Standard LifeInvProp Unaudited Net Asset Value as at 31 March 2021
May 06 2021 - 2:00AM
UK Regulatory
TIDMSLI
6 May 2021
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 March 2021
Net Asset Value and Valuations
· Net asset value ("NAV") per ordinary share was 85.3p (Dec 2020 - 82.0p),
an increase of 4.0%, resulting in a NAV total return, including dividends, of
4.9% for Q1 2021;
· The portfolio valuation (before CAPEX) increased by 2.5% on a like for
like basis, whilst the MSCI Monthly Index increased by 0.9% over the same
period.
Investment and letting activity
· Further restructuring of the portfolio to have assets fit for purpose in a
post COVID-19 world with the completion of three sales - two of them were
offices (Derby: £4.65m and Dartford: £3.1m) and one a retail warehouse in
Bradford for £2.65m.
· Lease renewal of entire office building in Kidlington, Oxford for 10 years
securing rent of £429,000pa.
· Letting of whole office in Bishops Stortford on 10 year lease to previous
sub tenant of part at £290,000pa.
Financial Position and Gearing
· Strong balance sheet with significant financial resources available for
investment of £55 million in the form of the Company's low cost, revolving
credit facility plus uncommitted cash after dividend and other financial
commitments of £9 million.
· As at 31 March 2021, the Company had a Loan to Value ("LTV") of 21.3%*.
The debt currently has an overall blended interest rate of 2.725% per annum.
*LTV calculated as debt less cash divided by portfolio value
Increased Dividend
· Dividend announced in relation to Q1, 2021 of 0.8925p, an increase of 25%
on previous quarterly dividend
Rent collection
It is perhaps not surprising that Q1 2021 has seen a lower level of rental
collection than other quarters in the last 15 months. With lockdown starting
before Christmas, and coming at the end of a very difficult year for many
companies, it has been noticeably harder to collect rent from some tenants.
Many tenants continue to engage, and we have agreed deferrals, lease extensions
or write offs as appropriate: however it was disappointing that the Government
extended the moratorium on enforcing lease arrangements and we still have some
tenants that have chosen not to pay or engage in a lease restructure. The
Company continues to make prudent assumptions when providing for bad debts in
the accounts with a provision of £3.3m as at 31 March 2020 (versus £2.58m at
31st December 2020).
Over the course of 2020 a total of 94.1% of rent due was collected. The table
below shows how that was spread out over the course of 2020, and into 2021.
Year Quarter % Received
2020 1 99%
2 92%
3 93%
4 92%
2020 FY 94%
2021 1 87%
2 86%
Dividends
The Board recognises the importance of dividends to its shareholders especially
when the COVID-19 crisis has forced many companies, across multiple sectors of
the economy, to cancel or suspend their dividends. The Company has continued to
pay out a dividend during the pandemic with dividends paid in 2020 equating to
80% of the 2019 level. In addition the Company recently announced a fifth
interim dividend relating to 2020 to comply with the REIT rules.
The 2020 dividend was covered 108% by income and, as the uncertainties caused
by the pandemic gradually ease, the Board has now taken the decision to
increase the quarterly dividend to 0.8925p. This is 25% higher than the
quarterly dividends of 0.714p paid during the pandemic. Given current rent
collection rates the Board believes this rate is sustainable even though the
recent asset sales will reduce rental income until reinvestment occurs. The
Board will keep the quarterly dividend under review as lockdown measures are
eased and as rental collection levels improve further and the reinvestment of
the asset sales proceeds takes place.
Share Buybacks
In the quarter the Company bought back a further £4.5m shares resulting in
total buybacks to date of £6m. These buybacks have been at significant
discounts to NAV which has enhanced both NAV and earnings per share.
Net Asset Value ("NAV")
The unaudited net asset value per ordinary share of Standard Life Investments
Property Income Trust Limited ("SLIPIT") at 31 March 2021 was 85.3p. 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 2021 of £438.6 million.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated
under IFRS over the period 31 December 2020 to 31 March 2021.
Per Share Attributable Comment
(p) Assets (£m)
Net assets as at 31 December 82.0 331.5
2020
Unrealised increase in 2.7 10.8 Like for like increase
valuation of property of 2.5% in property
portfolio valuations.
Gain on sale 0.0 0.1 Combined gain on sale
relating to sales of
Valley Road, Bradford,
Persimmon House,
Dartford and
Interfleet House,
Derby
CAPEX in the quarter 0.0 0.0 Limited CAPEX in
quarter
Net income in the quarter 0.4 1.5 Rolling 12 month
after dividend dividend cover of 124%
Interest rate swaps mark to 0.2 0.8 Decrease in swap
market revaluation liabilities in the
quarter as interest
rate expectations rose
Other movements in reserves -0.3 -1.3 Movement in lease
incentives in the
quarter
Share buybacks 0.3 -3.5 Investment in own
shares at discounts to
NAV
Net assets as at 31 March 85.3 339.9
2021
European Public Real Estate 31 Mar 2020 31 Dec 2020
Association ("EPRA")
EPRA Net Tangible Assets £342.8m £335.2m
EPRA Net Tangible Assets per 86.0p 82.9p
share
The Net Asset Value per share is calculated using 398,547,386 shares of 1p each
being the number in issue on 31 March 2021.
