CTPT Ct Property Trust Limited

To:                   Company Announcements
Date:                2 February 2023
Company:        CT Property Trust Limited
LEI:                  231801XRCB89W6XTR23

Subject:           Trading Update and Net Asset Value

Headlines

• NAV per share of 95.4 pence and Net Asset Value total return of -21.0 per cent for the quarter ended 31 December 2022.
• Share Price total return of -11.2 per cent for the quarter ended 31 December 2022 (68.6 pence per share).
• Portfolio capital value decrease of 18.4 per cent on a like-for-like basis.
• As of 31 December 2022, the portfolio void rate was 2.9 per cent by estimated rental value.
• Rent collection rates continue at pre-pandemic levels receiving 99.9 per cent for Q4 2022 and 99.9 per cent for 2022 as a whole.
• £90 million term loan at a fixed rate of 3.36 per cent until November 2026. Cash reserves of £32.3 million and access to a rolling credit facility of £20 million which is currently undrawn.
• Quarterly dividend maintained at 1.0p per share, paid on 30 December 2022.

Net Asset Value (‘NAV’)

The unaudited NAV per share of CT Property Trust Limited (‘CTPT’) as at 31 December 2022 was 95.4 pence. This represents a decrease of 21.8 per cent from the NAV per share as at 30 September 2022 of 122.0 pence and a NAV total return for the quarter of -21.0 per cent.

The NAV is based on the external valuation of the Company's property portfolio prepared by Cushman & Wakefield.

The NAV is calculated under International Financial Reporting Standards ("IFRS").

The NAV includes all income to 31 December 2022 and is calculated after the deduction of all dividends paid prior to that date.  

Breakdown of NAV movement

Set out below is a breakdown of the change to the unaudited net asset value per share calculated under IFRS over the period from 30 September 2022 to 31 December 2022.

* The un-geared unrealised capital return of portfolio over the quarter to 31 December 2022 was -18.4 per cent.

Matthew Howard, Fund Manager, CT Property Trust, commented:

The rapid repricing of the wider UK real estate market means that Q4 2022 is one of the most significant quarters for capital value declines on record. The pace of change has been determined by a concentration of events. Wider UK economic pressures and a highly inflationary environment saw the Bank of England base rate and gilt yields rise from the historic and sustained lows of recent years. This has placed upward pressure on yields for UK commercial property, which has been compounded by the increased cost and lower availability of debt and some areas of distressed selling. Against this backdrop, the autumn was a period of ‘pricing discovery’ across commercial markets, although towards the end of the year we did see an uptick in transactional activity on quality assets.

The industrial and retail warehousing sectors suffered the sharpest falls in value, as the significant and sustained yield compression of recent periods was partly reversed. We remain confident in our conviction positions towards the industrial and retail warehouse sectors (combined representing 77.5 per cent of the portfolio by value), where we hold a zero void rate against both sectors and continue to capture the in-built reversionary income growth at lease events, demonstrating their strong underlying occupational markets.

The Company’s wider portfolio continued to deliver positive occupier activity, represented by the low overall portfolio vacancy of 2.9 per cent (by estimated rental value) following the letting at Bracknell. The continued good occupational news across all sectors, including our offices in High Wycombe and retail in Sunningdale outlined below, speaks to the strong underlying fundamentals of the Company’s assets.

Our long-term focus on resilient locations, smaller assets and active management will be of increased importance this year as occupiers navigate inflationary pressures and a consumer credit squeeze.

As we enter 2023, we expect to see continued pricing pressure in parts of the commercial real estate market. An outcome of cyclical downturns is the opportunity to acquire quality assets that offer attractive pricing on a long-term basis. The Company maintains a conservative level of debt and our current cash position offers the potential to invest in new assets to enhance Company income where and when we see value.

Portfolio Performance

The capital value of the Company’s portfolio fell by 18.4 per cent over the quarter, with valuation movements dominated by market yield adjustments. The vacancy rate across the portfolio fell from 5.4 per cent by estimated rental value to 2.9 per cent, driven primarily by the letting at Unit 1 Network, Bracknell. The weighted average unexpired lease term, assuming all break options are exercised, fell slightly from 6.3 years to 6.2 years.

