Net Asset Value(s)

RNS Number : 2661W

Standard Life Invs Property Inc Tst

27 July 2009

 



STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED

30 June 2009

Key Highlights

• Net asset value per ordinary share was 50.5p as at 30 June 09, a decrease of 3.7% from 31 March 09

• Cash held by the Trust of £32.1m as at 30 June 09

• Loan to value of 42.8% after assuming cash balances are used to offset debt

• Dividend yield of 8.5% using the share price as at 23 July 2009 of 47p

Net Asset Value 

The unaudited net asset value per ordinary share of Standard Life Investments Property Income Trust Limited at 30 June 2009 was 50.5 pence. This is a decrease of 3.7 percentage points over the net asset value of 52.5 pence per share at 31 March 2009.  

The net asset value is calculated under International Financial Reporting Standards ('IFRS') and includes a provision for payment of a proposed interim dividend of 1.00p per ordinary share for the quarter to 30 June 2009.

The net asset value incorporates the external portfolio valuation by Jones Lang LaSalle at 30 June 2009. The property portfolio will next be valued by an external valuer during September 2009 and the next quarterly net asset value will be published thereafter.  

Breakdown of NAV movement

Set out below is a breakdown of the change to the unaudited net asset value per share calculated under IFRS over the period 31 March 2009 to 30 June 2009.

	Pence per share	% of opening NAV
Net Asset Value per share as at 31 March 2009	52.5	-
Unrealised loss following revaluation of property portfolio (including the effect of gearing)	(4.6)	(8.7%)
Increase in interest rate swap valuation	2.3	4.5%
Other movement in reserves	0.3	0.5%
Net Asset Value per share as at 30 June 2009	50.5	(3.7%)

The ungeared decrease in the valuation of the property portfolio over the quarter to 30 June 2009 was 4.2% (this figure excludes Capital Court, Uxbridge which was purchased on 1 April 2009).

Cash position

As at 30 June 2009 the Company had borrowings of £84.4m and a cash position of £32.1m (excluding rent deposits) therefore cash as a percentage of debt was 38.0%.

Loan to value ratio

As announced on 1 July 2009 the Company will be entering into revised banking arrangements with RBS under which the loan to value calculation method will be altered. The new loan documentation will calculate loan to value as borrowings less any cash placed with RBS as a percentage of the market value of the investment property.  As at 30 June 2009 the loan to value ratio using the method, and assuming all cash is placed with RBS as an offset to the loan balance, was 42.8% (31 March 2009: 38.5%).  The revised covenant level is 65% (previously 55%).

Total asset analysis as at 30 June 2009 (unaudited)

	£m	%
Office	47.5	30.6
Retail	22.5	14.5
Industrial	38.1	24.5
Other	14.1	9.1
Total Property Portfolio	122.2	78.6
Cash	32.1	20.7
Other Assets	1.1	0.7
Total Gross Assets	155.4	100.0

Breakdown in valuation movements over the period 31 March 2009 to 30 June 2009

	Exposure as at 30 June 2009 (%)	Capital Value Movement on Standing Portfolio (%)	£m
External Valuation at 31/03/09			113.5
Sub Sector Analysis:
RETAIL
South East Standard Retail	4.7	-	-
Retail Warehouses	13.8	(7.0)	(1.3)
OFFICES
Central London Offices	9.4	(4.9)	(0.6)
South East Offices	17.5	(2.7)	(0.2)
Rest of UK Offices	11.9	(1.6)	(0.2)
INDUSTRIAL
South East Industrial	6.7	(2.9)	(0.3)
Rest of UK Industrial	24.5	(3.2)	(1.0)
OTHER	11.5	(7.9)	(1.2)
Capital Court Uxbridge			13.5
External Valuation at 30/06/09	100	(4.2)	122.2

Investment Manager Commentary 

As at the end of June 2009 the UK Commercial Property market had fallen by 44% from its peak in June 2007. For the first time in the last 24 months there are encouraging signs that yields are stabilising and even hardening in the transactions market for the best properties. In June the IPD monthly index showed a capital decline of 0.9% (the smallest monthly decline since Sept 07), indeed 5 subsectors experienced positive yield impact in June. Over the quarter IPD reported a capital fall of 4.7% giving a total return of -2.7%.

Although the yield story is encouraging, rental levels continue to fall across the sectors, and this will drive further falls in capital values. Although the general economic conditions remain poor, and a number of tenants are struggling, there are signs of increased occupational demand where some tenants have identified opportunities to lock into good quality accommodation at below trend cost. 

The Company saw a total return on its portfolio of 0.1%, again outperforming the IPD monthly index. Its property portfolio has now outperformed the IPD monthly index over 3 months, as well as 1, 3 and 5 years.

During the quarter the company purchased an office building for £10.98m in Uxbridge. The purchase showed an initial yield of 9.95%. Since purchase the leases have been regeared to extend the average unexpired term and remove some upward / downward rent review provisions and the vacant suite has been let. The capital value of this asset has increased by 5.6% net of restructuring costs since purchase, as well as enhancing the revenue account. 

Progress has been made with a number of lettings, and although they have not yet completed, would reduce voids to 3.5% when complete. Over the quarter one tenant went into administration; however a guarantor is in place and is contracted to meet the rental obligations for the next 4 years.

The Company has agreed terms to change the covenant tests in the loan facility with RBS, such that the LTV covenant will increase to 65% from 55% and the LTV calculation will have a full cash offset. The new covenants are more in line with the peer group, and mean that the Company has greater flexibility over the use of its cash resources (currently £32m / 21% portfolio value) to further enhance total return and in particular the revenue account. As a consequence of the change in bank covenants the margin on the loan has increased to 150bps. At this level the Company retains a covered dividend on current projections.

All Enquiries:

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Ltd

Trafalgar Court

Les Banques

GY1 3Q1

Tel: [phone]

Fax: [phone]

APENDIX 1

Historical adjusted IFRS NAVs per Ordinary Share are as follows:

30/06/09	50.53p
31/03/09	52.49p
31/12/08	61.65p
30/09/08	87.24p
30/06/08	101.59p
31/03/08	102.71p
31/12/07	111.60p
30/09/07	130.70p
30/06/07	137.16p
31/03/07	134.42p
31/12/06	132.68p
30/09/06	129.51p
30/06/06	130.20p
31/03/06	124.28p
31/12/05	116.46p
30/09/05	107.12p
30/06/05	103.88p
31/03/05	101.34p
31/12/04	99.00p

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