13 September
2017
UK Commercial Property Trust
Limited
(“UKCPT” or the “Company”)
Half Year Results
LEI: 213800JN4FQ1A9G8EU25
(Classified Regulated Information, under DTR 6 Annex 1 Section
1.2)
UK Commercial Property Trust Limited (FTSE 250, LSE: UKCM),
which is advised by Aberdeen Standard Investments and owns a
diversified portfolio of high quality income producing UK
commercial property, announces its interim results for the half
year ended 30 June 2017.
Financial Highlights
- NAV total return of 5.3% – a robust return against a background
of slowing growth in the property market.
- Strong share price total return of 11.4%, outperforming the
FTSE All-Share REIT Index total return of 3.5% following a
re-rating of the Company’s shares from a discount to a premium in
the period.
- Since inception the Company has delivered a NAV total return of
72.3% and share price total return of 75.7%, both in excess of the
-11.8% return on the FTSE All-Share REIT Index over the same
period
- Net gearing at 11.6%, remains one of the lowest in the
Company’s peer group.
- Attractive dividend yield of 4.0% compare favourably to both
the FTSE All-Share Index and FTSE All-Share REIT Index both
yielding 3.6%.
- Uncommitted cash resources of £50m available for investment
with access to a further £50 million from the Company’s undrawn
revolving credit facility.
Property Highlights
- The Company’s above benchmark exposure to the favoured
Industrial sector strategically helped drive a total return of
5.5%, outperforming the IPD benchmark return of 4.8% with the
portfolio valued at £1.32billion.
- The strong income profile of the portfolio was further
supported by the low void rate of 4.4% which compares favourably to
the benchmark void rate of 6.8%.
- A total of £3.4 million of annual income was generated from 15
new lettings, after rent free periods and incentives, and 20 lease
renewals/rent reviews including:
- Rent review with Barclays in Exeter agreed at £450,000 per annum, 38% ahead
of the previous passing rent;
- Three lettings completed at Gatwick Gate, Crawley securing over £600,000 per annum and
improving capital value and unexpired lease length at this
property;
- Secured a new 25 year lease at a rent of £275,000 per annum
with Metro Bank Plc at The Parade in Swindon.
- Transactional activity included the following:
- Sale of 13 Great Marlborough Street, London for £30.5 million, reflecting a 3.3%
net initial yield and removing future letting risk;
- Reinvestment into pre-let industrial development in Burton upon
Trent, completed after the period end, for a total of £22.2
million, and a Grade A office asset in Sheffield for £20.2 million, both with long,
index-linked leases in place;
- Collectively transactions are a strong example of recycling
capital from mature, expensive markets into higher yielding assets
on long term leases with the two acquisitions generating a blended
index-linked yield on cost of 5.4%.
- 99% of rent collected within 21 days underlining strength of
tenant base.
- Portfolio yield of 4.7% with reversionary yield of 5.8%
highlighting reversionary nature of the portfolio.
Commenting on the results, Andrew
Wilson, Chairman of UKCPT, said:
“Despite the background of heightened political uncertainty,
UKCPT’s portfolio has again produced above benchmark returns as a
number of portfolio initiatives, combined with judicious sales and
acquisition activity, have
increased exposure to long-term income and driven value. This
performance has contributed to a strong return for shareholders in
the period, with the Company’s shares now trading at a premium to
Net Asset Value. We continue to explore the possibility of a REIT
conversion and expect to provide shareholders with a further update
in the coming months.”
Will Fulton, UKCPT’s
Fund Manager added:
“During the first half of 2017 the UKCPT portfolio delivered a
robust performance driven by the effective implementation of our
strategy, which focuses on delivering long term, sustainable
income, supported by successful asset management initiatives across
the investment sectors.”
For further information please
contact:
Will Fulton / Graeme McDonald, Standard Life Investments
Tel: 0131 245 2799 / 0131 245 3151
Edward Gibson-Watt / Oliver Kenyon, J.P. Morgan Cazenove
Tel: 020 7742 4000
Richard Sunderland / Claire Turvey / Polly
Warrack, FTI Consulting
Tel: 020 3727 1000
PERFORMANCE SUMMARY
CAPITAL VALUES AND
GEARING |
30
June
2017 |
31
December 2016 |
%
Change |
|
Total assets less
current liabilities (excl Bank loan & swap) (£’000) |
1,406,632 |
1,372,926 |
2.5 |
|
Net asset value per
share (p) |
88.9 |
86.2 |
3.1 |
|
Ordinary Share Price
(p) |
92.15 |
84.5 |
9.0 |
|
Premium/(Discount) to
net asset value (%) |
3.7 |
(2.0) |
n/a |
|
Gearing
(%): Net*
Gross** |
11.6
17.8 |
11.4
18.2 |
n/a
n/a |
|
|
|
|
|
|
TOTAL
RETURN |
6
month
% return |
1
year
% return |
3
year
% return |
5
year % return |
NAV † |
5.3 |
7.2 |
29.6 |
61.3 |
Share Price † |
11.4 |
33.6 |
28.9 |
71.0 |
MSCI (IPD) Balanced
Monthly and Quarterly Funds |
4.8 |
5.8 |
32.8 |
61.2 |
FTSE All-Share Real
Estate Investment Trusts Index |
3.5 |
9.2 |
19.6 |
78.3 |
FTSE All-Share
Index |
5.5 |
18.1 |
23.9 |
65.2 |
|
|
|
|
|
EARNINGS AND
DIVIDENDS |
30
June
2017 |
30
June
2017 |
|
|
EPRA Earnings per
share (p) |
1.73 |
1.73 |
|
|
Dividends declared per
ordinary share (p) |
1.84 |
1.84 |
|
|
Dividend Yield (%)
‡ |
4.0 |
5.1 |
|
|
IPD Benchmark Yield
(%) |
5.0 |
5.0 |
|
|
FTSE All-Share Real
Estate Investment Trusts Index Yield (%) |
3.6 |
3.7 |
|
|
FTSE All-Share Index
Yield (%) |
3.6 |
3.7 |
|
|
|
|
|
|
|
*
Calculated as net borrowings (gross borrowings less cash,
excl swap valuation) divided by total assets less current
liabilities (excl cash, borrowings and swaps)
**
Calculated as gross borrowings (excl swap valuation) divided by
total assets less current liabilities (excl borrowings and
swaps).
†
Assumes re-investment of dividends excluding transaction costs.
‡
Based on an annual dividend of 3.68p per share and the share price
at 30 June.
