17 May 2013 16:30
F&C UK Real Estate Investments Limited
Interim Management Statement
For the Three-Month Period from 1 January 2013 to 31 March 2013
As announced on 11 April 2013, the resolutions relating to the recommended proposals in relation to the acquisition of the business and assets of ISIS Property Trust Limited ("IPT") (including IPT's portfolio) and the change of name of the Company to "F&C UK Real Estate Investments Limited" were passed at a General Meeting of the Company. The resolutions at the general meeting of IPT were also passed and the Company acquired the business and assets of IPT in consideration for the issue of New Shares to IPT Shareholders.
IPT Shareholders received 1.2895 New Shares in respect of each IPT Share held resulting in a total of 97,550,491 New Shares being issued by the Company in accordance with the Scheme. As at the date of this statement, the Company has 208,050,491 ordinary shares in issue.
This statement covers the quarter to 31 March 2013; however, more up to date information on the Company's portfolio, following the above transaction can be found in the prospectus and on the Company's website.
Investment Objective
The investment objective is to provide 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 31 March 2013 | For the nine month period ended 31 March 2013 |
Net asset value per share | +1.2% | +0.3% |
Ordinary share price | +10.6% | +6.3% |
Portfolio total return per IPD | +1.1% | +1.9% |
Investment Property Databank UK Quarterly Index |
+1.2% |
+2.8% |
FTSE All-Share Index | +10.3% | +19.9% |
Capital Values - 3 months | As at 31 March 2013 | As at 31 December 2012 |
% Change |
Net asset value per share | 71.0p | 72.0p | -1.4 |
Ordinary share price | 64.5p | 60.0p | +7.5 |
FTSE All-Share Index | 3,380.6 | 3,093.4 | +9.3 |
Discount to net asset value | 9.2% | 16.7% | |
Net gearing # | 42.9% | 42.3% | |
Capital Values - 9 months | As at 31 March 2013 | As at 30 June 2012 |
% Change |
Net asset value per share | 71.0p | 76.2p | -6.8 |
Ordinary share price | 64.5p | 66.0p | -2.3 |
FTSE All-Share Index | 3,380.6 | 2,891.5 | +16.9 |
Discount to net asset value | 9.2% | 13.4% | |
Net gearing # | 42.9% | 40.4% | |
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 cash) divided by fair value of investment properties
Dividends
The second interim dividend for the year ending 30 June 2013 of 1.8 pence per share was paid on 28 March 2013 and a third interim dividend of 1.8 pence per share will be paid on 28 June 2013 to shareholders on the register on the record date of 5 April 2013. In the absence of unforeseen circumstances it is the intention of the Board to start paying quarterly dividends at 1.25 pence per share.
Review for the Period
Property Market Overview
All property total returns were 1.2 per cent in the first quarter of 2013, representing an improvement on the 0.9 per cent return in the final quarter of 2012 according to the IPD Quarterly Index. This was the strongest quarter end performance since December 2011, although the 12 month total return remained modest at 3.2 per cent and total returns are below the ten year average.
Capital values continued to fall during the period, declining by 0.2 per cent during the quarter and falling 2.8 per cent over the past year. However, performance has been supported by the 5.8 per cent annual income return. The commercial property market has continued to see a polarisation in performance. The strength of Central London has persisted across all the three main sectors according to the IPD Quarterly Index. Performance in the regions was subdued and total returns were negative for provincial offices for the sixth consecutive quarter. However, regional performance has improved quarter on quarter, across retail, offices and industrial.
Investors have remained focused on obtaining a long and secure income stream and this has favoured prime property in established locations. Data from CBRE shows that prime yields generally held steady in the quarter but edged in for City offices, prime shopping centres and prime leisure parks. CBRE held secondary yields steady during the quarter but see them trending weaker across all sectors of the market.
The occupier market is mixed with rental growth occurring in London and parts of the South East but still negative in regions where demand remains weak, lease driven and cost sensitive. The quarter saw the vacancy rate move up to 12.2 per cent at the all property level in March 2013 from 10.5 per cent in December 2012, according to the IPD Monthly Index. This is the highest level since 2009 and the deterioration occurred in all three sectors.
Portfolio Overview
The portfolio delivered a 1.1 per cent total return during the first quarter, with an attractive income return of 1.7 per cent but a fall in capital values of 0.6 per cent. The total return for the 12 month period to 31 March was 2.7 per cent.
The Company's office property outperformed delivering 2.1 per cent, driven mainly by higher yields in the rest of UK sub sector. In this quarter, the retail sector performed in line with the market with strong performance from retail warehouses but offset by poor returns from standard high street shops. The Company's industrial properties under performed as a result of the 3663 Unit, Echo Park Banbury, which fell by 2 per cent this quarter to reflect an initial yield of 7.2 per cent, and vacancies in Hemel Hempstead and Colnbrook. Elsewhere voids were kept to a minimum and the Company's total void rate as at 31 March was 4.4 per cent.
Top Ten Holdings
Property |
Sector | 31/03/2013 Percentage of portfolio |
Unit 3663, Echo Park, Banbury | Industrial | 10.5 |
Units 1-8, Lakeside Road, Colnbrook | Industrial | 7.5 |
Southampton International Park, Eastleigh | Industrial | 6.7 |
30/40, The Parade & 47/59A Warwick Street, Leamington Spa | Retail | 6.4 |
Clifton Moor Gate, York | Retail Warehouse | 5.5 |
Mercury House, 1 Dove Wynd, Strathclyde Business Park | Offices | 5.0 |
Hemel Gateway, Boundary Way, Hemel Hempstead | Industrial | 4.7 |
1-2 Lochside Way, Edinburgh Park, Edinburgh | Offices | 4.3 |
Willowbeck Road, Northallerton | Retail Warehouse | 4.2 |
7-8 High St.& 50 Colebrook Street, Winchester | Retail | 4.2 |
Total | 59.0 |
Geographical Analysis
Location | 31/03/2013 Percentage of Portfolio | 31/12/2012 Percentage of Portfolio | |
South East | 48.7 | 48.8 | |
West Midlands | 12.7 | 12.7 | |
Scotland | 11.0 | 11.0 | |
Yorkshire and Humberside | 9.7 | 9.7 | |
East Midlands | 5.0 | 5.0 | |
North West | 3.7 | 3.6 | |
London - West End | 2.6 | 2.6 | |
Eastern | 2.5 | 2.5 | |
Rest of London | 1.8 | 1.8 | |
North East | 1.6 | 1.6 | |
South West | 0.7 | 0.7 | |
Total | 100.0 | 100.0 |
Sector Analysis
Sector | 31/03/2013 Percentage of Portfolio | 31/12/2012 Percentage of Portfolio | |
Industrial | 35.9 | 36.0 | |
Retail | 33.7 | 33.6 | |
Offices | 15.9 | 15.9 | |
Retail Warehouse | 14.5 | 14.5 | |
Total | 100.0 | 100.0 |
With the exception of the acquisition of the business and assets of IPT highlighted at the start of this statement, the Board is not aware of any other significant events or transactions which have occurred between 31 March 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 website www.fcre.co.uk or at www.fcre.ggor at www.fandc.com .
For further information please contact:
Ian McBryde/Scott Macrae
F&C Investment Business Limited
Tel: 0207 628 8000