abrdn Property Income Trust Limited
(an
authorised closed-ended investment company incorporated in Guernsey
with registration number 41352)
LEI Number:
549300HHFBWZRKC7RW84
(The
“Company”)
2 May 2024
Unaudited
Net Asset Value as at 31 March
2024
Net
Asset Value and Valuations
·
Net asset
value (“NAV”) per ordinary share was 76.4p (Annual Report and
Financial Statements – 78.2p), a decrease of 2.2% for Q1 2024,
resulting in a NAV total return, including dividends, of -1.4% for
the quarter;
·
The
Company saw an overall fall in the value of the portfolio of 0.9%
over the quarter on a like for like basis driven mainly by the
office sector. Valuation changes and capex on the assets accounted
for 1p of the 1.8p decline in the NAV over the quarter.
·
The Q1 NAV
was impacted by further costs associated with the strategic review
and subsequent abortive corporate activity of 0.4p per
share. Further
strategic review costs of 0.5p per share will crystallise if the
managed wind-down is voted for by shareholders.
·
The
portfolio capital value decline of 0.9% on a like for like basis
during the quarter was broadly in line with the MSCI Monthly Index
decline of 0.8% over the same period.
·
The
portfolio ERV of £33.3m is £7.4m (28.8%) above the current
contracted rent, demonstrating the significant reversionary
potential.
·
Rent
Collection remained robust with 99% collected so far for Q1. Since
the beginning of 2021 quarterly rent collection has been
consistently at or above 99%.
·
EPRA
Earnings excluding non-recurring items have decreased by £300,000
in the period compared to Q4 (£132,000 increase) primarily due to
movements in lease incentives.
Investment
activity.
·
Two sales
completed during the quarter totalling £16.55m and a further two
sales completed after the quarter end totaling £13.2m.
Financial
Position
·
Robust
balance sheet with financial resources available for investment of
£33.2 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 7.9% as at end Q1 2024 (Q4 2023
7.6%).
The
largest vacancy is of a logistics unit that became vacant in
November 2023, and had been under
offer to sell to an owner occupier, but that is no longer
progressing.
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 £44.5m
was drawn as at 31st March. 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 March 2024, the Company had a Loan
to Value (LTV) of 29.0%*. The all-in cost of debt is 5.9% and the
focus remains on repaying the RCF to reduce this
further.
*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 Q1 2024 excluding exceptional items
associated with Corporate Activity is 75.4% (Dec 23 - 83.4%).
The Board
has provided guidance of its intention to maintain the current
dividend level. This guidance will be revisited after the wind-down
vote.
Net
Asset Value (“NAV”)
The
unaudited net asset value per ordinary share at 31 March 2024 was 76.4p. 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 2024 of £420.6
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
2023 to 31 March
2024.
|
|
Per
Share (p)
|
Attributable
Assets (£m)
|
Comment
|
|
Net assets
as at 31 December 2023
|
78.2
|
298.1
|
As per
Audited Annual Report
|
|
Unrealised
movement in valuation of property portfolio
|
-0.5
|
-2.0
|
Like for
like decrease of 0.9%.
|
|
Loss on
sale
|
-0.1
|
-0.5
|
|
|
CAPEX in
the quarter
|
-0.5
|
-2.3
|
Predominantly
final payment at Knowsley.
|
|
Non-recurring
items associated with Corporate Activity
|
-0.4
|
-1.1
|
|
|
Net income
in the quarter after dividend
|
-0.3
|
-1.0
|
Rolling
12-month dividend cover 78% excluding non-recurring items
associated with Corporate Activity.
|
|
Interest
rate hedge mark to market revaluation
|
0.1
|
0.2
|
Interest
rate cap valuation movement
|
|
Other
movements in reserves
|
-0.1
|
-0.2
|
Movements
in lease incentives.
|
|
Net assets
as at 31 March 2024
|
76.4
|
291.2
|
|
|
European
Public Real Estate
Association
(“EPRA”)
|
31
Mar 2024
|
31
Dec 2023
|
|
EPRA Net
Tangible Assets
|
£289.8m
|
£297.6m
|
|
EPRA Net
Tangible Assets per share
|
76.0p
|
78.1p
|
The Net
Asset Value per share is calculated using 381,218,977 shares of 1p
each being the number in issue on 31 March
2024.
Investment
Manager Review and Portfolio Activity
The first
quarter of the year is normally the slowest, for both occupier and
investment activity, and 2024 has felt no different. The asset
management completed in the quarter continues to demonstrate the
underlying strength of the portfolio.
