Standard LifeInvProp Net Asset Value(s)

 
TIDMSLI 
 
31 October 2018 
 
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI) 
 
LEI: 549300HHFBWZRKC7RW84 
 
Unaudited Net Asset Value as at 30 September 2018 
 
Key Highlights 
 
Solid Performance 
 
  * Net asset value ("NAV") per ordinary share was 91.4p (Jun 18 - 90.1p), a 
    rise of 1.4%, resulting in a NAV total return, including dividends, of 2.8% 
    for Q3 2018; 
 
  * The portfolio valuation increased by 1.7% on a like for like basis, whilst 
    the IPD/MSCI Monthly Index rose by 0.4% over the same period. 
 
Investment activity 
 
  * Purchase of an industrial unit close to Kettering. The property is let to 
    an engineering company which has taken a new 20 year lease with five yearly 
    indexed reviews. The purchase price of GBP8.1m reflects an initial yield of 
    7.15%. 
  * Purchase of an industrial unit at Cambuslang, near Glasgow for GBP5.03m 
    reflecting a net initial yield of 7% and is fully let to Speedy Hire until 
    June 2023. 
  * Post period end, sale of a vacant industrial unit in Oldham for GBP6.3m, 12% 
    above the 30 June valuation. 
 
Strong balance sheet with prudent gearing 
 
  * Prudent LTV* of 21.4% at the quarter end, one of the lowest in the 
    Company's peer group and the wider REIT sector. 
 
Share Issues 
 
  * Strong demand for the Company's shares in the quarter with 1.5m shares 
    issued in the quarter raising proceeds of GBP1.4m at prices accretive to NAV. 
 
Attractive dividend yield 
 
  * Dividend yield of 5.3% based on a quarterly dividend of 1.19p and the share 
    price of 89.5p as at 26 October 2018 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 30 September 2018 was 91.4p. 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 30 September 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 July 2018 to 30 September 2018. 
 
                              Per  Share (p)  Attributable             Comment 
                                               Assets (GBPm) 
 
Net assets as at 1 July 2018       90.1           364.2 
 
Unrealised increase in              1.9            7.6      Like for like increase of 
valuation of property                                       1.7% in property portfolio 
portfolio 
 
Transaction costs, including       -0.2           -0.9      Acquisition costs at 
SDLT on purchases                                           Kettering and Cambuslang 
 
CAPEX in the quarter               -0.5           -1.8      Predominantly CAPEX at 
                                                            Kirkgate, Epsom 
 
Net income in the quarter          -0.1           -0.2      Dividend cover of 95% in the 
after dividend                                              quarter 
 
Interest rate swaps mark to         0.2            0.7      Decrease in swap liabilities 
market revaluation                                          in the quarter. 
 
Share issues                        0.0            1.4      NAV accretive issue of 1.5m 
                                                            shares in the quarter raising 
                                                            GBP1.4m 
 
Net assets as at 30 September      91.4           371.0 
2018 
 
 
  European Public Real Estate               30 Sep 2018     30 Jun 2018 
  Association ("EPRA")* 
 
  EPRA Net Asset Value                          GBP371.2m         GBP365.0m 
 
  EPRA Net Asset Value per share                  91.5p           90.3p 
 
 
The Net Asset Value per share is calculated using 405,865,419 shares of 1p each 
being the number in issue on 30 September 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 Company has 54% of the portfolio in the industrial / logistics sector, 28% 
in the office sector, 7% in Other (leisure and data centres), and 11% in 
retail, with strong diversification of asset and tenant base across all the 
sectors. We believe this allocation will continue to support ongoing 
outperformance against the benchmark.  Notably, despite the continued problems 
facing the retail sector, the Company has benefited from its low exposure to 
the sector. SLIPIT has seen two retail tenant failures in the last year, but 
both units are now under offer - indeed one of them has three parties in 
competition and a rental level the same as under the old lease. 
 
Three investment transactions were contracted during the quarter; the purchase 
of an industrial facility close to Kettering let for 20 years with five yearly 
indexed reviews for GBP8.1m, reflecting a yield of 7.15%, and the purchase of a 
61,000 sq. industrial unit close to Glasgow for GBP5.03m, reflecting a yield of 
7% on the settlement of an outstanding rent review. After the quarter end the 
company completed the sale of a vacant industrial unit in Oldham, which had 
been the largest void for the last 18months. The sale price of GBP6.3m was nearly 
13% above the 30 June valuation. 
 
