21st Jan 2008 13:34
Standard Life Invs Property Inc Tst21 January 2008 STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED 31 December 2007 - Net Asset Value Announcement The unaudited net asset value per ordinary share of Standard Life InvestmentsProperty Income Trust Limited at 31 December 2007 was 111.6 pence. This is adecrease of 14.6 percentage points over the net asset value of 130.7 pence pershare at 30 September 2007 The net asset value is calculated under International Financial ReportingStandards ("IFRS") and includes a provision for payment of a proposed interimdividend of 1.69p per ordinary share for the quarter to 31 December 2007. The net asset value incorporates the external portfolio valuation by Jones LangLaSalle at 31 December 2007. The property portfolio will next be valued by anexternal valuer during March 2008 and the next quarterly net asset value will bepublished in early April 2008. Prior to the December valuation DTZ valued theproperty portfolio, however their contract expired in November 2007. Jones LangLaSalle have been appointed on a new 3 year contract after a competitive tenderprocess through which the Company has achieved a substantial cost saving. Breakdown of NAV movement Set out below is a breakdown of the change to the unaudited net asset value pershare calculated under IFRS over the period 30 September 2007 to 31 December2007. Pence per % of opening share NAV Net Asset Value per share as at 30 130.7 -September 2007Unrealised decrease in valuation of (17.0) (13.0%)property portfolio (including the effect ofgearing)Decrease in interest rate swap valuation (1.6) (1.2%)Other movement in reserves (0.5) (0.4%)Net Asset Value per share as at 31 December 111.6 (14.6%)2007 The ungeared decrease in the valuation of the property portfolio over thequarter to 31 December 2007 was 9.0%. This compares to the IPD Monthly IndexCapital return for the quarter of -9.7%. Total Asset Analysis as at 31 December 2007 (unaudited) +----------------------------+-----------+------------+| |£m |% |+----------------------------+-----------+------------+|Office |68.1 |31.1 |+----------------------------+-----------+------------+|Retail |37.7 |17.2 |+----------------------------+-----------+------------+|Industrial |51.3 |23.4 |+----------------------------+-----------+------------+|Other |21.1 |9.6 |+----------------------------+-----------+------------+|Total Property Portfolio |178.2 |81.3 |+----------------------------+-----------+------------+|Cash |34.5 |15.7 |+----------------------------+-----------+------------+|Other Assets* |6.6 |3.0 |+----------------------------+-----------+------------+|Total Gross Assets |219.3 |100.0 |+----------------------------+-----------+------------+ * other assets represent capitalised leasehold obligations and debtors Cash Position As at 31 December 2007, the Company has borrowings of £84.4m and a cash positionof £34.5m therefore cash as a percentage of debt was 40.9%. Breakdown in valuation movements over the period 30 September to 31 December2007. +---------------------------+-------------+-------------+---------+| | Exposure as |Capital Value| £m || | at 31 |Movement (%) | || |December 2007| | || | (%) | | |+---------------------------+-------------+-------------+---------+|External Valuation at 30/09| | | 195.83 ||/07 | | | |+---------------------------+-------------+-------------+---------+|Sub Sector Analysis: | | | |+---------------------------+-------------+-------------+---------+|RETAIL | 21.2 | -4.2 | -1.64 |+---------------------------+-------------+-------------+---------+|South East Standard Retail | 4.1 | -9.2 | |+---------------------------+-------------+-------------+---------+|Retail Warehouses | 17.1 | -2.9 | |+---------------------------+-------------+-------------+---------+| | | | |+---------------------------+-------------+-------------+---------+|OFFICES | 38.2 | -15.3 | -12.32 |+---------------------------+-------------+-------------+---------+|Central London Offices | 20.5 | -15.0 | |+---------------------------+-------------+-------------+---------+|South East Offices | 6.1 | -14.7 | |+---------------------------+-------------+-------------+---------+|Rest of UK Offices | 11.6 | -16.1 | |+---------------------------+-------------+-------------+---------+| | | | |+---------------------------+-------------+-------------+---------+|INDUSTRIAL | 28.8 | -6.1 | -3.34 |+---------------------------+-------------+-------------+---------+|South East Industrial | 2.9 | -7.6 | |+---------------------------+-------------+-------------+---------+|Rest of UK Industrial | 25.9 | -5.9 | |+---------------------------+-------------+-------------+---------+| | | | |+---------------------------+-------------+-------------+---------+|OTHER | 11.8 | -1.5 | -0.33 |+---------------------------+-------------+-------------+---------+| | | | |+---------------------------+-------------+-------------+---------+|External Valuation at 31/12| | | 178.20 ||/07 | | | |+---------------------------+-------------+-------------+---------+ Investment Manager Commentary UK Property Market Although much anticipated, the pricing correction currently underway in the UKcommercial property market has been more rapid and aggressive than predicted.The domestic market has looked expensive for some twelve months now following afour year bull run on the sector. Accelerating cost of debt at the end of thesummer sparked a sharp reappraisal of risk across all asset classes and,although the inclusion of real estate as a diversifier in a multi-assetportfolio on a global basis remains widely accepted, UK property must return tofair value to regain investor confidence. It is anticipated that this shouldoccur in the course of 2008 as UK commercial property yields move back towardstheir long term average. The final quarter of 2007 witnessed a further slowing of returns from the UKlisted and off-shore sectors. The UK FTSE Real Estate Index fell by 15.0% overthe quarter with much of the 2006 gains made in the run up to the introductionof REITs reversing over the course of the last twelve months. The off-shoresector has experienced a similar fortune, falling by 31% on average in thequarter as the sharp adverse swing in sentiment towards the sector took itstoll. Against the backdrop of property prices falling generally, the recent long termtrend