2nd Feb 2009 07:00
FOR IMMEDIATE RELEASE
2 FEBRUARY 2009
TAP - SNAPSHOT REPORT
the Advantage Property Income Trust Limited
Winter 2008
Investment objectives -
To provide shareholders with an attractive level of income, together with the potential for income and capital growth derived from investment in the Group's diversified portfolio of commercial property in the United Kingdom and the Channel Islands.
TAP benefits from a well balanced and diversified portfolio, with the opportunity to increase income and capital value. The Fund provides an attractive dividend yield to investors, with further income growth through the delivery of asset management initiatives.
Property Fund Adviser's comments -
Debt & Debt Restructuring
The Company wishes to announce that it has received credit committee approved terms from its primary lender, for a relaxation in its loan to value covenants. This would align the provisions in both debt facilities to an LTV threshold of 70%.
This offer is open for acceptance by the Company until 30th June 2009.
Investment Strategy
The quoted market continues to price shares at significant discounts to Net Asset Value (NAV). During Q4, TAP has maintained its better capital returns at property level against the IPD (Monthly) universe (-10.71% v -14.99%). The property portfolio continues to be managed with the aim of providing higher than average income returns. With an income return of 1.74% (IPD Monthly 1.61%) over the quarter, the Company's total return of -9.09% for Q4 represents notable outperformance against the IPD Monthly Q4 total return of -13.54%.
TAP has a lettable void rate of 5.66% as at 31 December 2008 which compares very favourably with IPD at 9.10% for the same period and provides the Company with the opportunity for an additional £1.0m of additional income going forward. The Company remains focused on a number of asset management initiatives to drive income growth including the ongoing refurbishment programmes underway at Reading and Stratford upon Avon, which have resulted in a total void of 11.20%.
The Company has maintained its strategy of reducing debt with further loan repayments totalling £6m made during Q4. One sale was completed during this period, of a 47,000 sq ft industrial unit on the Brackmills Industrial Estate to an owner occupier. The Company continues to review the future potential of all stabilised assets.
Financial Highlights as at 31 December 2008
NAV fell to 56.7p, a reduction of 25.8% over the quarter
Share price 9.00p (31/12/08)
Discount to NAV 84.1% (31/12/08)
Portfolio nominal equivalent yield of 8.22% (7.45% Q3 08)
Portfolio total return for the quarter was -9.1% (IPD Monthly Index Q4 at -13.5%)
One sale completed in Q4
Dividend 3.25 pence per share per annum
Estimated dividend cover 115% on recurring cash basis
Q4 2008 Portfolio Activity
A 47,000 sq ft industrial property on the Brackmills Industrial Estate in Northampton was sold to an owner occupier for £2.3m, achieving a 4.5% premium on the preceding valuation.
The Company made debt repayments totaling £6m over Q4 as a result of receipts from previously completed disposals and rescheduled asset management initiatives.
At Hemel Hempstead, the Company secured planning permission for B8 Open Storage at the 4.6 acre former Fujifilm site that was destroyed in the Buncefield explosion. The site is being actively marketed and the Company is confident of securing an income stream in the short to medium term.
Four lettings were completed during Q4, providing the Company with an additional £118,000 pa of income from industrial units at Runcorn, Stratford upon Avon and Swindon. Five rent reviews and two lease renewals were also concluded during this period at an average 8.9% premium to the previous rents and securing an additional £42,500 pa of income.
The refurbishment programmes at AdVantage Reading and The Swan Centre, Stratford upon Avon are nearing completion with strong interest recorded in the available space.
