4 November
2019
STANDARD LIFE INVESTMENTS PROPERTY
INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at
30 September 2019
Key highlights of the quarter
Solid performance
- Net asset value (“NAV”) per ordinary share was 90.3p
(Jun 19 – 91.1p), a decline of 0.9%,
resulting in a NAV total return, including dividends, of 0.4% for
Q3 2019;
- The portfolio valuation (before CAPEX) was flat on a like for
like basis, whilst the IPD/MSCI Monthly Index dropped by 0.7% over
the same period.
- NAV continues to be adversely impacted by the movement in the
Company’s interest rate swap, which now has a negative worth of
£3.3 million (Q2 2019: £2.4 million). This value will revert to
£nil on maturity of the swap in 2023.
Investment and letting activity
- The Company completed the sale of two industrial units, one in
Milton Keynes for £9.3m, and a
small unit in Mansfield for
£920,000, as well as completing two purchases – a small industrial
unit that adjoined an existing holding in Trafford Park Manchester for £3.5m, and a multi
let office in Edinburgh for
£8.76m.
- Five lettings were completed during the quarter securing a
total rent of £393,700 per annum, along with three lease renewals
securing £176,534 per annum.
- The Company completed a rent review on an industrial /
logistics unit which was linked to RPI, securing an increase of
£145,000pa (13.4% above the previous rental level).
Strong balance sheet with prudent
gearing
- Prudent LTV* of 24.6% at the quarter end, one of the lowest in
the Company’s peer group and the wider REIT sector.
- The Company currently has £18m drawn from its existing
revolving credit facility with £37m still available for investment
to take advantage of suitable opportunities that become available
in the near future.
Attractive dividend yield
- Dividend yield of 5.4% based on a quarterly dividend of 1.19p
and the share price of 88.4p as at 30
September 2019 compares favourably to the yield on the FTSE
All-Share REIT Index (4.3%) and the FTSE All-Share Index (4.2%) as
at the same date.
*LTV calculated as debt less cash divided by portfolio value
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of Standard
Life Investments Property Income Trust Limited (“SLIPIT”) at
30 September 2019 was 90.3p. 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 30
September 2019.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV
calculated under IFRS over the period 1 July
2019 to 30 September 2019.
|
Per Share (p) |
Attributable Assets (£m) |
Comment |
Net assets
as at 1 July 2019 |
91.1 |
369.8 |
|
Unrealised
decrease in valuation of property portfolio |
0.1 |
0.2 |
Portfolio
like for like movement flat in the quarter but unrealised
gain made in newly acquired asset at Edinburgh |
Loss on
Sale |
-0.1 |
-0.3 |
Loss on
Sale at Michigan Drive, Mansfield |
CAPEX in the quarter |
-0.4 |
-1.6 |
Predominantly transaction costs and also capital expenditure
at Swift House, Rugby |
Net income
in the quarter after dividend |
-0.1 |
-0.3 |
Dividend
cover of 93% in the quarter with £37m of RCF still available for
investment |
Interest
rate swaps mark to market revaluation |
-0.2 |
-0.9 |
Increase
in swap liabilities in the quarter as expectations of an upward
move in interest rates continued to be muted. |
Other
movements in reserves |
-0.1 |
-0.2 |
Movement
in lease incentives in the quarter |
Net assets
as at 30 September 2019 |
90.3 |
366.7 |
|
|
|
|
|
|
|
|
European Public Real Estate
Association (“EPRA”)* |
30 Sep 2019 |
30 Jun 2019 |
|
|
|
|
|
|
|
EPRA Net Asset
Value |
£370.0m |
£372.2m |
|
|
EPRA Net Asset Value per
share |
91.2p |
91.7p |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Net Asset Value per share is calculated using 405,865,419
shares of 1p each being the number in issue on 30 September 2019.
* 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
Despite continued uncertainty surrounding the outcome of Brexit,
Q3 was a busy quarter for the Company, with a number of sales and
purchases as well as several small occupational transactions.
The major sale completed was of an industrial unit in
Milton Keynes where we had
concerns over the ongoing viability of the tenant. The sale
proceeds of £9.3m were reinvested into a multi let office in
Edinburgh where there are good
prospects for rental growth. We also acquired a small industrial
unit in Trafford Park Manchester for
£3.5m, which was surrounded by units already in the Company’s
ownership.
