Standard LifeInvProp Net Asset Value(s)

 
TIDMSLI 
 
1 May 2018 
 
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI) 
 
LEI: 549300HHFBWZRKC7RW84 
 
Unaudited Net Asset Value as at 31 March 2018 
 
Key Highlights 
 
Solid Performance 
 
  * Net asset value ("NAV") per ordinary share was 89.4p (Dec 2017 - 87.6p), a 
    rise of 2.1%, resulting in a NAV total return, including dividends, of 3.4% 
    for Q1 2018; 
 
  * The portfolio valuation increased by 1.9% on a like for like basis, whilst 
    the IPD/MSCI Monthly Index rose by 1.0% over the same period. 
 
Portfolio activity 
 
  * Purchase of a 216,180 sq ft logistics facility in Shellingford, Oxfordshire 
    on the established White Horse Business Park, for GBP11.5m, reflecting an 
    initial yield of 6.5%. The unit is let for 25 years without a break, and is 
    subject to five yearly upwards only rent reviews fixed at 2.5% pa. 
 
  * Purchase of the Grand National Retail Park in Aintree for a price of GBP 
    6.125m, reflecting an initial yield of 6.85%.  The park is adjacent to the 
    race course, and consists of 4 units let as a leisure park to Premier Inn, 
    Pure Gym, Mitchells and Butler, and KFC. The investment benefits from 
    strong trade associated with the race course and provides opportunity for 
    asset management to extend leases from the current 8.1 years. 
 
  * Purchase of an industrial complex in Sandy, Bedfordshire for GBP6.02m, 
    reflecting a yield of 6.25%. The property is located immediately adjacent 
    to a junction of the A1, approximately 40 miles north of central London, 
    and is let for an unexpired term of 19 years at a rent of GBP3.17psf, subject 
    to indexed increases in rent every five years. 
 
Sales 
 
  * Completion of the sale of Elstree Tower in Borehamwood for GBP20m previously 
    announced in September 2017. 
 
  * Post the period end completed the sale of Charter Court, a multi let office 
    in Slough for GBP13.25m, 9.6% ahead of the end December valuation. 
 
The transactions above have continued the process of selling assets where 
future returns are expected to come under pressure and reinvesting into assets 
in favoured sectors that offer secure income and better future performance 
characteristics. 
 
Successful asset management activity 
 
  * Completed the letting of 1 Marsh Way, Rainham, the Company's largest void. 
    The property has been let on a 15 year lease (with tenant break option in 
    the tenth year) at a starting rent of GBP636,200pa. 
 
  * Voids rate as at 31 March 2018 was 5.8% (Dec 2017 - 7.7%). 
 
Strong balance sheet with prudent gearing 
 
  * LTV* of 14.3% and uncommitted cash of GBP44.1m post the quarter end 
    transactions with RCF of GBP35m also still available for investment in future 
    opportunities. 
 
  * Two year extension of existing GBP35million Revolving Credit facility ("RCF") 
    secured with Royal Bank of Scotland. While the margin over LIBOR on the RCF 
    will increase from 1.2% to 1.45% this extension will mean the RCF will now 
    expire at same time as the term loan in April 2023 providing the Company 
    with increased certainty of both availability and cost of financing to this 
    date. The interest rate on the Company's GBP110 million term loan remains 
    fixed at 2.725%. 
 
Premium rating 
 
  * Continued strong demand for the Company's shares with 8.25m shares issued 
    in the quarter raising proceeds of GBP7.6m. As at 24 Apr 2018 the share price 
    was 94.2p - a premium to the 31 March NAV of 5.4%. 
 
Attractive dividend yield 
 
  * Dividend yield of 5.1% based on a quarterly dividend of 1.19p as at 24 Apr 
    2018 compares favourably to the yield on the FTSE All-Share REIT Index 
    (3.8%) and the FTSE All Share Index (3.7%) as at the same date. 
 
*LTV calculated as Debt less cash (after sale of Charter Court) divided by 
portfolio value (excl Charter Court) 
 
Net Asset Value ("NAV") 
 
The unaudited net asset value per ordinary share of Standard Life Investments 
Property Income Trust Limited ("SLIPIT") at 31 Mar 2018 was 89.4p. 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 Mar 2018. 
 
Breakdown of NAV movement 
 
Set out below is a breakdown of the change to the unaudited NAV calculated 
under IFRS over the period 1 Jan 2018 to 31 Mar 2018. 
 
                               Per  Share (p) Attributable            Comment 
                                               Assets (GBPm) 
 
Net assets as at 31 Dec 2017        87.6          346.0 
 
Unrealised increase in              1.9            7.6      Mainly relates to like for 
valuation of property                                       like increase of 1.9% in 
portfolio                                                   property portfolio 
 
Loss on sales                       0.0           -0.2      Loss on sale of Bathgate 
 
CAPEX & purchase costs in the       -0.4          -1.7      Predominantly  acquisition 
quarter                                                     costs plus CAPEX 
 
Net income in the quarter           -0.2          -0.7      Dividend cover for the 
after dividend                                              quarter of 86% with 
                                                            uncommitted cash resources 
                                                            of GBP44m plus GBP35m RCF still 
                                                            available for investment 
                                                            which when utilised will 
                                                            allow the Company to move 
                                                            back towards a covered 
                                                            dividend. 
 
