10 Feb 2016 07:00
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LTD - Unaudited Net Asset ValueSTANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LTD - Unaudited Net Asset Value
PR Newswire
London, February 9
10 February 2016
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED (the “Company”)
(LSE: SLI)
Unaudited Net Asset Value as at 31 December 2015
Key Highlights
Net asset value per ordinary share was 82.2p as at 31 December 2015, an increase of 1.6% from 30 September 2015 resulting in a NAV total return of 3.0% for Q4 Completion of the purchase of 22 real estate assets for £165million through the acquisition of a Jersey Property Unit Trust (“JPUT”) resulting in a portfolio now valued at £452million, an increase of 46% from 30 September 2015 The acquisition was financed through the issue of 92.3million shares raising £74.2million after costs, additional debt of £55million and £35million of existing cash resources The standing property portfolio (portfolio excluding the JPUT acquisition) produced a total return of 3.8%, outperforming the 3.1% total return on the MSCI (formerly IPD) Monthly Index over the same period The Company sold two assets in the quarter for a combined value of £28.7million, both assets being sold at a price above that of the most recent valuation; Dividend increase announced of 2.5% to 1.19p per share commencing from the quarter end 31 March 2016 (payable in May 2016 and subject to any unforeseen circumstances); Based on the proposed new dividend rate, dividend yield of 5.5% based on share price of 87.0p (4 February 2016) comparing favourably to the yield on the FTSE All-Share REIT Index (3.2%) and the FTSE All Share Index (4.0%) as at the same date.Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share of Standard Life Investments Property Income Trust Limited (“SLIPIT”) at 31 December 2015 was 82.2p. This is an increase of 1.6% over the net asset value of 80.9p per share at 30 September 2015. The net asset value is calculated under International Financial Reporting Standards (“IFRS”).
The net asset value incorporates the external portfolio valuation by Jones Lang LaSalle and Knight Frank at 31 December 2015.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited NAV per share calculated under IFRS over the period 30 September 2015 to 31 December 2015.
| Per Share (p) | Attributable Assets (£m) | Comment | |
| Net assets as at 1 October 2015 | 80.9 | 233.2 | |
| Unrealised increase in valuation of property portfolio | 1.4 | 5.4 | Like for like increase of 1.8% in standing property portfolio. |
| Gain on sale of assets | 0.3 | 1.3 | Sale of assets in Cheltenham and Rickmansworth. |
| Acquisition costs during the period | -0.5 | -1.9 | Relates to costs on successful acquisition of new portfolio of 22 assets in December 2015. |
| Share Issuance (net of issuance costs) | 0.0 | 74.2 | Issue of 92.3 million shares at a premium of 2.84% to the underlying NAV |
| Net income in the quarter after dividend | 0.1 | 0.6 | Equates to dividend cover of 117% in the quarter boosted by a one-off reduction in management fees following the portfolio acquisition |
| Interest rate swaps mark to market revaluation | 0.1 | 0.5 | Decrease in swap liabilities |
| Other movement in reserves | -0.1 | (0.5) | Movement in lease incentives and CAPEX |
| Net assets as at 31 December 2015 | 82.2 | 312.8 |
| European Public Real Estate Association (“EPRA”)* | 31 Dec 2015 | 30 Sep 2015 | |
| EPRA Net Asset Value | £314.9m | £235.8m | |
| EPRA Net Asset Value per share | 82.8p | 81.8p | |
The Net Asset Value per share is calculated using 380,690,419 shares of 1p each being the number in issue on 31 December 2015.
* 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 final quarter of 2015 saw continued capital growth, boosted in part by increasing rental growth. According to the IPD MSCI monthly index this resulted in a total return of 3.1% for the quarter. The Company had a total return at a portfolio level of 2.7% and a NAV total return to investors of 3.0% over the same period. The portfolio return was distorted by the end of year purchase of the JPUT and the acquisition costs thereon with the standing portfolio producing a like-for-like total return of 3.8% in the quarter.
The Company had a very busy end to 2015. It completed the sale of two offices for a total of £28.7million. Both offices had delivered exceptional performance for the Company, having been bought for a combined £18.3m in 2012 / 13. The sale proceeds were reinvested at the end of the quarter into the JPUT acquisition, which consisted of a total of 22 assets at a cost of £165m. The Company raised £74.2m of new equity after costs and entered into a new debt facility with RBS to finance the portfolio, resulting in a Loan to Value (“LTV”) at the end of December of 28.1% and an all in cost of debt of 2.7%.
The new portfolio is obviously a major acquisition for the Company. This portfolio is a great fit with the “old” portfolio, and provides opportunity to enhance the income return through asset management. As a result of the purchase, the Board was able to announce an increase in the dividend by 2.5% to 1.19p per share with effect from the first quarter of 2016. Based on the share price of 87p as at 4th February 2016 this will provide shareholders with an attractive annual dividend yield of 5.5%.
We expect the first quarter of 2016 to be just as busy as we bed down the new portfolio, and get to know our new tenants. We believe there is plenty of asset management to undertake this year along with a debt refinancing as detailed below.