It was encouraging to complete five new lettings, securing rent
of £393,700p.a. We also put a number of suites under offer and are
encouraged by the number of viewings we have on our available
accommodation. It is not surprising that lettings are taking longer
than we would like given the general level of uncertainty, but we
continue to see a lack of supply in most markets and benefit from
having good quality buildings that present well and meet occupiers’
needs.
Retail has of course been at the centre of everyone’s attention
and the valuations on our small number of retail assets continue to
fall. However, we feel they still have a place in the portfolio as
they generally provide secure income and they meet retailer’s needs
for affordable outlets. We see the greatest stress on retail rental
levels in higher rented accommodation. After the reporting period
we completed a new lease to B&M on a retail unit that had
previously been let to Poundworld – we had three retailers
interested in the space and they were all prepared to pay the
previous passing rent. We continue to assess our assets on a
bottom up basis as well as reflecting on the macro influences on
the portfolio.
Across our office portfolio we have fitted out a number of
smaller vacant suites with desks and break out areas. This is to
ensure we have good quality amenities for tenants as well as making
it easier for new tenants to move in quickly.
Market commentary
- In spite of the material uncertainty facing businesses as a
result of the continued debate over Brexit, the occupational market
is generally stable with the exception of the retail sector.
Further company voluntary agreement (CVA) activity is highly likely
early next year, and even the stronger retailers are actively
looking to reduce occupational costs. It is our view that MSCI
data, which shows rents have fallen just 5% on average for retail
since the most recent peak in early 2018, has only scratched the
surface of the eventual rental decline.
- Retail expectations remain markedly negative, particularly in
town centres, with the notable exception of supermarkets. In a
low-return environment, long leases secured against strong
covenants are expected to outperform. Despite the wider retail
malaise, it expected supermarkets will deliver returns consistent
with other secure income-driven investments.
- Elsewhere, industrial rents continue to grow strongly in
London, the South East and the
best urban locations across the UK, but there are signs of
softening in regional logistics. Regional office markets are
benefiting from corporate and public sector consolidation, but
central London is more polarised.
The best new buildings are letting well, but second-hand space is
more challenging.
- Recent trends in the listed space have continued. Retail stocks
are priced at very large discounts to net asset value (NAV) and
there is caution about London
office developers. At the other end of the spectrum, operational
real estate businesses and income-focused stocks are generally
trading at a premium to NAV, anticipating above average returns
from the asset class over the coming years.
- While the third quarter saw the highest quarterly volume of
transactions in 2019, this was largely driven by the second-highest
volume on record in the alternatives space, where over £5 billion
of property exchanged hands. As of early October, Property Data had
only recorded just over £6 billion of deals in the third quarter in
the three traditional commercial sectors.
Investment Manager outlook
- We are conscious that the political and economic outlook is
highly uncertain and that the distribution of outcomes has a
‘barbell’ shape to it. Our real estate forecasts seek to straddle
the divergent outcomes and neither fully reflect the ‘no deal’
scenario on which we place the highest probability, nor a smooth
withdrawal from the EU. The announcement of the extension to
Article 50 and the general election in December does not change
this approach.
- Our forecast view does, however, sit towards the lower end of
the market consensus and continues to be driven by sharp falls in
retail values and a more bearish view of central London offices than most forecasters.
- For the calendar years 2019-21, the annualised return for all
UK commercial property is expected to be negative but we anticipate
a marginally positive 1% per annum total return over the three
years from September 2019. Within the
forecast there is however a very divergent outlook across the
sectors, with a strong conviction that industrial will continue to
outperform retail. Income will be a key component of total
returns.
- SLIPIT is well positioned to continue to benefit from its
structural underweight position to retail, and its focus on
providing good quality cost effective accommodation to
occupiers.
Dividends
The Company paid total dividends in respect of the quarter ended
30 June 2019 of 1.19p per Ordinary
Share, with a payment date of 30 August
2019.
