Net Asset Value

Guernsey, 26 October 2017

UK Commercial Property Trust Limited
(“UKCPT” or the “Company”)
LEI : 213800JN4FQ1A9G8EU25
 

Net Asset Value at 30 September 2017

UK Commercial Property Trust Limited (FTSE 250, LSE: UKCM), which is advised by Standard Life Investments and owns a diversified portfolio of high quality income producing UK commercial property, announces its unaudited quarterly Net Asset Value (“NAV”) as at 30 September 2017.

Portfolio performance driving strong NAV uplift

• NAV per share up 1.7% to 90.4p (30 June 2017: 88.9p), providing a NAV total return of 2.7% over the quarter.

• Like-for-like portfolio capital value increased by 2.0% during the quarter; after allowing for capital expenditure on the existing portfolio, net capital growth was 1.7%, outperforming the MSCI/IPD Monthly index increase of 1.3% over the same period.

Successful asset management securing income and delivering value

During the quarter to 30 September 2017, the Company secured an additional £1.9 million of annual rental income, in line with estimated rental value (“ERV”), through a successful focus on asset management initiatives. In total, six new leases and three lease renewals with rent reviews were concluded, including:

• A new 21 year lease was completed with H&M generating £740,000 per annum following the completion of their new flagship store on Exeter High Street.  The new lease incorporates five-yearly upwards only rent reviews to the higher of open market rent or RPI indexation. 

• At Eldon House, City of London, a lease renewal with Adsati and a rent review with MLM Building Control Ltd secured improved rents totalling £297,500 per annum, 6% ahead of ERV. 

• Two new ten year leases at The Parade, Swindon to Greggs and Go South Coast have resulted in an additional income of over £71,500 per annum. 

• At Regent Circus, Swindon a new lease was secured with Indian restaurant Tiffins for a 20 year term in-line with ERV. 

The void rate of the portfolio decreased to 4.1% as at 30 September 2017 (30 June 2017: 4.4%), well below the latest available MSCI/IPD benchmark figure of 6.8% as at 30 June 2017. 99% of rent continues to be collected within 21 days of its due date.

Additional secure, long term and sustainable income generated through investment activity

• The Company completed its forward funding of the 280,000 sq. ft. industrial logistics warehouse in Burton-on-Trent with a payment of £17.5 million. The asset is occupied on a 15 year lease to Palletforce Ltd, with annually compounded inflation linkage (adjusted every five years), reflecting a yield on capital of 5.8%.

• The Company sold its smallest investment, an industrial warehouse at Loudwater, High Wycombe for £4.7 million, ahead of valuation.

Strong financial position and attractive dividend yield

• Financial resources of £43 million are currently available for targeted investment in-line with the Company’s strategy and investment policy.  In addition, further firepower from the undrawn £50 million revolving credit facility remains available.

• Low net gearing of 12.7%* (gross gearing of 17.5%*), one of the lowest in the Company’s peer group and the quoted REIT sector.

• Dividend yield of 4.0% at period end, comparing favourably to the FTSE All-Share Index (3.7%) and FTSE All-Share REIT Index (3.6%).

* Net gearing - Gross borrowing less cash divided by total assets (excluding cash) less current liabilities 
        Gross gearing - Gross borrowings divided by total assets less current liabilities

Andrew Wilson, Chairman of UKCPT, commented:

“Today's announcement shows further growth and outperformance from UKCPT’s portfolio, which continues to be driven by ongoing successful asset management initiatives, as well as the strategic recycling of capital into higher yielding properties.  The Company’s £1.36 billion portfolio offers diversification by location and sector, and produces a high quality and sustainable income stream which underpins a healthy dividend yield for shareholders.”

Will Fulton, Fund Manager of UKCPT, said:

“During the period we successfully realised a number of opportunities to strengthen the positioning and income profile of our portfolio. This was achieved through a series of asset management initiatives and the acquisition of an income producing asset which adds to UKCPT’s long-term and secure income stream. We continue to explore opportunities to grow the portfolio through selective acquisitions that are accretive to earnings, enhance dividend cover and offer the potential for asset management activity.”

