TIDMSLI
LKKL14 September 2021
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST
LEI: 549300HHFBWZRKC7RW84
RESULTS IN RESPECT OF THE HALF YEARED 30 JUNE 2021
Performance Summary - Financial Review
- NAV total return 10.2 PERCENT
NAV total return of 10.2.% in the six months to 30 June 2021 (H1 2020: -9.0%)
as UK commercial property values began to recover, particularly in sectors
where the Company is strongly positioned. Over the longer term the Company has
continued to outperform its peer group returning 159.2% over ten years compared
to the AIC Property Direct - UK Commercial sector total return of 56.6% and
open ended property funds total return of 38.5%.
- Loan to value 17.6 PERCENT
Loan to value of 17.6% (H1 2020: 26.2%) - Prudent gearing levels with bank
covenants comfortably met.
- Share price total return 20.2 PERCENT
Share price total return of 20.2% (H1 2020: -30.9%) as the share price discount
reduced from 26.8% to 20.6%. Over the longer term the Company has outperformed
its peer group returning 94.4% over ten years compared to the AIC Property
Direct - UK Commercial sector total return of 33.6%.
- Dividends paid 1.9875p per share
(H1 2020: 2.38p per share)
Includes a top-up dividend for 2020 of 0.381p and reflects a 25% increase in
the level of dividends announced since the second half of 2020.
- Available for investment £80m
Significant financial resources at 30 June 2021 of £80 million available for
investment, comprising £55m in the form of the Company's low cost revolving
credit facility ("RCF") and £25m of uncommitted cash balances.
- Share Buybacks £4.5m
Share buybacks totalling £4.5m for the six month period at significant
discounts to NAV which are accretive to both NAV performance and earnings.
Performance Summary - Portfolio Review
- Occupancy rate 87.8 PERCENT
Occupancy rate of 87.8% as at 30 June 2021 (H1 2020: 92.2%) with a fall as a
result of selling let assets and muted office demand.
- Rent collection 93 PERCENT
As at 31 August 2021, rent collection of 94% for quarter 3 and 92% for quarter
2 which averages out to 93% for the first half.
- Operational CO2 saved 221 TONNES
221 tonnes of CO2 emissions saved through the installation of Solar PV schemes
in the portfolio.
- 3 new lettings and 1 lease renewal securing £445,000 per annum in rent.
(H1 2020: 2 new lettings securing £379,000 per annum in rent)
- Acquisition of land as part of carbon strategy
On 10 September 2021, the Company acquired 1,447 hectares of rough upland
grazing and open moorland in the Cairngorm National Park to plant a natural
broadleaf forest and undertake peatland restoration, as well as other bio
diverse habitat creation activities, to undertake a high quality offset
project.
- Restructured 1 lease and 4 rent reviews secured income of £878,000 per annum
of rent.
(H1 2020: Restructured 4 leases and 3 rent reviews to secure longer term income
on £735,000 per annum of rent)
Portfolio total return
- Portfolio total return of 7.9% (H1 2020: -5.6%) compared to MSCI benchmark of
5.7% (H1 2019: -3.8%) for the six month period as capital values rose.
Portfolio biased to outperforming sectors
- Company's Industrial Weighting 50.7%
(H1 2020: 52.7%)(MSCI benchmark: 34.9%)
Industrial weighting of 50.7% with only 11.0% in retail at 30 June 2021 as
portfolio is well aligned to sectors which are forecast to outperform in the
current environment.
- Company's Retail Weighting 11.0%
(H1 2020: 8.2%) (MSCI benchmark: 23.0%)
PERFORMANCE SUMMARY
Earnings & Dividends 30 June 2021 30 June 2020
EPRA earnings per share (p) (excl capital items & swap 1.90 1.96
movements)
Dividends declared per ordinary share (p) 1.99 2.38
Dividend cover (%)* 95.5 83.0
Dividend yield (%)** 4.9 7.9
FTSE All-Share Real Estate Investment Trusts Index Yield 2.7 4.4
(%)
FTSE All-Share Index Yield (%) 2.8 4.7
Capital Values & Gearing 30 June 2021 31 December 2020 Change %
Total assets (£million) 475.5 459.6 3.5
Net asset value per share (p) 88.3 82.0 7.7
Ordinary Share Price (p) 70.0 60.0 16.7
Discount to NAV (%) (20.6) (26.8)
Loan to Value (%)? 17.6 23.0
Total Return 6 months % 1 year % 3 year % 5 year %
return return return return
NAV? 10.2 15.6 13.5 40.0
Share Price? 20.2 22.1 (10.8) 16.7
FTSE All-Share Index 11.1 21.5 6.3 36.9
Property Returns & Statistics (%) 30 June 2021 30 June 2020
Property income return 2.3 2.2
MSCI benchmark income return 2.3 2.3
Property total return 7.9 (5.6)
MSCI benchmark total return 5.7 (3.8)
Void rate 12.2 7.8
* Calculated as revenue earnings per share (excluding capital items) as a
percentage of dividends declared per ordinary share.
** Based on last four quarterly dividends paid to 30 June 2021 of 3.0345p, in
addition to the 5th interim for 2020 of 0.381p, and the share price at 30 June
2021.
? Calculated as bank borrowings less all cash (including cash held at
managing agent) as a percentage of the open market value of the property
portfolio as at 30 June 2021.
? Assumes re-investment of dividends excluding transaction costs.
Sources: Aberdeen Standard Investments, MSCI Investment Property Databank
("IPD").
CHAIRMAN'S STATEMENT
The successful roll-out of the vaccination programme in the UK, and easing of
lockdown measures, has brought welcome signs of recovery to an economy trying
to find its feet having been poleaxed by the COVID-19 pandemic. The economy is
expected to grow around 7% in 2021 which compares to a 10% fall in 2020.
The level of recovery varies widely across all economic sectors as restriction
measures have eased at different rates, with some business owners still facing
uncertainty and worry over how they will return to normal trading, and the rest
of the population still trying to comprehend their 'new normal'. All of this
against the backdrop of concerns over new variants and the Government trying to
work out how best to address the funding deficit created in combatting
COVID-19.
ESG
Environmental, Social and Governance ("ESG") factors have become even more
important over the last 12 months, reversing the trend in previous difficult
economic times of ESG being downplayed. The drive towards Net Zero Carbon has
accelerated and become common language for many people, and wellness is clearly
identified as a key factor in building choice for occupiers. In this
environment your Board has been encouraged by the Investment Manager's
commitment to ESG performance, through asset equipment (energy efficiency) and
amenity (social and wellness).
The Company has acquired 1,447 hectares of rough upland grazing and open
moorland in the Cairngorm National Park for £7.5m to plant a natural broadleaf
forest and undertake peatland restoration as well as other bio diverse habitat
creation activities. The purchase enables the Company to undertake a high
quality offset project at a known cost, securing it from expected future growth
in carbon pricing. The demand for land for planting has grown considerably over
the last 3 years, and we believe the purchase gives the Company an early mover
advantage in this fast developing area.