Key Financial Statistics
As at 31 December 2008
|
Fund |
|
|
Launched |
Feb 2005 |
|
Share Price (31/12/08) |
9.00 |
|
Total shares issued |
142,747,300 |
|
Long term debt |
£111,759,705 |
|
Gearing |
56.9% LTV |
|
Average all in cost of debt |
Est. 6.17% |
|
Dividend dates |
Feb, May, Aug, Nov |
|
Property Portfolio |
|
|
Total property assets |
£196,270,000 |
|
Number of properties |
72 |
|
Average lot size |
£ 2.73 million |
|
Average lease length |
6. 63 years |
|
Total void rate (% rental value) |
11.20% |
|
Lettable void rate |
5.66% |
|
Income return (annualised) |
6.98% |
|
Net Initial Yield |
7.41% |
|
Net Reversionary Yield |
8.54% |
PROPERTY PORTFOLIO
Property Market
The latest IPD returns, as recorded by the Monthly Index mark a significant increase in the speed and extent of capital value declines, driven by continued outward yield shift across all sectors. CBRE recorded an All Property equivalent yield of 8.6% as at 31st December 2008. This reflects a 35.5% price correction from the June 2007 peak in capital values when the CBRE All Property Equivalent yield was at 5.4%
The market total return for the preceding 12 months now stands at -22.5% (IPD Monthly). According to CBRE, All property rental growth ended 2.4% down in 2008, illustrating the growing weakness in occupier markets. This was due mainly to the office sector which saw -6.8% rental growth in 2008 the majority of these falls were in central London office rents.
Market transaction volumes continue to be very low and are likely to remain so in the short term, with debt driven purchasers still struggling to secure lending. However there are signs that high net worth individuals and institutions are waiting for the optimum time to place their cash, with the expectation that some traction will return to the investment market in Q2 2009 and beyond.
kEY pORTOLIO aCTIVITIES
Top 10 property investments
|
|
Location |
Valuation Weighting |
|
The Brunel Centre |
Bletchley |
5.08% |
|
Waterfront Business Park |
Fleet |
4.84% |
|
National Westminster House |
Guernsey |
4.84% |
|
Brunswick Point |
Leeds |
4.64% |
|
The Links |
Warrington |
4.05% |
|
Kingscourt Leisure Complex |
Dundee |
4.04% |
|
Silver Court |
Welwyn Garden City |
3.41% |
|
Geoffrey House |
Maidenhead |
3.34% |
|
Southgate Retail Park |
Derby |
3.25% |
|
AdVantage |
Reading |
2.75% |
|
Total |
|
40.23% |
Sector breakdown %
|
36.98 |
Offices |
|
21.01 |
Industrial |
|
20.06 |
Retail Warehousing |
|
17.91 |
Retail |
|
4.04 |
Leisure |
Geographic breakdown %
|
37.39 |
South East |
|
11.59 |
Scotland |
|
9.45 |
West Midlands |
|
9.22 |
East Midlands |
|
7.46 |
Yorkshire & Humberside |
|
6.88 |
North West |
|
4.84 |
Channel Islands |
|
4.39 |
South West |
|
4.38 |
Outer London |
|
2.60 |
Eastern |
|
1.39 |
Wales |
|
0.41 |
North East |
TAP Income Analysis
2008 Income Growth
During 2008, in excess of £540,000 pa of additional income was secured by way of new lettings, rent reviews and lease renewals.
In total, 13 new lettings were completed, providing over £390,000 pa of new income at an average lease term of 3.85 years. Highlights include the ten year letting to Triumph Motorcycles at Trident Retail Park for their UK flagship dealership, and the letting to serviced office provider Hot Office at Silver Court, Welwyn Garden City for a term of ten years.
The 27 rent reviews and lease renewals settled in 2008 resulted in an uplift of income of £150,000 pa which equated to an average uplift on the preceding rent of 10%. Deals of note include the settlement of the September 2007 rent reviews with William Hill at Palmers Green which secured an uplift of 38% on the passing rent, and with Halfords at Sutton in Ashfield which secured an uplift of 26% on the passing rent.
Income Diversity
As at 31 December 2008, TAP had 221 tenants, providing a diversified income stream from a broad spectrum of business sectors. The top three sectors in terms of income concentration are: 39% attributable to the service industry; 29% attributable to the retail industry; and 9% attributable to the transportation and communications industry. In addition, according to analysis undertaken by Experian, 70% of the portfolio income is rated as Low to Medium risk or better.