Breakdown of NAV movement

Set out below is a breakdown of the change to the unaudited net asset value per share calculated under International Financial Reporting Standards ("IFRS") over the period from 1 July 2017 to 30 September 2017.

UK Commercial Property Trust Limited	Per  Share (p)	Attributable Assets (£m)	Comment
Net assets as at 1 July 2017	88.9	1,155.0
Unrealised increase in valuation of property portfolio	1.8	23.4	Like-for-like increase of 2.0%.
Gain on Sale	0.0	0.2	Gain relating to the sale of industrial warehouse at Loudwater.
Capital expenditure during the period	-0.1	-1.5	Includes final stage of the redevelopment at George Street, Edinburgh.
Income earned for the period	1.3	17.0	Equates to dividend cover of 88% for the quarter. Dividend cover for the year to date is 92%.
Expenses for the period	-0.6	-6.4
Dividend paid on 31 August 2017	-0.9	-12.0
Interest rate swaps mark to market revaluation	0.1	0.7	Improvement in swap liability as expectations of a rise in interest rates increase.
Net assets as at 30 September 2017	90.5	1,176.4
Deferred tax	-0.1	-1.3	Continued release of deferred tax asset.
Net assets as at 30 September 2017	90.4	1,175.1

*This adjustment reflects the ongoing write-off of the deferred tax asset as tax losses are utilised against profits.

Net Asset Value analysis as at 30 September 2017 (unaudited)

	£m	% of net assets
Retail	506.1	43.1%
Industrial	457.8	38.9%
Offices	267.4	22.8%
Leisure	131.3	11.2%
Total Property Portfolio	1,362.6	116.0%
Adjustment for lease incentives	-16.3	-1.4%
Fair value of Property Portfolio	1,346.3	114.6%
Cash	78.7	6.7%
Other Assets	25.0	2.1%
Total Assets	1,450.0	123.4%
Current liabilities	-24.4	-2.1%
Non-current liabilities (bank loans & swap)	-250.5	-21.3%
Total Net Assets	1,175.1	100.0

The NAV per share is based on the external valuation of the Company’s direct property portfolio. It includes all current period income and is calculated after the deduction of all dividends paid prior to 30 September 2017. It does not include provision for any unpaid dividends relating to periods prior to 30 September 2017, i.e. the proposed dividend for the period to 30 September 2017.

The NAV per share at 30 September 2017 is based on 1,299,412,465 shares of 25p each, being the total number of shares in issue at that time.

The EPRA NAV per share (excluding swap liability) is 90.6p (Jun 2017 – 89.1p) with EPRA earnings per share for the quarter (excluding deferred tax movement) being 0.82p (Jun 2017 – 0.86p).

Sector analysis

	Portfolio Value as at 30 Sep 2017 (£m)	Exposure as at 30 Sep 2017 (%)	Like for Like Capital Value Shift (excluding sales, purchases & capex)	Capital Value Shift (including sales & purchases)     (£m)
			(%)
Valuation as of 30 June 2017				1,323.1
Retail	506.1	37.1	2.4	11.9
High St – South East		2.8	0.0	0.0
High St – Rest of UK		5.0	1.8	1.2
Shopping Centres		7.9	1.6	1.7
Retail Warehouse		21.4	3.2	9.0
Offices	267.4	19.7	1.0	2.8
City		2.2	2.7	0.8
West End		6.8	1.8	1.6
South East		1.7	0.0	0.0
Rest of UK		9.0	0.3	0.4
Industrial	457.8	33.6	2.6	24.1
South East		23.8	2.7	4.1
Rest of UK		9.8	2.3	20.0
Leisure/Other	131.3	9.6	0.5	0.7
External valuation at 30 September 2017	1,362.6	100.0	2.0	1,362.6

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 Company’s website which can be found at: www.ukcpt.co.uk

For further information please contact:

Will Fulton / Graeme McDonald, Standard Life Investments
Tel: [phone]

Edward Gibson-Watt / Oliver Kenyon, J.P. Morgan Cazenove
Tel: [phone]

Richard Sunderland / Claire Turvey, Eve Kirmatzis, FTI Consulting
Tel: [phone]
[e-mail]

The above information is unaudited and has been calculated by Standard Life Investments Limited.