As we look through 2016 and beyond it is clear there are some challenges ahead. Uncertainty with a vote over Britain’s membership of the EU, combined with geo-political risk in Europe and a slowing China, overshadows the market. It feels as though we are at a point of inflection where capital growth from yield compression is coming to an end, and returns will be driven by income and rental growth – an environment the Company is well suited for. We have low voids (1.1%) and are seeing rental growth in most markets as supply remains constrained and tenant demand is good. With a continued expectation of “lower for longer” interest rates, UK commercial real estate continues to look attractively priced against other asset classes, and should be able to provide an attractive level of income.
Cash position
As at 31 December 2015 the Company had borrowings of £139.4million and a cash position of £12.4million (excluding rent deposits).
Dividends
The Company paid a third interim dividend in respect of the quarter ended 30 September 2015 of 1.161p per Ordinary Share, with ex-dividend and payment dates of 12 November 2015 and 27 November 2015 respectively.
In addition to the above the Company announced its intention to split the final interim dividend in respect of the period to 31 December 2015 into: (i) a fourth interim dividend for the period between 1 October 2015 and 20 December 2015 (the date immediately prior to Admission of the new shares detailed above) and (ii) a fifth interim dividend for the period between 21 December 2015 and 31 December 2015.
The Company therefore announced on 16 December 2015 that the fourth interim dividend will be 1.022 p with an ex-dividend date of 17 December 2015 and payment date of 31 March 2016.
The split of this dividend between a property income dividend and ordinary dividend will be announced at the same time as the announcement of the fifth interim dividend which is expected to be in early March 2016.
Loan to value and interest rate
As part of the financing of the JPUT acquisition described above, the Company increased its borrowing facilities from £84.4million to £139.4million. The additional borrowing was in the form of an additional term loan of £40.6million and a revolving credit facility of £14.4million (with the potential to draw a further £15.6million of the RCF). As at 31 December the loan to value ratio (assuming all cash is placed with RBS as an offset to the loan balance) was 28.1% (30 September 2015: 22.1%). The bank covenant level is 65%.
The weighted average interest rate on the loan as at 31 December 2015 is 2.7% compared to 3.7% as at 30 September 2015. The main reason for this drop was a reduction in margin payable on the existing facilities from 1.65% to 1.25%. The margin on the new facilities is also 1.25% and these new facilities are unhedged meaning the Company is benefiting from the current low interest rate environment at the shorter end of the yield curve.
It is the intention of the Board to refinance all the borrowings of the Company in the first half of this year and the managers are currently in negotiations with a number of potential lenders in order to achieve this.
Net Asset analysis as at 31 December 2015 (unaudited)
| £m | % of net assets | |
| Office | 164.1 | 52.5 |
| Retail | 100.8 | 32.2 |
| Industrial | 187.1 | 59.9 |
| Total Property Portfolio | 452.0 | 144.6 |
| Adjustment for lease incentives | (3.4) | (1.1) |
| Fair value of Property Portfolio | 448.6 | 143.5 |
| Cash | 12.4 | 4.0 |
| Other Assets | 6.2 | 2.0 |
| Total Assets | 467.2 | 149.5 |
| Non-current liabilities | (141.1) | (45.2) |
| Current liabilities | (13.3) | (4.3) |
| Total Net Assets | 312.8 | 100.0 |
Breakdown in valuation movements over the period 1 Oct 2015 to 31 Dec 2015
| Exposure as at 31 Dec 2015 (%) | Capital Value Movement on Standing Portfolio (%) | |
| IPD Sub Sector Analysis: | ||
| RETAIL | ||
| South East Retail | 7.5 | 1.2 |
| Rest of UK Retail | 1.1 | 1.1 |
| Retail Warehouses | 14.6 | 1.1 |
| OFFICES | ||
| London City Offices | 4.7 | 4.9 |
| London West End Offices | 2.5 | 5.8 |
| South East Offices | 22.6 | 0.8 |
| Rest of UK Offices | 5.6 | (0.7) |
| INDUSTRIAL | ||
| South East Industrial | 11.4 | 1.8 |
| Rest of UK Industrial | 30.0 | 2.3 |
| External Property Valuation at 31 Dec 2015 | 100.0 | 1.8 |
Top 10 Properties
| 31 Dec 15 (£m) | |
| White Bear Yard, London | 20-25 |
| Elstree Tower, Borehamwood | 15-20 |
| DSG, Preston | 15-20 |
| Denby 242, Denby | 15-20 |
| Symphony, Rotherham | 15-20 |
| Chester House, Farnborough | 15-20 |
| Charter Court, Slough | 10-15 |
| 3B - C Michigan Drive, Milton Keynes | 10-15 |
| Ocean Trade Centre, Aberdeen | 10-15 |
| Hollywood Green, London | 10-15 |
The Board is not aware of any other significant events or transactions which have occurred between 31 December 2015 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Details of the Company may also be found on the Investment Manager’s website which can be found at: www.standardlifeinvestments.com/its
For further information:-
Jason Baggaley – Real Estate Fund Manager Standard Life InvestmentsTel +44 (0) 131 245 2833 or jason_baggaley@standardlife.com
The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LtdTrafalgar CourtLes BanquesSt Peter PortGY1 3QLTel: 01481 745001Fax: 01481 745085