Debt Restructure

abrdn Property Income Trust Limited

(an authorised closed-ended investment company incorporated in Guernsey with registration number 41352)

LEI Number: 549300HHFBWZRKC7RW84

13 December 2022

ASSET MANAGEMENT UPDATE, DEBT RESTRUCTURE, MANAGEMENT FEE AND DIVIDEND GUIDANCE

abrdn Property Income Trust (“API” or the “Company”) is pleased to announce several initiatives that materially enhance the Company’s earnings for 2023 and beyond. These initiatives, which include asset management progress, debt restructuring and a management fee reduction, give the Board confidence to announce dividend guidance of 4.0p per share per annum for 2023 and 2024*, in line with the current dividend level.

Asset Management

At Explorer 1 & 2, the Company’s multi-let office investment in Crawley, two new lettings are under offer, potentially securing an annual rent of £299,000 p.a. These lettings will mean that over 95% of the available office space at the building has been let, with a total of four lettings having been completed in the last two years. This demonstrates the appeal of high-quality refurbished office space in good locations.

At 54 Hagley Road, Birmingham, terms have been agreed on a new lease, with the expectation of signing a binding contract by year end, on 21,500 sqft of vacant office accommodation to secure a further £408,000 p.a. This, combined with other contracted lettings, is expected to bring the vacancy rate of the portfolio down on a like-for-like basis from 9.3% as at end September 2022 to under 5%.

The Company has also exchanged on the sale of a small multi-let office in Bristol for £4.3m. The asset produces a rent of £322,500 p.a. subject to a lease expiry and a break in less than two years, at which point substantial capex would be required. The sale yield of 6.95% is attractive in the current market.

Refinancing of Debt

On 12 October 2022, the Company announced that it had completed an extension of its debt facilities that were due to expire in April 2023. The newly agreed term loan of £85m for three years from April 2023 was subject to a margin of 150bps over SONIA and an interest rate swap. At the time, there was heightened volatility and swap rates were high, exacerbated by political uncertainty, and the all-in cost of the term loan amounted to 6.97%.

In light of the change in the interest rate environment since completion, the Company has taken the decision to break the swap at a cost of £3.56m and replace it with an interest rate cap at a rate of 3.96%, retaining the attractive margin of 150bps previously agreed. The interest rate cap enables the Company to benefit from lower interest costs as SONIA falls, whilst providing protection in a rising rate environment such that, should SONIA increase, the maximum all-in financing rate of the term loan is capped at 5.46%. At the current SONIA rate of 2.92% the Company will pay interest of 4.42% on the term loan. The cost of the interest rate cap is £2.51m which will be amortised over the three-year tenor of the loan.

The cost of breaking the swap is a one-off charge to the income account impacting dividend cover in Q4 2022. This charge is consistent with the fair value mark-to-market loss through other comprehensive income that the Company would have suffered if the swap had been left in place, and there is therefore no material effect on the Company’s net asset value from breaking the swap.

Reduction of Investment Manager Fee

The Board is focussed on controlling the costs of the Company and, to this end, has agreed a 10bps reduction in the fee payable to the investment manager, effective from 1 January 2023. The fee will reduce to 60bps of Gross Asset Value (“GAV”) below £500m, and 50bps above £500m. The fee reduction would have had the effect of increasing dividend cover by 3.4% on the basis of the last published GAV.

Dividend guidance

The initiatives set out in this announcement give the Board confidence to provide dividend guidance of 4.0p per share per annum for 2023 and 2024*, thus maintaining the current dividend for two years. The Company expects that the dividends in 2023 and 2024 will be substantially covered by net income.

Jason Baggaley, fund manager of API commented: “I am delighted with the progress we have made on reducing vacancy in the portfolio. The last three years have not been easy for office lettings, however, we have been successful due to the quality of our offering, and the dedication of our asset managers. In October, we secured certainty over the debt refinance for the Company in difficult markets; in only a short amount of time there has been a very significant change in the market outlook for interest rates and with it, swap rates. The Board and Investment Manager have always taken an active approach to managing the Company, and so have taken the opportunity, given the change in market sentiment, to break the swap agreement and enter into a new interest rate cap thus enhancing earnings over the next three years. The cap also allows the Company to benefit from any future falls in interest rates in the next three years, which was not possible with the swap.”

* This is a target only and not a profit forecast. There can be no assurance that this target will be met.

All Enquiries:

Jason Baggaley Fund Manager  [e-mail]

Mark Blyth Deputy Fund Manager [e-mail]