Sources: Standard Life Investments, MSCI Investment Property
Databank (“IPD”)
Chairman’s Statement
I am pleased to report that the
positive performance that your Company delivered in 2016 has
continued into the first six months of 2017. Against a background
of heightened political uncertainty, UKCPT’s portfolio has again
produced above benchmark returns as a number of portfolio
initiatives, combined with judicious sales and acquisition
activity, have secured long-term income and driven value. This
performance has contributed to a strong return for shareholders in
the period, with the Company’s shares trading at a premium to Net
Asset Value (“NAV”) at the period end.
Over the period, the Company’s
portfolio, valued at £1.32 billion at 30 June, generated a total
return of 5.5%, significantly ahead of the IPD benchmark return of
4.8%. The property market has stabilised following the volatility
surrounding the EU referendum and has delivered solid income-led
returns. The industrial sector, where the Company has an overweight
exposure of 10% versus the IPD benchmark, was the main driver of
performance. Property also offers an attractive elevated yield
compared with other asset classes. Against this backdrop, UKCPT was
well positioned in the period with its portfolio, diversified
geographically and across all the main sectors, delivering a number
of successful asset management initiatives.
The sale of 13 Great Marlborough Street, London crystallised profit from the asset and
the recycling of the proceeds into higher yielding assets, in line
with the Company’s strategy. This included the forward purchase of
a pre-let industrial development at Burton upon Trent, which was
completed after the period end, and an office in Sheffield which, taken together, generate a
yield of 5.4% compared to the 3.3% yield from Great Marlborough
Street. Both of these acquisitions are let on long leases, of 15
and 22 years respectively, to tenants with strong covenants and
have inflation-linked uplifts in rent. The portfolio now contains
13% of income with inflation linked, or fixed increase rent
reviews, which provides a balance to the shorter-term leases which
have greater asset management opportunities. We continue to target
acquisitions in both these areas. It should also be highlighted
that our retail portfolio, the majority of which is in good, out of
town, retail warehouse parks, also generated above retail benchmark
returns.
The positive portfolio performance was
the main contributor to a NAV total return for the period of 5.3%.
This attractive return helps highlight the defensive qualities of
UKCPT with its strong balance sheet, low gearing and low void rate
combined with a secure tenant base that pays 99% of rents within 21
days.
Over the period, the Company’s share
price total return was a commendable 11.4% compared to a return of
3.5% on the FTSE All-Share REIT index. The Company’s shares
re-rated from a 2% discount to NAV at the year end to a 3.7%
premium as at 30 June, as investors sought the stable income return
our portfolio offers. This return also compares favourably to the
wider equity market, with the FTSE All-Share Index delivering a
total return of 5.5% in the period.
Over the longer term, the Company has
also performed well. Since inception in September 2006, driven by above- benchmark
portfolio returns, the Company has delivered a NAV total return of
72.3% and share price total return of 75.7% both considerably in
excess of the wider FTSE All-Share REIT index which returned -11.8%
over the same period.
Borrowings and Cash
UKCPT is financially well positioned for the current
environment. As at the period end the Company’s net gearing was
11.6% (gross gearing 17.8%), one of the lowest in the Company’s
immediate peer group and the wider REIT sector. The interest rate
on this gearing is fixed at an attractive 2.89% per annum with an
average maturity profile of 5.5 years. As capital values are
expected to come under pressure, low gearing remains a sensible
defensive strategy. Additionally, UKCPT has significant financial
resources with £50 million of uncommitted cash and a further £50
million revolving credit facility available to utilise. This will
allow the Investment Manager to take advantage of opportunities
that could arise in the current market environment and invest in
income-accretive acquisitions that will further boost dividend
cover, which was 94% for the six month period.
Dividends
UKCPT declared and paid its shareholders the following dividends
in the six month period to 30 June
2017.
|
Payment Date (2017) |
Dividend per share (p) |
Fourth interim for prior period |
Feb |
0.92 |
First interim |
May |
0.92 |
Total |
|
1.84 |
A second interim dividend of 0.92p was declared on 28 July and
paid on 31 August 2017. This equates
to a dividend yield of 4.0% as at 31 August
2017 and compares favourably with the yield on the 10 year
gilt (1.0%), the FTSE All-Share Index (3.6%) and, from a property
perspective, the FTSE REIT index (3.5%) as at the same date. In an
environment where interest rates are expected to remain at
historically low levels for the foreseeable future, the demand for
attractive but secure income continues unabated. The yield
differential that the shares of UKCPT offer, derived from a
well-diversified prime portfolio of UK commercial property, is a
positive foundation for future returns.
REIT Conversion
In its 2016 annual report, the Company
stated that it was actively considering joining the UK REIT regime
as a result of the proposed restrictions on interest deductions for
non-UK resident property companies. These restrictions would be
likely to result in income tax being paid (the current rate being
20%) on the net rental profits of the Company within the next few
years were the Company to maintain its current structure. Since
then, the Company has liaised with a number of shareholders on this
issue. Following these discussions, the Company has received from
Phoenix Life Limited, its largest shareholder, an indication of
support for REIT conversion, should the Board decide that is the
best course of action for the Company and shareholders as a whole.
The Company continues to progress its evaluation of the
implications of entering the UK REIT regime and expects to make a
final decision before the end of 2017. Shareholders will be updated
at that time and, if the decision is taken to convert, it is likely
that the date of this conversion will be early in the second
quarter of 2018.
It should be highlighted that if the decision is taken to adopt
REIT status for UK tax purposes the Company will become UK resident
for tax purposes but will remain incorporated in Guernsey for
company law purposes. The share register of the Company will
continue to be maintained in Guernsey and accordingly shares in the
company will remain as non-UK situs assets for UK inheritance tax
purposes. This notwithstanding, property income distributions paid
by the Company following its adoption of REIT status for UK tax
purposes should be treated as being UK source (rental) income in
the hands of shareholders.
Investment Manager
The Board notes the recently completed merger between Standard
Life and Aberdeen Asset Management. It is too early in the
integration process of the two companies to comment on what, if
any, implications this will have for the Company. The Board
continues to monitor developments very closely.
Outlook
The UK continues to be caught in a period of political
uncertainty. The indecisive result of the UK general election has
added a further layer of complexity to the Brexit negotiations and
has resulted in an uncertain political environment the likes of
which has not been seen in this country for decades. While the
economy seems to have shrugged off the outcome of the election, the
depreciation of sterling following the decision to leave the EU has
increased inflation, weakened consumer confidence and led to a
slowdown in the economy. This has resulted in a number of UK GDP
growth forecasts recently being pared back, among them being that
of the Bank of England which cut
its 2017 forecast from 1.9% to 1.7%.
