26 July
2017
STANDARD LIFE INVESTMENTS PROPERTY
INCOME TRUST LIMITED (LSE: SLI)
Unaudited Net Asset Value as at
30 June 2017
Key Highlights
Solid Performance
- Net asset value (“NAV”) per ordinary share at 30 June 2017 was 83.9p (31 Mar – 81.4p), a rise
of 3.1%, resulting in a NAV total return, including dividends, of
4.6% for Q2;
- The portfolio valuation increased by 2.0% on a like for like
basis, whilst the IPD/MSCI Monthly Index rose by 1.1% over the same
period.
Positive portfolio activity
- Sale of Matalan, Bradford for £3.8m, removing future letting
risk and capital expenditure;
- Four new lettings in the period securing £401,000 of income
plus three rent reviews generating additional income of £19,000 per
annum;
- Post period end purchases of multi let offices in Reading for £13.24m, reflecting an initial
yield of 6.75% and in Manchester
for £8.1m reflecting an initial yield of 6.4% with opportunities
for asset management.
Strong balance sheet with prudent
gearing
- LTV of 23.8% (after the purchases of Reading and Manchester) with RCF of £30m still available
for investment in future opportunities;
Premium rating
- Share price total return of 3.1% in the quarter comparing
favourably to the return on the FTSE All-Share Index of 1.4% and
the FTSE All-Share REIT Index of 1.9% over the same period;
- The Company’s shares traded at a premium to NAV of 6.4% as at
30 June 2017.
Attractive dividend yield
- Dividend yield of 5.3% based on a quarterly dividend of 1.19p
as at 30 June 2017 compares
favourably to the yield on the FTSE All-Share REIT Index (3.6%) and
the FTSE All Share Index (3.6%) as at the same date.
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of Standard
Life Investments Property Income Trust Limited (“SLIPIT”) at
30 June 2017 was 83.9p. The net asset
value is calculated under International Financial Reporting
Standards (“IFRS”).
The net asset value incorporates the external portfolio
valuation by Knight Frank at 30 June
2017. The next valuation will be undertaken on 30 September 2017.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV
calculated under IFRS over the period 1
April 2017 to 30 June
2017.
|
|
|
|
|
|
|
Per Share (p) |
Attributable Assets (£m) |
Comment |
|
Net assets
as at 31 March 2017 |
81.4 |
316.4 |
|
|
Unrealised
increase in valuation of property portfolio |
2.1 |
8.2 |
Like for
like increase of 2% in property portfolio |
|
CAPEX in
the quarter |
-0.2 |
-0.5 |
Predominantly relates to asset management initiatives at Gavin Way,
Birmingham and Kings Business Park, Bristol |
|
Net income
in the quarter after dividend |
0.3 |
1.2 |
One off
dilapidation receipts of £925k contributed to dividend cover of
127% |
|
Interest
rate swaps mark to market revaluation |
0.3 |
1.1 |
Decrease
in swap liabilities in the quarter |
|
Net assets
as at 30 June 2017 |
83.9 |
326.4 |
|
|
|
|
|
|
|
|
|
European Public Real Estate Association (“EPRA”)* |
30 Jun 2017 |
31 Mar 2017 |
|
EPRA Net Asset
Value |
£329.0m |
£320.1m |
|
EPRA Net Asset Value per
share |
84.6p |
82.3p |
|
|
|
|
|
|
|
|
|
|
|
|
The Net Asset Value per share is calculated using 388,815,419
shares of 1p each being the number in issue on 30 June 2017.
* The EPRA net asset value measure is to highlight the fair
value of net assets on an on-going, long-term basis. Assets and
liabilities that are not expected to crystallise in normal
circumstances, such as the fair value of financial derivatives, are
therefore excluded.
Investment Manager Commentary
Although the Company has maintained low voids for several years,
the void rate increased in the quarter to 6.7% (31 March – 3.2%) as
three units became vacant. The new voids are dominated by an
industrial unit in Rainham, where we already have an interested
party, and two office suites in Southampton and Crawley. We have initial interest in
Southampton and are about to start
a refurbishment in Crawley, where
we expect strong demand for the unit. Of the older voids, the most
significant is an industrial unit in Oldham where, although there was letting
interest, we have instead agreed terms to sell the unit.
Letting has generally gone well with a number of smaller
transactions having been completed over the quarter with rent
totalling £401,000 pa.