Investment Manager Review and Portfolio Activity
Q1 2021 was dominated by another severe lockdown in the UK, with many companies
unable to trade, individuals required to work from home where possible, and
ability to travel outside a small local area restricted. Such conditions proved
difficult for real estate: however we were able to continue with the
restructuring of the portfolio with the completion of three sales - two of them
offices (Derby: £4.65m and Dartford: £3.1m) and a retail warehouse in Bradford
for £2.65m. The sales reflect our view that these assets were not best placed
to meet changing work, social and shopping patterns in a post COVID-19 world.
We were delighted to renew an office lease on a whole building on the outskirts
of Oxford for ten years (tenant break in year 5) in return for a capital
contribution towards works of improvement the tenant was undertaking to the
building. The new rent was slightly above the previous rent. We also completed
a new ten year lease to an existing sub tenant on an office in Bishop's
Stortford having taken an early surrender from the head tenant who had not been
in occupation. The two lettings demonstrate that well located offices that meet
tenants' needs remain in demand. During the quarter we also completed the lease
renewal of a retail unit in London (at previous passing rent) and a ten year
lease extension on an industrial asset in Birmingham.
Since quarter end the initial easing of restrictions has seen an immediate pick
up in enquiries on vacant accommodation, with encouraging inspection levels. We
have a number of lease regear negotiations underway, and are hopeful that the
improvement in sentiment will help with conversion rates.
Oli Lord, the Deputy Fund Manager on SLIPIT for the last three years, has been
promoted into a new role in the Transaction team at ASI, and Mark Blyth has
been appointed in his place. Mark has been with ASI for 10 years, and has 20
years' experience in real estate, most recently as Deputy Fund Manager of a
significant Pooled Pension Fund. Whilst we are sad to see Oli leave the team
and we look forward to working with him in his new role, we are excited to
bring in some new ideas and experience to the team.
The Company's LTV of 21.3% remains low compared to the AIC peer group (25.0%)
with the Company also having significant headroom in its banking covenants. The
Company's interest rate swap liability fell in the quarter to £2.9 million (Dec
20: £3.7 million). This liability will unwind to £0 on maturity in 2023.
Investment Manager Market review
Economic Outlook
· With a successful vaccine roll-out and the gradual relaxation of
restrictions, there is a real sense that the UK economy is gathering momentum.
The final composite PMI, which measures activity in the services and
manufacturing sectors, increased to 56.4 in March, up from the 49.6 recorded in
February. UK construction activity has also expanded at the fastest pace in
more than six years in March according to the IHS Markit/CIPS UK construction
PMI, which rose to 61.7 in March, from 53.3 in February.
· A survey for the Recruitment & Employment Confederation (REC) and KPMG
pointed to a sharp recovery in hiring activity as the quarter drew to an end,
with recruiters reporting the strongest rebound in permanent hiring for six
years in March. The increase in hiring activity was relatively broad-based,
with only retail seeing a decline in activity. Consumer-facing services stand
to benefit in particular as momentum builds into Q2.
· Financial markets have revised up their expectations for medium-term
inflation since the start of this year. Both headline and core inflation will
move higher in many economies over the next two quarters, driven by a
combination of energy and food price base effects. The ASI Research Institute
(ASIRI) believes that many of the drivers of higher inflation are temporary and
will reverse by the end of the year. In this context, monetary policy is likely
to remain highly accommodative, although the chance of negative rates has
significantly diminished.
Occupier Trends
· The outlook for the office sector continues to generate much debate. A
recent survey conducted by CIPD, the professional body for HR and people
development, found that 63% of participants in its employer survey are
developing a hybrid working model where employees spend only part of the time
in the office. The uncertainty surrounding the occupational demand for office
space is clearly reflected in elevated availability rates across most major UK
office markets at present.
· After a record breaking year in 2020, the logistics market is set for
another strong year of activity, with a large number of live requirements
currently in the market. Increased online retail activity, demand from parcel
delivery companies and a potential boost in demand from the onshoring of supply
chains should continue to support take-up numbers.
· Retail fortunes continue to be very mixed. Food led, and budget / DIY
retailers continue to trade well, however fashion and hospitality led schemes
face continued headwinds. The recent announcement by John Lewis that they will
close a further eight stores combined with the demise of Debenhams and many
national multiples will leave glaring holes in many locations.
Investment Trends
· MSCI monthly index figures show a relatively resilient Q1 with a total
return of 2.2%. Again Logistics led the way, however in March there was a
capital gain of 0.5% in retail warehouse valuations - a marked change from
recent times. It should be noted that high street retail and shopping centres
continued to decline in value, as did offices, but to a lesser extent.
· With a national lockdown in place throughout Q1, it is unsurprising that
transaction activity slowed markedly. Early indications of investment volumes
for the quarter suggest a total of around £6.6 billion. This follows the £16.7
billion that was transacted in Q4, the highest quarterly total of 2020.