In relation to the UK real estate market, a level of normality
has returned following the volatility experienced after the Brexit
vote, with the sector continuing to provide a yield profile that is
attractive when compared with other asset classes. In addition, the
fundamentals of the sector remain strong compared to previous
cycles with lending to the sector at a lower level than in
2007/2008, relatively limited development, lower vacancy levels and
liquidity in the market with investment volumes above the long term
average. In this environment the steady, secure income component of
a portfolio, with an elevated yield that continues to provide a
significant margin compared to other asset classes, is likely to be
the key driver of returns.
Set against this, UKCPT, with its many
defensive qualities, is well positioned for the future. The
portfolio is prime in nature, which should be beneficial in the
current risk-averse environment. It is also well diversified both
in terms of sector and geography, with an overweight exposure to
the Industrial sector (33% of the portfolio), which is expected to
be the best performing sector over the medium term. Geographically,
the portfolio has limited exposure to the City of London (2.2% of the portfolio), which
is forecast to be one of the weakest markets due to the
uncertainties over how Brexit will affect the financial services
industry, a major employer in London. Furthermore, the Company has limited
voids which, combined with a strong tenant base and rent collection
profile, underpins the Company’s attractive dividend yield in a
world where secure income is still very much in demand. The Company
is in a strong financial position with low gearing and significant
resources for further investment should opportunities arise.
Combined with an Investment Manager who has a proven track record
of delivering successful asset management initiatives, I continue
to believe that your Company has the strong foundations required to
create value for shareholders in an uncertain environment.
Andrew
Wilson
Chairman
12 September 2017
Manager’s Review
For the half year ended 30 June
2017
Market Review
While UK real estate continues to provide an elevated yield
compared to other asset classes, in the first half of 2017 the
resilience of the UK economy seen after the EU Referendum
diminished somewhat. A weaker consumer sector, impacted by a
squeeze on spending power, caused the economy to grow by only 0.2%
and 0.3% in the first and second quarters of 2017, compared to the
0.7% growth recorded in Q4 2016.
As wages lagged further behind inflation, forecasts for
household spending continued to be mixed, despite the employment
rate in the three month period to June showing the strongest rise
since 1975. Wage growth is one of the key indicators that the Bank
of England is monitoring closely
as, in recent months, the Monetary Policy Committee (“MPC”) has
become increasingly divided as to the timing of shifting its policy
stance. The majority in favour of keeping policy on hold increased,
however, at the MPC’s latest meeting, bolstered by downgrades to
the Bank’s economic forecast and by a less positive view on the
outlook for pay.
Commercial Property
Market conditions and sentiment have
stabilised in recent months following the capital decline
immediately following the result of the EU Referendum in
June 2016. Although economic growth
is moderating, the All Property total return for the market (as
measured by the MSCI/IPD Balanced Monthly and Quarterly Index)
recorded a reasonable 4.8% over the first six months of 2017 with
overseas investors continuing to favour the UK market. Capital
values rose by 2.3% and rents grew by 0.7% over this time frame. As
for equity markets, the FTSE All Share and the FTSE 100 total
returns were 5.5% and 4.7% respectively over the period. For listed
real estate equities, total returns were 4.0%.
In terms of sectors, the industrial and
logistics distribution sector continued to demonstrate its
strength, generating a total return of 8.1% in the first half of
2017. While retail again lagged the other sectors, the margin of
difference between sector performance has narrowed lately. Retail
recorded a 3.3% total return in the first six months of 2017
compared to 3.9% for offices, where returns felt the impact of
political uncertainty feeding into the leasing market. In terms of
capital growth, industrial values rose by 5.4%. Retail continued to
be the weakest, with values rising by 0.6% over the first six
months of the year, whilst office values rose by 1.8% over the same
time frame. In line with the strong returns for industrials
recently, the sector also recorded the strongest rental growth at
2.0%. This compares to largely stable office and retail rents,
which demonstrated relatively muted rental growth of 0.4% and 0.2%
respectively over the period.
Portfolio Performance
Against this backdrop, it is pleasing
to report a robust performance from the Company during the
reporting period, with its property portfolio generating a 5.5%
total return versus 4.8% for its MSCI/IPD benchmark. The table
below sets out the components of these returns for the six month
period to 30 June 2017. All
valuations are undertaken by the Company’s valuer, CBRE Ltd.
|
Total
Return |
Income
Return |
Capital
Growth |
|
Fund
% |
Benchmark
% |
Fund
% |
Benchmark
% |
Fund
% |
Benchmark
% |
|
|
|
|
|
|
|
Industrial |
7.5 |
8.1 |
2.5 |
2.5 |
4.9 |
5.4 |
Office |
6.0 |
3.9 |
2.5 |
2.0 |
3.4 |
1.8 |
Retail |
4.0 |
3.3 |
1.8 |
2.7 |
2.2 |
0.6 |
Leisure/Other |
3.6 |
5.9 |
2.5 |
2.4 |
1.1 |
3.4 |
Total |
5.5 |
4.8 |
2.2 |
2.4 |
3.2 |
2.3 |
Source: MSCI/IPD, assumes reinvestment
of income in capital gain/loss
As has been the case for some years, the Company’s income
profile provided a stable and reliable element of the portfolio
return, delivering 2.2% for the six month period (2.4% excluding
exceptional leasing revenue expenditure, principally associated
with the Company’s new Primark store at Shrewsbury), whilst capital growth accelerated
to 3.2% against the benchmark’s 2.3%. The main drivers of this
outperformance arose from a strategic overweight position in the
industrial (including logistics distribution) sector and strong
asset performance from active management. Activity of particular
note arose in the Company’s West End office and shopping centre
portfolios, with a significant Soho office sale in January and
retail letting success at The Parade, Swindon.
Industrial
The strongest performance during the first half came from the
Company’s industrial portfolio, with a total return of 7.5%. A
significant vacancy at Radlett and short term lease expiry dates at
both Lutterworth (Magna Park) and
Neasden, Wembley, had an impact on the relative performance against
the benchmark of 8.1%. Investment demand is strong and good stock
is scarce, particularly in London
and the South East, where the market continues to reward the strong
income characteristics of the sector. Underpinning this demand and
performance are positive rental growth expectations and encouraging
letting prospects for well-located vacant stock. Within this period
the Company benefited from leasing activity on its multi-let
industrial estates at Gatwick Airport, Dartford and Radlett, together with yield
improvement across the sector. The Company’s industrial portfolio
is well located and split approximately 40:60 between single-let
‘big box’ logistics assets and London-focused multi-let industrial estates;
the prime characteristics of the portfolio should stand it in good
stead with both ‘big box’ and ‘multi-let estate’ well placed to
continue providing sustainable income, while also offering some
growth opportunities.