of offices outperforming on a quarterly basis came to an end over thisquarter. At -8.3% over the 3 months to end December, Industrials recorded theleast negative return this quarter. This compares to offices at -10.5% andretail at -9.8%. Across the sectors, the occupier markets have been resilientalthough it is anticipated there may be some softening of demand as a result ofthe general economic slowdown taking place and the fall out of the creditmarkets, this is likely to have most effect on the City specifically and theCentral London office markets to a lesser extent. Unlike in the early 1990'sslowdown, there has been an absence of widespread speculative building in the UKcommercial property market in this cycle apart from in the City and some of thelarger regional office markets. Also in this period, economic growth has beenrobust and despite some softening it is forecast to remain so, albeit at belowcurrent levels. This is in sharp contrast to the recessionary environment of theearly 1990's. During the quarter, the decline in the direct property market intensified,however it was in the offshore listed sector that the greatest movement wasseen. Discounts have moved from an average of 20% at end September 2007 to circa38% at end December 2007. A trigger for the fall was the greater than expectedfall in NAVs in a couple of the companies in the sector, and ensuing concernover how close to breaching banking covenants some companies in the sector mightbe. Trading volumes have generally been low, and only the larger companies haveundertaken share buy backs. The buybacks have not been in great quantity andhave had little impact on discounts. Investment Outlook The bull run in UK Commercial property over the four years to 2007 led tounsustainable pricing, with property income yields below the risk free rate.This triggered a faster than expected price correction. The credit crisiscontributed to the speed of the correction, and the market has returned to amore rational pricing level with IPD monthly index initial yields at 5.2% at endDecember. This is more in line with the long term premium to the adjusted riskfree rate. IPD equivalent yields as at end December were 6.3% which provides amargin again over Libor and 5 year swaps. From a landlord's perspective, the fundamentals supporting the occupier marketsremain in place. This should help to provide solid grounds for continued tenantdemand and consequently an environment that enables rents to be moved forward.The economy remains in good shape and although momentum may soften goingforward, economists continue to forecast robust economic expansion next year.Similarly, financial and business services data along with manufacturing andindustrial production forward looking surveys suggest that the occupier markethas a firm foundation. As a consequence of the pricing correction currentlyunderway, and despite rental growth expected to be firm, the returns in thecoming year are expected to be at levels well below the above average returnsinvestors have experienced from commercial property in the past decade. A returnto healthy single digit returns is expected thereafter. Strategy Update: The sale of six properties for £41.5m in July 2007 proved propitious timinggiven the subsequent downturn in the UK commercial property market in the lastquarter. As at 31 December 2007, the Company had cash resources of £34.5mrepresenting 40.9% of the outstanding borrowings. In the current volatile markets the Board and Investment Manager are focussed onkeeping the Company's gearing levels down. Taking account of the current outlookfor the UK Commercial Property market and the Company's current level of gearingthe Board and the Investment Manager remain confident that the Company is wellplaced to maintain its dividend and meet all banking covenants. The Board andthe Investment Manager will keep under review the best use for the Company'scash resources taking account of all market factors. Portfolio Activity: Purchases and Sales: During the quarter the Company exchanged on the purchase of a well letindustrial unit in the Thames Gateway for £7.5m, which shows an initial yield of6.5%. Completion is due in early February 2008. The purchase was undertaken tocapitalise on an off market opportunity to buy a good quality building with anabove average income return and strong prospects for income and capital growth,in line with the company strategy. Asset Management: Hollywood Green, London: The Company has reached an agreement to surrender withHoyts, and an agreement for lease with Cineworld. Although the rental incomewill be lower under the new lease, Cineworld are a stronger covenant and the newlease has fixed increases throughout its term. Hoyts no longer trade from anyother cinemas in the UK or Europe, and a premium is payable by Hoyts for thesurrender of their lease. The transaction is conditional on Office of FairTrading approval, and an application has been made. Storage Land, Witham: A planning application has been made for a new industrialunit and the outstanding rent review has been agreed at £14,500 p.a. (rentpassing £9,400 p.a.). The existing lease is being terminated in March 2008, andthe Company will either sell with the benefit of planning or undertake thedevelopment itself. Ocean Trade Centre, Aberdeen: The new lease to unit 8 completed in the firstweek of January 2008, and solicitors have been instructed on the letting of unit17 at a new rental level of £7.50 per sq ft. Crown Farm, Mansfield: The tenant vacated unit 1B on lease expiry and a minorrefurbishment has been undertaken using the dilapidations monies received.Marketing of the unit is underway. Enquiries: Richard England Press Manager, Standard Life Investments Tel: 0131 245 2750 The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Ltd Trafalgar Court Les Banques GY1 3Q1 Tel: 01481 745439 Fax: 01481 745085 APPENDIX 1 Historical NAV per Ordinary Share are as follows: Adjusted IFRS NAV Adjusted UK GAAP NAV 31/12/07 111.60p 115.96p30/09/07 130.70p 133.47p30/06/07 137.16p 137.79p31/03/07 134.42p 137.23p31/12/06 132.68p 136.47p30/09/06 129.51p 134.37p30/06/06 130.20p 134.87p31/03/06 124.28p 130.46p31/12/05 116.46p 124.00p30/09/05 107.12p 114.31p30/06/05 103.88p 111.82p31/03/05 101.34p 106.63p31/12/04 99.00p 105.16p This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SLI.L