Standard LifeInvProp Unaudited Net Asset Value as at 31 March 2021

 
TIDMSLI 
 
6 May 2021 
 
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI) 
 
LEI: 549300HHFBWZRKC7RW84 
 
Unaudited Net Asset Value as at 31 March 2021 
 
Net Asset Value and Valuations 
 
·    Net asset value ("NAV") per ordinary share was 85.3p (Dec 2020 - 82.0p), 
an increase of 4.0%, resulting in a NAV total return, including dividends, of 
4.9% for Q1 2021; 
 
·    The portfolio valuation (before CAPEX) increased by 2.5% on a like for 
like basis, whilst the MSCI Monthly Index increased by 0.9% over the same 
period. 
 
Investment and letting activity 
 
·    Further restructuring of the portfolio to have assets fit for purpose in a 
post COVID-19 world with the completion of three sales - two of them were 
offices (Derby: £4.65m and Dartford: £3.1m) and one a retail warehouse in 
Bradford for £2.65m. 
 
·    Lease renewal of entire office building in Kidlington, Oxford for 10 years 
securing rent of £429,000pa. 
 
·    Letting of whole office in Bishops Stortford on 10 year lease to previous 
sub tenant of part at £290,000pa. 
 
Financial Position and Gearing 
 
·    Strong balance sheet with significant financial resources available for 
investment of £55 million in the form of the Company's low cost, revolving 
credit facility plus uncommitted cash after dividend and other financial 
commitments of  £9 million. 
 
·    As at 31 March 2021, the Company had a Loan to Value ("LTV") of 21.3%*. 
The debt currently has an overall blended interest rate of 2.725% per annum. 
 
*LTV calculated as debt less cash divided by portfolio value 
 
Increased Dividend 
 
·    Dividend announced in relation to Q1, 2021 of 0.8925p, an increase of 25% 
on previous quarterly dividend 
 
Rent collection 
 
It is perhaps not surprising that Q1 2021 has seen a lower level of rental 
collection than other quarters in the last 15 months. With lockdown starting 
before Christmas, and coming at the end of a very difficult year for many 
companies, it has been noticeably harder to collect rent from some tenants. 
Many tenants continue to engage, and we have agreed deferrals, lease extensions 
or write offs as appropriate:  however it was disappointing that the Government 
extended the moratorium on enforcing lease arrangements and we still have some 
tenants that have chosen not to pay or engage in a lease restructure.  The 
Company continues to make prudent assumptions when providing for bad debts in 
the accounts with a provision of £3.3m as at 31 March 2020 (versus £2.58m at 
31st December 2020). 
 
Over the course of 2020 a total of 94.1% of rent due was collected. The table 
below shows how that was spread out over the course of 2020, and into 2021. 
 
Year     Quarter    % Received 
 
2020     1              99% 
 
         2              92% 
 
         3              93% 
 
         4              92% 
 
2020 FY                 94% 
 
2021     1              87% 
 
         2              86% 
 
Dividends 
 
The Board recognises the importance of dividends to its shareholders especially 
when the COVID-19 crisis has forced many companies, across multiple sectors of 
the economy, to cancel or suspend their dividends. The Company has continued to 
pay out a dividend during the pandemic with dividends paid in 2020 equating to 
80% of the 2019 level. In addition the Company recently announced a fifth 
interim dividend relating to 2020 to comply with the REIT rules. 
 
The 2020 dividend was covered 108% by income and, as the uncertainties caused 
by the pandemic gradually ease, the Board has now taken the decision to 
increase the quarterly dividend to 0.8925p. This is 25% higher than the 
quarterly dividends of 0.714p paid during the pandemic.  Given current rent 
collection rates the Board believes this rate is sustainable even though the 
recent asset sales will reduce rental income until reinvestment occurs. The 
Board will keep the quarterly dividend under review as lockdown measures are 
eased and as rental collection levels improve further and the reinvestment of 
the asset sales proceeds takes place. 
 
Share Buybacks 
 
 
In the quarter the Company bought back a further £4.5m shares resulting in 
total buybacks to date of £6m. These buybacks have been at significant 
discounts to NAV which has enhanced both NAV and earnings per share. 
 
Net Asset Value ("NAV") 
 
The unaudited net asset value per ordinary share of Standard Life Investments 
Property Income Trust Limited ("SLIPIT") at 31 March 2021 was 85.3p. 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 2021 of £438.6 million. 
 