UK REAL ESTATE MARKET
The UK Commercial real estate market, underpinned as it is by the UK economy,
is starting to show signs of recovery, albeit with polarisation evident across
sectors.
As the UK spent the whole of the first half of the year with some kind of
Covid-19 related restriction and most of the first quarter with severe
restrictions, the MSCI Quarterly Index delivered a striking total return of
5.7% during H1 2021. Once again, however, the return was overwhelmingly driven
by the industrial sector. While offices and retail only achieved six-month
returns of 1.9% and 1.7% respectively, the total return for industrials over
the period was 12.9%. While capital values fell across offices and retail,
industrial values rose by more than 10%. Industrial performance was
broad-based, both in terms of geography and asset type. However, the retail
sector has shown increasing dispersion. While supermarkets and retail
warehouses outperformed the All Property average, achieving 6.6% and 5.4%
respectively, shopping centre returns were -7.7%, despite a sharp slowdown in
value erosion in the second quarter. Standard shop returns were also negative
at -1.2%.
The Covid-19 pandemic has led to an acceleration of change, emphasising trends
that were already evident. Much of this change is likely to be permanent, for
example heightened levels of online shopping (benefitting logistics in
particular), whilst others will change again - for example home working will
form part of a hybrid model, but is unlikely to remain the norm for most
people.
Most of the change driven by Covid-19 has seen a polarisation of returns across
sectors, but there is one significant force that is influencing returns within
sectors, and that is ESG. In previous recessions ESG has declined in
importance, but not so this time. It has become a real driver of behaviours and
therefore of returns, and we expect to see increasing bifurcation of returns
for assets that meet ESG standards and those that do not.
PORTFOLIO AND CORPORATE PERFORMANCE
Your Company produced a portfolio total return of 7.9% in the six month period
with income and capital returns both ahead of their MSCI benchmark (benchmark
total return of 5.7%). The Investment Manager's report provides a full analysis
of the portfolio performance.
This portfolio performance resulted in a NAV total return of 10.2% in the six
month period.
The total return to shareholders in the period was 20.2% as the share price
rose as the economy started to reopen leading to improvement in rent collection
and asset values. These were the main factors behind the discount at which the
Company's shares traded to NAV narrowing from 26.8% at 1 January to 20.6% as at
30 June.
Whilst returns in 2020 were impacted by COVID-19, the Company's portfolio has
consistently outperformed the MSCI index over 1,3, 5, and 10 years establishing
a strong long term track record. An NAV total return of 40.0% over five years
to end of June 2021 compares to the peer group total return of 16.4%. Open
ended property funds returned 9.3% over the same period.
RENT COLLECTION & DIVIDS
Throughout the pandemic, the Board and its Investment Manager have been mindful
of the Company's Environmental, Social and Governance ("ESG") obligations as a
responsible landlord and has reflected this in working considerately with
tenants to collect rents. This has included agreeing repayment plans to suit
the needs of the tenants as well as granting amended lease terms. Write offs
have occurred where appropriate, mainly where the tenant, generally lacking
scale, has no means of paying.
As restrictions are lifted, and the economy starts to show signs of recovery,
rent collection figures are showing improvement and as at 31 August 2021 95% of
all rents due in relation to 2020 are now collected and 94% in relation to the
most recent (third) quarter in 2021. Where the Investment Manager considers the
tenant is capable of settling arrears but does not engage, court action has
been pursued. Further detail on rent collection and interaction with tenants is
included in the Investment Manager's Report.
The Board recognises the importance of dividends to its shareholders and
continued to pay a dividend throughout the pandemic. A fifth interim dividend
in respect of 2020 was announced and paid in early 2021 and, recognising that
the worst of the economic impact of the pandemic seemed to have passed, the
decision was taken for the first quarter to increase quarterly dividend levels
by 25% in 2021. Following this increase, the Board will continue to monitor
closely the impact of the lifting of lockdown restrictions on rent receipts and
recurring earnings in addition to the contribution from new acquisitions, as
the Company deploys its significant capital resources.
FINANCIAL RESOURCES & PORTFOLIO ACTIVITY
Throughout the pandemic, the Company has maintained a strong financial position
and this continues to be the case. On 30 June 2021, the Company had significant
financial resources of £80 million to deploy for further investment,
represented by £25 million of uncommitted cash and all of its £55 million
flexible, low-cost revolving credit facility. Loan to Value ("LTV") remains
prudent at 17.6% and banking covenants are comfortably met with significant
headroom.
This solid grounding allows the Investment Manager the firepower to invest in
strategic, well-positioned acquisitions as well as pursuing initiatives to
reduce the Company's carbon footprint.
MANAGER REBRAND
The Board notes that Standard Life Aberdeen plc has rebranded to abrdn plc. The
Board is working with the Manager on the implications of this and will be
actively considering a change of name for the Company. The Board will engage
with its shareholders on plans for rebranding in due course.
OUTLOOK
After withstanding the unprecedented economic shock created by the Covid-19
pandemic, the economy is now in recovery mode as the vaccination programme has
reached critical mass and restrictions are relaxed, although uncertainties
remain. From a real estate perspective in the UK, structural trends are set to
drive performance over the medium term, leading to polarisation both between,
and within, sectors.
Industrials are forecast to remain the best-performing sector over the next
three years, underpinned by fundamentals supporting further rental growth and
investment demand to push yields lower into the second half of 2021.
By contrast, office fundamentals point to falling rental values and rising
income risk. With little adjustment to values thus far, weak returns are
expected over the medium term along with a widening gap between offices
regarded as best quality space and ageing office space that does not offer
attractive working conditions for staff. Such a split is also expected in the
retail sector, with retail warehouse values now rising rapidly in modern parks,
anchored by strong occupiers in the grocery, discount variety and DIY markets;
meanwhile, fashion-led offerings and high-street or shopping-centre locations
are expected to see ongoing difficulties.
This trend of bifurcation highlights the need to hold the right assets, not
just assets in the right sector.
SLIPIT is well positioned to take advantage of the trends referred to above,
holding over 50% of its portfolio in the industrial sector, well above the
benchmark weighting. Assets held within the retail and office sectors are
substantially well placed to benefit from the intra-sector divide we are
seeing. In addition to this well-structured existing portfolio, the Company
also has a strong balance sheet, with significant financial resources to invest
into the existing portfolio with conviction seeking to boost revenue generation
for the future.
James Clifton-Brown
Chair
13 September 2021
PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets consist of direct investments in UK commercial property.
Its principal risks are therefore related to the commercial property market in
general, but also the particular circumstances of the properties in which it is
invested, and their tenants. The overarching risk to the Company's portfolio is
COVID-19, which has caused significant loss of life and global economic
disruption. It arguably affects all areas of risk on which the Company reports
and has increased the risk profile of the Company, as set out in the Chair's
Statement and the Investment Manager's Report. The Board and Investment Manager
seek to mitigate risks through a strong initial due diligence process,
continual review of the portfolio and active asset management initiatives. All
of the properties in the portfolio are insured, providing protection against
risks to the properties and also protection in case of injury to third parties
in relation to the properties.
