Net Asset Value(s)

RNS Number : 7443Q

UK Commercial Property Trust Ltd

17 April 2009

 



UK COMMERCIAL PROPERTY TRUST LIMITED

Net Asset Value

For the three month period from 1 January 2009 to 31 March 2009

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.

Net asset value

The unaudited net asset value per share of UK Commercial Property Trust Limited as at 31 March 2009 was 67.6p.  This represents a decrease of 5.1 per cent. from the net asset value per share as at 31 December 2008.

The net asset value per share is based on the external valuation of the property portfolio prepared by CB Richard Ellis Limited as at 31 March 2009 of £526.2 million.

The net asset value per share is calculated under International Financial Reporting Standards ('IFRS').

The net asset value per share includes all current period income and is calculated after deduction of all dividends paid prior to 31 March 2009.  It does not include provision for any unpaid dividends for the periods prior to 31 March 2009 including the dividend for the quarter to 31 March 2009. It is expected that the shares will go ex-dividend on 13 May 2009 and that the dividend of 1.3p per share will be paid on 29 May 2009.  The adjusted net asset value per share after deducting such quarterly dividend is 66.3p.

On 17 March 2009 the Company bought back 28,571,429 Ordinary Shares of 25p each at a total cost of £15 million.  This resulted in a positive contribution to the net asset value per share of 0.5p per share.  The NAV per share at 31 March 2009 is based on 838,554,858 shares of 25p each, being the total number of shares in issue at that time.

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 from 1 January 2009 to 31 March 2009.

UK Commercial Property Trust Limited	Per  Share  (p)	Attributable Assets (£m)
Net assets as at 1 January 2009	71.2	617.3
Unrealised decrease in valuation of property portfolio	(4.0)	(33.9)
Capital expenditure during the period	(0.0)	(0.3)
Income earned for the period	1.4	11.5
Expenses for the period	(0.2)	(1.7)
Dividend paid on 27 February 2009	(1.3)	(11.4)
Contribution of share buy back 17 March 2009 to NAV per share	0.5	(15.0)
Net assets as at 31 March 2009	67.6	566.5

UK Commercial Property Trust Limited
Net Asset Analysis as at 31 March 2009	£m	%
Property Portfolio
Office	273.4	48.3
Retail	155.9	27.5
Industrial	96.9	17.1
Total Property	526.2	92.9
Net Current Assets	40.3	7.1
Total Net Assets as at 31 March 2009	566.5	100.0

The annualised total expense ratio of the Company for the period ended 31 March 2009, based on the average total assets as at 31 March 2009 and on the basis of annualised expenses, was 0.85% (December 2008: 0.85%).  For the purposes of this calculation, 'expenses' includes the costs of running the Group, including the investment management fee, administration fees, Directors' fees, insurance costs, Board costs, registrar costs and any irrecoverable VAT, but excludes, capital expenditure and refurbishment and irrecoverable property running costs.

Over the period the Company had no borrowings. However, as per the 20 June 2008 announcement, the Company has an £80 million seven year term loan facility with Lloyds Banking Group plc now in place.

Review of the period

As the UK's economic indicators have been fed through the system in the last 3 months, many forecasters have not been slow in revising their forecasts. GDP forecasts (consensus down to  -3.0% from -1.5% for 2009), house prices, consumer and business confidence are all down whilst unemployment continues to rise, with February recording the 12th consecutive monthly increase. 

The UK base rate has continued to fall to 0.5% representing a further, though questionable, move to stimulate the economy. Quantitative Easing has now been introduced into the MPC's armoury of initiatives in a further attempt to improve confidence in the financial markets but the likely 50% increase in the PSBR over 2009/2010 has further weakened the economic outlook, with many expecting a short-lived period of deflation to be followed in the medium term by accelerating inflation.

There remains little positive news for commercial property; the expectation and realisation of £2.5 bn of rights issues has resulted in real estate equities underperforming the market average, with property derivatives and many forecasters pricing in further capital value falls in 2009. In saying that, however, the IPD Monthly Index did record slower falls in capital values than in Q4 2008, with falls of -3.01% in January 2009 and -3.1% in February 2009 compared to -5.67% and -5.84% in November 2008 and December 2008 respectively. The IPD total return for All Property for the 12 months to 28 February 2009 was -24.3%.

  IPD All Property rental values fell by a further 0.9% in February 2009, pushing the annual rate down to -3.0% and still falling, led by Central London offices with West End rental values falling -3.3% in February alone.

The IPD All Property equivalent yield at the end of February was up to 8.9% (from 8.7% in January) with secondary property yields rising. 

Investment volumes remain thin, consistent with the level of uncertainty in the market, although there are tentative signs of the prime end of the market beginning to stabilise as equity players recognise the significant margin between property yields and the risk free alternative as they invest in those assets which offer long leases to good covenants and minimal risk.

Given this background, the value of the Company's portfolio has fallen by -6.1% during the quarter. The largest falls have been in those areas where the outlook for rents is at its worst, namely Central London offices and bulky goods retail warehousing (which have fallen in value by -7.6% and -9.4% respectively over the quarter), whilst the Company's distribution warehouses,  which are well let on long leases, recording falls in the region of  -2.0%.

The quieter occupational market manifested itself in no new lettings over the quarter, although the office space formerly occupied by Kaupthing (in administration) at Colmore Row, Birmingham is now under offer, highlighting that such a market does still exist for the right property on the right terms. The company's void level remains broadly the same at 3.45% whilst rent collection efficiency for the March 2009 quarter does show a marginal improvement over the December 2008 quarter at 98% collected after 7 days.

There were no sales or purchases during the quarter. The Company remains ungeared with available cash reserves of approx £40.3m and a loan facility in place with Lloyds Banking Group.

  Breakdown in valuation movements over the period 1 January 2009  to 31 March 2009

Set out below is a breakdown of the movement in the external valuation of the property portfolio over the period from 1 January 2009 to 31 March 2009.

UK Commercial Property Trust Limited	Exposure % as at 31 March	Capital Value Shift %	£m
External Valuation at  1 January 2009			560.10
Sub Sector Analysis
Retail	29.62	-7.24	-12.18
High St - South East	9.86	-3.70	-1.99
Shopping Centres	9.52	-8.41	-4.60
Retail Warehouses	10.25	-9.38	-5.59
Offices	51.96	-5.89	-17.11
West End	20.54	-7.59	--8.88
South East	12.58	-5.39	-3.78
Rest of UK	18.84	-4.30	--4.46
Industrial	18.42	-4.54	-4.61
South East	11.01	-6.12	-3.78
Rest of UK	7.40	-2.09	-0.83
Adjustment for disposals			0.00
Adjustment for acquisitions			0.00
External valuation at 31 March 2009		-6.05%	526.2

Material Events

On 16th April the Company completed the purchase of the freehold interest in Kew Retail Park, Richmond (an Open A1 retail park let to Mothercare, Boots, Next, Gap and TK Maxx) for £31.4m representing 6.98% net initial yield.  The purchase price was met from the Company's existing cash reserves.

Other than the above, the Board is not aware of any significant events or transactions which have occurred between 31 March 2009  and the date of publication of this statement which would have a material impact on the financial position of the Company.

Enquiries

The Company Secretary, Northern Trust International Fund Administration Services (Guernsey) Limited - 01481 745338

Robert Boag/Gerry Brady/Gary Hutcheson, Ignis Investment Services Limited - 0141 222 8000

  Important Note

The above information is unaudited and has been calculated by Ignis Investment Services Limited.

 

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