Standard LifeInvProp Net Asset Value(s)
July 26 2017 - 2:00AM
UK Regulatory
TIDMSLI
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 GBP3.8m, removing future letting risk and
capital expenditure;
* Four new lettings in the period securing GBP401,000 of income plus three rent
reviews generating additional income of GBP19,000 per annum;
* Post period end purchases of multi let offices in Reading for GBP13.24m,
reflecting an initial yield of 6.75% and in Manchester for GBP8.1m 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 GBP
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 Attributable Comment
Share Assets (GBPm)
(p)
Net assets as at 31 March 81.4 316.4
2017
Unrealised increase in 2.1 8.2 Like for like increase of 2% in
valuation of property property portfolio
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 0.3 1.2 One off dilapidation receipts
after dividend of GBP925k contributed to
dividend cover of 127%
Interest rate swaps mark to 0.3 1.1 Decrease in swap liabilities in
market revaluation the quarter
Net assets as at 30 June 2017 83.9 326.4
30 Jun 2017 31 Mar 2017
European Public Real Estate Association ("EPRA")*
EPRA Net Asset Value GBP329.0m GBP320.1m
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 GBP401,000 pa.
The investment side was quieter over the quarter with the sale of a retail
warehouse unit let to Matalan for GBP3.8m. Since the quarter end, however, we
have reinvested our cash into two offices for a total of GBP21.3m (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 GBP5m 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 GBP2.6million.
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)
GBPm % of net assets
Office 123.7 37.9
Retail 93.9 28.7
Industrial 200.5 61.4
Total Property 418.1 128.0
Portfolio
Adjustment for lease -4.0 -1.2
incentives
Fair value of Property 414.1 126.8
Portfolio
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 -111.7 -34.2
(bank loans & swap)
Total Net Assets 326.4 100.0
Breakdown in valuation movements over the period 1 Apr 2017 to 30 Jun 2017
Portfolio Exposure as Like for Like Capital Value
Value as at at 30 June Capital Value Shift (incl
30 June 2017 (%) Shift (excl transactions
2017 (GBPm) transactions & (GBPm)
CAPEX)
(%)
External valuation at 31 413.7
Mar 17
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 30 418.1 100.0 2.0 418.1
Jun 2017
*Includes sale of Bradford
Top 10 Properties
30 Jun 17 (GBPm)
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 As % of total
rent rent
1 Sungard Availability Services 1,320,000 4.7
(UK) Ltd
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
END
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