The Board have carried out an assessment of the risk profile of the Company
which concluded that the risks as at 30 June 2021, including the overarching
risk of COVID-19, were not materially different from those detailed in the
statutory accounts for the Company for the year ended 31 December 2020, which
were published in April 2021.
Having reviewed the principal risks, including the impact of COVID-19, the
Directors believe that the Company has adequate resources to continue in
operational existence for the foreseeable future and therefore believes it
appropriate to adopt the going concern basis in preparing the financial
statements.
INVESTMENT MANAGER'S REPORT
MARKET COMMENTARY
In another half-year dominated by the impact of the COVID-19 pandemic, the UK
economy has surprised somewhat on the upside. Economic output contracted by
only 1.5% during the first quarter, despite the majority of it being spent in a
strict lockdown. After a fall in GDP of nearly 10% in 2020, the UK began the
year at a much lower base level of output. However, with remote working well
established, fiscal support firmly in place and the roll-out of vaccines
offering cause for optimism, the economy was able to adapt and function better
than many had anticipated.
Encouragingly, the economy has bounced back strongly during the second quarter
as measures to restrict the spread of the virus were gradually relaxed in line
with a Government roadmap first announced in February. That is despite the
dramatically more transmissible Delta variant of the virus leading to a renewed
surge in cases. Importantly, the successful vaccination programme in the UK
appears to have significantly weakened the link between infections and
hospitalisations.
The re-opening of the economy has seen inflation start to rise. But it is, in
some ways, a recovery period like no other; the pandemic severely affected the
supply side of the economy, which is being rebuilt alongside surging demand.
That has caused bottlenecks in some specific areas of the labour market,
exacerbated by frictions resulting from Brexit and the loss of EU labour
through the pandemic - particularly in London - that has largely not returned
to the UK. In addition, there are significant base effects driving inflation:
fuel prices dropped sharply last spring and are now significantly higher, while
the removal of fiscal packages such as the VAT cut and the "eat out to help
out" scheme will also drive inflation higher this year. Nevertheless, the Bank
of England's monetary policy committee is expected to look through this
inflation, which it argues is transitory, and interest rates are expected to
remain at their record low level for some time to come.
COMMERCIAL PROPERTY
The relaxation of lockdown restrictions during the second quarter has seen a
rebound in retail sales but perhaps not to the extent many had expected.
Footfall, particularly on high streets and in shopping centres, has remained
20-30% below the same period in 2019 but higher conversion rates have pushed
sales above 2019 levels. After an initial surge in sales on the reopening of
non-essential stores in April, sales volumes have plateaued and, indeed, fell
month-on-month in June across non-food stores. Retail parks have outperformed
in footfall and sales terms but, with many big-ticket purchases perhaps brought
forward and re-opened hospitality absorbing more of consumer spending, there
are signs that household goods and DIY sales are now falling back.
There was an extension of the moratorium on tenant evictions to the end of
June, removing the previously planned March cliff-edge that would have occurred
with shops still shuttered. A further extension was always possible, but few
foresaw the nine-month extension to March 2022 that was announced only weeks
before the June quarter day. The length of the extension was based on leaving
sufficient time for landlords and tenants to reach agreements relating to
unpaid rent bilaterally. Alongside the extension, the government announced that
a binding arbitration process would be written into legislation in due course -
likely in the autumn - which will apply if negotiations between landlords and
tenants fail. The legislation will also ring-fence arrears built up by
businesses during periods of enforced closure, implying that landlords will
share the financial impact with their tenants.
There was no material return to office working during the first half of the
year, due to concerns around the safety of office environments and public
transport commuting. Availability rates have risen in all major office markets
but most steeply in London with smaller, more secondary buildings hardest hit.
Vacancy has plateaued during the second quarter but at a high level that is
consistent with falling rents, especially in secondary stock that is out of
favour with tenants. Remote and hybrid working policies will outlive the
pandemic and most occupiers are acting cautiously and consultatively with their
workforces in respect of future requirements. In contrast, take-up remains
exceptionally strong in the industrial sector. In the logistics space, the
first half of 2021 set a new record level of take-up, driven by the fundamental
structural changes to the way and the speed with which goods are distributed to
consumers.
The backdrop of the Covid-19 restrictions in the first half of the year has
meant the MSCI/IPD Quarterly Index total return of 5.7% was quite remarkable.
The return was driven, again by the industrial sector (12.9%) as offices and
retail delivered muted figures (1.9% and 1.7% respectively).
Our house view forecast envisages a modest fall in values over the next year,
primarily driven by our expectation of falling rents in the office sector and a
further adjustment across fashion retail locations as valuations move towards
prevailing levels of pricing.
Strong performance, however, is expected from the industrial sector and from
out-of-town retail, in the form of both supermarkets and retail warehouses.
With the fundamentals supportive of further rental growth, investment demand
for industrials is set to push yields lower in the second half of the year and
the sector is forecast to remain the top performer over the next three years.
We expect bifurcation in the retail sector, with modern retail parks, let at
affordable rents and anchored by grocery, discount variety and DIY occupiers,
likely to deliver strong returns over the next 12 months. Fashion-oriented
parks are more vulnerable to the same occupational challenges facing high
streets and shopping centres, where we expect another year of negative total
returns. Bifurcation is also expected to be a feature of the office market,
with the best quality space favoured by tenants and more resilient for
investors and secondary space increasingly distressed. While our office
forecasts are weak overall, it is secondary space where vacancy is high and
letting appetite is very weak that is most at risk of significant falls in
rents and values.
INVESTMENT OUTLOOK
The UK economy is forecast to continue its recovery this year and achieve
growth of around 7% across 2021 as a whole. However, after a fall of nearly 10%
in 2020, the level of economic activity is expected to remain below pre-Covid
levels until at least next year. That implies an output gap and a rise in
unemployment towards 6% when the Coronavirus Job Retention Scheme ends at the
end of September.
Understandably, there is significant uncertainty around the outlook at present
and there remains a relatively low weighting to the central case as a result.
The global impact of the Delta variant - and the risk of further variants of
concern - is one source of uncertainty, while Brexit and trade remains an
issue. The escalatory situation regarding the Northern Ireland Protocol is but
one example that, far from being "done", Brexit is a process and one that will
be a continued source of friction and uncertainty for many UK businesses.
However, while the economic fundamentals are important, for much of the UK real
estate market it is structural trends that are set to drive performance over
the medium term. It is the continuation of the structural shift to online
shopping, which has been accelerated by the pandemic, that is driving logistics
demand and rental value growth. That same trend is one of the drivers of
discretionary retail's challenges, alongside a host of other headwinds. A
greater sustainability focus among younger shoppers, including rapid growth in
the second-hand market, alongside further digitisation of high street services
are among those additional headwinds.
