3 Feb 2021 07:00
Standard Life Investments Property Income Trust - Unaudited Net Asset Value as at 31 December 2020Standard Life Investments Property Income Trust - Unaudited Net Asset Value as at 31 December 2020
PR Newswire
London, February 2
3 February 2021
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (LSE: SLI)
LEI: 549300HHFBWZRKC7RW84
Unaudited Net Asset Value as at 31 December 2020
Net Asset Value and Valuations
Net asset value (“NAV”) per ordinary share was 82.0p (Sep 2020 – 78.8p), an increase of 4.1%, resulting in a NAV total return, including dividends, of 5.0% for Q4 2020; The portfolio valuation (before CAPEX) increased by 3.3% on a like for like basis, whilst the MSCI Monthly Index increased by 0.6% over the same period.Investment and letting activity
In late December the Company completed the sale of four multi-let industrial estates for £37.75m in-line with the previous valuation. Sales completed of a small office for £4.30m and small retail warehouse investment for £3.55m which taken together represented an increase on the previous valuation of £150,000. Office suite in Edinburgh let to secure £82,580 p.a. rent.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 cash of £9.4 million. As at 31 December 2020, the Company had a Loan to Value (“LTV”) of 23.0%*. The debt currently has an overall blended interest rate of 2.725% per annum.*LTV calculated as debt less cash divided by portfolio value
Rent collection
Q4 was a quarter that saw renewed restrictions of operation for many tenants as the summer lull from Covid-19 reversed. The extension of Government restrictions on rental collection continues to impact, with several tenants withholding payment but accepting they will have to pay at some point. We continue to chase those companies that can pay rent, and work with those that cannot, through repayment plans, lease alterations/ extensions, or rent frees. For 2020 as a whole 91% of rent due was collected, and we expect this figure to improve slightly with time. The Company has made prudent assumptions as to providing for bad debts in the accounts with a provision of £2.58m as at 31 December 2020 (versus £139,000 at 31st December 2019)
| Rental Quarter | % collected as at 29/001/2020 |
| Q1 2020 | 99% |
| Q2 2020 | 91% |
| Q3 2020 | 91% |
| Q4 2020 | 87% |
| Q1 2021 | 74% increasing to over 79% with tenants paying monthly but billed quarterly. |
Although we are encouraged by the rental collection figures, we are very aware that restrictions at the beginning of 2021 are having a significant impact on many companies and that impact is likely to remain well into Q2.
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 payments made in 2020 totalling 3.8p per share which equates to 80% of the 2019 level.
The Board has taken the decision to maintain the same level of quarterly dividend as paid last quarter equating to 0.714p per share, which represents 60% of last year’s level for the same quarter. The Board continues to believe this rate balances the need for shareholders to continue receiving income during this difficult period while maintaining a prudent approach given current rent collection rates. The recent asset sales (as well as some proposed sales) will reduce rental income until reinvestment occurs. Although the investment manager has an interesting pipeline of potential purchases, the timing and amount of future income from these is uncertain. The Board has also decided to bring forward the payment of this fourth interim dividend and it will now be paid at the end of February 2021 instead of the end of March 2021. The Board will keep the quarterly dividend rate under review in the expectation that the vaccination programme allows lockdown measures to be eased and economic activity and rental collection levels in 2021 return to close to pre Covid-19 levels.
The Board also recognises the requirement of the REIT rules to distribute at least 90% of its annual property income within 12 months of the year end. It therefore expects to pay a further, fifth interim dividend in May 2021, of at least 0.25p per share once the audited financial statements of the Company are completed in April 2021.
Share Buybacks
The Board believes that investment by the Company in SLIPIT’s shares at the prevailing price and discount to net asset value offers an attractive investment opportunity for its shareholders given the financial resources the Company has at its disposal. To date the Company has bought back £1.45m of shares.
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of Standard Life Investments Property Income Trust Limited (“SLIPIT”) at 31 December 2020 was 82.0p. 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 December 2020 of £437.7 million and did not contain a material uncertainty clause.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV calculated under IFRS over the period 30 September 2020 to 31 December 2020.
| Per Share (p) | Attributable Assets (£m) | Comment | |
| Net assets as at 30 September 2020 | 78.8 | 320.5 | |
| Unrealised increase in valuation of property portfolio | 3.3 | 13.5 | Like for like increase of 3.3% in property valuations. |
| Loss on sale | -0.2 | -0.5 | Loss on sale of Industrial portfolio after costs |
| CAPEX in the quarter | -0.5 | -2.2 | Predominantly CAPEX at Hagley Road, Birmingham |
| Net income in the quarter after dividend | 0.6 | 2.0 | Rolling 12 month dividend cover of 108% |
| Interest rate swaps mark to market revaluation | 0.1 | 0.3 | Decrease in swap liability in the quarter as interest rates rose |
| Other movements in reserves | -0.2 | -0.6 | Movement in lease incentives in the quarter |
| Share buybacks | 0.1 | -1.5 | Investment in own shares at discounts to NAV |
| Net assets as at 31 December 2020 | 82.0 | 331.5 |
| European Public Real Estate Association (“EPRA”) | 31 Dec 2020 | 30 Sep 2020 |
| EPRA Net Tangible Assets | £335.2m | £324.6m |
| EPRA Net Tangible Assets per share | 82.9p | 79.8p |
The Net Asset Value per share is calculated using 404,316,422 shares of 1p each being the number in issue on 31 December 2020.
