19 Nov 2013 16:00
F&C UK Real Estate Investments Limited
Interim Management Statement
For the Three-Month Period from 1 July 2013 to 30 September 2013
Investment Objective
The investment objective 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.
Performance Summary
Total Return * | For the three month period ended 30 September 2013 |
Net asset value per share | 3.9% |
Ordinary share price | 5.9% |
Portfolio total return per IPD | 2.6% |
Investment Property Databank UK Quarterly Index | 2.9% |
FTSE All-Share Index | 5.6% |
Capital Values - 3 months | As at 30 September 2013 | As at 30 June 2013 |
% Change |
Net asset value per share | 73.2p | 71.7p | 2.1% |
Ordinary share price | 75.5p | 72.5p | 4.1% |
FTSE All-Share Index | 3,443.9 | 3,289.7 | 4.7% |
Premium to net asset value | 3.1% | 1.1% | |
Net gearing # | 38.0% | 39.7% | |
Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.
* - All total returns are based on net dividends re-invested
# - Net gearing: Bank debt (less net current assets) divided by fair value of investment properties
Dividends
The fourth interim dividend for the year ended 30 June 2013 of 1.25 pence per share was paid on 27 September 2013. In the absence of unforeseen circumstances it is the intention of the Board to maintain quarterly dividends at this rate, giving a total dividend of 5.0 pence per share for the 2013/14 financial year.
Property Market Overview
The upturn in the UK commercial property market has continued to gather momentum and all-property total returns were 2.9 per cent in the quarter ended 30 September 2013 compared with 1.9 per cent in the previous quarter, according to the IPD Quarterly Index. This represented the strongest three month performance since 2010 and took total returns in the ninth month period to 30 September 2013 to 6.0 per cent.
The stronger tone to the UK commercial property market in part reflected changing perceptions about the economy and financial markets. The UK economy delivered positive GDP growth in the second quarter of 2013 and survey evidence points to broad-based growth in the third quarter. The Eurozone economy appears to have emerged from recession and, although concerns remain about how the debt crisis will ultimately be resolved, fears of a disorderly collapse have waned. The Bank of England kept interest rates on hold during the period and the tone of their "forward guidance" has been supportive towards achieving sustainable economic growth.
Property yields remained attractively priced against gilts and this, coupled with stronger economic data, led investors to become more active in the transactions market.
The property market has seen a sharp turnaround over the course of 2013 with improvement extending beyond prime London property into the regions and to good secondary stock. There are still problem areas within property and the impact of fiscal austerity and uncertainty about the global economic and financial situation remain of concern.
Portfolio Update
As at 30 September, the property portfolio was valued at £278.9 million, an uplift of £2.3 million since June. The portfolio produced a return of 2.6 per cent over the quarter. Capital growth accounted for 0.8 per cent of the return with income being 1.8 per cent.
Central London Offices and the Retail sector outperformed with major contributors to performance being 14 Berkeley Street, London W1, a West End office building with a Land Rover showroom on the ground floor, which increased in value by £900,000 or 4.8 per cent. The motor dealership complex at Clifton Moor Gate, York, which is let to Inchcape until September 2030, increased in value by £425,000 or 4.8 per cent. Following a regearing of the headlease for a further 125 years at 2/3 Pavilion Buildings, Brighton (the principal tenant being All Bar One), the property increased in value by £400,000 or 20.0 per cent. Performance was disadvantaged by Industrial and Rest of UK Offices, particularly where voids and short leases currently impact on valuation.
The Manager is continuing with a strategy of selling smaller assets. Two assets were sold in the previous quarter and although no sales were completed in the quarter ending 30 September 2013, there are four properties which are under offer for sale.
The vacancy rate of the portfolio remains low with a void rate of 3.1 per cent and an average weighted unexpired lease term of 7.7 years.
Top Ten Holdings
Property |
Sector | 30/09/2013 Percentage of portfolio |
London W1, 14 Berkeley Street | Offices | 7.0% |
Banbury, 3663 Unit, Echo Park | Industrial | 6.0% |
Colnbrook, Units 1-8 Lakeside Road | Industrial | 4.3% |
Eastleigh, Southampton International Park | Industrial | 3.8% |
Leamington Spa, 30-40 The Parade | Retail | 3.7% |
York,Clifton Moor Gate | Retail Warehouse | 3.3% |
Chelmsford, County House, County Square. | Offices | 3.1% |
Andover, Keens House, Anton Mill Road. | Offices | 2.8% |
Luton, Enterprise Way | Retail Warehouse | 2.8% |
Hemel Hempstead, Hemel Gateway | Industrial | 2.7% |
Total | 39.5% |
Geographical Analysis
Location | 30/09/2013 Percentage of Portfolio | 30/06/2013 Percentage of Portfolio | |
South East | 44.2 | 44.2 | |
London - West End | 8.6 | 8.3 | |
West Midlands | 8.3 | 8.4 | |
Eastern | 7.9 | 8.0 | |
Yorkshire and Humberside | 7.6 | 7.6 | |
Scotland | 6.1 | 6.1 | |
Rest of London | 5.4 | 5.4 | |
North West | 4.7 | 4.7 | |
East Midlands | 4.3 | 4.3 | |
South West | 1.8 | 1.9 | |
North East | 1.1 | 1.1 | |
Total | 100.0 | 100.0 |
Sector Analysis
Sector | 30/09/2013 Percentage of Portfolio | 30/06/2013 Percentage of Portfolio | |
Industrial | 29.0 | 29.3 | |
Retail | 26.5 | 26.3 | |
Offices | 26.5 | 26.5 | |
Retail Warehouse | 18.0 | 17.9 | |
Total | 100.0 | 100.0 |
The Board is not aware of any significant events or transactions which have occurred between 30 September 2013 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Quarterly and Key Information
Further information regarding the Company, including performance since launch and the most recent annual and interim reports, can be found at the Company's websites www.fcre.co.uk, www.fcre.gg or at www.fandc.com
This interim management statement has been prepared solely to provide information to meet
the requirements of the UK Listing Authority's Disclosure and Transparency Rules.
For further information please contact:
Ian McBryde/Scott Macrae
F&C Investment Business Limited
Tel: 0207 628 8000