Breakdown of NAV movement 
 
Set out below is a breakdown of the change to the unaudited NAV calculated 
under IFRS over the period 31 December 2020 to 31 March 2021. 
 
                              Per  Share   Attributable   Comment 
                                 (p)        Assets (£m) 
 
Net assets as at 31 December     82.0          331.5 
2020 
 
Unrealised increase in           2.7           10.8       Like for like increase 
valuation of property                                     of 2.5% in property 
portfolio                                                 valuations. 
 
Gain on sale                     0.0            0.1       Combined gain on sale 
                                                          relating to sales of 
                                                          Valley Road, Bradford, 
                                                          Persimmon House, 
                                                          Dartford and 
                                                          Interfleet House, 
                                                          Derby 
 
CAPEX  in the quarter            0.0            0.0       Limited CAPEX in 
                                                          quarter 
 
Net income in the quarter        0.4            1.5       Rolling 12 month 
after dividend                                            dividend cover of 124% 
 
Interest rate swaps mark to      0.2            0.8       Decrease in swap 
market revaluation                                        liabilities in the 
                                                          quarter as interest 
                                                          rate expectations rose 
 
Other movements in reserves      -0.3          -1.3       Movement in lease 
                                                          incentives in the 
                                                          quarter 
 
Share buybacks                   0.3           -3.5       Investment in own 
                                                          shares at discounts to 
                                                          NAV 
 
Net assets as at 31 March        85.3          339.9 
2021 
 
 
 
 
European Public Real Estate         31 Mar 2020        31 Dec 2020 
Association ("EPRA") 
 
EPRA Net Tangible Assets              £342.8m             £335.2m 
 
EPRA Net Tangible Assets per           86.0p               82.9p 
share 
 
The Net Asset Value per share is calculated using 398,547,386 shares of 1p each 
being the number in issue on 31 March 2021. 
 
Investment Manager Review and Portfolio Activity 
 
Q1 2021 was dominated by another severe lockdown in the UK, with many companies 
unable to trade, individuals required to work from home where possible, and 
ability to travel outside a small local area restricted. Such conditions proved 
difficult for real estate: however we were able to continue with the 
restructuring of the portfolio with the completion of three sales - two of them 
offices (Derby: £4.65m and Dartford: £3.1m) and a retail warehouse in Bradford 
for £2.65m. The sales reflect our view that these assets were not best placed 
to meet changing work, social and shopping patterns in a post COVID-19 world. 
 
We were delighted to renew an office lease on a whole building on the outskirts 
of Oxford for ten years (tenant break in year 5) in return for a capital 
contribution towards works of improvement the tenant was undertaking to the 
building. The new rent was slightly above the previous rent. We also completed 
a new ten year lease to an existing sub tenant on an office in Bishop's 
Stortford having taken an early surrender from the head tenant who had not been 
in occupation. The two lettings demonstrate that well located offices that meet 
tenants' needs remain in demand. During the quarter we also completed the lease 
renewal of a retail unit in London (at previous passing rent) and a ten year 
lease extension on an industrial asset in Birmingham. 
 
Since quarter end the initial easing of restrictions has seen an immediate pick 
up in enquiries on vacant accommodation, with encouraging inspection levels. We 
have a number of lease regear negotiations underway, and are hopeful that the 
improvement in sentiment will help with conversion rates. 
 
Oli Lord, the Deputy Fund Manager on SLIPIT for the last three years, has been 
promoted into a new role in the Transaction team at ASI, and Mark Blyth has 
been appointed in his place. Mark has been with ASI for 10 years, and has 20 
years' experience in real estate, most recently as Deputy Fund Manager of a 
significant Pooled Pension Fund.  Whilst we are sad to see Oli leave the team 
and we look forward to working with him in his new role, we are excited to 
bring in some new ideas and experience to the team. 
 
The Company's LTV of 21.3% remains low compared to the AIC peer group (25.0%) 
with the Company also having significant headroom in its banking covenants. The 
Company's interest rate swap liability fell in the quarter to £2.9 million (Dec 
20: £3.7 million). This liability will unwind to £0 on maturity in 2023. 
 