Investment Manager Review and Portfolio Activity
The Company had an active Q4 with several sales. The most significant sale (in late December) was of four multi-let industrial estates for £37.75m. Industrial is a favoured sector but we wanted to realise the performance we have enjoyed on these assets, recognising that future performance within the industrial sector is likely to be more polarised, with logistics performing better than small unit multi-let. This will especially be the case if, as we expect, an increasing number of small businesses fail due to the economic impact of Covid-19. We also sold a small non air conditioned office in Derby for £4.3m following a regear of the lease, and a standalone retail warehouse let to Smyth’s Toys for £3.55m. Both of these sales reflect our changing expectations for some assets following Covid-19.
Sales proceeds were used to repay the £35m drawn under the Revolving Credit Facility (RCF) and also means the Company has cash for investment and share buy backs. Buy backs were limited during the quarter, as the share price improved after they were commenced. During a closed period the Board cannot change any instructions on buy backs given to the broker, which reduced flexibility. Buy backs will remain under review and considered as an investment decision alongside further asset purchases and sales.
Lettings were naturally thin on the ground with ongoing lockdown restrictions, however we did complete the letting of an office suite in Edinburgh for £82,500pa.
The LTV of 23.0% provides sufficient headroom against banking covenants (Bank LTV covenant is 55% and interest rate cover required is 175% v 595% achieved). The Company’s interest rate swap liability fell in the quarter at £3.74 million (Sep 20: £4.07 million). This liability will unwind to £0 on maturity in 2023.
Investment Manager Market review
The fourth quarter saw a modest improvement in investment volumes when compared with the previous quarter. Despite the occupational uncertainties, offices accounted for 40% of the £10.6 billion transacted. Positive industrial sentiment resulted in the sector accounting for over 30% of total investment volumes in the final quarter of 2020. Investor interest remains largely focused on the most secure income streams with supermarkets, logistics assets and other industrials in the South East the key areas of focus. But sectors dependent on discretionary consumer spending remain out of favour; the leisure sector recording its weakest quarterly investment since Q4 2008. In mid-December, the furlough scheme was extended to the end of April, which gives greater time for business planning and decision-making around redundancies following the March budget. But it also means all the main business support measures are in place until at least the end of March, which should shield much of the economy from the effects of the renewed lockdown. Brexit negotiations went right to the wire but a chaotic no deal was averted. As we have previously flagged, the ASI Research Institute believes the very narrow deal agreed will be a drag on UK economic growth over the longer term. Many unknowns remain, including the impact on financial services, which are not covered by the deal. Trading for the consumer-facing retail, leisure and hospitality sectors remains challenging in the face of Covid-19 restrictions. However, supermarkets remain the clearest exception, enjoying record sales growth during the final quarter of 2020. The office occupational market remains weak, with availability rates rising steeply. In central London, the availability rate has doubled during 2020 to stand at close to 10%, although this has been largely driven by second-hand space. In complete contrast, logistics enjoyed a record year for take-up in 2020 and requirement levels remain very high. According to the MSCI Monthly index All Property total return for 2020 was -1.0%, with a huge sector & segment variance, with industrial SE delivering 10.3% and shopping centres delivering -19.9%, with values declining -26.6% over the year. At a sector level retail returned -10.8% over 2020, with industrial at 8.7%. The office sector was marginally negative at -0.9%.Investment Manager Market outlook