The Government's failure to reform business rates continues to impair store
viability, while the withdrawal of VAT relief for tourists is a major
additional threat to central London values.
The expected divergence in fortunes across the office sector is expected to be
a key theme going forward, with total demand under downward pressure from
hybrid working and occupiers increasingly discerning about their space. Offices
that are not flexible, do not offer the amenity and connectivity tenants
demand, are not technologically-enabled and, importantly, fall down on
sustainability measures face a hugely challenging future that is not, in our
view, reflected in current values. Assets that are future-fit, however, will
remain attractive and could start to attract a rental premium if supply of the
highest quality buildings is constrained.
PERFORMANCE
The Company considers a range of measures when assessing its performance. The
underlying performance of the real estate assets is the first level of
consideration, and is a direct comparison to the wider market. The NAV total
return, on the other hand, is a better reflection of the return experienced by
the Company as a whole, as it encompasses all aspects of the Company including
debt and expenses. Finally, the share price total return is a useful metric in
so much as it reflects investor experience, but it is the one metric over which
the Investment Manager and the Board have least control.
PORTFOLIO LEVEL PERFORMANCE
The Company's investment portfolio performed well in the first six months of
2021 providing a total return of 7.9%, compared to the MSCI/IPD benchmark of
5.7%. This continues the portfolios out-performance over 1,3,5, and 10 year
periods. The outperformance is driven by a combination of sector allocation
(high exposure to the industrial sector which has performed strongly, and no
exposure to shopping centres that have performed very poorly), and partly due
to stock selection, particularly in retail warehousing where the Company's
exposure is to DIY and budget retail at affordable rents.
NAV PERFORMANCE
The underlying portfolio performance is the main driver of NAV performance,
however the debt used in the fund also has an impact - and with rising values
that impact is positive (the reduced interest rate swap liability over the
first half has also been beneficial). The NAV total return should not be
directly compared to the MSCI/IPD benchmark as the two contain different
factors, so the table below shows the Company's NAV total return over time
compared to the AIC sector of rival companies, and also the Investment
Associations open ended property funds sector.
NAV Total Returns to 30 June 2021 1 year 3 years 5 years (%) 10 years (%)
(%) (%)
Standard Life Investments Property Income Trust 15.6 13.5 40.0 159.2
AIC Property Direct - UK Sector (weighted average) 6.0 7.0 16.4 56.6
Investment Association Open Ended Commercial 1.1 -2.5 9.3 38.5
Property Funds sector
Source: Aberdeen Standard Investments, Association of Investment Companies
("AIC")
SHARE PRICE PERFORMANCE
Shares in the Company were trading at a 26.8% discount at the start of the
reporting period, and that has narrowed over the 6 months to 20.6% following
the increase in dividend and improved sentiment as we progress out of lockdown.
Share Price Total Returns to 30 June 2021 1 year 3 years 5 years (%) 10 years (%)
(%) (%)
Standard Life Investments Property Income Trust 22.1 -10.8 16.7 94.4
FTSE All-Share Index 21.5 6.3 36.9 85.5
AIC Property Direct - UK Sector (weighted average) 34.4 0.5 15.1 33.6
Source: Aberdeen Standard Investments, Association of Investment Companies
("AIC")
DIVID
SLIPIT is focussed on providing shareholders with an attractive level of
dividend. The Company continued to pay a dividend throughout the pandemic, but
the level in 2020 was 80% of that in 2019, 3.808p per share against 4.76p per
share. In the first quarter of 2021 the Company increased the quarterly
dividend by 25% to 0.8925 pence per share (maintained in the second quarter).
The Board believes this level to be sustainable and to have reasonable
prospects for growth as cash is invested and provisions reduce. If required a
5th dividend will again be paid, to ensure at least 90% of net rental income is
distributed, as required by the REIT rules.
The main factor in the Company's ability to pay the dividend is the amount of
rental income it receives. Over the last 9 months the Company has undertaken a
number of sales as it repositions the portfolio for a post Covid world; the net
rent the Company forecast at 30 June 2020 was £26.8m per annum, but by 30 June
2021 that had decreased to £24.5m.
Rental income will grow again as new investments are made and gearing
increased. The other impact on rental income is the collection of rent due.
Prior to Covid the Company regularly recovered 99% - 100% of the rent due,
however, the restrictions on tenants' ability to trade through Covid have
adversely impacted their ability to pay, and for 2020 the collection rate
stands at 95%. For the first half of 2021 it stands at 91%, reflecting the
severe lockdown and its impact on the first quarter, slowly relaxing into the
second. As at 31 August the third quarter figure stands at 94%. It should be
noted that the Company has taken a prudent approach to making provisions for
rent due, at roughly 8% of the rent due in the period.
Rent H1 Collection
collection
Retail 81%
Industrial 99%
Office 89%
Other 73%
Total 91%
PORTFOLIO VALUATION
The investment portfolio is valued on a quarterly basis by Knight Frank LLP. At
30 June the portfolio comprised 46 assets (55 the year before) valued at £
433.8m, with cash of £33.8m (£447.3m and £5.0m prior year). At 30 June there
was no money drawn on the RCF (£14m prior year). The portfolios initial yield
was 5.3% and the equivalent yield was 6.3%.
PORTFOLIO STRATEGY AND ALLOCATION
The Company has a clear investment objective, seeking to offer investors an
attractive level of income together with the prospect of income and capital
growth by investing in a diversified portfolio of commercial property. The
investment manager has focussed on two elements in its strategy recently:
1. ESG: We fundamentally believe that investments with strong ESG
credentials will perform better than similar investments with poor ESG
credentials. In order to achieve a reliable and growing income stream from
property assets, it will be increasingly important to have good quality
properties that meet tenants needs. Wellness is increasingly important to
occupiers, and energy performance (and carbon footprint) to both investors and
occupiers.
2. Change driven by Covid-19 means that an active approach to managing the
portfolio is required. Offices, in particular, are going through rapid change,
much of which is structural, just as retail has over the last 10 years. We have
undertaken a thorough review of the portfolio to ensure that the assets we hold
are "future fit", i.e. they will meet the needs of occupiers and investors in a
post Covid world.
Over the last ten years the Company has benefitted from investing in good
secondary properties at higher than average yields, and then enjoying yield
compression between prime and secondary. We strongly believe that the next 5
years will see a reversal of this theme, and that the spread for secondary
assets will widen, as their ESG credentials will not be good enough, and
investors will shy away. Sustainable and growing income will come from better
quality assets, and yields will remain keen for those. Poorer assets will fail
to attract tenants, and pricing will fall as new investors build in significant
refurbishment costs.
Aberdeen Standard Investments has developed tools to help it address these
changes. To help understand ESG matters at an asset level we have developed the
Impact Dial - a comprehensive measure of where the asset stands today, and what
it is capable of achieving, measureable against a benchmark or fund target. In
the office space we have developed a questionnaire based around key aspects
such as flexibility, amenity, connectivity, technology, and sustainability to
analyse each asset and its potential.
