COVID-19 and Dividend Update

23 April 2020

STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
 

LEI: 549300HHFBWZRKC7RW84

COVID-19 AND DIVIDEND UPDATE
 

This announcement contains Inside Information as defined under the Market Abuse Regulation (EU) No. 596/2014.
 

Standard Life Investments Property Income Trust Limited (LSE: SLI), today provides an update in relation to the impact of COVID-19 on the Company.  The Company entered the crisis in a robust position, with a diversified portfolio of UK commercial property that is heavily weighted towards the industrial sector; it also has prudent gearing and significant capital resources. 
 

Portfolio Valuation

The portfolio valuation as at 31 March 2020 was £458.6 million which represents a 4.9% like for like decline in valuation from 31 December 2019. The components of the movement in valuation, split by sector, are shown in the table below.

The Company’s portfolio is well diversified with a 52.3% weighting to the industrial sector and only 8.5% in the retail sector and 7.3% in the other commercial sector which includes leisure. The Company owns no shopping centres.

	Portfolio Value as at 31 Mar 2020 (£m)	Exposure as at 31 Mar 2020 (%)	Like for Like Capital Value Shift (excl transactions & CAPEX)	Capital Value Shift (incl transactions (£m)
			(%)
External valuation at 31 Dec 19				493.2
Retail	39.0	8.5	-7.7	-3.2
South East Retail		2.0	-9.4	-0.9
Rest of UK Retail		0.0	0.0	0.0
Retail Warehouses		6.5	-7.1	-2.3
Offices	146.3	31.9	-4.1	-17.0
London City Offices		2.9	-0.7	-0.1
London West End Offices		3.0	-4.9	-0.7
South East Offices		15.1	-4.4	-13.9
Rest of UK Offices		10.9	-4.5	-2.3
Industrial	240.1	52.3	-5.0	-12.8
South East Industrial		13.6	-4.9	-3.2
Rest of UK Industrial		38.7	-5.1	-9.6
Other Commercial	33.2	7.3	-4.5	-1.6
External valuation at 31 Mar 20	458.6	100.0	-4.9	458.6

Financial Resources

The Company is in a strong financial position. It has a robust, prudently geared balance sheet with significant financial resources available of £47 million being the unutilised amount of its low cost, flexible revolving credit facility with The Royal Bank of Scotland (“RBS”). As at 20 April the Company also had £5.9 million of cash.
 

Gearing

The Company has a Loan to Value (“LTV”) of 24.4%, based on the 31 March 2020 valuation and the cash balance above; the debt comprises a term loan of £110 million and a revolving credit facility of £55 million of which £8 million has been utilised, both with RBS. The facilities expire in April 2023 and currently have an overall blended interest rate of 2.65% per annum. 
 

Bank Covenants

As at 31 December 2019, the Company reported the following amounts in relation to its loan covenants:

	Cover / Limit
Actual Interest Cover	683% (Limit 175%)
LTV*	28.3% (Limit 55%)

*Loan value less cash held in RBS accounts divided by pledged portfolio
 

In terms of headroom, net rental income would need to fall by 74% and property values would need to fall by 50% for covenants to be breached based on the 31 December 2019 numbers. In addition there are four properties still available to be pledged which were valued at £53 million at end of December. 

Rent collection

As at close of business on 20 April 2020, the Company had received payments reflecting 66% of rents due for what can collectively be termed advance billing for the second quarter of the year; this comprises both old and new English quarter days (25^th March and 1^st April) and the Scottish quarter day (28^th February). The figures below include those tenants with whom it has been agreed, and have paid, on a monthly in advance basis. Assuming those tenants continue to pay rent monthly the collection figure should increase to 74%. The statistics, split between sectors, are shown below.

The impact of the virus and associated restrictions on how we live, work and play is felt by every company, and this Company’s team of asset managers are working closely with our tenants to understand their needs. We believe that this is a crisis that impacts on individuals as much as companies and we take the Social aspects of ESG very seriously. We firmly believe that by helping tenants now and building better relationships we will have better occupancy over future months and years, which will in turn benefit the Company’s cash flow. 

	% collected compared to contracted rent per sector
Industrial	65%
Retail	60%
Offices	72%
Other	100%
Leisure	39%
Overall	66%

The payment rate is continuing to rise and the Investment Manager is in close communication with tenants to understand their difficulties and assess where genuine challenges exist which can be alleviated by alternative rent solutions from deferral of repayment to rent rebates in return, for example, for extensions of leases.
 

Dividend

The Company confirms that it intends to pay a quarterly dividend of 1.19p per share, in respect of the three month period to 31 March 2020, which is expected to be declared and payable in May 2020. This reflects the fact that a significant proportion of rent for this period was paid in advance, prior to the impact from the Covid-19 pandemic. The Company is acutely aware of the importance of quarterly dividends payable to shareholders, and whilst the Company experienced some disruption to cash collection in the quarter to 31 March 2020, it will deploy a small part of the financial resources that it has available to cover the shortfall in income for this period. However, in light of the current uncertainty and in the absence of a clear resolution to Covid-19 and its impact on the economy and the ability of businesses to conduct normal activities, the rent collection for the period to 30 June 2020, and potentially thereafter, will be materially impacted which is likely to affect the Company’s future dividends. The Board will continue to closely monitor the situation in relation to rent collection and keep its future dividend policy under review accordingly.
 

Year end results

While the Company announced its fourth quarter NAV statement on 4 February 2020, due to the impact of COVID-19 and guidance from both the Company’s auditors and the Financial Conduct Authority, the release of the Company’s final full year 2019 results is now expected to be made during May 2020.  In addition, a full quarterly net asset value statement for the quarter ending 31 March 2020 will also be issued in due course.
 

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:  [phone] or [e-mail]
 

Graeme McDonald - Senior Fund Control Manager, Aberdeen Standard Investments

Tel: [phone] or [e-mail]