Office
Boosted by the profitable sale of a low-yielding office investment
in London’s Soho, 13 Great Marlborough Street, the return posted by
the Company’s office portfolio was a close second to the industrial
performance, at 6.0% for the period against 3.9% for the
benchmark.
The Company has a desired underweight position in Central London and South East offices and is
marginally overweight in the better yielding UK regions. Overall,
the portfolio is underweight in the office sector. The latest data
from benchmark provider MSCI/IPD suggests that Central London rents are declining modestly.
In particular, the City of London
office market is under the spotlight following the EU Referendum
decision, with uncertainty cast on future financial services
cross-border trading. The Company has just one small office
investment in the City, which accounts for only 2% of its portfolio
and is let on generally modest rents. The asset is strategically
located within a stone’s throw of the new Liverpool Street
Elizabeth Line Crossrail station due to open next year.
During the period we witnessed continuing investment demand,
particularly from overseas investors, for Central London offices. UK based demand was
stronger for regional offices, being attracted by a more generous
yield.
Retail
The Company is currently in line with its benchmark retail weight,
although a number of initiatives are underway which may lead to a
reduction in this holding. However it is reflective of our asset
management success that, although UK retail as a whole
underperformed UK All Property, the Company’s retail holding
outperformed UK Retail with a total return of 4.0% compared to the
3.3% benchmark.
Led by a series of successful leasing initiatives at The Parade,
Swindon, most notably re-letting
the Company’s only BHS exposure and securing a long lease to Metro
Bank, the Company’s shopping centres returned a healthy 5.4%. It is
also pleasing to report the successful opening of the new Primark
store in the Charles Darwin Centre, Shrewsbury, following the period end in July;
early reports show a significant increase in footfall throughout
both Charles Darwin and Pride Hill
centres which, it is hoped, will lead to improved net operating
income.
Leisure
The Company’s leisure assets in Kingston upon Thames, Swindon, and Glasgow, altogether representing 10% of the
portfolio, delivered a total return of 3.6% during the first six
months of the year. Performance is relatively lacklustre against
the benchmark of 5.9% and this remains a focus.
Investment Activity
At the start of the year the Company took advantage of the strong
Investment market in London’s West End and sold 13 Great
Marlborough Street to a special purchaser for £30.5 million,
reflecting a 3.3% net initial yield. The property is let to Sony
Interactive Entertainment whose lease expires in September 2018 and so the disposal also served to
reduce letting risk in the portfolio.
In July, just after the period end, the Company achieved
practical completion of the pre-let development it committed to in
February 2017, comprising a 258,370
sq ft distribution warehouse in Burton upon Trent for a total
consideration of £22.2 million, reflecting a yield on capital of
5.8%. Let to Palletforce Limited for 15 years at £5.58 psf, or £1.4
million per annum, the rent benefits from RPI inflation linked rent
increases of between 1% and 3% per annum, compounded and effective
five yearly. Situated on Centrum West, an industrial park situated
in a prime logistics location, equidistant between Nottingham and Birmingham on the A38 dual carriageway between
the M1 and M6 motorways, 87% of the UK population can be accessed
within a legally continuous 4.5 hour HGV drive time.
In June, Hartshead House, 2 Cutlers Gate, Sheffield, where the city centre railway
station is earmarked as a stop for the future HS2 rail line, was
acquired for £20.2 million reflecting a net initial yield of 5%.
This prominent 61,638 sq ft Grade A office is let to Capita
Business Services Limited, part of Capita plc, on a lease with
annual indexed linked rent increases and 22 years to expiry.
Delivering a current rent of almost £1.1 million per annum, the
transaction further increases the Company’s exposure to long term,
secure and growing income streams.
Collectively these transactions are a strong example of
recycling capital from mature expensive markets into higher
yielding assets, here on long term leases, to deliver sustainable
income. £42.4 million has been invested generating a blended
index-linked yield on cost of 5.4%.
At The Parade, Swindon two
strategic shop units were purchased at the entrance to the shopping
centre which, when incorporated with an existing unit, allowed the
Company to secure a new 25 year unbroken lease with challenger
bank, Metro Bank Plc, at a rent of £275,000 per annum. Metro Bank
will construct a new flagship unit at their cost, scheduled to open
in December 2017.
In July, after the period end, the Company sold its smallest
investment, an industrial warehouse let to UK bed retailer, Dreams
Ltd, at Loudwater, High Wycombe, for £4.7 million.
Asset Management Activity
It was pleasing to see the Company maintain its low void position
of 4.4% (of ERV) at 30 June 2017,
comfortably below the MSCI/IPD benchmark void rate of 6.8%.
During the year the Company continued its drive to strengthen
income streams, extend lease lengths and add value to the
portfolio. A total of £3.4 million of annual income was generated
from 15 new lettings, after rent free periods and incentives, and
20 lease renewals/rent reviews.
With one exception, all open market rent reviews agreed during
the period saw increases and settlements ahead of rental value. A
particularly good example was at the Company’s holding on Exeter
High Street where the rent review from 24
May 2015 with Barclays Bank Plc was agreed at £450,000 per
annum, 38% ahead of the previous rent passing.
Helping to improve the portfolio’s rental income, three lettings
completed at Gatwick Gate, Crawley, to Airbase Interiors, Capital Scenery
and USP Designs, secured over £600,000 per annum and also improved
the capital value and unexpired lease length at this property. This
asset delivered the highest total return in the portfolio within
the first half of the year.
On the Company’s largest South East industrial holding at
Ventura Park in Radlett, lease renewals took place with JMT
Indisplay and UK Mail, securing £627,769 per annum, 8% ahead of
ERV. This asset management activity helped to deliver the largest
positive contribution to portfolio total return during the first
six months of the year.
A new 10 year lease renewal was completed with Jacksons
Commercial & Private Law, at Central Square, Newcastle. The new rent of £64,389 per annum
reflects an uplift of 4% ahead of ERV and the lease also improved
the average weighted unexpired lease length at the building.
At the Charles Darwin Centre, Shrewsbury, building contractor McLaughlin and
Harvey successfully completed the mall refurbishment and also the
creation of the new anchor store for Primark, which opened on
27 July 2017. As mentioned above,
footfall levels have increased strongly as a result. Also referred
to above is positive progress in securing the signature of an
Agreement for Lease at The Parade, Swindon, with strong covenant Wilko to take
the Company’s only former BHS store. The new 15 year lease, let at
ERV, will generate rental income of £385,000 per annum, leaving
only a small proportion remaining to let in the upper floors.