The investment side was quieter over the quarter with the sale
of a retail warehouse unit let to Matalan for £3.8m. Since the
quarter end, however, we have reinvested our cash into two offices
for a total of £21.3m (excl costs). Both offices are multi let, one
in Reading close to the train
station, and the other in Manchester close to the City centre. They were
bought off market at yields of 6.75% and 6.4% respectively.
The Company had a strong quarter in Q2 with capital growth of
the assets of 2.0% against the IPD/ MSCI monthly index growth of
1.1%. This, combined with an above market income yield boosted by
one-off dilapidation receipts, led to a NAV total return in the
quarter of 4.6%.
The Company had repaid all borrowings under the Revolving Credit
facility at the end of the quarter and the Company’s overall LTV at
30 June 2017 was 19.9%. Since the
quarter end the Company re-drew £5m of the RCF for the most recent
purchases resulting in the LTV increasing to 23.8%. The valuation
of the interest rate swap against the term loan moved in the
Company’s favour during the quarter and now stands at a liability
of £2.6million.
Market Commentary
The resilience of the UK economy, which showed post the Brexit
referendum vote, has faded into 2017. A weaker consumer
sector, impacted by a squeeze on spending power, caused the economy
to grow by only 0.2% in the first quarter of 2017, a pronounced
slowdown from the 0.7% growth recorded in Q4 2016. A series of
softer output data released recently has also dampened hopes of a
strong rebound for Q2. As wages lag further behind inflation,
forecasts for household spending continue to be mixed, despite the
employment rate in the three-month period to May showing the
strongest rise since 1975.
Wage growth is one of the key indicators that the Bank of
England is monitoring closely as
in recent weeks the Monetary Policy Committee (MPC) has become
increasingly divided as to the timing of shifting its policy
stance. Ultimately, the MPC’s interest rate decision is dependent
on how the economy evolves and currently the Bank’s forecast GDP
growth is at a solid 1.9% for the calendar year 2017. Our in-house
forecast, however, is for slower growth and implies a small
increase in UK spare capacity which should ease the MPC's concerns
about a trade-off between growth and inflation and any interest
rate increases are therefore expected to be gradual and modest.
Within the real estate sector, All Property (as measured by
MSCI/IPD) recorded a total return of 1.1% in the quarter. The
industrial and logistic distribution sector has continued to
demonstrate its strength generating a total return of
4.6%. Retail and offices fell behind industrial with
similar total returns for the quarter of 1.8% and 1.9%
respectively. Office returns are feeling the impact of political
uncertainty feeding into the leasing market. Rents remained largely
stable over the last three months with retail rental growth of
0.1%, office rental growth of 0.3% and industrial rental growth of
1% over the quarter.
Looking over the last twelve months, All Property (as measured
by MSCI/IPD) recorded a total return of 5.1% p.a. Market conditions
and sentiment have stabilised following the capital decline after
the Brexit referendum. Capital values fell by 0.5% p.a. in the year
to end June with an income return of 5.6% driving performance. In
terms of a sector analysis, the industrial sector has continued to
demonstrate its strength generating a total return of 12.4% p.a.
Retail was no longer the laggard sector in the same period,
recording total returns of 3.0% p.a., ahead of offices which
recorded total returns of 2.2% p.a. reflecting the political
uncertainties associated with the sector.
Investment Outlook
UK real estate continues to provide an elevated yield compared
to other assets and the market has stabilised following the post
Brexit upheaval last year. Furthermore, lending to the sector is at
a lower level than in 2007/2008 and liquidity remains reasonable.
Additionally, development continues to be relatively constrained by
historic standards, and existing vacancy rates are below average
levels in most markets, which should all help to maintain the
positive returns the sector is currently recording. In this
environment, the steady secure income component generated by the
asset class is likely to be the key driver of returns going
forward.
The market is likely to continue to be sentiment driven in the
short term as the politics and economic impact associated with the
UK’s withdrawal from the European Union continues to evolve. The
retail sector continues to face a series of headwinds that may hold
back recovery in weaker locations due to oversupply and structural
issues. Given the backdrop of continuing heightened macro
uncertainty, investors are becoming more risk averse and better
quality assets are once again broadly outperforming those of poorer
quality.
Dividends
The Company paid total dividends in respect of the quarter ended
31 March 2017 of 1.19p per Ordinary
Share, with a payment date of 31 May
2017.
