Net Asset Value(s)

RNS Number : 1482B

UK Commercial Property Trust Ltd

21 October 2009

 



Net Asset Value/ Interim Management Statement

For the three month period from 1 July 2009 to 30 September 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 30 September 2009 was 67.7p.  This represents an increase of 2.9 per cent. from the net asset value per share as at 30 June 2009.

The net asset value per share is based on the external valuation of the property portfolio prepared by CB Richard Ellis Limited as at 30 September 2009 of £562.4 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 30 September 2009.  It does not include provision for any unpaid dividends for the periods prior to 30 September 2009 including the dividend for the quarter to 30 September 2009. 

Further to the announcement made on 6 October 2009, the Company declared a third interim dividend on Thursday 15 October 2009 in respect of the period from 1 July 2009 to 29 October 2009 of 1.7262p per Ordinary Share, with an ex dividend date of 21 October 2009, which will be paid on 30 November 2009. It should be noted that this period is slightly longer than three months. It was also noted in the announcement made on 6 October 2009 that it is intended that a fourth interim dividend will be paid in February 2010 in respect of the period from 30 October 2009 to 31 December 2009. As this period is slightly less than three months it is expected that the fourth interim dividend will be 0.8988p per Share.

The adjusted net asset value per share after deducting 1.3125p in respect of a notional dividend for the period 1 July 2009 to 30 September 2009 is 66.4p.

The NAV per share at 30 September 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 July 2009 to 30 September 2009.

UK Commercial Property Trust Limited	Per  Share  (p)	Attributable Assets (£m)
Net assets as at 1 July 2009	65.8	551.6
Unrealised increase in valuation of property portfolio	2.1	17.4
Capital expenditure during the period	(0.1)	(0.6)
Income earned for the period	1.4	11.8
Expenses for the period	(0.2)	(1.6)
Dividend paid on 28 August 2009	(1.3)	(11.0)
Net assets as at 30 September 2009	67.7	567.6

UK Commercial Property Trust Limited
Net Asset Analysis as at 30 September 2009	£m	%
Property Portfolio
Office	268.4	47.3
Retail	195.5	34.4
Industrial	98.5	17.4
Total Property	562.4	99.1
Net Current Assets	5.2	0.9
Total Net Assets as at 30 September 2009	567.6	100.0

The total expense ratio of the Company for the period ended 30 September 2009, based on the total assets as at 30 September 2009 and on the basis of annualised expenses, was 0.88%. 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 in place.

Review of the period 

Expectations that the economy is past the worst are now gaining traction although the central forecast for GDP growth remains low and slow with the re-engineering of the economy expected to take a number of years particularly as the full effects of unemployment are yet to be felt.  

The Government's quantitative easing programme has not yet reached the wider economy and, although there is some anecdotal evidence of banks' ability to lend, business and consumer confidence, together with investment appetite, remains fragile. For so long as this remains the case, the consensus is for interest rates to remain low.

The last two months of the quarter have seen the first signs of capital value uplift within the property market since the summer of 2007. The main source of this positive move has been the rally in prime yields as the focus of investor attention remains in a relatively narrow section of the market (i.e. prime assets, long leases, strong covenants). Although the definition of prime is slightly more fluid in the mind of some investors, the fact remains that there is more money in the market than available stock.  

Investment volumes, although improving, remain well behind those of 2008, with overseas money still accounting for the majority of transactions. The average initial yield for property has moved to 7.87%; however, for as long as the outlook for the economy remains uninspiring, weak occupational demand will mean that, in the short term, rents will continue to decline, albeit at a slower rate, with any positive outlook in rent not anticipated until 2011/2012.

The underlying increase in the portfolio valuation during Q2 was +3.19%, which is expected to be ahead of IPD Monthly and Quarterly benchmark.  

The key drivers of performance were the Company's industrial and retail stocks, which have respectively shown 5.07% and 4.07% capital value increase over the quarter, due primarily to yield compression within the distribution warehouse and retail warehouse sub sectors. Offices still made a positive contribution (1.88%), buoyed by continued investor focus on Central London stocks which have outweighed the negative impact of the falls in value of the Company's South East offices. These have shorter income and are susceptible to falls in ERV, which remain a feature of that market.

The level of voids has fallen to 2.86% of ERV as a result of lettings in the Company's office holdings and, although this is clearly positive, letting activity is nevertheless expected to remain muted.

The Company's bad debt provision as at 30th September was 1.04% of rent passing.  

The Company's key attributes remain the long leases let to good covenants with minimal voids and its strong income base, which together with the balance of the available debt facility will provide the basis to support the Company's dividend flow and its ambitions.

Breakdown in valuation movements over the period 1 July 2009 to 30 September 2009

Set out below is a breakdown of the movement in the external valuation of the property portfolio over the period from 1 July 2009 to 30 September 2009.

.

UK Commercial Property Trust Limited	Exposure %  as at  30 Sept*	Capital Value Shift* ( %)	£m
External Valuation at  1 July 2009			544.99
Sub Sector Analysis
Retail	34.76	4.07	7.65
High St - South East	9.46	2.63	1.37
Shopping Centres	8.54	0.00	0.00
Retail Warehouses	16.76	7.14	6.28
Offices	47.73	1.88	4.96
West End	19.86	4.97	5.29
South East	10.55	-1.08	-0.65
Rest of UK	17.32	0.33	0.32
Industrial	17.51	5.07	4.76
South East	10.04	3.14	1.72
Rest of UK	7.47	7.79	3.04
Adjustment for disposals			0.00
Adjustment for acquisitions			0.00
External valuation at 30 Sept 2009		3.19	562.36

Material Events

As announced to the stock exchange on 6 October 2009 the Company is proposing an acquisition of 11 properties with an aggregate market value of £146 million; please see the aforementioned announcement for more information.

Enquiries

The Company Secretary, Northern Trust International Fund Administration Services (Guernsey) Limited - 01481 745432

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

Nigel Russell/Graeme Caton/Graham Reaves, G&N Collective Funds Services Limited

0131 226 4411

Important Note

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

 

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