Q3 2018 should have been a quiet quarter for asset management - after all, 
there is so much noise about political turmoil, Brexit, trade wars and the 
outlook for the UK economy. The managers have, however, remained busy in 
ensuring tenants continue to have good quality accommodation that works for 
their businesses.  The managers completed six lease renewals / extensions with 
a rental value of GBP1.15million p.a. along with three smaller lettings totalling 
just under GBP200,000 p.a. SLIPIT also took a surrender of a short lease on some 
office accommodation in a multi-use asset in Westminster, (with a three month 
rent penalty), and simultaneously agreed to re-let the space on a new 10 year 
lease. 
 
The reported vacancy rate actually increased over the quarter to 10.8% as the 
company had a lease expiry on a large logistics unit where the tenant vacated 
(representing 2.5% of the void); however the managers have already agreed terms 
to re-let the unit. In addition, since the quarter end, the void rate has 
reduced to 7.9% due mainly to the sale of Oldham referred to above. 
 
Economic outlook 
 
  * The UK economy bounced back in the second quarter after a weak start to the 
    year. However, at 0.4%, the recovery amounted to little more than a return 
    to trend growth than making up for any 'lost ground'. 
  * The recovery in real income growth has temporarily stalled as higher oil 
    prices have pushed inflation higher. However, wage growth data surprised on 
    the upside and improving household finances should help support spending, 
    offset by the rebuilding of savings from very low levels. 
  * As expected, the Bank of England (BoE) increased interest rates by 25 basis 
    points (bp) to 0.75% at the August meeting of the monetary policy 
    committee. The BoE has highlighted rising unit labour costs (ULC) as a 
    reason for more monetary tightening; it effectively thinks the 'speed 
    limit' of the economy is much lower than in the past. 
  * Aberdeen Standard Investments (ASI) is of the view that the relationship 
    between ULC and inflation is not always robust and are forecasting just one 
    further 25 bp hike in rates in 2019. 
  * The manager's Brexit base case is that a 'no deal' scenario will be averted 
    but there are a number of very different ways in which this could happen. 
    Nevertheless, the risk of 'no deal' has risen and is uncomfortably high 
    with less than six months until the UK leaves the EU. 
 
Occupier trends 
 
  * The Industrial sector remains comfortably the strongest part of the market 
    in terms of occupier sentiment and fundamentals. While monthly MSCI data 
    suggests a slowing in the rate of rental growth in August, the managers see 
    no visible change in rental tension, with vacancy rates remaining 
    exceptionally low. 
  * London office markets remain broadly static with uncertainty around Brexit 
    regularly cited as a factor for occupiers. 
  * The trend is slightly more positive in the 'big six' regional office 
    markets, with the modest but steady upward trajectory of rents continuing 
    and the vacancy rate being gradually eroded. 
  * The retail sector continues to face significant long-term structural 
    challenges that the modest rates of rental decline in the MSCI indices do 
    not yet reflect. There are very few expansionary retailers away from the 
    value end of the market. 
 
Investment trends 
 
  * Early data on investment volumes by value for the third quarter suggest the 
    lowest quarterly total in two years and substantially less than during the 
    same quarter in 2017. 
  * Total returns on the MSCI Monthly Index have continued to slow, with 
    equivalent yields rising modestly in August. Market sentiment is muted but, 
    with relatively low levels of leverage in the market and robust income 
    streams, there is little pressure to sell. 
  * In a similar vein to last quarter, investor preference in the listed sector 
    continues to be tilted towards the income-orientated sectors. Industrial 
    and alternatives are trading at varying levels of net asset value (NAV) 
    premiums, while retail real estate investment trusts (REITs) remain at 
    large discounts to NAVs. The London office names are still trading at a 
    discount to NAV, reflecting the current level of uncertainty in the market. 
 
Performance outlook 
 

  * From a top-down perspective, the managers expect existing industrial 
    investments to deliver considerably stronger returns than retail and 
    offices over the next three years, but accessing the yield component of 
    those returns through new purchases is unrealistic given competitive 
    bidding. They expect retail returns to be negative over the next three 
    years, with rents declining and yields rising, but that dynamic is not 
    uniform across the sector. 
  * Although there are clear differences in the outlook for the various sectors 
    of Industrial, Office and Retail, the managers believe it is important to 
    maintain a disciplined approach at asset level to invest in good quality 
    assets that meet occupier needs. 
 