SLIPIT has always taken an active approach to managing its portfolio, and that
has continued into 2021, exiting three office assets that we did not believe
were future fit, and an industrial asset that had poor ESG credentials, that we
thought would impact future performance.
The structure of a portfolio remains an important component to driving returns,
and SLIPIT continues to have a high exposure to industrial (50.7% at 30 June),
a moderate exposure to offices (31.0%), and a low but growing exposure to
retail (11.0%) via retail warehousing. The Company's exposure to "other" is
mainly made up of a Data Centre, and leisure complex in north London with
redevelopment potential. We will increase the industrial and retail exposure
further assuming investments under offer complete.
Stock picking within favoured sectors drives returns as well, and in SLIPIT we
seek to own assets that meet tenants' needs. In the retail space this means
owning assets that are affordable and trade well for the tenant. In offices
that means owning assets with great amenity (eg showers and changing
facilities, coffee lounges etc) that are efficient to occupy (shared meeting
rooms etc). Increasingly, we have seen demand from tenants for fully fitted
office suites and have already provided them in many locations which has led to
enhanced letting terms at several buildings. SLIPIT benefits from a team of
experienced and dedicated asset managers who engage with the company's tenants
to maximise occupancy and income. Over the course of the last 15 months a great
deal of time has been spent liaising with tenants to agree rental payments that
enable their businesses to survive, but also recognising the contractual
arrangements in place.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)
The annual report and accounts provide a lot of information on our approach to
ESG. This report seeks to update on the activities we are undertaking. The
GRESB submission (the most widely used of ESG benchmarking in real estate) was
made in July and we await results, to be shared in the annual report and
accounts.
Our practical approach to ESG takes several forms:
1. All members of the team working on the SLIPIT portfolio have a key goal
"to be able to demonstrate that ESG is considered in every decision they make"
2. A team member given overarching responsibility to drive our PV and EV roll
out
3. New lettings to have enhanced lease provision for collection of utility
consumption data
4. Net zero assessment being made from fund level to asset action plans
5. All assets to be assessed under the ASI Impact Dial proprietary tool
6. All office planned maintenance plans to incorporate additional capex
required to meet future energy standards through to 2030
7. Future carbon offset plan in place to give fixed cost solution.
The PV programme continues to grow, however it is slow progress, as we work on
getting tenant usage data and documentation, securing grid connections and
engineers' reports on loading capacity.
In addition to the 6 operational PV schemes providing 1.2mwp we have a further
13 that are advanced (offering up to 2.8mWp), and another 7 where discussions
on capacity are just starting. To put this into context, the existing PV output
is sufficient to boil a kettle 7,944,006 times a year, or to power 428 electric
cars for a year. It is also equivalent to the yearly electrical use of 239
average UK households.
Even a very efficient property portfolio will have some residual carbon that
will require to be offset. The SLIPIT investment team believes that offsetting
is a last resort after minimising carbon output, and that if it is to be
undertaken then it needs to be done to the highest standard. As a result,
SLIPIT has acquired 1,447 hectares of rough upland grazing and open moorland in
the Cairngorm National Park for reforestation and peatland restoration. 956
acres are for planting, 167 hectares of open ground for diverse natural
habitat, and 324 hectares are of deep peat, of which 115 is suitable for
restoration. This is not an investment into commercial forestry, but is the
purchase of land to plant natural broadleaf trees to generate woodland carbon
credits in the future. The benefit of acquiring a carbon offset by this method
is that the cost is known, and attractive, compared to buying carbon offsets in
the open market. It comes with a significant responsibility. We will be
creating a long term diverse natural habitat, and have to be aware of
sensitivities to local communities and existing land uses. The purchase price
for the land is £7.5m and the Company will be seeking a planting consent for
the land. The cost of fencing and planting is likely to be covered fully by
grants. The Investment Manager and the Board believe that being early entrants
into this market will be of financial benefit to the Company in future years as
more institutions seek net zero pathways.
This is a large project with the planting of approximately 1.5m trees in
addition to the peatland restoration. It is anticipated the site will sequester
approximately 373,000 tonnes of carbon over the life of the project. Other
potential benefits include flood mitigation, bio diverse habitat creation, soil
retention and water purification. The net biodiversity gain is going to become
more important in real estate as changes to planning legislation will require
future net gain to be demonstrated, both on and off site on all new
developments.
ASSET MANAGEMENT
Over the first 6 months, 5 lease restructures / renewals were agreed to extend
the income, securing £877,830pa. Just after the reporting period a further
lease was renewed to secure £255,000pa on a logistics unit (23% above the
previous rent).
In the same period three office lettings and one renewal were completed to
secure £444,575pa. It is hoped that conversion of office interest will increase
as Covid restrictions are eased.
Voids currently stand at 12.2%, an increase caused in part by property
disposals during the period but also from several office lease expiries. Office
demand has been muted as people are required to work from home but we expect to
see an increase in demand through the remainder of the year which will, in
turn, improve our rental income and reduce our cost base.
INVESTMENT SALES
We continued to reposition the portfolio for a post Covid world with the sale
of three office assets for a total of £17.25m that we did not believe were
going to meet future needs, as well as an industrial unit for £6.25m with poor
ESG credentials, and a small retail warehouse unit investment for £2.65m.
After the reporting period we also completed the sale of a small office in
Bishops Stortford for £3.75m.
INVESTMENT PURCHASES
No purchases were completed in the first half of the year although terms have
been agreed to buy a B&Q retail warehouse for £14m at a yield of 6.5%, a
logistics unit in Washington for £7m at a yield of 5.75% recently let on a new
15 year lease, and to fund an industrial development pre let to a Council for
15 years at a total cost of £15m, reflecting a yield of 4.25%.
New purchases will focus on good quality assets that can provide a sustainable
income. ESG will play an important part in the assessment of suitable new
investments in terms of energy efficiency, carbon footprint, tenant use, and
social factors.
DEBT
The Company has two facilities with RBS, both of which expire in April 2023.
The main facility is a fully drawn fixed term loan of £110m, which is subject
to an interest rate swap. The second part of the facility is a Revolving Credit
Facility (RCF) of £55m. At 30 June no sum was drawn from the RCF, as the
proceeds of sales at the end of 2020 and into 2021 were used to repay it. It is
anticipated that the RCF will be utilised again later in 2021 as further
investments are made. The loan to value ratio at 30 June stood at 17.6%, which
is the lowest it has ever been. Given the wider general outlook a range of
20%-30% is seen as more desirable.
CONCLUSION
It is easy to feel quite positive currently, with the economy growing, tenant
activity improving, and the portfolio performing well. The level of change we
are experiencing suits an actively managed fund, and we believe the
repositioning of the portfolio and renewed focus on ESG will drive continued
out-performance. However, caution is required. Autumn and winter are likely to
see a resurgence in Covid, and if that comes in the form of another variant
where vaccines are less effective, then that will have a negative impact. We
are also keeping a close watch on inflationary pressures, especially in
building supplies and labour.