Industrial

The Company’s industrial assets saw a decline in value of 21.3 per cent over the quarter. This correction comes despite the sector’s strong occupational market and continued rental growth. Unit 1 Network, Bracknell, which had become vacant in September 2022, was let during the quarter reflecting a 47 per cent uplift from the previous passing rent. We also agreed terms for two outstanding rent reviews at Lakeside Logistics Centre near Heathrow, which will show material increases to previous passing rents once concluded. The current vacancy within the industrial portfolio is zero and there are several near-term lease events where we expect to enhance income.

Retail Warehousing

The capital value of Company’s retail warehousing assets fell by 15.3 per cent over the quarter, which again was driven by a market level yield adjustment. The portfolio remains fully occupied and is characterised by ‘essential retailers’ and discount-led occupiers let at sustainable rental levels. Exposure to this occupier base has been part of the long-term strategy for the Company, which is less sensitive to challenges in consumer spend and disposable income.

High Street Retail

Although the Company’s high street retail assets saw capital value decline of 8.0 per cent over the quarter, the in-town retail sector has benefitted from a relative yield defence following a number of years of previous yield decompression. Our exposure is fairly limited at 6.4 per cent of the portfolio by value but the neighbourhood and convenience focussed portfolio has been accretive to portfolio income and remains near fully occupied. Over the quarter, two lease renewals were concluded at the neighbourhood scheme at Chobham Road, Sunningdale. The renewals were delivered at a premium of 2 per cent above estimated rental value on 5-year terms.

Offices

The portfolio’s office assets saw valuation falls of 15.3 per cent over the quarter, which was also predominantly driven by market yield adjustments. There is an increasing focus on the ESG credentials of offices, with valuers becoming more sensitive to potential cap-ex requirements. Companies with established and robust ESG agendas, that have been positioning their portfolios for the long term, are well placed in this evolving environment. The occupational market for good quality space remains strong, as illustrated by the November letting of two floors of offices at Glory Park in High Wycombe. The incumbent occupier lease was surrendered for a premium and the floors immediately relet at a similar rental tone to a new occupier on a 10-year lease, with a break option after 5 years.

Investment Activity

No sales or purchases concluded over the quarter.
 

ESG

We were pleased to retain both our GRESB two-star rating and EPRA Gold Award for sustainability disclosures, demonstrating the continued progress with our ESG strategy. Towards the end of 2022 we completed a programme of individual Net Zero Carbon (NZC) surveys for all assets and have made good progress with our portfolio level analysis, working alongside our retained advisors. Having taken the decision to complete these surveys in advance of our announcing our targets, the Company will soon be in a position to release its NZC pathway.

Cash and Borrowings

As at 31 December 2022, the Company had approximately £32.3 million of available cash and an undrawn revolving credit facility of £20 million. The £90 million long-term debt with Canada Life and the £20 million revolving credit loan facility with Barclays (which is undrawn) do not need to be refinanced until November 2026 and March 2025 respectively. As at 31 December 2022, the LTV (net of cash) was 22.7 per cent.

Share Price

The share price was 68.6 pence per share as at 31 December 2022, which represented a discount of 28.1 per cent to the NAV per share announced above. The share price total return for the quarter was -11.2 per cent.

Share Buybacks

The Company purchased 2,475,000 ordinary shares during the quarter. As at 31 December 2022 the Company had 8,575,000 shares held in treasury (3.7 per cent of ordinary shares in issue), acquired at an average discount to NAV of 37.9 per cent.

Dividend

On 29 November 2022, the Company announced a quarterly dividend payment of 1.0 pence per ordinary share in respect of the financial year ended 30 June 2023, which was paid to shareholders on 30 December 2022. The Board will continue to monitor rental receipts and earnings closely and keep the future level of dividends under review.
 

Portfolio Analysis

Summary Balance Sheet

The property portfolio will next be valued by an external valuer during March 2023 and it is expected that the net asset value per share as at 31 March 2023 will be announced in April 2023.

Important information

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.



Enquiries:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481 745001


Matthew Howard
Scott Macrae
Columbia Threadneedle Investment Business Limited
Tel: 0207 628 8000