Interest rate swaps mark to         0.4            1.8      Decrease in swap 
market revaluation                                          liabilities in the quarter 
 
Share issues                        0.2            7.6      NAV accretive issue of 
                                                            8.25m shares in the quarter 
                                                            raising GBP7.6m 
 
Other movement in reserves          -0.1          -0.2      Movement in lease 
                                                            incentives in the quarter 
 
Net assets as at 31 Mar 2018        89.4          360.2 
 
 
  European Public Real Estate               31 Mar 2018     31 Dec 2017 
  Association ("EPRA")* 
 
  EPRA Net Asset Value                          GBP360.7m         GBP348.2m 
 
  EPRA Net Asset Value per share                  89.5p           88.2p 
 
 
The Net Asset Value per share is calculated using 403,115,419 shares of 1p each 
being the number in issue on 31 Mar 2018. 
 
* 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 
 
The first quarter is generally fairly quiet as investors and occupiers take 
stock and plan for the year ahead. This year, however, activity seemed to 
continue on from the end of 2017 with little change. The Company was no 
exception, with several transactions rolling over from last year and some new 
activity. It was pleasing to complete a new lease on the Company's largest 
vacant building in January, and over the quarter we found inspection levels on 
all the vacant units was higher than in Q4 last year. Although lettings are 
taking longer to secure, the level of interest is encouraging and generally new 
leases have been agreed on better terms than assumed in the Company's 
valuations. The void level reduced over the quarter to 5.8%, and is likely to 
be in a range between 5%-10% throughout the year as various leases expire and 
new lettings are completed. 
 
Three purchases were completed in Q1, with a total investment of just over GBP 
23m. The two industrial / logistics units are let on long leases with 
indexation, and although the units are older, they provide cost efficient 
occupation for the tenants, with future potential for redevelopment. The 
leisure scheme in Aintree is adjacent to the race course, and we are already 
actively engaged in extending leases to give long term secure income. As a 
result of two sales of offices with potentially large capex requirements the 
Company has a larger than normal cash holding (c10%) at quarter end. This 
larger than normal cash holding obviously has a short term impact on the level 
of dividend cover given the low yield on cash holdings. We are, however, 
considering several investment opportunities and will seek to invest the cash 
over the next 6 months into assets with lower capex requirements and stronger 
growth potential. Investing the cash in suitable investments will enable the 
Company to move back towards a covered dividend. 
 
Market Commentary 
 
UK economic growth was 0.4% in the fourth quarter of 2017 and was revised down 
to 1.7% for the year as a whole. Early data for the first quarter of 2018 has 
been underwhelming, particularly for the services sector. Retail sales figures 
have been particularly weak over the first quarter, however there are signs 
that the economy will benefit from a recovery in household spending power later 
this year as the tight labour market starts to feed through into stronger wage 
growth. Regular pay growth reached 2.8% in February, while consumer price 
inflation (CPI) fell to 2.5% in March. The Bank of England has signalled that 
further rate rises are coming although the recent GDP announcement has cast 
some doubt over the timing of these. 
 
The UK property market produced a total return of 2.3% in Q1, according to the 
MSCI Monthly Index. Over the 12 month period to 31 March the total return was 
11.3% after a year of consistent capital growth resulting in 5.6% capital 

growth over the 12 month period. The majority of this growth came from inward 
yield shift, with rental value growth of only 2% over the 12 months. 
 
Volatility in the financial markets in Q1 have been reflected in the negative 
total returns of the FTSE All Share (-6.9%) and the FTSE 100 (-7.2%).  The FTSE 
All-Share REIT Index was also negative over the first quarter of 2018 at -3.5%. 
 
Industrials remained the clear outperformer at a sector level, with a total 
return of 4.3% over the quarter, led by strong returns in the South East and 
rental growth of 1.0%. Office and retail total returns over the quarter were 
more muted at 1.9% and 1.2% respectively, with a modest 0.4% growth in rents in 
the former but flat rents in the latter. In the office sector, central London 
underperformed the South East and the regions over the quarter with South East 
offices now also the top performing office segment over the last five years. 
Retail returns were weighed down by shopping centres, which returned just 0.4% 
over the quarter but retail warehouse performance was healthier at 1.5%. 
 
