Standard LifeInvProp Net Asset Value(s)
August 02 2016 - 2:00AM
UK Regulatory
TIDMSLI
2 August 2016
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
Unaudited Net Asset Value as at 30 June 2016
Key Highlights
* Net asset value per ordinary share was 81.8p ( March 2016 - 82.3p), a fall
of 0.6%, resulting in a NAV total return, including dividends, of +0.8% for
Q2;
* The portfolio valuation increased by 0.9% on a like for like basis which
compares favourably to the quarterly capital return on the monthly IPD
Monthly Index of -0.1%
* This valuation increase, however, was more than offset by adverse movements
in the valuation of the Company's swap as a result of movements in interest
rates following the EU referendum result;
* Sale of four assets in the period from 1 April up to date of this
announcement for a combined GBP15.4million which was 4% above most recent
valuations;
* Proceeds from the sales were used to reduce the revolving credit facility
("RCF") resulting in a LTV at the date of this announcement of 28.4%;
* Successful asset management initiatives up to the date of this announcement
included:
* Three rent reviews completed securing GBP698,000 per annum of income which is
above ERV;
* Two new lettings completed generating GBP79,000 of income;
* Six lease regears/renewals resulting in GBP667,000 of income being secured;
* Low void rate of 3.8% as at 30 June 2016;
* Dividend yield of 6.1% based on a quarterly dividend of 1.19p and a share
price of 78.5p (29 July 2016), comparing favourably to the yield on the
FTSE All-Share REIT Index (3.5%) and the FTSE All Share Index (3.5%) 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 2016 was 81.8p. 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 June 2016. Both valuers have included the
following caveat when issuing its valuations for the quarter ended 30 June
2016.
"Following the Referendum held on 23 June 2016 concerning the UK's membership
of the EU, a decision was taken to exit. We are now in a period of uncertainty
in relation to many factors that impact the property investment and letting
markets. Since the Referendum date it has not been possible to gauge the effect
of this decision by reference to transactions in the market place. The
probability of our opinion of value exactly coinciding with the price achieved,
were there to be a sale, has reduced. We would, therefore, recommend that the
valuation is kept under regular review and that specific market advice is
obtained should you wish to effect a disposal."
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 April 2016 to 30 June 2016.
Per Share (p) Attributable Comment
Assets (GBPm)
Net assets as at 31 March 82.3 313.3
2016
Unrealised increase in 1.0 3.9 Like for like increase of
valuation of property 0.9% in property portfolio
portfolio
Net income in the quarter 0.1 0.2 Continued strong income
after dividend generation with dividend
remaining fully covered.
Interest rate swaps mark to -1.4 -5.2 Increase in swap
market revaluation liabilities as a result of
a decrease in the
expectation for future
interest rates following
the EU referendum result
Other movement in reserves -0.2 -0.6 Movement in lease
incentives and capital
expenditure in the quarter
Net assets as at 30 June 81.8 311.6
2016
30 Jun 2016 31 Mar 2016
European Public Real Estate Association
("EPRA")*
EPRA Net Asset Value GBP317.0m GBP316.3m
EPRA Net Asset Value per share 83.3p 83.1p
The Net Asset Value per share is calculated using 380,690,419 shares of 1p each
being the number in issue on 30 June 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
During Q2 the focus remained on improving resilience in the portfolio as we saw
the UK commercial real estate market approaching the end of the capital growth
cycle. As well as securing a number of lease regears and renewals to give
greater certainty of income flow, we also sold three assets that we believed
would not perform in line with our expectations going forward. Even given the
decision to leave the EU, we believe the Company is relatively well placed to
continue to offer an attractive level of income to investors.
During Q2 the Company put in place a new debt facility with The Royal Bank of
Scotland which replaces the short term facility agreed as part of the Pearl
portfolio acquisition in December 2015. The new facility provides flexibility
by having a term loan for 7 years for GBP110m, and a RCF for GBP35m. During the
quarter the Company repaid GBP3.5m with a further GBP11.5m repaid in July 2016
resulting in the drawn amount on the RCF now being GBP20.0m. The new facility
was completed in April and the term loan was matched with an interest rate swap
entered into at the same time. The all in cost as at 30 June 2016 was 2.5% pa.
However, the movement in the interest rate curve following the vote to leave
the EU has led to a negative movement in the value of the interest rate swap
resulting in a swap liability of GBP5.5m as at 30 June 2016. The current LTV is
28.4%, compared with the maximum LTV covenant in the debt facility of 60%.
Market Commentary
The implications of the Referendum have caused a complex interaction between
politics, economics and markets which makes the situation very difficult to
predict. Given the political uncertainty and increased financial stress
experienced so far, the UK economy is expected to be affected negatively,
although as market volatility rises, safe haven assets will benefit. It would
seem that the negative sentiment and heightened uncertainty is likely to impact
adversely UK real estate capital values although this is not reflected in the
June valuations and has yet to materialize significantly in the index level
data. Unclear messages are emerging in respect of post referendum transactions
with a mixture of deal withdrawals, price renegotiations but also completions
at previously agreed figures.
