Standard LifeInvProp Net Asset Value

 
TIDMSLI 
 
3 May 2019 
 
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI) 
 
LEI: 549300HHFBWZRKC7RW84 
 
Unaudited Net Asset Value as at 31 March 2019 
 
Key Highlights 
 
Solid Performance 
 
  * Net asset value ("NAV") per ordinary share was 91.1p (Dec 18 - 91.0p), a 
    rise of  0.1%, resulting in a NAV total return, including dividends, of 
    1.4% for Q1 2019; 
 
  * The portfolio valuation (before CAPEX) increased by 0.3% on a like for like 
    basis, whilst the IPD/MSCI Monthly Index dropped by 0.8% over the same 
    period. 
 
  * NAV adversely impacted by the movement in the Company's interest rate swap, 
    which now has a negative worth of GBP1.86 million (Q4 2018: GBP804,000). This 
    value will revert to GBPnil on maturity of the swap in 2023. 
 
Investment and letting activity 
 
  * No purchases or sales were made during the quarter 
  * Three lettings were completed during the quarter securing a total of GBP 
    132,000pa 
  * Lease to Tesco renewed for a term of 15 years with tenant break at year 10 
    securing a rent of GBP107,250pa (same as previous rent). 
  * After the quarter end three rent reviews totalling GBP703,000 were agreed on 
    industrial assets, securing an uplift of GBP135,000pa, (23.8%), on the 
    previous rent. 
  * Also after the quarter end, the Company took a surrender of a lease over an 
    office in Staines and simultaneously re-let it on a 10 year lease at GBP 
    715,000pa, which was above the previous rental level. 
 
Strong balance sheet with prudent gearing 
 
  * Prudent LTV* of 24.4% at the quarter end, one of the lowest in the 
    Company's peer group and the wider REIT sector. 
 
Attractive dividend yield 
 
  * Dividend yield of 5.3% based on a quarterly dividend of 1.19p and the share 
    price of 90.4p as at 31 March 2019 compares favourably to the yield on the 
    FTSE All-Share REIT Index (4.3%) and the FTSE All-Share Index (4.2%) as at 
    the same date. 
 
*LTV calculated as Debt less cash divided by portfolio value 
 
Net Asset Value ("NAV") 
 
The unaudited net asset value per ordinary share of Standard Life Investments 
Property Income Trust Limited ("SLIPIT") at 31 March 2019 was 91.1p. The net 
asset value is calculated under International Financial Reporting Standards 
("IFRS"). 
 
The net asset value incorporates the external portfolio valuation by Knight 
Frank LLP at 31 March 2019. 
 
Breakdown of NAV movement 
 
Set out below is a breakdown of the change to the unaudited NAV calculated 
under IFRS over the period 1 January 2019 to 31 March 2019. 
 
                             Per  Share  Attributable         Comment 
                                (p)      Assets (GBPm) 
 
Net assets as at 1 January      91.0        369.4 
2019 
 
Unrealised increase in          0.4          1.7      Like for like increase 
valuation of property                                 of 0.3% in property 
portfolio                                             portfolio 
 
CAPEX  in the quarter           -0.1         -0.3     CAPEX predominantly at 
                                                      Kings Business Park, 
                                                      Bristol and Basinghall 
                                                      Street, London 
 
Net income in the quarter       0.1          0.2      Dividend cover of 104% 
after dividend                                        in the quarter with GBP 
                                                      14m of RCF still 
                                                      available for 
                                                      investment 
 
Interest rate swap - mark       -0.2         -1.0     Increase in swap 
to market revaluation                                 liabilities in the 
                                                      quarter as expectations 
                                                      of an upward move in 
                                                      interest rates continue 
                                                      to be muted. 
 
Other movements in reserves     -0.1         -0.4     Movement in lease 
                                                      incentives in the 
                                                      quarter 
 
Net assets as at 31 March       91.1        369.6 
2019 
 
 
 
 
European Public Real Estate  31 Mar 2019  31 Dec 2018 
Association ("EPRA")* 
 
EPRA Net Asset Value             GBP371.5m      GBP370.2m 
 
EPRA Net Asset Value per           91.5p        91.2p 
share 
 
The Net Asset Value per share is calculated using 405,865,419 shares of 1p each 
being the number in issue on 31 March 2019. 
 
* The EPRA net asset value measure is to highlight the fair value of net assets 
on an on-going, long-term basis. Assets and liabilities that are not expected 
to crystallise in normal circumstances, such as the fair value of financial 
derivatives, are therefore excluded. 
 