We will continue to manage the portfolio with caution, trying to adapt to
change, and meeting occupier needs so that we can continue to generate a
sustainable rental income to pay an attractive dividend.
Jason Baggaley
Investment Manager
13 September 2021
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Interim Management Report in
accordance with applicable law and regulations. The Directors confirm that to
the best of their knowledge:
- The condensed Unaudited Consolidated Financial Statements have been prepared
in accordance with IAS 34; and
- The Interim Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules; and
- In accordance with 4.2.9R of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules, it is confirmed that this publication has not
been audited or reviewed by the Company's auditors.
The Interim Report, for the six months ended 30 June 2021, comprises an Interim
Management Report in the form of the Chair's Statement, the Investment
Manager's Report, the Directors' Responsibility Statement and a condensed set
of Unaudited Consolidated Financial Statements. The Directors each confirm to
the best of their knowledge that:
a. the Unaudited Consolidated Financial Statements are prepared in accordance
with IFRSs as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Group; and
b. the Interim Report includes a fair review of the development and performance
of the business and the position of the Group, together with a description of
the principal risks and uncertainties faced.
For and on behalf of the Directors of Standard Life Investments Property Income
Trust Limited.
Approved by the Board on
13 September 2021
James Clifton-Brown
Chair
FINANCIAL STATEMENTS
Unaudited Consolidated Statement of Comprehensive Income for the period ended
30 June 2021
Notes 1 Jan 2021 to 30 Jun 1 Jan 2020 to 30 Jun 1 Jan 2020 to 31 Dec
2021 £ 2020 £ 2020 £
Rental income 14,236,719 14,475,764 29,439,549
Service charge income 1,919,813 846,574 3,543,976
Surrender premium - - 21,250
Valuation gain/(loss) from investment 3 23,692,631 (38,278,871) (27,640,224)
properties
Loss on disposal of investment properties 3 (1,373,427) (97,867) (4,806,137)
Investment management fees 2 (1,602,289) (1,596,433) (3,198,519)
Valuer's fees (37,078) (45,402) (84,638)
Auditor's fees (74,300) (39,250) (118,400)
Directors' fees and expenses (105,962) (125,882) (236,953)
Service charge expenditure (1,919,813) (846,574) (3,543,976)
Other direct property expenses (2,632,817) (2,540,224) (4,904,968)
Other administration expenses (405,619) (346,263) (512,849)
Operating profit/(loss) 31,697,858 (28,594,428) (12,041,889)
Finance income 526 3,801 3,896
Finance costs (1,746,493) (1,823,245) (3,744,074)
Profit/(loss) for the period before taxation 29,951,891 (30,413,872) (15,782,067)
Taxation
Tax charge - - -
Profit/(loss) for the period, net of tax 29,951,891 (30,413,872) (15,782,067)
Other Comprehensive Income
Valuation gain/(loss) on cash flow hedge 1,289,811 (1,831,613) (1,514,638)
Total other comprehensive gain/(loss) 1,289,811 (1,831,613) (1,514,638)
Total comprehensive gain/(loss) for the period, 31,241,702 (32,245,485) (17,296,705)
net of tax
Earnings per share (p) (p) (p)
Basic and diluted earnings per share 5 7.50 (7.48) (3.88)
Adjusted (EPRA) earnings per share 1.90 1.96 4.10
All items included in the above Unaudited Consolidated Statement of
Comprehensive Income derive from continuing operations.
The notes are an integral part of these Unaudited Consolidated Financial
Statements.
Unaudited Consolidated Balance Sheet as at 30 June 2021
Notes 30 Jun 2021 30 Jun 2020 31 Dec 2020 £
£ £
Non-current assets
Investment properties 3 423,666,556 442,987,223 428,412,375
Lease incentives 3 7,335,331 5,211,158 5,885,270
Rental deposits held on behalf of tenants 833,768 1,393,927 855,866
431,835,655 449,592,308 435,153,511
Current assets
Investment properties held for sale 3, 4 3,700,000 - 4,300,000
Trade and other receivables 6,222,513 9,898,419 10,802,197
Cash and cash equivalents 33,750,589 4,993,983 9,383,371
43,673,102 14,892,402 24,485,568
Total Assets 475,508,757 464,484,710 459,639,079
LIABILITIES
Current liabilities
Trade and other payables 11,414,647 10,894,423 13,096,054
Interest rate swap 8 1,354,600 1,194,281 1,472,387
12,769,247 12,088,704 14,568,441
Non-current liabilities
Bank borrowings 9 109,638,819 123,421,818 109,542,823
Interest rate swap 8 1,090,841 2,857,948 2,262,867
Obligations under finance leases 901,887 903,831 902,645
Rent deposits due to tenants 833,768 1,393,927 855,866
112,465,315 128,577,524 113,564,201
Total liabilities 125,234,562 140,666,228 128,132,642
Net assets 350,274,195 323,818,482 331,506,437
EQUITY
Capital and reserves attributable to Company's equity holders
Share capital 228,383,857 228,383,857 228,383,857
Treasury Share Reserve (5,991,417) - (1,450,787)
Retained earnings 7,038,582 4,447,819 7,339,209
Capital reserves 23,004,801 (6,851,566) (604,214)
Other distributable reserves 97,838,372 97,838,372 97,838,372
Total equity 350,274,195 323,818,482 331,506,437
NAV per share 88.3 79.6 82.0
EPRA NTV 88.9 80.6 82.9
The notes are an integral part of these Unaudited Consolidated Financial
Statements.
