Standard LifeInvProp Unaudited Net Asset Value
November 03 2016 - 3:00AM
UK Regulatory
TIDMSLI
3 November 2016
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
Unaudited Net Asset Value as at 30 September 2016
Key Highlights
* Net asset value per ordinary share was 79.0p ( June 2016 - 81.8p), a fall
of 3.4%, resulting in a NAV total return, including dividends, of -2.1% for
Q3;
* The portfolio valuation decreased by 2.2% on a like for like basis, whilst
the IPD/MSCI Monthly Index fell by 3.6% over the same period;
* Positive share price performance in the quarter with share price total
return of 5.0% resulting in the Company's shares trading at a premium to
NAV of 3.5% as at 30 Sep 2016;
* Successful asset management initiatives up to the date of this announcement
included
· 3 new lettings of industrial units in Aberdeen and one
lease renewal
· Refurbishment completed on largest void in the portfolio
- Broadgate Oldham
· Terms agreed for letting of one of three vacant units at
Trafford Park Manchester
* Low void rate of 4.4% as at 30 Sep 2016 (which will decrease by 1% on
completion of sale of a property in Bristol);
* Dividend yield of 5.8% based on a quarterly dividend of 1.19p as at 30 Sep
2016 compares favourably to the yield on the FTSE All-Share REIT Index
(3.6%) and the FTSE All Share Index (3.5%) as at the same date; it is
anticipated the dividend will be covered for the financial year.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 30 September 2016 was 79.0p. The
net asset value is calculated under International Financial Reporting Standards
("IFRS").
The net asset value incorporates the external portfolio valuation by Jones Lang
LaSalle and Knight Frank at 30 September 2016. The caveat that was in place for
the Company's valuations as at 30 June 2016, following the result of the EU
referendum, has been removed.
The information in this announcement was inside information.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV per share
calculated under IFRS over the period 1 July 2016 to 30 September 2016.
Per Share Attributable Comment
(p) Assets (GBPm)
Net assets as at 30 June 2016 81.8 311.6
Unrealised decrease in -2.6 -9.9 Like for like decrease of 2.2%
valuation of property portfolio in property portfolio.
Net income in the quarter after 0.2 0.6 Continued strong income
dividend generation with dividend cover
of 126% in the quarter.
Interest rate swaps mark to -0.3 -1.1 Increase in swap liabilities
market revaluation as a result of a continuing
expectation that interest
rates will be lower for longer
as a result of the EU
referendum.
Other movement in reserves -0.1 -0.5 Movement in lease incentives
and capital expenditure in the
quarter.
Net assets as at 30 September 79.0 300.7
2016
30 Sep 2016 30 Jun 2016
European Public Real Estate Association ("EPRA")*
EPRA Net Asset Value GBP307.3m GBP317.0m
EPRA Net Asset Value per share 80.7p 83.3p
The Net Asset Value per share is calculated using 380,690,419 shares of 1p each
being the number in issue on 30 September 2016.
* 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
The third quarter of 2016 was, of course, dominated by the outcome of the EU
Referendum. Perhaps attributable to this, the summer months were quieter than
usual, with many people away and little desire for decisions to be made. We
noticed this for lettings, with transactions being slow to progress. We are
pleased to report, however, that more recently we have since seen signs of
"business as usual" from many of our tenants, especially in the industrial and
logistics sector.
Although the market appears to be stabilising, and several economic indicators
are better than expected, we retain our cautious outlook and will seek to take
risk off the table, especially where this can be done above present valuations.
Our void level has increased slightly over the quarter, but is still very low
at 4.4% compared to the IPD benchmark of 7.1%. Across the portfolio we have
about 225 tenants, and have 18 units available to let, ranging in size from
215sq.ft (a kiosk worth GBP11,000 per annum) to a 101,000sq.ft logistics unit
worth GBP520,000 per annum. Income remains key to us, and our focus is on letting
these vacant units, and interest is encouraging in a number of them. It is
pleasing however that the dividend cover remains robust at 126%.
Since the quarter end we have exchanged contracts to sell an asset in Bristol
that included our second largest void (an industrial unit of 51,000sq.ft worth
GBP308,000 pa). Encouragingly, the sale price is above the June valuation and the
sale proceeds will be used, at least initially, to repay part of the revolving
credit facility ("RCF"). This transaction is due to complete in early November
and will reduce the void rate in the Company to 3.4%.
Last quarter we highlighted the new debt facility the Company had entered into
in April this year and the disadvantageous movement in the mark to market value
of the interest rate swap. As at the end of September, the Company had a term
loan of GBP110m and GBP21m outstanding under the RCF. This provided a Loan to Value
Ratio of 27.3%. The all in cost of the debt is 2.56%, however the NAV
recognises another GBP1.1m adverse movement in the value of the interest rate
swap - taking the liability recognised to GBP6.5m. This will revert to GBP0 at
maturity of the swap in April 2023, or sooner if longer term interest rates
were to rise.
Market Commentary
The economic data following the referendum has not been as negative as feared
although the heightened uncertainty has had some impact on overall activity and
this is likely to continue. Significant monetary support and the rapid
formation of a workable government have helped support the wider economy also.
Although the recent economic data makes an immediate recession after the vote
less likely, potential longer term constraints on economic growth in the UK
remain as uncertainty dampens business investment. The weaker pound should help
to boost net export growth and the depreciated currency also makes UK real
estate more attractive to overseas investors.