Investment Manager Market review 
 
Economic Outlook 
 

·   With a successful vaccine roll-out and the gradual relaxation of 
restrictions, there is a real sense that the UK economy is gathering momentum. 
The final composite PMI, which measures activity in the services and 
manufacturing sectors, increased to 56.4 in March, up from the 49.6 recorded in 
February. UK construction activity has also expanded at the fastest pace in 
more than six years in March according to the IHS Markit/CIPS UK construction 
PMI, which rose to 61.7 in March, from 53.3 in February. 
 
·   A survey for the Recruitment & Employment Confederation (REC) and KPMG 
pointed to a sharp recovery in hiring activity as the quarter drew to an end, 
with recruiters reporting the strongest rebound in permanent hiring for six 
years in March. The increase in hiring activity was relatively broad-based, 
with only retail seeing a decline in activity. Consumer-facing services stand 
to benefit in particular as momentum builds into Q2. 
 
·   Financial markets have revised up their expectations for medium-term 
inflation since the start of this year. Both headline and core inflation will 
move higher in many economies over the next two quarters, driven by a 
combination of energy and food price base effects. The ASI Research Institute 
(ASIRI) believes that many of the drivers of higher inflation are temporary and 
will reverse by the end of the year. In this context, monetary policy is likely 
to remain highly accommodative, although the chance of negative rates has 
significantly diminished. 
 
Occupier Trends 
 
·   The outlook for the office sector continues to generate much debate. A 
recent survey conducted by CIPD, the professional body for HR and people 
development, found that 63% of participants in its employer survey are 
developing a hybrid working model where employees spend only part of the time 
in the office. The uncertainty surrounding the occupational demand for office 
space is clearly reflected in elevated availability rates across most major UK 
office markets at present. 
 
·   After a record breaking year in 2020, the logistics market is set for 
another strong year of activity, with a large number of live requirements 
currently in the market. Increased online retail activity, demand from parcel 
delivery companies and a potential boost in demand from the onshoring of supply 
chains should continue to support take-up numbers. 
 
·   Retail fortunes continue to be very mixed. Food led, and budget / DIY 
retailers continue to trade well, however fashion and hospitality led schemes 
face continued headwinds. The recent announcement by John Lewis that they will 
close a further eight stores combined with the demise of Debenhams and many 
national multiples will leave glaring holes in many locations. 
 
Investment Trends 
 
·   MSCI monthly index figures show a relatively resilient Q1 with a total 
return of 2.2%. Again Logistics led the way, however in March there was a 
capital gain of 0.5% in retail warehouse valuations - a marked change from 
recent times. It should be noted that high street retail and shopping centres 
continued to decline in value, as did offices, but to a lesser extent. 
 
·   With a national lockdown in place throughout Q1, it is unsurprising that 
transaction activity slowed markedly. Early indications of investment volumes 
for the quarter suggest a total of around £6.6 billion. This follows the £16.7 
billion that was transacted in Q4, the highest quarterly total of 2020. 
 
·   The positive sentiment towards the industrial and alternative sectors was 
evident once again in the first quarter. Combined, these sectors accounted for 
close to 70% of investment volumes and eight of the top ten transactions. 
 
·   The student accommodation market recorded a noticeable pick-up in activity 
as investors look through the current disruption and focus on the longer term 
growth outlook for the sector. As has been the case for a number of years, the 
preferred route for investors seeking to gain critical mass in this sector is 
through portfolio acquisitions. 
 
Outlook 
 
·   Despite the UK spending almost all of the first quarter in a strict 
lockdown, real estate values have risen in both January and February, with 
modest losses in office and retail more than offset by robust capital 
appreciation in the industrial sector. Broadly, this is expected to continue 
through 2021, although we expect declines in office values to accelerate. 
 
·   The significant deterioration in fundamentals and the absence of a driver 
to absorb the elevated vacancy informs our materially below consensus forecasts 
for central London offices. We anticipate rents falling by more than 10% in 
2021, although this is a more modest decline than the historic relationship 
between vacancy and rents would suggest. As the challenges are largely 
structural, we don't envisage the kind of sharp recovery seen in cyclical 
downturns, meaning we also expect central London offices to underperform over 
the 3-year forecast horizon. 
 
