Interim Management Statement

RNS Number : 9997E

F&C Commercial Property Trust Ld

17 May 2013

 



F&C Commercial Property Trust Limited

Interim Management Statement

For the Period from 1 January 2013 to 17 May 2013

Investment Objective

The investment objective of the Company is to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.

Performance Summary

Total Return	For the three month period ended 31 March 2013
Net asset value per share *	1.5%
Ordinary Share price	1.4%
Investment Property Databank Quarterly Universe	1.2%
FTSE All-Share Index	10.3%

Capital Values	As at  31 March 2013	As at 31 December 2012	% Change
Net asset value per share *	98.8p	98.8p	-
Ordinary Share price	103.6p	103.7p	-0.1
Premium to net asset value *	4.9%	5.0%
Gearing * #	27.4%	27.8%
Net gearing * $	13.9%	15.0%

Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.

*  Calculated under International Financial Reporting Standards ('IFRS'). Net asset value total return is calculated assuming dividends are re-invested

#  Gearing: Borrowings/total assets (less current liabilities)

$  Net gearing: (Borrowings - cash)/total assets (less current liabilities and cash)

Review of the First Quarter

Property Market Overview

Total market returns in the first quarter of 2013 were 1.2 per cent, according to the IPD Quarterly Universe, registering an improvement on the previous quarter. However, capital values moved lower in the three month period and rental growth was modest and patchy.

London is still out-performing the regions with Central London shops and offices being particularly strong. However, the quarter saw the regions experience the greater improvement in quarterly performance, although total returns remain subdued in absolute terms. Over the period total returns turned positive for Rest of South East offices (South East offices outside London) but stayed negative for Rest of UK offices for the sixth consecutive quarter. The quarter saw offices deliver the strongest performance among the three main commercial property sectors, followed by industrials, with retail lagging.

Investors are focused on long-term security of income which has benefited prime property in established locations. The preservation of the income stream has become critical against a muted economic backdrop and there is a marked gap in net income growth between prime and more secondary stock.

Investment activity is holding up well, with institutions becoming net investors during the quarter. It is a lack of prime stock rather than a lack of investor appetite which is restricting growth in the volume of transactions. Overseas investors are still driving the market but are widening their search beyond their core focus of Central London.

Property investors have remained cautious given the weak tone of the domestic economy and continued uncertainty in the Eurozone but sentiment has steadied and there is competition for property which meets their investment criteria.

Portfolio Overview

As at 31 March 2013 the Company's portfolio was valued at £888.5 million (31 December 2012: £879.7 million). After allowing for capital expenditure, this represented a 0.6 per cent increase in the valuation over the quarter.

The portfolio recorded a total return of 2.0 per cent over the period, compared with the IPD  Quarterly Universe total return of 1.2 per cent and the portfolio was ranked on the 12^th percentile against 234 benchmark funds.

The strongest performing property sub-sectors of the portfolio were South East Retail, driven by the Company's largest asset St. Christopher's Place Estate, London W1, retail warehouses and South East offices. The weakest total return came from Rest of UK offices but these properties produced a positive total return and no sub-sector in the portfolio recorded a negative total return.

The Company incurred capital expenditure of £3.2 million, mainly relating to three of its main projects at Burma Road, Winchester; Thames Valley Two, Reading; and St. Christopher's Place Estate.

The student accommodation at Burma Road, Winchester is progressing well and three of the five blocks have already been handed over to the University of Winchester with the two remaining blocks due for completion in June 2013, in readiness for the new academic year. Long leased properties with strong credit and RPI linked or fixed rental uplifts continue to be highly sought after by investors resulting in this holding experiencing some further yield compression over the quarter. The refurbishment of Thames Valley Two, Reading has completed and we currently have two lettings at due diligence stage with good levels of demand for the remaining space. The project at St. Christopher's Place Estate relates to the refurbishment of an office floor and its part conversion to create four residential units. These works are progressing on budget and programme.

There were no sales or purchases over the period, although the sale of Charles House, 5-11 Regent Street, London SW1, at £36.0 million, completed on 5 April 2013 with contracts having been exchanged on 27 November 2012. The property was acquired by The Crown Estates, the freeholder, at a net initial yield of 5.96 per cent showing a profit of £1.6 million compared with the previous external valuation at 30 September 2012 of £34.4 million.

Void levels within the portfolio are 7.0 per cent of estimated rental value (excluding properties held for development) compared with the benchmark void rate of 10.2 per cent. This equates to approximately £3.5 million of rental value of which approximately 30 per cent is currently under offer. As previously reported, the Company has had an exposure to recent retailer defaults with units let to Comet and JJB Sports, with a combined rental liability of £1.3 million per annum. Negotiations to re-let both these units are now well advanced.

Dividends

Monthly interim dividends, in respect of the year ended 31 December 2012, each of 0.5 pence per share, were paid on 31 January, 28 February, 28 March and 26 April 2013. The Board has recently announced a first monthly interim dividend in respect of the year to 31 December 2013, of 0.5 pence per share, payable on 31 May 2013 to shareholders on the register on 17 May 2013.

Top Ten Holdings

Properties valued in excess of £100 million	Sector
London W1, St. Christopher's Place Estate	Retail
Properties valued between £70 million and £100 million
Newbury, Newbury Retail Park	Retail Warehouse
Properties valued between £50 million and £70 million
London SW1, Cassini House, St James's Street	Offices
London SW19, Wimbledon Broadway	Retail
Properties valued between £40 million and £50 million
Solihull, Sears Retail Park	Retail Warehouse
Properties valued between £30 million and £40 million
Rochdale, Dane Street	Retail Warehouse
London W1, 25 Great Pulteney Street	Offices
Uxbridge, 3 The Square, Stockley Park	Offices
London SW1, Charles House, 5-11 Regent Street*	Offices
Properties valued between £20 million and £30 million
Chorley, Units 6 and 8 Revolution Park	Industrial

* The sale of London SW1, Charles House, 5-11 Regent Street completed on 5 April 2013 with contracts having been exchanged on 27 November 2012.

Geographical Analysis

Location	31/03/2013 Percentage of portfolio		31/12/2012 Percentage of portfolio
London - West End	39.3		38.9
South East	27.8		27.7
Midlands	11.4		11.5
North West	11.1		11.2
Scotland	7.4		7.6
Eastern	1.9		2.0
Rest of London	1.1		1.1
Total	100.0		100.0

Sector Analysis

Sector	31/03/2013 Percentage of portfolio		31/12/2012 Percentage of portfolio
Offices	36.0		36.3
Retail	27.3		26.9
Retail Warehouses	20.3		20.5
Industrial	14.2		14.4
Other	2.2		1.9
Total	100.0		100.0

Issue of Shares

During the quarter to 31 March 2013 the Company issued 14.0 million Ordinary Shares, raising gross proceeds of £14.1 million. The Company has not issued any Ordinary Shares since the end of the quarter.

Subsequent Events

Other than the completion of the sale of Charles House referred to above, the Board is not aware of any significant events or transactions which have occurred since 31 March 2013 and the date of publication of this statement which would have a material impact on the financial position of the Company.

Quarterly and Key Information

This statement and further information regarding the Company, including movements in the share price since the end of the period and the Group's most recent annual and interim reports, can be found at the Company's website www.fccpt.co.uk.

Enquiries:

Richard Kirby

F&C REIT Asset Management LLP

Tel: [phone]

Graeme Caton

Winterflood Securities Limited

Tel: [phone]

 

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