Augmenting this, and following the purchase of two strategic units,
at the entrance to The Parade, the Company secured a new 25 year
lease with Metro Bank Plc at a rent of £275,000 per annum. Metro
Bank will fund the construction of a new flagship unit, scheduled
to open in December 2017. This
profitable transaction, as well as providing good income, will
greatly enhance the appearance of this important street corner.
Within the Company’s multi-use office and retail investment at
83/85 George Street, Edinburgh,
Clydesdale Bank’s new flagship branch opened during February. In
the same month a new 10 year lease was completed with global power
generation company InterGen, securing a headline rent of £30 psf
per annum, following the comprehensive refurbishment of its office
floor. The remaining 10,000 sq ft top floor has been recently
refurbished and is now available with minimal Grade A office
competition in Edinburgh.
Rent Collection, Voids and Leasing
Tone
Tenant covenants are monitored on a quarterly basis. The
Company’s average rent collection efficiency over the past 12
months shows that 99% of rent was collected within 21 days of the
due date, indicative of the quality of the Company’s tenant
profile.
As reported above it was pleasing to see the Company maintain
its low void position of 4.4% (of ERV) at 30
June 2017, ahead of the MSCI/IPD benchmark figure of
6.8%.
Market Outlook
UK real estate continues to provide an elevated yield compared to
other assets in a market which has stabilised following last year’s
post-Brexit upheaval. Lending to the sector is at a lower level
than in 2007/08 and liquidity remains reasonable. At the same time
development continues to be relatively constrained by historical
standards, with below average vacancy levels in most markets, which
should help to maintain the positive returns that the sector is
currently recording. In this environment, the steady secure income
component generated by the asset class is likely to be the key
driver of future returns, and the strategy for UKCPT reflects this.
The market is expected to continue to be sentiment driven in the
short term as the political and economic impact associated with the
UK’s withdrawal from the European Union continues to evolve. The
retail sector continues to face a series of headwinds that may hold
back recovery in weaker locations due to oversupply and structural
issues. Given the backdrop of continuing heightened macroeconomic
uncertainty, investors are becoming more risk averse and better
quality assets are once again broadly outperforming those of a
poorer quality.
In 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 standing as a transparent
market with a robust legal framework, real estate as an asset class
should be well placed for the longer term.
Portfolio Strategy
Your Company aims to deliver an attractive level of income,
together with the potential for capital and income growth, through
investment in a diversified UK commercial property portfolio. Our
strategy to achieve this
combines investment, sales, and proactive asset management,
including disciplined investment in existing stock where
accretive.
Having undertaken a number of sales and purchases in the first
half of the year, UKCPT retains a generous cash position of £50
million which is available for new investment in line with the
Company’s investment policy. This cash available is after allowing
for dividend and capital expenditure commitments and, if
opportunities arise, the Company has a further £50 million of
capital available to be drawn down tactically from its revolving
credit facility.
When looking at opportunities to deploy these resources, we
continue our focus on long-term secure income, often found in
alternative sectors which we will look to access, provided they
would be accretive to recurring dividend cover; examples might
include well-located hotels, funding the construction of pre-let
logistics facilities, and potentially re-priced right-sized
supermarkets in vibrant economies with strong demographics.
We will continue to review opportunities in the South East
office sector – modern, well-let properties in strong locations to
limit the impact of depreciation on returns - but only if an
element of ‘re-pricing’ has occurred to offset lower rental growth
expectations. Importantly we are also open to exploiting pricing
opportunity in the market, across most sectors, with a large team
and the resource to react quickly. With uncertainty continuing in
the wider economy and market as the path to Brexit evolves,
interesting opportunities will, we believe, arise in the property
market.
Turning to income, whilst we are pleased with the Company’s
continued low vacancy rate of 4.4%, we anticipate it is likely to
grow before shrinking again with at least one, and possibly two,
large but very well located prime logistic distribution units
likely to become vacant (together approximately 5.7% of ERV).
Prospects for re-letting at good rents are strong, warranting the
current strategy to retain these investments (at Wembley,
London, and Magna Park, Lutterworth) in order to benefit
from future rental growth and capital appreciation on re-letting or
lease renewal.
In our 2016 year-end report we stated our belief that the
Company was well positioned to enter a new phase of the property
cycle focused on income return rather than capital growth as
returns slowed. That income return component will remain in sharp
focus as Brexit uncertainty evolves and we maintain our belief that
the Company remains well positioned to face this new environment
with a strong balance sheet, a well-diversified portfolio, low
gearing and a low vacancy rate.