Two rent
reviews were completed in the quarter, an industrial unit at Sandy
where the lease has indexation and so the settlement was in line
with valuation expectations, and a retail warehouse unit where the
rent was settled 4.6% above the December
2023 valuation assumption. We also completed a lease renewal
on a retail park of a fast-food drive through, where the increase
in rent was 16.7% above the December valuation assumption. Two
sales were completed in the quarter totalling £16.55m, and since
the quarter end two further sales completed for £13.2m (details of
all sales have already been reported) and a letting of two units
completed at our multi let industrial scheme in Aberdeen.
The
vacancy rate has increased slightly, in part due to the sales
completed. The vacancy rate of 7.9%
excludes
the recently completed speculative development which represents
2.5% of ERV. That and the logistics unit in Swadlincote (3.3% of
ERV) are key opportunities to drive value and we are marketing the
units to owner occupiers and tenants.
Following
completion of several sales the RCF has reduced over the quarter,
with a drawn balance of £45.5m at quarter end (following further
repayments in April, this is £31.6m as at 2nd May) As a result, at
the quarter end the LTV was 29%. It is intended that sale proceeds
will be reduced to repay the RCF as a priority.
The Board
will shortly be issuing a circular to recommend a change of
Investment Strategy to enable the Company to enter a managed
winddown through the disposal of its assets leading to a
liquidation of the Company over the next 18-36 months.
Investment
Manager’s UK Real Estate Market Outlook – Q1
2024
-
Although
the UK economy contracted over the second half of 2023, briefly
entering a technical recession, it is expected to return to
moderate growth over the course of this year. Indeed, the monthly
GDP for January was positive at 0.2%. Housing activity is picking
up, while the return of positive real income growth has helped to
boost sentiment and spending.
-
The annual
consumer price index (CPI) declined to 3.2% in March. We expect
headline inflation to fall well below 2% by the middle of the year,
because of base effects and lower energy prices. That said,
underlying inflation pressures are likely to remain stickier. We
believe the idea of the UK being an outlier on the upside of
inflation is over, as the focus now shifts to the Bank of
England (BofE) and the timing of
its cuts.
-
At its
March meeting, the BofE showed it was more aligned in its direction
to maintain monetary policy pressure than during prior months. The
prospect of further rate hikes has largely left investors’ minds,
but expectations of the timing and extent of cuts remain uncertain.
Gilt yields have remained over 4% during the quarter, and the
risk-free rate of return along with high debt costs continues to
impact on real estate pricing.
-
The
decline in UK real estate capital values moderated over 2023.
Despite further pressure on values, downward movements in pricing
were nowhere near those in 2022. There are signs of stabilisation
in light of a brighter macroeconomic picture, although this may be
slower to materialise in out-of-favour sectors. Capital declines
continued in Q1 2024 with the MSCI Monthly Index showing an
all-property capital decline of 0.8% and total return of
0.6%.
-
Industrial
(logistics) remains the favoured sector, and it appears the period
of retail being shunned is coming to an end. Offices are the out of
favour sector, apart from the best city centre assets. We expect to
see continued valuation falls in the office sector even as interest
rates start to fall, and the general market conditions
improve.
-
UK
investment volumes remain subdued, as liquidity has become a major
limiting factor. Activity has been slow as investors await an
improvement in the macroeconomic environment. We expect a muted
first half of 2024 as most investors have little motivation to
sell. Activity should pick up later in the year as more conviction
returns to the market.
-
UK real
estate looks poised for a modest recovery, following a collection
of positive movements in the economic landscape. With inflation
seemingly under control and the first interest rate cuts expected
later in 2025, we expect to see an increase in UK real estate
performance from 2025.
-
We expect
any areas of distress to be quite localised as debt maturities
filter through, rather than as a result of any systemic breaches in
covenants. These pockets of stress will largely be focused on
poor-quality assets with significant capital expenditure
requirements. Such assets could provide opportunities for
cash-ready investors, as the outlook for the wider market
improves.