Investment Manager Commentary 
 
It is no surprise that the Brexit negotiations dominated Q1 and investment 
transaction levels in UK real estate, along with take up, were well below 
average. 
 
In this environment we were pleased to complete three new lettings and a lease 
renewal. Despite all the market commentary about the retail sector, one letting 
was of a retail unit that previously had been let to Maplin. We also renewed a 
lease to Tesco that was due to expire in 2020 to give an extra 10 years income 
security. 
 
The familiar theme of industrials being the best performing sector, and retail 
the worst, continued into the first quarter of 2019 and looks set to remain the 
case for some time yet. The structure of the Company's investment portfolio 
remains supportive for continued outperformance compared to the IPD / MSCI 
index, and holding a large exposure to industrial / logistics and small 
exposure to retail remains the correct balance. 
 
After the quarter end we also completed on the surrender and re-letting of an 
office in Staines. This exemplifies our active approach to asset management - 
following one of our regular tenant meetings we became aware that the tenant 
wanted to downsize in the building and would probably exercise their break 
clause in 2021. We agreed to jointly market the building with them, so that our 
experience in that market could be utilised, and we quickly identified a new 
tenant, who wanted the whole building on a new ten year lease. A three-way deal 
is never easy, but by working together we were able create a transaction that 
worked for all parties. 
 
During the quarter we experienced an increase in voids notwithstanding the new 
lettings (7.4% compared to 5.9% at end of December 2018), as a distribution 
warehouse became vacant on lease expiry. We are currently marketing the unit, 
which is in Rugby, part of the "Golden Triangle" for industrials. 
 
Market commentary 
 
  * Looking at the UK it is clear that Brexit-related uncertainty is now 
    weighing very heavily on the economy and is responsible for much of the 
    recent slow-down. However, assuming a 'no deal' Brexit is avoided and 
    uncertainty around the terms of exit is not prolonged for too long, the 
    economy is poised for a recovery into 2020. 
  * Recent patterns in the occupier market have changed little, setting aside 
    the short-term turbulence caused by Brexit-related uncertainty, which is 
    making leasing deals more difficult to complete. Structural trends are the 
    key drivers of industrial strength and retail weakness, while strong office 
    fundamentals are being tempered by the uncertain climate as well as the 
    rapid growth of the flexible office sector. 
  * Capital values have fallen for five consecutive months, according to the 
    MSCI Monthly Index in March 2019. Liquidity in the market remains impaired, 
    with evidence growing that appetite for risk has diminished. A high 
    proportion of deals for alternative assets, in a quarter of otherwise muted 
    investment activity, emphasises that lower risk income focus. 
  * In our base case we expect a low return environment over the next three 
    years for the commercial real estate market, with total returns of just 
    1.9% per annum over the period 2019-21. We also expect the current wide 
    spread in sector level returns to endure in the short term and performance 
    to be dispersed across the risk spectrum. 
  * In the current environment, we believe it is prudent to secure income as a 
    priority over pushing for the highest immediate rent and to crystallise 
    profits from recent asset management success. The listed market continues 
    to build in large discounts for retail, although a rising wider equity 
    market has narrowed discounts to NAV for generalists and a number of stocks 
    focused on industrial and alternatives continue to trade at a premium. 
  * The first quarter is usually a busy time in the real estate lending market 
    but a combination of factors has brought it almost to a standstill in 2019. 
    While there are some active debt funds, appetite is at the low risk end of 
    the spectrum and willingness to lend against retail is almost non-existent. 
    Difficulty in refinancing shopping centres could be a trigger for 
    distressed sales. 
 
Investment themes 
 
  * The UK market is being weighed down by Brexit and, at the time of writing, 
    numerous outcomes remain possible, including a hard 'no deal' scenario. The 
    risk to market pricing and of occupier distress is greatest in that 
    scenario but, even if it is averted, it does not mean an end to the 
    uncertainty around the UK's future trading relationships. 
  * Passage of the EU Withdrawal Agreement merely moves the Brexit process on, 
    but with no clear visibility of the eventual nature of the long term UK-EU 
    relationship. Meanwhile, an extension of the Article 50 process offers no 
    resolutions and prolongs the current uncertainty. 
  * With the only definitive scenario - a 'no deal' Brexit - being the most 

    disruptive, in ASI's view, and more prolonged uncertainty being the 
    alternative, we do not expect risk to be rewarded in the short term. 
 
Dividends 
 
The Company paid total dividends in respect of the quarter ended 31 December 
2018 of 1.19p per Ordinary Share, with a payment date of 29 March 2019. 
 