Unaudited Consolidated Statement of Changes in Equity for the period ended 30
June 2021
Notes Share Treasury Retained Capital Other Total equity £
Capital £ Shares £ Earnings £ Reserves £ Distributable
Reserves £
Opening balance 1 January 2021 228,383,857 (1,450,787) 7,339,209 (604,214) 97,838,372 331,506,437
Profit for the period - - 29,951,891 - - 29,951,891
Other comprehensive income - - - 1,289,811 - 1,289,811
Total comprehensive income for the - - 29,951,891 1,289,811 - 31,241,702
period
Ordinary shares placed into treasury - (4,540,630) - - - (4,540,630)
net of issue costs
Dividends paid 7 - - (7,933,314) - - (7,933,314)
Valuation gain from investment 3 - - (23,692,631) 23,692,631 - -
properties
Loss on disposal of investment 3 - - 1,373,427 (1,373,427) - -
properties
Balance at 30 June 2021 228,383,857 (5,991,417) 7,038,582 23,004,801 97,838,372 350,274,195
Notes Share Treasury Retained Capital Other Total equity £
Capital £ Shares £ Earnings £ Reserves £ Distributable
Reserves £
Opening balance 1 January 2020 227,431,057 - 6,168,350 33,356,785 97,838,372 364,794,564
Loss for the period - - (30,413,872) - - (30,413,872)
Other comprehensive income - - - (1,831,613) - (1,831,613)
Total comprehensive loss for the - - (30,413,872) (1,831,613) - (32,245,485)
period
Ordinary shares issued net of issue 952,800 - - - - 952,800
costs
Dividends paid 7 - - (9,683,397) - - (9,683,397)
Valuation loss from investment - - 38,278,871 (38,278,871) - -
properties
Loss on disposal of investment 3 - - 97,867 (97,867) - -
properties
Balance at 30 June 2020 228,383,857 - 4,447,819 (6,851,566) 97,838,372 323,818,482
Notes Share Treasury Retained Capital Other Total equity £
Capital £ Shares £ Earnings £ Reserves £ Distributable
Reserves £
Opening balance at 1 January 2020 227,431,057 - 6,168,350 33,356,785 97,838,372 364,794,564
Loss for the year - - (15,782,067) - - (15,782,067)
Other comprehensive income - - - (1,514,638) - (1,514,638)
Total comprehensive loss for the - - (15,782,067) (1,514,638) - (17,296,705)
period
Ordinary shares issued net of issue 952,800 - - - - 952,800
costs
Ordinary shares placed into treasury - (1,450,787) - - - (1,450,787)
net of issue costs
Dividends paid 7 - - (15,493,435) - - (15,493,435)
Valuation loss from investment - - 27,640,224 (27,640,224) - -
properties
Loss on disposal of investment 3 - - 4,806,137 (4,806,137) - -
properties
Balance at 31 December 2020 228,383,857 (1,450,787) 7,339,209 (604,214) 97,838,372 331,506,437
The notes are an integral part of these Unaudited Consolidated Financial
Statements.
Unaudited Consolidated Cash Flow Statement for the period ended 30 June 2021
Cash flows from operating activities Notes 1 Jan 2021 to 1 Jan 2020 to 1 Jan 2020 to
30 Jun 2021 £ 30 Jun 2020 £ 31 Dec 2020 £
Profit/(loss) for the period before taxation 29,951,891 (30,413,872) (15,782,067)
Movement in lease incentives (1,499,070) (659,591) (1,694,642)
Movement in trade and other receivables 4,602,539 (6,080,465) (6,446,180)
Movement in trade and other payables (1,704,263) 1,757,627 3,421,484
Finance costs 1,746,493 1,823,245 3,744,074
Finance income (526) (3,801) (3,896)
Valuation (gain)/loss from investment properties 3 (23,692,631) 38,278,871 27,640,224
Loss on disposal of investment properties 3 1,373,427 97,867 4,806,137
Net cash inflow from operating activities 10,777,860 4,799,881 15,685,134
Cash flows from investing activities
Interest received 526 3,801 3,896
Purchase of investment properties - - (21,297,754)
Capital expenditure on investment properties 3 (388,299) (2,438,541) (4,947,828)
Net proceeds from disposal of investment properties 3 28,101,573 10,602,133 50,973,863
Net cash inflow from investing activities 27,713,800 8,167,393 24,732,177
Cash flows from financing activities
Net proceeds on issue of ordinary shares - 952,800 952,800
Shares bought back during the year (4,540,630) - (1,450,787)
Bank borrowing - 6,000,000 27,000,000
Repayment of RCF - (10,000,000) (45,000,000)
Interest paid on bank borrowing (943,690) (1,545,552) (2,479,388)
Payments on interest rate swap (706,808) (172,761) (1,038,749)
Dividends paid to the Company's shareholders 7 (7,933,314) (9,683,397) (15,493,435)
Net cash outflow from financing activities (14,124,442) (14,448,910) (37,509,559)
Net increase/(decrease) in cash and cash equivalents 24,367,218 (1,481,636) 2,907,752
Cash and cash equivalents at beginning of period 9,383,371 6,475,619 6,475,619
Cash and cash equivalents at end of period 33,750,589 4,993,983 9,383,371
The notes are an integral part of these Unaudited Consolidated Financial
Statements.
Notes to the Unaudited Consolidated Financial Statements for the period ended
30 June 2021
1 ACCOUNTING POLICIES
The Unaudited Consolidated Financial Statements have been prepared in
accordance with International Financial Reporting Standard ("IFRS") IAS 34
'Interim Financial Reporting' and, except as described below, the accounting
policies set out in the statutory accounts of the Group for the year ended 31
December 2020. The condensed Unaudited Consolidated Financial Statements do not
include all of the information required for a complete set of IFRS financial
statements and should be read in conjunction with the Consolidated Financial
Statements of the Group for the year ended 31 December 2020, which were
prepared under full IFRS requirements.
2 RELATED PARTY DISCLOSURES
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party in
making financial or operational decisions.
Investment Manager
Aberdeen Standard Fund Managers Limited received fees for their services as
investment managers.
Under the terms of the IMA the Investment Manager is entitled to 0.70% of total
assets up to £500 million; and 0.60% of total assets in excess of £500 million.
The total fees charged for the period ended 30 June 2021 amounted to £1,602,289
(period ended 30 June 2020: £1,596,433). The total amount due and payable at
the period end amounted to £810,544 excluding VAT (period ended 30 June 2020: £
791,146 excluding VAT).
3 INVESTMENT PROPERTIES
Country UK UK UK UK
Class Industrial Office Retail Other Total
30 Jun 2021 30 Jun 2021 30 Jun 2021 30 Jun 30 Jun 2021
2021
Market value as at 1 January 211,200,000 142,695,000 51,150,000 32,650,000 437,695,000
Capital expenditure on investment properties 500 542,165 (161,866) 7,500 388,299
Opening market value of disposed investment properties (9,400,000) (17,425,000) (2,650,000) - (29,475,000)
Valuation gain from investment properties 19,242,790 1,310,424 2,117,985 1,021,432 23,692,631
Movement in lease incentives receivable 806,710 527,411 93,881 71,068 1,499,070
Market value at 30 June 221,850,000 127,650,000 50,550,000 33,750,000 433,800,000
Investment property recognised as held for sale - (3,700,000) - - (3,700,000)
Market value net of held for sale at 30 June 221,850,000 123,950,000 50,550,000 33,750,000 430,100,000
Right of use asset recognised on leasehold properties - 901,887 - - 901,887
Adjustment for lease incentives (3,306,019) (2,737,168) (654,812) (637,332) (7,335,331)
Carrying value at 30 June 218,543,981 122,114,719 49,895,188 33,112,668 423,666,556
The market value provided by Knight Frank LLP at the period ended 30 June 2021
was £433,800,000 (30 June 2020: £447,295,000) however adjustments have been
made for lease incentives of £7,335,331 (30 June 2020: £5,211,158) under IFRS
requirements and leasehold right of use assets of £901,887 (30 June 2020: £
903,381) under IFRS requirements.
Further details regarding the investment property recognised as held for sale
can be found in Note 4.