Net
Asset analysis as at 31 March 2024
(unaudited)
|
|
£m
|
%
of net assets
|
|
Industrial
|
244.0
|
83.8
|
|
Office
|
59.9
|
20.6
|
|
Retail
|
72.0
|
24.7
|
|
Other
Commercial
|
36.5
|
12.5
|
|
Land
|
8.2
|
2.8
|
|
Total
Property Portfolio
|
420.6
|
144.4
|
|
Adjustment
for lease incentives
|
-9.3
|
-3.2
|
|
Fair
value of Property Portfolio
|
411.3
|
141.2
|
|
Cash
|
7.5
|
2.6
|
|
Other
Assets
|
18.0
|
6.2
|
|
Total
Assets
|
436.8
|
150.0
|
|
Current
liabilities
|
-16.7
|
-5.7
|
|
Non-current
liabilities (bank loans)
|
-128.9
|
-44.3
|
|
Total
Net Assets
|
291.2
|
100.0
|
Breakdown
in valuation movements over the period 01
January 2024 to 31 March
2024
|
|
Portfolio
Value as at 31 Mar 2024 (£m)
|
Exposure
as at 31 Mar 2024 (%)
|
Like
for Like Capital Value Shift (excl transactions &
CAPEX)
|
Capital
Value Shift (incl transactions (£m)
|
|
|
(%)
|
|
External
valuation at 31 Dec 23
|
|
|
|
439.2
|
|
|
|
|
|
|
|
Retail
|
72.0
|
17.2
|
(0.7)
|
(0.4)
|
|
South East
Retail
|
|
1.8
|
(1.3)
|
(0.1)
|
|
Retail
Warehouses
|
|
15.4
|
(0.6)
|
(0.3)
|
|
|
|
|
|
|
|
Offices
|
59.9
|
14.2
|
(4.5)
|
(12.7)
|
|
London
City Offices
|
|
0.0
|
0.0
|
(9.9)
|
|
London
West End Offices
|
|
1.8
|
(3.8)
|
(0.3)
|
|
South East
Offices
|
|
5.2
|
(4.5)
|
(1.0)
|
|
Rest of UK
Offices
|
|
7.2
|
(4.7)
|
(1.5)
|
|
|
|
|
|
|
|
Industrial
|
244.0
|
58.0
|
(0.5)
|
(6.1)
|
|
South East
Industrial
|
|
9.2
|
0.2
|
0.0
|
|
Rest of UK
Industrial
|
|
48.8
|
(0.6)
|
(6.1)
|
|
|
|
|
|
|
|
Other
Commercial
|
36.5
|
8.7
|
1.5
|
0.6
|
|
|
|
|
|
|
|
Land
|
8.2
|
1.9
|
0.0
|
0.0
|
|
|
|
|
|
|
|
External
valuation at 31 Mar 24
|
420.6
|
100.0
|
(0.9)
|
420.6
|
Yields
|
|
Initial
Yield (%)
|
Equivalent
Yield
(%)
|
EPRA
NIY
(%)
|
|
Portfolio
|
5.8
|
7.2
|
4.8%
|
Top
10 Properties
|
|
31
Mar 24 (£m)
|
|
Halesowen,
B&Q
|
20-25
|
|
Rotherham,
Ickles Way
|
20-25
|
|
Birmingham,
54 Hagley Road
|
15-20
|
|
Welwyn
Garden City, Morrison’s
|
15-20
|
|
Shellingford,
White Horse Business Park
|
15-20
|
|
Swadlincote,
Tetron 141
|
10-15
|
|
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 39.5% of portfolio
value
Top
10 tenants
|
Tenant
Name
|
Passing
Rent
|
%
of total Passing Rent
|
|
B&Q
Plc
|
1,560,000
|
6.0%
|
|
Public
Sector
|
1,365,203
|
5.2%
|
|
WM
Morrisons Supermarkets Ltd
|
1,252,162
|
4.8%
|
|
The
Symphony Group Plc
|
1,225,000
|
4.7%
|
|
Schlumberger
Oilfield UK plc
|
1,138,402
|
4.4%
|
|
Timbmet
Limited
|
904,768
|
3.5%
|
|
Atos IT
Services UK Limited
|
872,466
|
3.4%
|
|
CEVA
Logistics Limited
|
840,000
|
3.2%
|
|
ThyssenKrupp
Materials (UK) Ltd
|
643,565
|
2.5%
|
|
Hermes
Parcelnet Ltd
|
591,500
|
2.3%
|
|
Top
ten tenants
|
10,393,066
|
39.9%
|
Regional
Split
|
South
East
|
23.8%
|
|
West
Midlands
|
19.4%
|
|
North
West
|
14.8%
|
|
East
Midlands
|
13.8%
|
|
North
East
|
12.6%
|
|
Scotland
|
10.3%
|
|
South
West
|
3.5%
|
|
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 March 2024 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 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