Over the twelve months to end September, the All Property Monthly Index
recorded a total return of 3.2% against 9.2% in the twelve months to end June
this year. The sharp capital decline following the unexpected result of the EU
Referendum was the main contributor to the fall in returns, with capital values
in the Monthly Index falling by 3.6% over the quarter to September 2016,
although market conditions and sentiment have stabilised in recent weeks.
Encouragingly, rental growth remained stable at 2.7% in the twelve months to
end September.
As for the equity markets, the FTSE All Share and the FTSE 100 total returns
were 7.8% and 7.1% respectively in the third quarter. For listed real estate
equities, total returns have regained the declines they experienced immediately
after the vote to leave the EU, closing the quarter end with a rise of nearly
5%.
Investment Outlook
The measures taken by real estate funds after the unexpected referendum vote to
protect existing fund investors and stem the initial liquidity driven outflows
are gradually being unwound and stability and a level of normality is returning
to the UK property market. In the environment where the economic fundamentals
are expected to soften further and with uncertainty remaining above "normal"
levels, we expect lower returns from property than has been the case over the
last few years. Given this background, the steady secure income component
generated by the asset class is likely to be the key driver of returns going
forward.
In the short term, the market is likely to be sentiment driven, which will
further affect capital values until there is clarity on the timeline and nature
of the EU exit, while the medium term impact will hinge on the economic
effects. From a sector perspective, we continue to expect Central London
offices to be the most impacted sector in the near term given the linkages to
European markets via cross border trading. Industrial and retail assets are
expected to be comparatively resilient, although not immune, given their close
connection to consumers. Despite the uncertain outlook, UK real estate
continues to provide an elevated yield compared to other assets and, unlike in
the financial crisis, lending to the sector is at a much lower level than in
2007/2008. Furthermore, existing vacancy rates are below average levels in most
markets and development remains relatively constrained, which should all help
stabilise the market further out. The "global hunger for yield" can only
strengthen the demand for real estate in the current ultra-low interest rate
environment. The retention of the UK's safe haven status should also ensure the
asset class is better placed longer term.
Cash and Borrowing position
As at 30 September 2016 the Company had cash of GBP13.3million. The LTV as at
this date (Borrowings less cash divided by portfolio value) was 27.3%.
Dividends
The Company paid total dividends in respect of the quarter ended 30 June 2016
of 1.19p per Ordinary Share, with a payment date of 31 August 2016.
Net Asset analysis as at 30 September 2016 (unaudited)
GBPm % of net
assets
Office 182.8 60.8
Retail 97.2 32.3
Industrial 151.1 50.2
Total Property Portfolio 431.1 143.3
Adjustment for lease incentives (3.7) (1.2)
Fair value of Property Portfolio 427.4 142.1
Cash 13.3 4.4
Other Assets 7.2 2.4
Total Assets 447.9 148.9
Non-current liabilities (bank (136.5) (45.4)
loans & swap)
Current liabilities (10.7) (3.5)
Total Net Assets 300.7 100.0
Breakdown in valuation movements over the period 1 Jul 2016 to 30 Sep 2016
Portfolio Exposure as Like for Capital
Value as at at 30 Sep Like Value Shift
30 Sep 2016 Capital
(GBPm) Value Shift
2016 (%) (%)
Valuation as of 30 450.1
Jun 2016
Retail 97.2 22.5 -1.4 -1.3
South East Retail 6.4 -0.8 -0.2
Rest of UK Retail 1.2 -2.0 -0.1
Retail Warehouses 14.9 -1.6 -1.0
Offices 151.1 35.1 -3.6 -5.7
London City Offices 4.7 -5.4 -1.2
London West End 2.6 0.0 0.0
Offices
South East Offices 22.4 -3.5 -3.5
Rest of UK Offices 5.4 -4.2 -1.0
Industrial 182.8 42.4 -1.5 -2.8
South East Industrial 11.1 -0.2 -0.1
Rest of UK Industrial 31.3 -1.9 -2.7
Sale of Teddington -9.2
and
Kingston-upon-Thames
External valuation at 431.1 100.0 -2.2 431.1
30 Sep 2016
Top 10 Properties
30 Sep 16 (GBPm)
White Bear Yard, London 20-25
Elstree Tower, Borehamwood 15-20
Denby 242, Denby 15-20
DSG, Preston 15-20
Symphony, Rotherham 15-20
Chester House, Farnborough 15-20
Charter Court, Slough 10-15
3B - C Michigan Drive, Milton Keynes 10-15
Ocean Trade Centre, Aberdeen 10-15
Hollywood Green, London 10-15
Top 10 tenants:
Tenant group Passing As % of total
rent rent
1 Sungard Availability Services 1,320,000 4.6 %
(UK) Ltd
2 BAE Systems 1,257,640 4.4 %
3 Techno Cargo Logistics Ltd 1,242,250 4.3 %
4 DSG 1,177,677 4.1 %
5 The Symphony Group Plc 1,080,000 3.8 %
6 Bong UK 727,240 2.5 %
7 Euro Car Parts Ltd 703,430 2.5 %
8 Royal Bank of Scotland Plc 700,000 2.4 %
9 Ricoh UK Limited 696,995 2.4 %
10 Matalan 696,778 2.4 %
9,602,010 33.5 %
Total Fund Passing Rent 28,666,652
Regional Split:
South East 39.9%
East Midlands 15.1%
North West 12.0%
North East 8.6%
South West 6.1%
West Midlands 5.9%
Scotland 5.1%
London City 4.7%
London West End 2.6%
The Board is not aware of any other significant events or transactions which
have occurred between 30 Sep 2016 and the date of publication of this statement
which would have a material impact on the financial position of the Company.
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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