Will Fulton
Fund Manager
12 September 2017
Half Yearly Condensed Consolidated
Income Statement
For the half year ended 30 June
2017
|
|
Half
year ended 30 June 2017 (unaudited) |
|
Half
year ended 30 June 2016 (unaudited) |
|
For
year ended 31 December 2016 (audited) |
|
|
Notes |
£'000 |
|
£'000 |
|
£'000 |
|
Income |
|
|
|
|
|
|
|
Rental income |
|
35,027 |
|
33,792 |
|
68,573 |
|
Gains/(Losses) on
investment properties |
2 |
37,495 |
|
4,389 |
|
(5,944) |
|
Interest revenue
receivable |
|
163 |
|
199 |
|
455 |
|
Total
income |
|
72,685 |
|
38,380 |
|
63,084 |
|
|
|
|
|
|
|
|
|
Expenditure |
|
|
|
|
|
|
|
Investment management
fee |
|
(4,526) |
|
(4,462) |
|
(8,870) |
|
Direct property
expenses |
|
(2,666) |
|
(1,453) |
|
(3,716) |
|
Other expenses |
|
(1,494) |
|
(1,117) |
|
(3,362) |
|
Total
expenditure |
|
(8,686) |
|
(7,032) |
|
(15,948) |
|
|
|
|
|
|
|
|
|
Net operating
profit before finance costs |
|
63,999 |
|
31,348 |
|
47,136 |
|
|
|
|
|
|
|
|
|
Net finance
costs |
|
|
|
|
|
|
|
Finance costs |
|
(4,018) |
|
(4,020) |
|
(8,101) |
|
|
|
(4,018) |
|
(4,020) |
|
(8,101) |
|
|
|
|
|
|
|
|
|
Net profit from
ordinary activities before taxation |
|
59,981 |
|
27,328 |
|
39,035 |
|
Taxation on profit on
ordinary activities |
9 |
(2,623) |
|
(492) |
|
6,151 |
|
Net profit for the
period |
4 |
57,358 |
|
26,836 |
|
45,186 |
|
|
|
|
|
|
|
|
|
Other
comprehensive income to be reclassified to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss) arising on
effective portion of interest rate swap |
|
913 |
|
(5,506) |
|
(3,913) |
|
Other comprehensive
income |
|
913 |
|
(5,506) |
|
(3,913) |
|
|
|
|
|
|
|
|
|
Total comprehensive
income for the period |
|
58,271 |
|
21,330 |
|
41,273 |
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share (p) |
3 |
4.41p |
|
2.07p |
|
3.48p |
|
EPRA earnings per
share (excluding deferred tax movement) |
|
1.73p |
|
1.73p |
|
3.46p |
|
Half Yearly Condensed Consolidated
Balance Sheet
As at 30 June 2017
|
|
|
|
|
30
June 2017 (unaudited) |
|
30
June 2016 (unaudited) |
|
|
31
December 2016 (audited) |
|
|
|
|
Notes |
£'000 |
|
£'000 |
|
|
£'000 |
Non-current assets |
|
|
|
|
|
|
|
|
Investment
properties |
|
2 |
1,309,844 |
|
1,274,457 |
|
|
1,242,274 |
Deferred
tax asset |
|
9 |
3,909 |
|
- |
|
|
6,515 |
|
|
|
|
|
1,313,753 |
|
1,274,457 |
|
|
1,248,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
Investment
properties held for sale |
|
- |
|
- |
|
|
28,350 |
Trade and
other receivables |
|
18,777 |
|
12,423 |
|
|
16,035 |
Cash and
cash equivalents |
|
98,611 |
|
114,353 |
|
|
104,893 |
|
|
|
|
|
117,388 |
|
126,776 |
|
|
149,278 |
Total
assets |
|
|
1,431,141 |
|
1,401,233 |
|
|
1,398,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
Trade and
other payables |
|
(24,509) |
|
(22,922) |
|
|
(25,141) |
Interest
rate swap |
|
|
(1,326) |
|
(2,449) |
|
|
(1,340) |
|
|
|
|
|
(25,835) |
|
(25,371) |
|
|
(26,481) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term liabilities |
|
|
|
|
|
|
|
|
Bank
loan |
|
|
(248,790) |
|
(248,357) |
|
|
(248,532) |
Interest
rate swap |
|
|
(1,515) |
|
(2,898) |
|
|
(2,414) |
|
|
|
|
|
(250,305) |
|
(251,255) |
|
|
(250,946) |
Total
liabilities |
|
|
(276,140) |
|
(276,626) |
|
|
(277,427) |
|
|
|
|
|
|
|
|
|
|
|
Net
assets |
|
|
1,155,001 |
|
1,124,607 |
|
|
1,120,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
|
|
|
|
Share
capital |
|
|
539,872 |
|
539,872 |
|
|
539,872 |
Special
distributable reserve |
|
586,547 |
|
585,821 |
|
|
590,594 |
Capital
reserve |
|
|
31,423 |
|
4,261 |
|
|
(6,072) |
Interest
rate swap reserve |
|
(2,841) |
|
(5,347) |
|
|
(3,754) |
Equity
Shareholders' funds |
|
1,155,001 |
|
1,124,607 |
|
|
1,120,640 |
Net
asset value per share |
|
88.9p |
|
86.5p |
|
|
86.2p |
EPRA
Net asset value per share |
|
89.1p |
|
87.0p |
|
|
86.5p |
Half Yearly Condensed Consolidated Statement of
Changes in Equity
For the half year ended 30 June
2017
|
|
|
|
|
Special |
|
|
Interest |
|
|
|
|
|
Share |
distributable |
Capital |
Revenue |
rate
swap |
|
|
|
|
|
capital |
reserve |
reserve |
reserve |
reserve |
Total |
|
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
Half
year ended 30 June 2017 unaudited |
|
|
|
|
|
|
|
At 1 January
2017 |
|
|
|
539,872 |
590,594 |
(6,072) |
- |
(3,754) |
1,120,640 |
Net profit for the
period |
|
|
|
- |
- |
- |
57,358 |
- |
57,358 |
Other
comprehensive income |
|
|
- |
- |
- |
- |
913 |
913 |
Dividends paid |
|
|
7 |
- |
- |
- |
(23,910) |
- |
(23,910) |
Transfer
in respect of gains on investment properties |
- |
- |
37,495 |
(37,495) |
- |
- |
Transfer
from special distributable reserve |
|
- |
(4,047) |
- |
4,047 |
- |
- |
At 30 June
2017 |
|
|
|
539,872 |
586,547 |
31,423 |
- |
(2,841) |
1,155,001 |
Half
year ended 30 June 2016 unaudited |
|
|
|
|
|
|
|
At 1 January
2016 |
|
|
|
539,872 |
587,284 |
(128) |
- |
159 |
1,127,187 |
Net profit for the
period |
|
|
|
- |
- |
- |
26,836 |
- |
26,836 |
Other
comprehensive income |
|
|
- |
- |
- |
- |
(5,506) |
(5,506) |
Dividends paid |
|
|
|
- |
- |
- |
(23,910) |
- |
(23,910) |
Transfer
in respect of gains on investment properties |
- |
- |
4,389 |
(4,389) |
- |
- |
Transfer
from special distributable reserve |
|
- |
(1,463) |
- |
1,463 |
- |
- |
At 30 June
2016 |
|
|
|
539,872 |
585,821 |
4,261 |
- |
(5,347) |
1,124,607 |
For the
year ended 31 December 2016 audited |
|
|
|
|
|
|
At 1 January
2016 |
|
|
|
539,872 |
587,284 |
(128) |
- |
159 |
1,127,187 |
Net profit for the
year |
|
|
|
- |
- |
- |
45,186 |
- |
45,186 |
Other
comprehensive income |
|
|
- |
- |
- |
- |
(3,913) |
(3,913) |
Dividends paid |
|
|
|
- |
- |
- |
(47,820) |
- |
(47,820) |
Transfer
in respect of gains on investment properties |
- |
- |
(5,944) |
5,944 |
- |
- |
Transfer
to special distributable reserve |