Net Asset analysis as at 30 September
2019 (unaudited)
|
£m |
% of
net assets |
Industrial |
256.7 |
70.0 |
Office |
163.4 |
44.5 |
Retail |
43.9 |
12.0 |
Other Commercial |
34.8 |
9.5 |
Total Property
Portfolio |
498.8 |
136.0 |
Adjustment for lease
incentives |
-4.8 |
-1.3 |
Fair value of
Property Portfolio |
494.0 |
134.7 |
Cash |
5.1 |
1.4 |
Other Assets |
11.9 |
3.2 |
Total
Assets |
511.0 |
139.3 |
Current
liabilities |
-13.7 |
-3.7 |
Non-current
liabilities (bank loans) |
-127.3 |
-34.7 |
EPRA Net Asset
Value |
370.0 |
100.9 |
Swap liability |
-3.3 |
-0.9 |
Net Asset
Value |
366.7 |
100.0 |
Breakdown in valuation movements over
the period 1 July 2019 to
30 September 2019
|
Portfolio Value as at 30 Sep 19 (£m) |
Exposure as at 30 Sep 2019 (%) |
Like
for Like Capital Value Shift (excl transactions &
CAPEX) |
Capital Value Shift (incl transactions (£m) |
|
(%) |
External valuation
at 30 Jun 19 |
|
|
|
496.8 |
|
|
|
|
|
Retail |
43.9 |
8.8 |
-2.1 |
-1.0 |
South East Retail |
|
2.1 |
-1.9 |
-0.2 |
Rest of UK Retail |
|
0.0 |
0.0 |
0.0 |
Retail Warehouses |
|
6.7 |
-2.2 |
-0.8 |
|
|
|
|
|
Offices |
163.4 |
32.8 |
-0.3 |
8.6 |
London City
Offices |
|
2.7 |
1.9 |
0.3 |
London West End
Offices |
|
2.9 |
-1.7 |
-0.3 |
South East
Offices |
|
16.8 |
-1.0 |
-0.9 |
Rest of UK
Offices |
|
10.4 |
0.8 |
9.5 |
|
|
|
|
|
Industrial |
256.7 |
51.4 |
0.6 |
-5.6 |
South East
Industrial |
|
13.0 |
-0.4 |
-9.9 |
Rest of UK
Industrial |
|
38.4 |
0.9 |
4.3 |
|
|
|
|
|
Other
Commercial |
34.8 |
7.0 |
0.0 |
0.0 |
|
|
|
|
|
External valuation
at 30 Sep 2019 |
498.8 |
100.0 |
0.0 |
498.8 |
Top 10 Properties
|
30
Sep 19 (£m) |
Hagley Road,
Birmingham |
20-25 |
Denby 242, Denby |
15-20 |
Symphony,
Rotherham |
15-20 |
The Pinnacle,
Reading |
15-20 |
Hollywood Green,
London |
15-20 |
Marsh Way,
Rainham |
10-15 |
Timbmet,
Shellingford |
10-15 |
New Palace Place,
London |
10-15 |
Chester House,
Farnborough |
10-15 |
Basinghall Street,
London |
10-15 |
Top 10 tenants
Name |
Passing Rent
£ |
% of passing
rent |
|
|
|
BAE Systems plc |
1,257,640 |
4.6% |
Technocargo Logistics
Limited |
1,242,250 |
4.5% |
Public sector |
1,158,858 |
4.2% |
The Symphony Group
PLC |
1,080,000 |
3.9% |
Jenkins Shipping
Group |
813,390 |
2.9% |
Timbmet Limited |
799,683 |
2.9% |
ATOS IT Services
Ltd |
771,581 |
2.8% |
CEVA Logistics
Limited |
652,387 |
2.4% |
GW Atkins |
625,000 |
2.3% |
P&O Ferries |
479,090 |
1.7% |
Total |
8,879,879 |
32.2% |
Regional Split
South East |
35.0% |
East Midlands |
16.8% |
West Midlands |
13.9% |
North West |
11.2% |
North East |
7.2% |
Scotland |
6.5% |
South West |
3.8% |
London West End |
2.9% |
City of London |
2.7% |
The Board is not aware of any other significant events or
transactions which have occurred between 30
September 2019 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 +44 (0) 131 245 2833 or jason.baggaley@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Aberdeen
Standard Investments
Tel +44 (0) 131 372 0134 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