·   Signs of bifurcation in the retail sector have been growing and are 
explicitly reflected in our forecasts. Discretionary, fashion-led retail in 
particular is expected to see further significant value loss. In contrast, 
retail that is skewed towards grocery, value and core bulky goods categories 
has largely stabilised. We are forecasting a modest rise in values across 
retail warehousing this year, despite some further falls in rental values, 
allied to a high income return. 
 
Net Asset analysis as at 31 March 2021 (unaudited) 
 
                                   £m           % of net assets 
 
Industrial                       220.1               64.8 
 
Office                           136.1               40.0 
 
Retail                            49.3               14.5 
 
Other Commercial                  33.1                9.7 
 
Total Property Portfolio         438.6               129.0 
 
Adjustment for lease              -7.1               -2.1 
incentives 
 
Fair value of Property           431.5               126.9 
Portfolio 
 
Cash                              16.4                4.8 
 
Other Assets                      17.9                5.3 
 
Total Assets                     465.8               137.0 
 
Current liabilities              -13.4               -3.9 
 
Non-current liabilities          -112.5              -33.1 
(bank loans & swap) 
 
Total Net Assets                 339.9               100.0 
 
Breakdown in valuation movements over the period 1 January 2021 to 31 March 
2021 
 
                        Portfolio     Exposure as  Like for Like    Capital Value 
                      Value as at 31   at 31 Mar   Capital Value     Shift (incl 
                      Mar 2021 (£m)    2021 (%)     Shift (excl   transactions (£m) 
                                                   transactions & 
                                                       CAPEX) 
 
                                                        (%) 
 
External valuation at                                                   437.7 
31 Dec 20 
 
Retail                     49.3          11.3           1.8             -1.8 
 
South East Retail                         1.9           0.0              0.0 
 
Rest of UK Retail                         0.0           0.0              0.0 
 
Retail Warehouses                         9.4           2.1             -1.8 
 
Offices                   136.1          31.0           0.4             -6.7 
 
London City Offices                       3.0           -0.8            -0.1 
 
London West End                           3.0           0.0              0.0 
Offices 
 
South East Offices                       14.0           0.4             -2.7 
 
Rest of UK Offices                       11.0           0.8             -3.9 
 
Industrial                220.1          50.1           4.2              8.9 
 
South East Industrial                    11.2           6.2              2.9 
 
Rest of UK Industrial                    38.9           3.6              6.0 
 
Other Commercial           33.1           7.6           1.5              0.5 
 
External valuation at     438.6          100.0          2.5             438.6 
31 Mar 21 
 
Top 10 Properties 
 
                                       31 Mar 21 (£m) 
 
Hagley Road, Birmingham                    25-30 
 
B&Q, Halesowen                             20-25 
 
Symphony, Rotherham                        15-20 
 
Marsh Way, Rainham                         15-20 
 
Timbmet, Shellingford                      15-20 
 
The Pinnacle, Reading                      10-15 
 
Hollywood Green, London                    10-15 
 
Atos Data Centre, Birmingham               10-15 
 
New Palace Place, London                   10-15 
 
Badentoy, Aberdeen                         10-15 
 
Top 10 tenants 
 
Tenant Name                        Passing Rent     % of total Passing Rent 
 
B&Q Plc                             1,560,000                 5.7% 
 
BAE Systems plc                     1,257,640                 4.6% 
 
The Symphony Group Plc              1,225,000                 4.5% 
 
Public sector                       1,158,858                 4.2% 
 
Schlumberger Oilfield UK plc        1,138,402                 4.1% 
 
Jenkins Shipping Co Ltd              843,390                  3.1% 
 
Timbmet Group Limited                799,683                  2.9% 
 
Atos IT Services UK Ltd              772,710                  2.8% 
 
CEVA Logistics Limited               692,117                  2.5% 
 
Time Wholesale Services (UK)         656,056                  2.4% 
Ltd 
 
                                    10,103,856               36.8% 
 
Regional Split 
 
South East                       30.3% 
 
West Midlands                    19.1% 
 
East Midlands                    13.5% 
 
Scotland                         10.3% 
 
North West                        9.8% 
 
North East                        6.5% 
 
South West                        4.5% 
 
London West End                   3.0% 
 

City of London                    3.0% 
 
The Board is not aware of any other significant events or transactions which 
have occurred between 31 March 2021 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 3QL 
 
Tel: [phone] 
 
 
 
END 
 
 

(END) Dow Jones Newswires

May 06, 2021 02:00 ET (06:00 GMT)