 
Dividends 
 
The Company paid total dividends in respect of the quarter ended 30 June 2018 
of 1.19p per Ordinary Share, with a payment date of 31 August 2018. 
 
Net Asset analysis as at 30 September 2018 (unaudited) 
 
                             GBPm       % of net assets 
 
Office                     135.2           36.4 
 
Retail                      50.0           13.5 
 
Industrial                 260.4           70.2 
 
Other                       33.4            9.0 
 
Total Property Portfolio   479.0           129.1 
 
Adjustment for lease        -3.5           -1.0 
incentives 
 
Fair value of Property     475.5           128.1 
Portfolio 
 
Cash                        7.3             2.0 
 
Other Assets                8.2             2.2 
 
Total Assets               491.0           132.3 
 
Current liabilities        -10.5           -2.8 
 
Non-current liabilities    -109.5          -29.5 
(bank loans & swap) 
 
Total Net Assets           371.0           100.0 
 
Breakdown in valuation movements over the period 1 Jul 18 to 30 Sep 18 
 
                          Portfolio   Exposure as at Like for Like Capital Value 
                         Value as at   30 Sep 2018   Capital Value  Shift (incl 
                         30 Sep 2018       (%)        Shift (excl  transactions 
                            (GBPm)                     transactions      (GBPm) 
                                                       & CAPEX) 
 
                                                          (%) 
 
External valuation at                                                  458.0 
30 Jun 2018 
 
Retail                      50.0           10.5          -1.5          -0.8 
 
South East Retail                          2.5           -1.5          -0.2 
 
Rest of UK Retail                          0.0            0.0           0.0 
 
Retail Warehouses                          8.0           -1.5          -0.6 
 
Offices                     135.2          28.2           1.6           2.2 
 
London City Offices                        2.7            4.4           0.6 
 
London West End Offices                    2.9            1.1           0.2 
 
South East Offices                         18.5           1.6           1.4 
 
Rest of UK Offices                         4.1            0.0           0.0 
 
Industrial                  260.4          54.4           2.3          19.0 
 
South East Industrial                      15.3           1.4           1.0 
 
Rest of UK Industrial                      39.1           2.7          18.0 
 
Other Commercial            33.4           6.9            1.8           0.6 
 
External valuation at       479.0         100.0           1.7          479.0 
30 Sep 2018 
 
Top 10 Properties 
 
 
                                       30 Sep 18 (GBPm) 
 
Denby 242, Denby                           15-20 
 
Symphony, Rotherham                        15-20 
 
Chester House, Farnborough                 15-20 
 
The Pinnacle, Reading                      10-15 
 
Hollywood Green, London                    10-15 
 
New Palace Place, London                   10-15 
 
Timbmet, Shellingford                      10-15 
 
Marsh Way, Rainham                         10-15 
 
15 Basinghall Street, London               10-15 
 
Atos,Birmingham                            10-15 
 
Top 10 tenants 
 
Name                           Passing     % of passing rent 
                               Rent 
 
BAE Systems plc                 1,257,640         4.8% 
 
Technocargo Logistics Limited   1,242,250         4.7% 
 
The Symphony Group PLC          1,080,000         4.1% 
 
Timbmet Limited                  799,683          3.0% 
 
Bong UK Limited                  756,620          2.9% 
 
ATOS IT Services Ltd             750,000          2.8% 
 
Ricoh UK Limited                 696,995          2.6% 
 
CEVA Logistics Limited           633,385          2.4% 
 
GW Atkins                        625,000          2.4% 
 
Thyssenkrupp Materials (UK)Ltd   590,000          2.2% 
 
Total                           8,431,573         31.9% 
 
Regional Split 
 
South East                        39.3% 
 
East Midlands                     17.1% 
 
North West                        12.4% 
 
West Midlands                      9.8% 
 
North East                         7.5% 
 
Scotland                           4.6% 
 
South West                         3.7% 
 
London West End                    2.9% 
 
City of London                     2.7% 
 
The Board is not aware of any other significant events or transactions which 
have occurred between 30 September 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

October 31, 2018 03:00 ET (07:00 GMT)