· The positive sentiment towards the industrial and alternative sectors was
evident once again in the first quarter. Combined, these sectors accounted for
close to 70% of investment volumes and eight of the top ten transactions.
· The student accommodation market recorded a noticeable pick-up in activity
as investors look through the current disruption and focus on the longer term
growth outlook for the sector. As has been the case for a number of years, the
preferred route for investors seeking to gain critical mass in this sector is
through portfolio acquisitions.
Outlook
· Despite the UK spending almost all of the first quarter in a strict
lockdown, real estate values have risen in both January and February, with
modest losses in office and retail more than offset by robust capital
appreciation in the industrial sector. Broadly, this is expected to continue
through 2021, although we expect declines in office values to accelerate.
· The significant deterioration in fundamentals and the absence of a driver
to absorb the elevated vacancy informs our materially below consensus forecasts
for central London offices. We anticipate rents falling by more than 10% in
2021, although this is a more modest decline than the historic relationship
between vacancy and rents would suggest. As the challenges are largely
structural, we don't envisage the kind of sharp recovery seen in cyclical
downturns, meaning we also expect central London offices to underperform over
the 3-year forecast horizon.
· Signs of bifurcation in the retail sector have been growing and are
explicitly reflected in our forecasts. Discretionary, fashion-led retail in
particular is expected to see further significant value loss. In contrast,
retail that is skewed towards grocery, value and core bulky goods categories
has largely stabilised. We are forecasting a modest rise in values across
retail warehousing this year, despite some further falls in rental values,
allied to a high income return.
Net Asset analysis as at 31 March 2021 (unaudited)
£m % of net assets
Industrial 220.1 64.8
Office 136.1 40.0
Retail 49.3 14.5
Other Commercial 33.1 9.7
Total Property Portfolio 438.6 129.0
Adjustment for lease -7.1 -2.1
incentives
Fair value of Property 431.5 126.9
Portfolio
Cash 16.4 4.8
Other Assets 17.9 5.3
Total Assets 465.8 137.0
Current liabilities -13.4 -3.9
Non-current liabilities -112.5 -33.1
(bank loans & swap)
Total Net Assets 339.9 100.0
Breakdown in valuation movements over the period 1 January 2021 to 31 March
2021
Portfolio Exposure as Like for Like Capital Value
Value as at 31 at 31 Mar Capital Value Shift (incl
Mar 2021 (£m) 2021 (%) Shift (excl transactions (£m)
transactions &
CAPEX)
(%)
External valuation at 437.7
31 Dec 20
Retail 49.3 11.3 1.8 -1.8
South East Retail 1.9 0.0 0.0
Rest of UK Retail 0.0 0.0 0.0
Retail Warehouses 9.4 2.1 -1.8
Offices 136.1 31.0 0.4 -6.7
London City Offices 3.0 -0.8 -0.1
London West End 3.0 0.0 0.0
Offices
South East Offices 14.0 0.4 -2.7
Rest of UK Offices 11.0 0.8 -3.9
Industrial 220.1 50.1 4.2 8.9
South East Industrial 11.2 6.2 2.9
Rest of UK Industrial 38.9 3.6 6.0
Other Commercial 33.1 7.6 1.5 0.5
External valuation at 438.6 100.0 2.5 438.6
31 Mar 21
Top 10 Properties
31 Mar 21 (£m)
Hagley Road, Birmingham 25-30
B&Q, Halesowen 20-25
Symphony, Rotherham 15-20
Marsh Way, Rainham 15-20
Timbmet, Shellingford 15-20
The Pinnacle, Reading 10-15
Hollywood Green, London 10-15
Atos Data Centre, Birmingham 10-15
New Palace Place, London 10-15
Badentoy, Aberdeen 10-15
Top 10 tenants
Tenant Name Passing Rent % of total Passing Rent
B&Q Plc 1,560,000 5.7%
BAE Systems plc 1,257,640 4.6%
The Symphony Group Plc 1,225,000 4.5%
Public sector 1,158,858 4.2%
Schlumberger Oilfield UK plc 1,138,402 4.1%
Jenkins Shipping Co Ltd 843,390 3.1%
Timbmet Group Limited 799,683 2.9%
Atos IT Services UK Ltd 772,710 2.8%
CEVA Logistics Limited 692,117 2.5%
Time Wholesale Services (UK) 656,056 2.4%
Ltd
10,103,856 36.8%
Regional Split
South East 30.3%
West Midlands 19.1%
East Midlands 13.5%
Scotland 10.3%
North West 9.8%
North East 6.5%
South West 4.5%
London West End 3.0%
City of London 3.0%
The Board is not aware of any other significant events or transactions which
have occurred between 31 March 2021 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.slipit.co.uk
For further information:-
Jason Baggaley - Real Estate Fund Manager, Aberdeen Standard Investments
Tel: 07801039463 or jason.baggaley@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Aberdeen Standard Investments
Tel: 07717543309 or graeme.mcdonald@aberdeenstandard.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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