%. The largest negative contributor to performance was the
office sector, which returned -11.9%. The residential sector was
once again the strongest performing sector, returning 8.2%. The
industrial sector returned 5.1% over the same period.
Outlook
-
Monetary
policy and the wider macroeconomic backdrop were in the driving
seat in 2023 and we believe this will continue in 2024. Towards the
end of 2023, market expectations for interest-rate cuts picked up
pace as underlying inflation pressures eased. Softer economic data
added weight to the argument that the BoE’s ‘Table mountain’
profile was less likely to be sustainable. Despite the outlook for
monetary policy becoming more positive from this point, an
improvement in UK real estate performance is not expected until the
second half of 2024. It is likely that sectors that saw the
greatest outward yield shift as interest rates rose will see the
strongest performance as they fall, in particular logistics assets
where rental growth remains robust. Higher yield risk assets are
less likely to benefit from this re-rating.
-
While the
macro environment will continue to dominate as we move through
2024, sector allocation will remain crucial. Polarisation in
performance from both a sector and asset-quality perspective will
remain key differentiators for performance. Real estate refinancing
poses a risk to our outlook in 2024, but we believe this risk is
more heavily skewed towards the office sector, given the amount of
outstanding debt and lack of appetite for lending in this
sector.
-
A UK
general election is mandated to occur no later than 28 January 2025, and a date in November of 2024
looks most likely at the moment. The Labour
party has opened-up a 20-point lead in the polls, relative to the
Conservative party. At this stage, it appears likely there will be
a change of government in the UK over the next 12 months, however
that does not appear to be impacting markets at the present
time.
-
With the
increased prospect of interest-rate cuts in 2024, we expect an
improvement in UK real estate performance as we move through 2024.
This will be driven primarily by improved investor confidence and
greater liquidity in the market. The downside risk to our forecasts
remains elevated, given weaker economic growth prospects and the
potential uncertainty created by the upcoming election in the
UK.
Net
Asset analysis as at 31 December 2023
(unaudited)
|
£m
|
%
of net assets
|
Industrial
|
250.1
|
83.6
|
Office
|
72.6
|
24.3
|
Retail
|
72.4
|
24.2
|
Other
Commercial
|
35.9
|
12.0
|
Land
|
8.2
|
2.7
|
Total
Property Portfolio
|
439.2
|
146.9
|
Adjustment
for lease incentives
|
-9.2
|
-3.1
|
Fair
value of Property Portfolio
|
430.0
|
143.8
|
Cash
|
6.7
|
2.2
|
Other
Assets
|
18.6
|
6.2
|
Total
Assets
|
455.3
|
152.2
|
Current
liabilities
|
-14.9
|
-5.0
|
Non-current
liabilities (bank loans)
|
-141.3
|
-47.2
|
Total
Net Assets
|
299.1
|
100.0
|
Breakdown
in valuation movements over the period 01
October 2023 to 31 December
2023
|
Portfolio
Value as at 31 Dec 2023 (£m)
|
Exposure
as at 31 Dec 2023 (%)
|
Like
for Like Capital Value Shift (excl transactions &
CAPEX)
|
Capital
Value Shift (incl transactions (£m)
|
|
(%)
|
External
valuation at 30 Sep 23
|
|
|
|
449.6
|
|
|
|
|
|
Retail
|
72.4
|
16.5
|
(1.4)
|
(1.0)
|
South East
Retail
|
|
1.7
|
(3.8)
|
(0.3)
|
Retail
Warehouses
|
|
14.8
|
(1.1)
|
(0.7)
|
|
|
|
|
|
Offices
|
72.6
|
16.5
|
(9.4)
|
(7.4)
|
London
City Offices
|
|
2.2
|
(6.6)
|
(0.7)
|
London
West End Offices
|
|
1.8
|
(6.4)
|
(0.5)
|
South East
Offices
|
|
5.2
|
(12.9)
|
(3.3)
|
Rest of UK
Offices
|
|
7.3
|
(8.3)
|
(2.9)
|
|
|
|
|
|
Industrial
|
250.1
|
57.0
|
0.5
|
0.4
|
South East
Industrial
|
|
8.8
|
(1.0)
|
(0.3)
|
Rest of UK
Industrial
|
|
48.2
|
0.8
|
0.7
|
|
|
|
|
|
Other
Commercial
|
35.9
|
8.2
|
(6.1)
|
(2.4)
|
|
|
|
|
|
Land
|
8.2
|
1.8
|
0.0
|
0.0
|
|
|
|
|
|
External
valuation at 31 Dec 23
|
439.2
|
100.0
|
(2.2)
|
439.2
|
Yields
|
Initial
Yield (%)
|
Equivalent
Yield
(%)
|
EPRA
NIY
(%)
|
Portfolio
|
5.8
|
7.1
|
4.9%
|
Top
10 Properties
|
31
Dec 23 (£m)
|
Halesowen,
B&Q
|
20-25
|
Rotherham,
Ickles Way
|
20-25
|
Birmingham,
54 Hagley Road
|
15-20
|
Welwyn
Garden City, Morrison’s
|
15-20
|
Swadlincote,
Tetron 141
|
15-20
|
Shellingford,
White Horse Business Park
|
15-20
|
London,
Hollywood Green
|
10-15
|
Washington,
Rainhill Road
|
10-15
|
Corby, 3
Earlstrees Road
|
10-15
|
St Helens,
Stadium Way
|
10-15
|
The
top ten assets represent 38.2% of portfolio
value
Top
10 tenants
Tenant
Name
|
Passing
Rent
|
%
of total Passing Rent
|
B&Q
Plc
|
1,560,000
|
5.7%
|
Public
Sector
|
1,365,203
|
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
|
3.3%
|
Atos IT
Services UK Limited
|
872,466
|
3.2%
|
CEVA
Logistics Limited
|
840,000
|
3.1%
|
ThyssenKrupp
Materials (UK) Ltd
|
643,565
|
2.4%
|
Hermes
Parcelnet Ltd
|
591,500
|
2.2%
|
Top ten
tenants
|
10,393,066
|
38.1%
|
Regional
Split
South
East
|
23.0%
|
West
Midlands
|
18.7%
|
North
West
|
15.4%
|
East
Midlands
|
13.5%
|
North
East
|
12.0%
|
Scotland
|
10.1%
|
South
West
|
3.3%
|
City of
London
|
2.2%
|
London
West End
|
1.8%
|
Except as
described above, the Board is not aware of any significant property
events or transactions which have occurred between 31 December 2023 and the date of publication of
this statement which would have a material impact on the financial
position of the Company. The company announced on 19 January 2024 its intention to merge with
Custodian REIT.
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 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