31 January 2019
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 December 2018
Key Highlights
Solid Performance
Investment and letting activity
Strong balance sheet with prudent gearing
Attractive dividend yield
*LTV calculated as Debt less cash divided by portfolio value
Net Asset Value (“NAVâ€)
The unaudited net asset value per ordinary share of Standard Life Investments Property Income Trust Limited (“SLIPITâ€) at 31 December 2018 was 91.0p. The net asset value is calculated under International Financial Reporting Standards (“IFRSâ€).
The net asset value incorporates the external portfolio valuation by Knight Frank LLP at 31 December 2018.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated under IFRS over the period 1 October 2018 to 31 December 2018.
Per Share (p) | Attributable Assets (£m) | Comment | |||||||||
Net assets as at 30 Sep 2018 | 91.4 | 371.0 | |||||||||
Unrealised increase in valuation of property portfolio | 0.6 | 2.5 | Like for like increase in property portfolio of 0.7% | ||||||||
CAPEX & transaction costs in the quarter | -0.7 | -2.8 | Predominantly transaction costs at Hagley Road and capital expenditure on asset management initiative at Kirkgate, Epsom | ||||||||
Net income in the quarter after dividend | -0.1 | -0.3 | Continued strong income generation with dividend cover of 93% in the quarter. | ||||||||
Interest rate swaps mark to market revaluation | -0.1 | -0.7 | Increase in swap liabilities as a result of reduced expectations of a rise in interest rates. | ||||||||
Other movement in reserves | -0.1 | -0.3 | Movement in lease incentives in the quarter | ||||||||
Net assets as at 31 Dec 2018 | 91.0 | 369.4 | |||||||||
European Public Real Estate Association (“EPRAâ€)* |
31 Dec 2018 |
30 Sep 2018 |
|||||||||
EPRA Net Asset Value | £370.2m | £371.2m | |||||||||
EPRA Net Asset Value per share | 91.2p | 91.5p | |||||||||
The Net Asset Value per share is calculated using 405,865,419 shares of 1p each being the number in issue on 31 December 2018.
* 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
The final quarter of 2018 was significant for SLIPIT as we completed the purchase of the largest asset in the fund. 54 Hagley Road Birmingham is an edge of prime multi-let office that we believe has scope for strong rental growth over the next few years. This is due to a combination of local infrastructure improvements (a new tram stop is going to be built directly outside the building improving connectivity to the city centre), along with a large mixed use development further enhancing the immediate surroundings. The area has also seen a loss of office space due to residential conversion – thus reducing supply of competing space and making 54 Hagley Rd one of the best value for money offices in the area. The asset was acquired for £23.75m, reflecting a yield of 7.6%.
There was an increased level of negative press around the retail sector in December, although it appears that many valuations have been slow to react. Although the Company has limited exposure to the retail sector, those assets it does own all saw value declines greater than the IPD monthly index, but we feel it remains very important to reflect sentiment as well as direct transactional activity, and to mark to market. We are delighted that the two vacant retail units we have as a result of tenant failure are both under offer to new tenants.
The Company saw an increase in value of the portfolio of held assets as a result of the high exposure to industrial assets and of asset management lettings activity. The negative movement in the interest rate swap, costs of acquiring the new office in Birmingham, and capital expenditure on the refurbishment of several assets did however result in a small decline in the NAV.
Q4 also saw a significant reduction in void levels to 5.9% (Q3 2018 – 10.8%) with several large lettings, and the sale of a vacant industrial unit in Oldham. The two largest lettings (an industrial unit in Swadlincote and an office in Monck Street, London) secured rent of £1.2m pa. The Company now has 249 tenants, providing a diversified source of income, and an average unexpired term to earliest break of 6 years.
Market commentary
Investment outlook
Dividends
The Company paid total dividends in respect of the quarter ended 30 September 2018 of 1.19p per Ordinary Share, with a payment date of 30 November 2018.