In the unaudited consolidated cash flow statement, surplus from
disposal of investment properties comprise:
30 Jun 21 30 Jun 20 31 Dec 20
Opening market value of disposed investment properties 29,475,000 10,700,000 55,780,000
Loss on disposal of investment properties (1,373,427) (97,867) (4,806,137)
Net proceeds from disposed investment properties 28,101,573 10,602,133 50,973,863
4 INVESTMENT PROPERTIES HELD FOR SALE
As at 30 June 2021, the Group was actively seeking a buyer for Anglia House,
Bishop's Stortford. The Group both exchanged contracts and completed this sale
on 10 September 2021 for a price of £3,750,000.
5 EARNINGS PER SHARE
The earnings per Ordinary share are based on the net profit for the period of £
29,951,891 (30 June 2020: loss of £30,413,872) and 399,178,920 (30 June 2020:
406,671,111) ordinary shares, being the weighted average number of shares in
issue during the period.
Earnings for the period to 30 June 2021 should not be taken as a guide to the
results for the year to 31 December 2021.
6 INVESTMENT IN SUBSIDIARY UNDERTAKINGS
The Group undertakings consist of the following 100% owned subsidiaries at the
Balance Sheet date:
· Standard Life Investments Property Holdings Limited, a property
investment company with limited liability incorporated in Guernsey, Channel
Islands.
· Standard Life Investments (SLIPIT) Limited Partnership, a property
investment limited partnership established in England.
· Standard Life Investments SLIPIT (General Partner) Limited, a company
with limited liability incorporated in England. This Company is the GP for the
Limited Partnership.
· Standard Life Investments SLIPIT (Nominee) Limited, a company with
limited liability incorporated and domiciled in England.
· Hagley Road Limited, a property investment company with limited
liability incorporated in Jersey, Channel Islands.
7 DIVIDS AND PROPERTY INCOME DISTRIBUTION GROSS OF INCOME TAX
30 Jun 2021 30 Jun 2020 31 Dec 2020
£ £ £
Non property income distributions
0.561p per ordinary share paid in March 2020 relating to the quarter - 2,284,011 2,284,011
ending 31 December 2019
0.238p per ordinary share paid in May 2020 relating to the quarter ending - 968,340 968,340
31 March 2020
Property income distributions
0.629p per ordinary share paid in March 2020 relating to the quarter - 2,557,687 2,557,687
ending 31 December 2019
0.952p per ordinary share paid in May 2020 relating to the quarter ending - 3,873,359 3,873,359
31 March 2020
0.714p per ordinary share paid in August 2020 relating to the quarter - - 2,905,019
ending 30 June 2020
0.714p per ordinary share paid in November 2020 relating to the quarter - - 2,905,019
ending 30 September 2020
0.714 per ordinary share paid in February 2021 relating to the quarter 2,878,508 - -
ending 31 December 2020
0.381p per ordinary share paid in May 2021 relating to the quarter ending 1,512,274 - -
31 December 2020
0.8925p per ordinary share paid in May 2021 relating to the quarter ending 3,542,532 - -
31 March 2021
7,933,314 9,683,397 15,493,435
A property income dividend of 0.8925p per share was declared on 4 August 2021
in respect of the quarter to 30 June 2021 - a total payment of £3,542,532. This
was paid on 27 August 2021.
8 FINANCIAL INSTRUMENTS AND INVESTMENT PROPERTIES
Fair values
The fair value of financial assets and liabilities is not materially different
from the carrying value in the annual financial statements.
Fair value hierarchy
The following table shows an analysis of the fair values of investment
properties recognised in the balance sheet by the level of the fair value
hierarchy:
30 June 2021 Level 1 Level 2 Level 3 Total fair
value
Investment properties - - 434,701,887 434,701,887
The lowest level of input is the underlying yields on each property which is an
input not based on observable market data.
The following table shows an analysis of the fair values of financial
instruments recognised in the balance sheet by the level of the fair value
hierarchy:
30 June 2021 Level 1 Level 2 Level 3 Total fair
value
Loan facilities - 111,538,104 - 111,538,104
The lowest level of input is the interest rate payable on each borrowing which
is a directly observable input.
30 June 2021 Level 1 Level 2 Level 3 Total fair
value
Interest rate swap - 2,445,441 - 2,445,441
Of the figure above, £1,354,600 is included within current liabilities and £
1,090,841 is included within non-current liabilites. The lowest level of input
is the three month LIBOR yield curve which is a directly observable input.
There were no transfers between levels of fair value hierarchy during the six
months ended 30 June 2021.
Explanation of the fair value hierarchy:
Level 1 Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2 Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly observable.
Level 3 Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
The fair value of investment properties is calculated using unobservable inputs
as described in the annual report and accounts for the year ended 31 December
2020.
Sensitivity of measurement to variance of significant unobservable inputs:
· A decrease in the estimated annual rent will decrease the fair value.
· An increase in the discount rates and the capitalisation rates will
decrease the fair value.
· There are interrelationships between these rates as they are partially
determined by the market rate conditions.
· The fair value of the derivative interest rate swap contract is
estimated by discounting expected future cash flows using current market
interest rates and yield curves over the remaining term of the instrument.
The fair value of the loan facilities are estimated by discounting expected
future cash flows using the current interest rates applicable to each loan.
9 BANK BORROWINGS
On 28 April 2016 the Company entered into an agreement to extend £145 million
of its existing £155 million debt facility with RBS. The debt facility
consisted of a £110 million seven year term loan facility and a £35 million
five year RCF which was extended by two years in May 2018 with the margin on
the RCF now at LIBOR plus 1.45%. Interest is payable on the Term Loan at 3
month LIBOR plus 1.375% which equates to a fixed rate of 2.725% on the Term
Loan.
In June 2019, the Company also entered into a new arrangement with the Royal
Bank of Scotland International Limited (RBSI) to extend its Revolving Credit
Facility (RCF) by £20 million. This facility has a margin of 1.60% above LIBOR.
As at 30 June 2021 none of the RCF was drawn (30 June 2020: £14 million).
Under the terms of the loan facility there are certain events which would
entitle RBS to terminate the loan facility and demand repayment of all sums
due. Included in these events of default is the financial undertaking relating
to the LTV percentage. The loan agreement notes that the LTV percentage is
calculated as the loan amount less the amount of any sterling cash deposited
within the security of RBS divided by the gross secured property value, and
that this percentage should not exceed 60% for the period to and including 27
April 2021 and should not exceed 55% after 27 April 2021 to maturity.
10 EVENTS AFTER THE BALANCE SHEET DATE
On 10 September 2021, the Company completed the acquisition of rough upland
grazing and open moorland in Cairngorm National Park for £7.5m, further details
of which are in the Chair's Statement.
Also on 10 September 2021, the Company completed the sale of Anglia House,
Bishop's Stortford for £3.75m.
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
Jason Baggaley
Aberdeen Standard Investments
Tel: 0131 245 2833
Gregg Carswell
Aberdeen Standard Investments
Tel: 0131 222 8278
END
END
(END) Dow Jones Newswires
September 14, 2021 02:00 ET (06:00 GMT)
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