The MSCI Monthly All Property total return in December of 1.0% was the highest single monthly return since December 2017, and the quarterly return of 2.0% was the strongest since Q2 2018 with each consecutive monthly return improving since the weak point in March 2020. Unfortunately, the rapid escalation of cases and hospitalisations since mid-December has necessitated another national lockdown akin to that of last spring, including school closures. Measures to combat the new variant – and evidence that other strains, such as that first detected in South Africa, may be even more infectious – are set to cause a further contraction in GDP in Q1 2021. With vaccines now being rolled out, it is a case of ‘the darkest hour just before the dawn’ and we continue to expect a strong rebound in the second half of the year as the vaccines start to deliver herd immunity. Typically, it is during the emergence from crises that performance by risk profile diverges the most. In particularly challenging market conditions, investors can be less discerning about relative risks; as the market begins to recover, it becomes clearer where those risks have been both over- and understated. It is the office sector where such mispricing is most likely to appear during 2021, as the true nature of post-Covid occupational requirements gradually becomes more distinct. It is easy to believe that the vaccine will bring an end to the misery many people have been suffering, and with that a return to growth, however performance across the different sectors, and indeed within the sectors is likely to remain very polarised. We continue to expect outperformance from logistics and supermarkets, with fashion retail continuing to lag. Offices remain an area of significant change, where there will undoubtedly be winners and losers.Net Asset analysis as at 31 December 2020 (unaudited)
| £m | % of net assets | |
| Industrial | 211.2 | 63.8 |
| Office | 142.7 | 43.0 |
| Retail | 51.2 | 15.4 |
| Other Commercial | 32.6 | 9.8 |
| Total Property Portfolio | 437.7 | 132.0 |
| Adjustment for lease incentives | -5.9 | -1.7 |
| Fair value of Property Portfolio | 431.8 | 130.3 |
| Cash | 9.4 | 2.8 |
| Other Assets | 18.4 | 5.6 |
| Total Assets | 459.6 | 138.7 |
| Current liabilities | -14.8 | -4.4 |
| Non-current liabilities (bank loans & swap) | -113.3 | -34.3 |
| Total Net Assets | 331.5 | 100.0 |
Breakdown in valuation movements over the period 1 October 2020 to 31 December 2020
| Portfolio Value as at 31 Dec 2020 (£m) | Exposure as at 31 Dec 2020 (%) | Like for Like Capital Value Shift (excl transactions & CAPEX) | Capital Value Shift (incl transactions (£m) | |
| (%) | ||||
| External valuation at 30 Sep 20 | 464.9 | |||
| Retail | 51.2 | 11.7 | 0.4 | -3.3 |
| South East Retail | 1.9 | 0.0 | 0.0 | |
| Rest of UK Retail | 0.0 | 0.0 | 0.0 | |
| Retail Warehouses | 9.8 | 0.5 | -3.3 | |
| Offices | 142.7 | 32.6 | 0.3 | 0.4 |
| London City Offices | 3.0 | -0.8 | -0.1 | |
| London West End Offices | 3.1 | 0.0 | 0.0 | |
| South East Offices | 14.6 | -3.0 | -2.0 | |
| Rest of UK Offices | 11.9 | 5.0 | 2.5 | |
| Industrial | 211.2 | 48.2 | 6.5 | -24.9 |
| South East Industrial | 10.6 | 5.7 | -14.7 | |
| Rest of UK Industrial | 37.6 | 6.7 | -10.2 | |
| Other Commercial | 32.6 | 7.5 | 1.7 | 0.6 |
| External valuation at 31 Dec 20 | 437.7 | 100.0 | 3.3 | 437.7 |
Top 10 Properties
| 31 Dec 20 (£m) | |
| Hagley Road, Birmingham | 25-30 |
| B&Q, Halesowen | 15-20 |
| Symphony, Rotherham | 15-20 |
| Marsh Way, Rainham | 15-20 |
| The Pinnacle, Reading | 10-15 |
| Timbmet, Shellingford | 10-15 |
| Hollywood Green, London | 10-15 |
| New Palace Place, London | 10-15 |
| Atos Data Centre, Birmingham | 10-15 |
| Badentoy, Aberdeen | 10-15 |
Top 10 tenants
| Tenant name | Passing Rent | % of total Passing Rent |
| B&Q Plc | 1,560,000 | 5.6% |
| BAE Systems plc | 1,257,640 | 4.5% |
| The Symphony Group Plc | 1,225,000 | 4.4% |
| Public sector | 1,158,858 | 4.1% |
| Schlumberger Oilfield UK plc | 1,138,402 | 4.1% |
| Jenkins Shipping Co Ltd | 843,390 | 3.0% |
| Timbmet Group Limited | 799,683 | 2.9% |
| Atos IT Services UK Ltd | 772,710 | 2.8% |
| CEVA Logistics Limited | 692,117 | 2.5% |
| ThyssenKrupp Materials (UK) Ltd | 643,565 | 2.3% |
| 10,091,365 | 36.2% |
Regional Split
| South East | 30.4% |
| West Midlands | 18.5% |
| East Midlands | 14.2% |
| Scotland | 10.1% |
| North West | 9.4% |
| North East | 7.0% |
| South West | 4.4% |
| 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 December 2020 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 InvestmentsTel: 07801039463 or jason.baggaley@aberdeenstandard.com
Oli Lord - Real Estate Deputy Fund Manager, Aberdeen Standard InvestmentsTel: 07557938803 or oli.lord@aberdeenstandard.com
Graeme McDonald - Senior Fund Control Manager, Aberdeen Standard InvestmentsTel: 07717543309 or graeme.mcdonald@aberdeenstandard.com
The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LtdTrafalgar CourtLes BanquesSt Peter PortGY1 3QL
Tel: 01481 745001