Net Asset analysis as at 31 December 2018 (unaudited)
£m | % of net assets | |
Industrial | 259.2 | 70.2 |
Office | 159.6 | 43.2 |
Retail | 46.5 | 12.6 |
Other Commercial | 33.8 | 9.2 |
Total Property Portfolio | 499.1 | 135.2 |
Adjustment for lease incentives | -3.9 | -1.0 |
Fair value of Property Portfolio | 495.2 | 134.2 |
Cash | 8.3 | 2.2 |
Other Assets | 8.7 | 2.3 |
Total Assets | 512.2 | 138.7 |
Current liabilities | -12.7 | -3.5 |
Non-current liabilities (bank loans & swap) | -130.1 | -35.2 |
Total Net Assets | 369.4 | 100.0 |
Breakdown in valuation movements over the period 1 October 2018 to 31 December 2018
Portfolio Value as at 31 Dec 2018 (£m) | Exposure as at 31 Dec 2018 (%) | Like for Like Capital Value Shift (excl transactions & CAPEX) | Capital Value Shift (incl transactions (£m) | |
(%) | ||||
External valuation at 30 Sep 2018 | 479.0 | |||
Retail | 46.5 | 9.3 | -7.0 | -3.5 |
South East Retail | 2.2 | -6.5 | -0.8 | |
Rest of UK Retail | 0.0 | 0.0 | 0.0 | |
Retail Warehouses | 7.1 | -7.1 | -2.7 | |
Offices | 159.6 | 32.0 | 0.9 | 24.5 |
London City Offices | 2.6 | 0.0 | 0.0 | |
London West End Offices | 2.8 | 3.3 | 0.5 | |
South East Offices | 18.0 | 0.8 | 0.7 | |
Rest of UK Offices | 8.6 | 0.0 | 23.3* | |
Industrial | 259.2 | 51.9 | 2.0 | -1.3 |
South East Industrial | 14.9 | 1.4 | 1.0 | |
Rest of UK Industrial | 37.0 | 2.2 | -2.3** | |
Other Commercial | 33.8 | 6.8 | 1.3 | 0.4 |
External valuation at 31 Dec 2018 | 499.1 | 100.0 | 0.7 | 499.1 |
*Purchase of Hagley Rd Birmingham
** Sale of Oldham industrial unit
Top 10 Properties
31 Dec 18 (£m) | |
Hagley Road, Birmingham | 20-25 |
Denby 242, Denby | 15-20 |
Symphony, Rotherham | 15-20 |
Chester House, Farnborough | 10-15 |
The Pinnacle, Reading | 10-15 |
Hollywood Green, London | 10-15 |
Marsh Way, Rainham | 10-15 |
New Palace Place, London | 10-15 |
Timbmet, Shellingford | 10-15 |
Atos,Birmingham | 10-15 |
Top 10 tenants
Name | Passing Rent £ | % of passing rent |
BAE Systems plc | 1,257,640 | 4.5% |
Technocargo Logistics Limited | 1,242,250 | 4.4% |
Public sector | 1,158,858 | 4.1% |
The Symphony Group PLC | 1,080,000 | 3.8% |
Timbmet Limited | 799,683 | 2.8% |
Bong UK Limited | 756,620 | 2.7% |
ATOS IT Services Ltd | 750,000 | 2.7% |
Ricoh UK Limited | 696,995 | 2.5% |
CEVA Logistics Limited | 652,387 | 2.3% |
GW Atkins | 625,000 | 2.2% |
Total | 9,019,433 | 32.0% |
Regional Split
South East | 38.0% |
East Midlands | 16.9% |
West Midlands | 13.9% |
North West | 10.5% |
North East | 7.1% |
Scotland | 4.6% |
South West | 3.6% |
London West End | 2.8% |
City of London | 2.6% |
The Board is not aware of any other significant events or transactions which have occurred between 31 December 2018 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 which can be found at: www.slipit.co.uk
For further information:-
Jason Baggaley – Real Estate Fund Manager, Standard Life Investments
Tel +44 (0) 131 245 2833 or jason.baggaley@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Standard Life Investments
Tel +44 (0) 131 245 3151 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