Investment Outlook 
 
We envisage positive but low total returns over the next five years, with the 
forecast annual total return being slightly below the market income return. 
Aside from industrial valuations catching up with extremely strong pricing and 
delivering appreciably stronger returns in the short term, we do not see yield 
shift contributing positively to capital growth over the forecast period. 
Relative differences in projected segment performance beyond that initial yield 
shift for industrials are expected to be reasonably small, with no clear 
outperforming segment beyond industrial in 2018. Whilst the downside risk is 
greater as prices remain high in a long-term context, we do not see a specific 
trigger for a correction. Fundamentals are positive in the industrial sector, 
although retail is more polarised. Most office markets are well-balanced with 
limited new supply, albeit we see more risk in London. Debt is accretive to 
income returns and lending remains selective and prudent, with total debt much 
lower than before the global financial crisis. There remains significant 
capital targeting the asset class, both from overseas and domestic investors' 
allocations, with the comparatively high income yield one of the attractions. 
We would caution that property's required risk premium has likely increased 
over time as leases have shortened and income has become riskier, while rental 
growth prospects have diminished. With income expected to be the main driver of 
returns over the forecast period, the degree of income risk - whether potential 
tenant default or the durability of income at lease events - will be key to 
asset performance. It remains our view that lower risk, higher quality assets 
are likely to perform best over the medium term. 
 
Dividends 
 
The Company paid total dividends in respect of the quarter ended 31 December 
2017 of 1.19p per Ordinary Share, with a payment date of 29 March 2018. 
 
Net Asset analysis as at 31 Mar 2018 (unaudited) 
 
                           GBPm         % of net assets 
 
Office                   133.5             37.1 
 
Retail                    64.9             18.0 
 
Industrial               235.9             65.5 
 
Other                     6.2               1.7 
 
Total Property           440.5             122.3 
Portfolio 
 
Adjustment for lease      -3.4             -0.9 
incentives 
 
Fair value of            437.1             121.4 
Property Portfolio 
 
Interest rate swap        0.1               0.0 
 
Cash                      36.0             10.0 
 
Other Assets              6.9               1.9 
 
Total Assets             480.1             133.3 
 
Current liabilities      -10.1             -2.8 
 
Non-current              -109.8            -30.5 
liabilities (bank 
loans & swap) 
 
Total Net Assets         360.2             100.0 
 
Breakdown in valuation movements over the period 1 Jan 2018 to 31 Mar 2018 
 
                      Portfolio   Exposure as   Like for Like   Capital Value 
                     Value as at   at 31 Mar    Capital Value    Shift (incl 
                     31 Mar 2018   2018 (%)      Shift (excl   transactions (GBP 
                        (GBPm)                   transactions &         m) 
                                                 CAPEX) (%) 
 
External valuation                                                  433.2 
at 31 Dec 17 
 
Retail                  64.9         14.7            0.8             -4.7 
 
South East Retail                     5.7            2.8             0.7 
 
Rest of UK Retail                     0.0            0.0             0.0 
 
Retail Warehouses                     9.0           -0.4             -5.4 
 
Offices                 133.5        30.3            2.3            -17.0 
 
London West End                       3.1            0.0             0.0 
Offices 
 
South East Offices                   22.7            2.7            -17.4 
 
Rest of UK Offices                    4.5            2.1             0.4 
 
Industrial              235.9        53.6            1.9             22.8 
 
South East                           16.2            3.2             14.3 
Industrial 
 
Rest of UK                           37.4            1.4             8.5 
Industrial 
 
Other Commercial         6.2          1.4            0.0             6.2 
 
External valuation      440.5        100.0           1.9            440.5 
at 31 Mar 2018 
 
Top 10 Properties 
 
 
                                       31 Mar 18 (GBPm) 
 
Denby 242, Denby                           15-20 
 
Symphony, Rotherham                        15-20 
 
Chester House, Farnborough                 15-20 
 
The Pinnacle, Reading                      10-15 
 
New Palace Place, London                   10-15 
 
Hollywood Green, London                    10-15 
 
Charter Court, Slough                      10-15 
 
Howard Town Retail Park, High Peak         10-15 
 
Timbmet, Shellingford                      10-15 
 
March Way, Rainham                         10-15 
 
Top 10 tenants 
 
Name                        Passing Rent % of passing rent 
 
BAE Systems plc              1,257,640          4.8% 
 
Technocargo Logistics        1,242,250          4.8% 
Limited 
 
The Symphony Group PLC       1,080,000          4.1% 
 
Hadleigh PVT Limited          799,683           3.1% 
 
Bong UK Limited               756,620           2.9% 
 
Euro Car Parts Limited        736,355           2.8% 
 
Ricoh UK Limited              696,995           2.7% 
 
CEVA Logistics Limited        633,385           2.4% 
 
Thyssenkrupp Materials (UK)   590,000           2.3% 
Ltd 
 
Public Sector                 559,148           2.1% 
 
Total                        8,352,076          32.0% 
 
Total Passing Rent           26,024,462 
 
Regional Split 
 
South East          44.7% 
 
East Midlands       16.4% 
 
North West          12.5% 
 
North East          8.2% 
 
West Midlands       7.5% 
 
Scotland            3.8% 
 
South West          3.8% 
 
London West End     3.1% 
 
The Board is not aware of any other significant events or transactions which 
have occurred between 31 Mar 2018 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 
which can be found at: www.slipit.co.uk 
 
For further information:- 
 
Jason Baggaley - Real Estate Fund Manager,  Standard Life Investments 
 
Tel [phone] or [e-mail] 
 
Graeme McDonald  - Real Estate Finance Manager, Standard Life 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 01, 2018 02:00 ET (06:00 GMT)