|
- |
3,310 |
- |
(3,310) |
- |
- |
At 31 December
2016 |
|
|
|
539,872 |
590,594 |
(6,072) |
- |
(3,754) |
1,120,640 |
Half Yearly Condensed Consolidated
Cash Flow Statement
For the half year ended 30 June
2017
|
|
|
|
|
|
|
|
|
Year
ended |
|
|
|
|
|
30
June 2017 (unaudited) |
|
30
June 2016 (unaudited) |
|
31
December 2016 (audited) |
|
|
|
|
|
£'
000 |
|
£'
000 |
|
£'
000 |
Cash
flows from operating activities |
|
|
|
|
|
|
|
Net profit
for the period before taxation |
|
59,981 |
|
27,328 |
|
39,035 |
Adjustments for: |
|
|
|
|
|
|
|
|
|
(Gains)/Losses on investment properties |
|
|
2 |
(37,495) |
|
(4,389) |
|
5,944 |
Movement
in lease incentive |
|
|
|
(3,165) |
|
(113) |
|
(2,271) |
Movement
in provision for bad debts |
|
|
(38) |
|
(262) |
|
(75) |
Decrease/(Increase) in operating trade and other receivables |
460 |
|
(669) |
|
(2,310) |
(Decrease)/Increase in operating trade and other payables |
(646) |
|
(1,311) |
|
1,421 |
Finance costs |
|
|
|
|
4,018 |
|
4,040 |
|
8,125 |
Cash
generated by operations |
|
|
23,115 |
|
24,624 |
|
49,869 |
Tax
paid |
|
|
- |
|
- |
|
(453) |
Net
cash inflow from operating activities |
|
|
23,115 |
|
24,624 |
|
49,416 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
|
|
Purchase
of investment properties |
|
|
2 |
(27,500) |
|
- |
|
(1,911) |
Sale of
investment properties |
|
|
2 |
30,500 |
|
45,600 |
|
45,595 |
Capital
expenditure |
|
|
|
2 |
(4,725) |
|
(3,973) |
|
(8,558) |
Net
cash (outflow)/inflow from investing activities |
|
(1,725) |
|
41,627 |
|
35,126 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
|
Dividends paid |
|
|
|
7 |
(23,910) |
|
(23,910) |
|
(47,820) |
Bank loan interest
paid |
|
|
|
|
(3,070) |
|
(3,237) |
|
(6,467) |
Payments
under interest rate swap arrangement |
|
(692) |
|
(537) |
|
(1,148) |
Net
cash (outflow) from financing activities |
|
(27,672) |
|
(27,684) |
|
(55,435) |
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
|
(6,282) |
|
38,567 |
|
29,107 |
Opening
balance |
|
|
|
104,893 |
|
75,786 |
|
75,786 |
Closing
cash and cash equivalents |
|
|
|
98,611 |
|
114,353 |
|
104,893 |
|
|
|
|
|
|
|
|
|
|
Represented by |
|
|
|
|
|
|
|
|
|
Cash at bank |
|
|
|
|
54,150 |
|
18,729 |
|
44,821 |
Money market
funds |
|
|
|
|
44,461 |
|
95,624 |
|
60,072 |
|
|
|
|
|
98,611 |
|
114,353 |
|
104,893 |
Notes to the Accounts
For the half year ended 30 June
2017
1. ACCOUNTING
POLICIES
The condensed consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standard (‘IFRS’) IAS 34 ‘Interim Financial Reporting’ and, except
as described below, the accounting policies set out in the
statutory accounts of the Group for the year ended 31 December 2016.
The condensed consolidated financial statements do not include
all of the information required for a complete set of IFRS
financial statements and should be read in conjunction with the
consolidated financial statements of the Group for the year ended
31 December 2016, which were prepared
under full IFRS requirements.
2. INVESTMENT
PROPERTIES
Freehold and Leasehold
Properties |
£’000 |
Opening valuation |
1,270,624 |
Purchases at cost |
27,500 |
Capital expenditure |
4,725 |
Gain on revaluation to fair
value |
38,510 |
Disposal at prior year
valuation |
(28,350) |
Adjustment for lease incentives |
(3,165) |
Total fair value at 30 June |
1,309,844 |
|
|
Gain on Investment Properties at
Fair Value Comprise |
|
Valuation Gains |
38,510 |
Movement in provision for lease
incentives |
(3,165) |
Gain on disposal |
2,150 |
|
37,495 |
|
|
Gains on Investment Properties
Sold |
|
Original cost of investment
properties sold |
(15,339) |
Sale proceeds |
30,500 |
Profit on investment properties
sold |
15,161 |
Recognised in previous periods |
13,011 |
Recognised in current period |
2,150 |
|
15,161 |
3. BASIC AND DILUTED
EARNINGS PER SHARE
The earnings per ordinary share are based on the net profit for
the period of £57,358,000 (30 June
2016 net profit of £26,836,000) and 1,299,412,465
(30 June 2016: 1,299,412,465)
Ordinary Shares, being the weighted average number of shares in
issue during the period.
4. EARNINGS
Earnings for the period to 30 June
2017 should not be taken as a guide to the results for the
year to 31 December 2017.
5. SHARES
As at 30 June 2017 the total
number of shares in issues is 1,299,412,465 (30 June 2016: 1,299,412,465).
6. NET ASSET
VALUE
The net asset value per ordinary share is based on net assets of
£1,155,001,000 (30 June 2016:
£1,124,607,000) and 1,299,412,465 (30 June
2016: 1,299,412,465) ordinary shares.
7. DIVIDENDS
PERIOD TO 30 JUNE 2017 |
Rate
(pence) |
£’000 |
Dividend for the period 1 October
2016 to 31 December 2016, paid 28 February 2017 |
0.92 |
11,955 |
Dividend for the period 1 January
2017 to 31 March 2017, paid 31 May 2017 |
0.92 |
11,955 |
|
|
23,910 |
A dividend of 0.92p per share for the period 1 April 2017 to 30 June
2017 was paid on 31 August
2017. Under International Financial Reporting Standards,
these unaudited financial statements do not reflect this
dividend.
8. DIVIDENDS
No Director has an interest in any transactions which are, or
were, unusual in their nature or significance to the Group. The
Directors of the Company received fees for their services totalling
£111,000 (30 June 2016: £114,000) for
the six months ended 30 June 2017,
none of which was payable at the period end (30 June 2016: Nil). Standard Life Investments
(Corporate Funds) Limited received fees for its services as
Investment Manager. The total charge to the Income Statement during
the period for these fees was £4,576,000 (30
June 2016: £4,512,000) of which £50,000 was administration
fees (30 June 2016: £50,000).
£2,312,000 (30 June 2016: £2,287,000)
of this total charge remained payable at the period end.