Net Asset analysis as at 31 March 2019 (unaudited) 
 
                               GBPm         % of net assets 
 
Industrial                   260.5             71.3 
 
Office                       160.5             43.9 
 
Retail                        45.8             12.5 
 
Other Commercial              34.0              9.3 
 
Total Property Portfolio     500.8             137.0 
 
Adjustment for lease          -4.2             -1.2 
incentives 
 
Fair value of Property       496.6             135.8 
Portfolio 
 
Cash                          9.0               2.5 
 
Other Assets                  8.2               1.1 
 
Total Assets                 513.8             139.4 
 
Current liabilities          -12.0             -3.3 
 
Non-current liabilities      -132.2            -36.1 
(bank loans & swap) 
 
Total Net Assets             369.6             100.0 
 
Breakdown in valuation movements over the period 1 January 2019 to 31 March 
2019 
 
                         Portfolio  Exposure as   Like for     Capital 
                        Value as at  at 31 Mar  Like Capital Value Shift 
                         31 Mar 19   2019 (%)   Value Shift     (incl 
                           (GBPm)                    (excl     transactions 
                                                transactions     (GBPm) 
                                                  & CAPEX) 
 
                                                    (%) 
 
External valuation at                                           499.1 
31 Dec 2019 
 
Retail                     45.8         9.1         -1.6         -0.7 
 
South East Retail                       2.1         -2.7         -0.3 
 
Rest of UK Retail                       0.0         0.0          0.0 
 
Retail Warehouses                       7.0         -1.2         -0.4 
 
Offices                    160.5       32.1         0.6          0.9 
 
London City Offices                     2.6         0.8          0.1 
 
London West End Offices                 2.9         2.8          0.4 
 
South East Offices                     18.0         0.7          0.6 
 
Rest of UK Offices                      8.6         -0.5         -0.2 
 
Industrial                 260.5       52.0         0.5          1.3 
 
South East Industrial                  14.9         0.5          0.4 
 
Rest of UK Industrial                  37.1         0.5          0.9 
 
Other Commercial           34.0         6.8         0.7          0.2 
 
External valuation at      500.8       100.0        0.3         500.8 
31 Mar 2019 
 
Top 10 Properties 
 
                                       31 Mar 19 (GBPm) 
 
Hagley Road, Birmingham                    20-25 
 
Denby 242, Denby                           15-20 
 
Symphony, Rotherham                        15-20 
 
The Pinnacle, Reading                      15-20 
 
New Palace Place, London                   10-15 
 
Chester House, Farnborough                 10-15 
 
Hollywood Green, London                    10-15 
 
Marsh Way, Rainham                         10-15 
 
Timbmet, Shellingford                      10-15 
 
Atos,Birmingham                            10-15 
 
Top 10 tenants 
 
Name                           Passing     % of passing rent 
                               Rent GBP 
 
BAE Systems plc                 1,257,640         4.5% 
 
Technocargo Logistics Limited   1,242,250         4.4% 
 
Public sector                   1,158,858         4.1% 
 
The Symphony Group PLC          1,080,000         3.8% 
 
Timbmet Limited                  799,683          2.8% 
 
Bong UK Limited                  771,752          2.7% 
 
ATOS IT Services Ltd             750,000          2.7% 
 
Ricoh UK Limited                 696,995          2.5% 
 
CEVA Logistics Limited           652,387          2.3% 
 
GW Atkins                        625,000          2.2% 
 
Total                           9,034,565         32.0% 
 
Regional Split 
 
South East                        38.0% 
 
East Midlands                     17.0% 
 
West Midlands                     13.6% 
 
North West                        10.5% 
 
North East                         7.2% 
 
Scotland                           4.6% 
 
South West                         3.6% 
 
London West End                    2.9% 
 
City of London                     2.6% 
 
The Board is not aware of any other significant events or transactions which 
have occurred between 31 March 2019 and the date of publication of this 
statement which would have a material impact on the financial position of the 
Company. 
 
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 Investment Manager's website 
at: www.slipit.co.uk 
 
For further information:- 
 
Jason Baggaley - Real Estate Fund Manager, Aberdeen Standard Investments 
Tel [phone] or [e-mail] 
 
Graeme McDonald  - Senior Fund Control Manager, Aberdeen Standard Investments 
Tel [phone] or [e-mail] 
 
The Company Secretary 
Northern Trust International Fund Administration Services (Guernsey) Ltd 
Trafalgar Court, Les Banques, St Peter Port, GY1 3Q 
Tel: [phone] 
 
 
 
END 
 

(END) Dow Jones Newswires

May 03, 2019 08:28 ET (12:28 GMT)