Whilst the Company did have exposure to Adams Childrenswear, Key Business Finance (Landsbanki), MFI, and Woolworths, they were collectively responsible for less than 1.80% of the annual portfolio rent roll. Ethel Austin, The Works, Select, Diamonds & Pearls and Land of Leather are other TAP occupiers that have entered administration over recent months, however all remain in occupation and continue to pay rent whilst being closely monitored.
Income Risk
Due to the difficult trading environment for the majority of UK businesses at present, TAP has undertaken a thorough analysis of the occupier and income risk within the portfolio. Each tenant has been rated red, amber or green, based on Experian research, IPD IRIS information and TAP knowledge obtained through discussions with each business. Red companies have the highest risk of failure, green the lowest.
Should all occupiers with a red rating fail, the portfolio income would fall by 10.75%, and the blended interest cover ratio across the two debt facilities would fall to 2.48%. Should all occupiers with a red and amber rating fail, portfolio income would fall by a total of 27.29% and the blended interest cover ratio would fall to 2.02%. By way of illustration, the ICR for the two facilities are 1.3% and 1.7% respectively. The income security within the Company is therefore very strong.
Retail Income
Given the sharp reduction in consumer confidence and spending in the UK as we continue in recession, particular attention has been paid to the retail sector. Accordingly, TAP has looked at this sector in more detail.
Of the 113 tenants in the retail sector, 12.13% are rated red. This is equivalent to an annual rent roll of £707,235pa or 4.47% of the portfolio's total rent roll. This categorisation includes those tenants who were in administration as at the 31 December 2008 such as MFI, Woolworths and Select Retail. 13.54% of the retail income has been rated as amber which is equivalent to an annual rent roll of £789,170 pa or 4.99% of the portfolio's total income. The balance of the retail income has been assessed as green; essentially low or negligible risk where occupier failure is deemed unlikely. This is equivalent to 74.33% of the retail portfolio and 27.42% of the total portfolio rent roll.
Top 10 tenants
|
Income Weighting |
|
|
Halfords Limited |
14.84% |
|
Nisaba Group Ltd |
4.68% |
|
Clydesdale Bank plc |
4.31% |
|
National Westminster Bank plc |
4.19% |
|
Toys R Us |
3.83% |
|
Odeon Multiplex Ltd |
3.39% |
|
Amtek Investments UK 2 Ltd |
3.28% |
|
Exel Europe Ltd |
2.45% |
|
GeoPost Ltd |
1.97% |
|
Wilkinson Hardwear Stores Ltd |
1.79% |
Contact details
For further information, or to organise a presentation, please contact:
Broker
Singer Capital Markets LtdOne Hanover StreetLondonW1S 1AX
James Maxwell / Brad cheng - T: 020 3205 7500
Secretary
Anson Fund Managers Limited
Anson Place
Mill Court
La Charroterie
St. Peter Port
Guernsey
GY1 1EJ
T: 01481 722260
Property Fund Adviser
Valad Asset Management (UK) Limited
1 Mount Street
London W1K 3NB
CHRIS CARTER KEALL / FRASER KENNEDY - T: 020 7659 6666
Source: This snap shot has been approved for issue by The Advantage Property Income Trust Limited, which accepts responsibility for the information contained herein save for the content of the Property Fund Adviser's comments.
This document is not, and is not intended to be an invitation, inducement, offer, or solicitation, to deal in the shares of the company. The price of shares in the company and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of shares in the company. An investment in the company should be considered only as part of a balanced portfolio of which it should not form a disproportionate part. Investments in property are relatively illiquid and may be more difficult to realise than equities or bonds. Yields may vary and are not guaranteed. All figures are correct as at 31 December 2008. Past performance cannot be relied upon as a guide to future performance.
The Advantage Property Income Trust Limited (TAP)
Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ
T 01481 722260 F 01481 729829 E [email protected] W www.tapincome.com
END OF ANNOUNCEMENT
E&OE - In transmission
Related Shares:
TAP.L