9. TAXATION
TAXATION ON PROFIT ON ORDINARY
ACTIVITIES COMPRISES |
£’000 |
Release of deferred tax asset |
2,606 |
Corporation tax charge |
17 |
|
2,623 |
During the year to 31 December
2016 the Group recognised a net deferred tax asset of
£6,515,000. This was a result of the Group forecasting it would
begin to utilise tax losses built up since inception to offset
future taxable profits. During the half year to 30 June 2017, £2,606,000 of this asset was
written-off as these tax losses begin to be
utilised.
The company owns one UK Limited Company, Brixton Radlett
Property Limited (“BRPL”). As the losses of the Group cannot be
used to offset the profits of BRPL, the profits of this Company are
subject to corporation tax in the UK, at a rate of 20%. For the
half year to 30 June 2017, this is
estimated at £17,000.
10. FINANCIAL INSTRUMENTS AND
INVESTMENT PROPERTIES
The lowest level of input is the three month LIBOR yield curve
which is a directly observable input.
There were no transfers between levels of the fair value
hierarchy during the six months ended 30
June 2017. Explanation of the fair value hierarchy:
Level
1
Quoted prices (unadjusted) in active markets for identical assets
or liabilities that the entity can access at the
measurement date.
Level
2
Use of a model with inputs (other than quoted prices included in
level 1) that are directly or indirectly observable market
data.
Level
3
Use of a model with inputs that are not based on observable market
data.
Sensitivity of measurement to variance
of significant unobservable inputs:
The fair value of investment properties is calculated using
unobservable inputs as described in the annual report and accounts
for the year ended 31 December 2016.
The fair value of the derivative interest rate swap contract is
estimated by discounting expected future cash flows using current
market interest rates and yield curves over the remaining term of
the instrument. The fair value of the bank loans are estimated by
discounting expected future cash flows using the current interest
rates applicable to each loan. There have been no transfers between
levels in the year for items held at fair value.
Fair value hierarchy
The following table shows an analysis of the fair values of
investment properties recognised in the balance sheet by level of
the fair value hierarchy:
30 June 2017 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Investment properties |
- |
- |
1,309,844 |
1,309,844 |
The lowest level of input is the underlying yields on each
property which is an input not based on observable market data.
The following table shows an analysis of the fair value of bank
loans recognised in the balance sheet by level of the fair value
hierarchy:
30 June 2017 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Loan Facilities |
- |
266,222 |
- |
266,222 |
The lowest level of input is the interest rate applicable to
each borrowing as at the balance sheet date which is a directly
observable input.
The following table shows an analysis of the fair values of
financial instruments and trade receivables and payables recognised
in the balance sheet by level of fair value hierarchy:
30 June 2017 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Interest rate swap |
- |
(2,841) |
- |
(2,841) |
Trade and other receivables |
- |
18,777 |
- |
18,777 |
Trade and other payables |
- |
(24,509) |
- |
(24,509) |
The lowest level of input is the three month LIBOR yield curve
which is a directly observable input. The carrying amount of trade
and other receivables and payables is equal to their fair value,
due to the short term.
11. FINANCING
The Company has fully utilised all of the £150 million facility
in place with Barclays Bank Plc.
The Company has in place an interest rate swap with Barclays
Bank Plc totalling £150 million. The fair value in respect of this
interest rate swap as at 30 June 2017
is a liability of £2,841,000 (June
2016: Liability of £5,347,000).
The Company has fully utilised all of the £100 million facility
in place with Cornerstone Real Estate Advisors Europe LLP.
The Company has in place a £50 million revolving credit facility
with Barclays Bank Plc none of which was utilised at the period
end.
12. SUBSIDIARY UNDERTAKINGS
The Company owns 100 per cent of the issued ordinary share
capital of UK Commercial Property Finance Holdings Limited (UKCFH),
a company incorporated in Guernsey whose principal business is that
of a holding company.
The Company owns 100 per cent of the issued share capital of UK
Commercial Property Estates Holdings Limited (UKCPEH), a company
incorporated in Guernsey whose principal business is that of a
holding company. UKCPEH Limited owns 100 per cent of the issued
share capital of UK Commercial Property Estates Limited, a company
incorporated in Guernsey whose principal business is that of an
investment and property company. UKCPEH also owns 100% of Brixton
Radlett Property Limited, a UK company, whose principal business is
that of an investment and property company.
UKCFH owns 100 per cent of the issued ordinary share capital of
UK Commercial Property Holdings Limited (UKCPH), a company
incorporated in Guernsey whose principal business is that of an
investment and property company.
UKCFH owns 100 per cent of the issued share capital of UK
Commercial Property GP Limited, (GP), a company incorporated in
Guernsey whose principal business is that of an investment and
property company.
UKCPT Limited Partnership, (GLP), is a Guernsey limited
partnership, and it holds a portfolio of properties. UKCPH and GP,
have a partnership interest of 99 and 1 per cent respectively in
the GLP. The GP is the general partner and UKCPH is a limited
partner of the GLP.
UKCFH owns 100 per cent of the issued share capital of UK
Commercial Property Nominee Limited, a company incorporated in
Guernsey whose principal business is that of a nominee company.
In addition the Group wholly owns seven Jersey Property Unit
Trusts (JPUTs) namely Junction 27 Retail Unit Trust, Charles Darwin
Retail Unit Trust, St Georges Leicester Unit Trust, Kew Retail Park
Unit Trust, Pride Hill Retail Unit Trust, Riverside Mall Retail
Unit Trust and Rotunda Kingston Property Unit Trust. The principal
business of the Unit Trusts is that of investment in property.
Principal Risks and Uncertainties
The Group’s assets consist of direct investments in UK
The Group’s assets consist of direct investments in UK
commercial property. Its principal risks are therefore related to
the UK commercial property market in general, but also the
particular circumstances of the properties in which it is invested
and their tenants. Other risks faced by the Group include economic,
strategic, regulatory, management and control, financial and
operational. These risks, and the way in which they are mitigated
and managed, are described in more detail under the heading
Principal Risks and Uncertainties within the Report of the
Directors in the Company’s Annual Report for the year ended
31 December 2016. The Group’s
principal risks and uncertainties have not changed materially since
the date of that report and are not expected to change materially
for the remaining six months of the Group’s financial year.
Statement of Directors’ Responsibilities in
Respect of the Half Yearly Financial Report to 30 June 2017
We confirm that to the best of our knowledge:
The condensed set of half yearly financial statements have been
prepared in accordance with IAS 34 “Interim Financial Reporting”,
and give a true and fair view of the assets, liabilities, financial
position and return of the Company.
The half yearly Management Report includes a fair value review
of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the company
during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
On behalf of the Board
Andrew Wilson
Chairman
12 September 2017
End of announcement