Against that background, UK listed real estate equities total returns fell by
nearly 7% over the period 31/03/16 to 30/06/16. This decline is in contrast to
the FTSE All Share and the FTSE 100 total returns where the returns rose by
4.7% and 6.5% respectively as at the quarter end. REIT pricing since the
referendum has been volatile, with discounts to NAV moving to over 25% for some
of the majors, before recovering to around 10% on average. SLIPIT has also
suffered from share price volatility but, more recently, the Company's share
price has recovered to a 4 - 6% discount to NAV.
Investment Outlook
The slowdown in UK real estate that was materializing prior to the referendum
has been exacerbated by the vote outcome. The heightened uncertainties
following the result and the subsequent retreat in business and consumer
confidence are likely to impact negatively on the outlook for the economy. This
will have detrimental consequences for UK real estate given the direct linkage
to economic activity. We therefore anticipate increased downward pressure on UK
commercial real estate capital values. The magnitude of any declines will
depend on the impact on the domestic economy and the level of interest rates
and yields from alternative investment classes. In the short term, there is
likely to be pessimistic sentiment in the market place, which will further
affect capital values until there is clarity on the timing and nature of the
exit from the EU and real estate's medium-term prospects. The impact will vary
on the different sectors and geographies. From a sector perspective, we expect
Central London offices to be the most negatively impacted in the near term
given the linkages to European markets via cross border trading. We expect
industrial and retail assets to be comparatively resilient, although not
immune, given their higher yields. Long income assets should provide most
resilience in any downturn. Despite the negative 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 at below average levels in
most markets and development remains relatively constrained which all should
help stabilise the market further out. The current "lower for even longer"
interest rate environment coupled with an increasing investor global search for
yield and the retention of the UK's safe haven status should all ensure the
asset class is better placed longer term.
Cash position
As at 30 June 2016 the Company had cash of GBP18.3million.
Dividends
The Company paid total dividends in respect of the quarter ended 31 March 2016
of 1.19p per Ordinary Share, with a payment date of 31 May 2016.
Net Asset analysis as at 30 June 2016 (unaudited)
GBPm % of net
assets
Office 163.1 52.3
Retail 101.5 32.6
Industrial 185.5 59.5
Total Property Portfolio 450.1 144.4
Adjustment for lease incentives (3.9) (1.3)
Fair value of Property Portfolio 446.2 143.1
Cash 18.3 5.9
Other Assets 6.5 2.1
Total Assets 471.0 151.1
Non-current liabilities (bank (145.8) (46.8)
loans & swap)
Current liabilities (13.6) (4.3)
Total Net Assets 311.6 100.0
Breakdown in valuation movements over the period 1 Apr 16 to 30 Jun 2016
Portfolio Exposure as Like for Like Capital Value
Value as at at 30 Jun Capital Value change (GBPm)
30 Jun 2016 2016 (%) Shift
(GBPm)
(%)
Valuation as of 31 452.3
Mar 2016
Retail 101.5 22.6 0.6 0.7
South East Retail 7.0 1.6 0.5
Rest of UK Retail 1.1 0.0 0.0
Retail Warehouses 14.5 0.3 0.2
Offices 163.1 36.2 1.3 2.0
London City Offices 4.7 0.0 0.0
London West End 2.5 3.2 0.4
Offices
South East Offices 23.6 0.0 0.0
Rest of UK Offices 5.4 7.3 1.6
Industrial 185.5 41.2 0.7 1.2
South East Industrial 10.6 0.5 0.2
Rest of UK Industrial 30.6 0.7 1.0
Sale of Turin Court -6.1
and Witham
External valuation at 450.1 100.0 0.9 450.1
30 Jun 2016
Top 10 Properties
30 Jun 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
Bourne House, Staines 10-15
Top 10 tenants:
Tenant group Passing rent As % of total rent
(GBP)
1 Sungard Availability Services 1,320,000 4.6 %
(UK) Ltd
2 BAE Systems 1,257,640 4.3 %
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 3.7 %
6 Bong UK 727,240 2.5 %
7 Royal Bank of Scotland Plc 700,000 2.4 %
8 Ricoh UK Limited 696,995 2.4 %
9 Matalan 696,778 2.4 %
10 Grant Thornton 680,371 2.3 %
9,578,951 33.0 %
Total Fund Passing Rent 29,025,646
Regional Split:
Region Region Weighting
South East 41.0%
Scotland 4.9%
South West 6.1%
North West 11.6%
London West End 2.5%
East Midlands 14.9%
London City 4.7%
North East 8.5%
West Midlands 5.8%
The Board is not aware of any other significant events or transactions which
have occurred between 30 June 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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