Net Asset analysis as at 30 June 2017 (unaudited)
|
£m |
% of
net assets |
Office |
123.7 |
37.9 |
Retail |
93.9 |
28.7 |
Industrial |
200.5 |
61.4 |
Total Property
Portfolio |
418.1 |
128.0 |
Adjustment for lease
incentives |
-4.0 |
-1.2 |
Fair value of
Property Portfolio |
414.1 |
126.8 |
Cash |
26.7 |
8.2 |
Other Assets |
6.8 |
2.1 |
Total
Assets |
447.6 |
137.1 |
Current
liabilities |
-9.5 |
-2.9 |
Non-current
liabilities (bank loans & swap) |
-111.7 |
-34.2 |
Total Net
Assets |
326.4 |
100.0 |
Breakdown in valuation movements over
the period 1 Apr 2017 to 30 Jun 2017
|
Portfolio Value as at 30 June 2017 (£m) |
Exposure as at 30 June 2017 (%) |
Like
for Like Capital Value Shift (excl transactions &
CAPEX) |
Capital Value Shift (incl transactions (£m) |
|
(%) |
External valuation
at 31 Mar 17 |
|
|
|
413.7 |
|
|
|
|
|
Retail |
93.9 |
22.4 |
0.2 |
-3.6 |
South East Retail |
|
6.7 |
1.4 |
0.4 |
Rest of UK Retail |
|
1.2 |
-8.5 |
-0.4 |
Retail Warehouses |
|
14.5 |
0.5 |
-3.6* |
|
|
|
|
|
Offices |
123.7 |
29.6 |
1.9 |
2.4 |
London West End
Offices |
|
3.2 |
16.1 |
1.9 |
South East
Offices |
|
23.2 |
0.5 |
0.5 |
Rest of UK
Offices |
|
3.2 |
0.0 |
0.0 |
|
|
|
|
|
Industrial |
200.5 |
48.0 |
2.9 |
5.6 |
South East
Industrial |
|
12.4 |
0.8 |
0.4 |
Rest of UK
Industrial |
|
35.6 |
3.6 |
5.2 |
|
|
|
|
|
External valuation
at 30 Jun 2017 |
418.1 |
100.0 |
2.0 |
418.1 |
*Includes sale of Bradford
Top 10 Properties
|
30 Jun 17 (£m) |
|
|
Denby 242, Denby |
15-20 |
Elstree Tower, Borehamwood |
15-20 |
Symphony, Rotherham |
15-20 |
DSG, Preston |
15-20 |
Chester House, Farnborough |
15-20 |
New Palace Place, London |
10-15 |
Howard Town Retail Park, High
Peak |
10-15 |
Charter Court, Slough |
10-15 |
Hollywood Green, London |
10-15 |
Eden Street, Kingston upon
Thames |
10-15 |
Top 10 tenants
|
Tenant
group |
Passing
rent |
As % of total
rent |
1 |
Sungard Availability
Services (UK) Ltd |
1,320,000 |
4.7 |
2 |
BAE Systems plc |
1,257,640 |
4.5 |
3 |
Techno Cargo Logistics
Ltd |
1,242,250 |
4.4 |
4 |
DSG Retail
Limited |
1,177,677 |
4.2 |
5 |
The Symphony Group
Plc |
1,080,000 |
3.8 |
6 |
Bong UK |
741,784 |
2.7 |
7 |
Euro Car Parts
Ltd |
736,355 |
2.7 |
8 |
Ricoh UK Limited |
696,995 |
2.5 |
9 |
CEVA Logistics
Limited |
614,937 |
2.2 |
10 |
Thyssenkrupp Materials
(UK) Ltd |
590,000 |
2.1 |
|
|
|
|
|
|
9,457,638 |
33.8 |
|
Total Fund Passing
Rent |
27,978,184 |
|
Regional Split
South East |
43.4% |
East Midlands |
15.3% |
North West |
12.8% |
North East |
9.6% |
West Midlands |
6.6% |
Scotland |
5.0% |
South West |
4.1% |
London West End |
3.2% |
The Board is not aware of any other significant events or
transactions which have occurred between 30
June 17 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 which can be found at:
www.standardlifeinvestments.com/its
For further information:-
Jason Baggaley – Real Estate Fund
Manager, Standard Life Investments
Tel +44 (0) 131 245 2833 or jason_baggaley@standardlife.com
Graeme McDonald - Real Estate
Finance Manager, Standard Life Investments
Tel +44 (0) 131 245 3151 or graeme_mcdonald@standardlife.com
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Ltd
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: 01481 745001