Unaudited Net Asset Value as at 31 December 2023
abrdn Property Income Trust Limited
(an authorised closed-ended investment company incorporated in Guernsey with registration number 41352)
LEI Number: 549300HHFBWZRKC7RW84
(The “Company”)
1 February 2024
Unaudited Net Asset Value as at 31 December 2023
Net Asset Value and Valuations
- Net asset value (“NAV”) per ordinary share was 78.4p (Sep 2023 – 82.2p), a decrease of 4.6% for Q4 2023, resulting in a NAV total return, including dividends, of -3.5% for the quarter;
- The Company saw an increase in the value of its industrial assets (which make up 57% of the portfolio) of £6.9m (excluding sales), whilst its office assets (16.5% of the portfolio) fell by £7.5m. Retail and “Other” assets fell slightly by £1.0m and £2.4m respectively.
- The portfolio again outperformed the MSCI monthly index with a capital value decline of 2.2% on a like for like basis during the quarter, compared to the MSCI Monthly Index decline of 2.6% over the same period.
- The portfolio ERV of £34.2m is £7.0.m (25.7%) above the current contracted rent, demonstrating the significant reversionary potential.
- Rent Collection remained robust with 99% collected so far for Q4. Since the beginning of 2021 quarterly rent collection has been consistently at or above 99%.
- EPRA Earnings have increased by £132,000 (4.3%) compared to Q3 (£274,000 increase in Q3 over Q2).
Investment and letting activity
- Four lettings completed over the quarter totalling £1.14m pa rent along with a lease extension for 5 years securing £160,000pa.
- Three rent reviews settled on logistics assets providing an uplift in annual rent of £236,487 (52% above the previous rent passing, and 12% above the valuation assumption).
Financial Position
- Robust balance sheet with financial resources available for investment of £25.0 million (from the Company’s revolving credit facility) net of current cash after dividend and other financial commitments.
Occupancy / Void / WAULT
The Company had a vacancy rate of 7.6% as at end Q4 2023 (Q3 8.0%). Although new leases were completed that would have reduced the vacancy rate to 4.4% on a like for like basis, we had a new vacancy on a logistics unit in late November. That unit is now under offer to sell.
Debt Facility and Gearing
API currently has two facilities with RBSI, an £85m term loan (fully drawn) and an £80m Revolving Credit Facility (RCF) of which £56.9m was drawn as at 31st December. Both facilities are at a margin of 150bps over SONIA and an interest rate cap on SONIA has been put in place at 4% over the term loan (all-in rate of 5.5%). As at 31 December 2023, the Company had a Loan to Value (LTV) of 30.8%*.
*LTV calculated as debt less all cash divided by investment portfolio value
Dividends
A dividend of 1p will be paid for the quarter which means that the dividend is therefore being maintained at an annualised rate of 4p per share. The dividend cover for Q4 2023 is 83.4% (Sep 23 - 79.9%). The Board has provided guidance of its intention to maintain the current dividend level.
Net Asset Value (“NAV”)
The unaudited net asset value per ordinary share at 31 December 2023 was 78.4p. The net asset value is calculated under International Financial Reporting Standards (“IFRS”).
The net asset value incorporates the external portfolio valuation by Knight Frank LLP at 31 December 2023 of £439.2 million.
Breakdown of NAV movement
Set out below is a breakdown of the change in the unaudited NAV calculated under IFRS over the period 30 September 2023 to 31 December 2023.
|
| Per Share (p) | Attributable Assets (£m) | Comment |
| Net assets as at 30 September 2023 | 82.2 | 313.6 |
|
| Unrealised movement in valuation of property portfolio | -1.0 | -3.9 | Like for like decrease of 2.2%. |
| Loss on sale | -0.1 | -0.4 |
|
| CAPEX in the quarter | -2.0 | -7.5 | Predominantly development spend at Washington and Knowsley, including the two large PV schemes at those assets. |
| Net income in the quarter after dividend | -0.2 | -0.6 | Rolling 12 month dividend cover 81%. |
| Interest rate hedge mark to market revaluation | -0.3 | -1.2 | CAP valuation movement |
| Other movements in reserves | -0.2 | -0.9 | Movements in lease incentives. |
| Net assets as at 31 December 2023 | 78.4 | 299.1 |
|
| European Public Real Estate Association (“EPRA”) |
31 Dec 2023 |
30 Sep 2023 |
| EPRA Net Tangible Assets | £297.6m | £310.8m |
| EPRA Net Tangible Assets per share | 78.1p | 81.5p |
The Net Asset Value per share is calculated using 381,218,977 shares of 1p each being the number in issue on 31 December 2023.
Investment Manager Review and Portfolio Activity
Following new leases totalling £1.3m pa in Q3 further lettings completed in Q4 totalling £1.1m pa. Despite these lettings the void rate only reduced to 7.6% from the Q3 level of 8% as we had the tenant of a logistics unit leave in late November. We have now placed the unit under offer to sell to an owner occupier. The sale figure is approximately 10% ahead of the end December valuation. The lettings demonstrate the appeal of the API assets to occupiers, but office demand remains muted, and no lettings were completed in this sector during Q4.
Just before Christmas we completed the construction of the speculative logistics unit in Knowsley. The development provides a high-quality logistics unit, and we have terms out to two parties, with several more arranging an inspection – there is still good demand and limited supply for this quality of building.
The rent reviews settled during the quarter were on industrial units and realised significant rental growth not only in real terms, but also against valuation assumptions. Despite securing over £230,000 pa of rental uplift from reviews and the lettings over the quarter the Company’s portfolio still has £7m pa rental reversion based on the Q4 valuation, which represents a potential increase in annual rent of 25.7%.
Despite having one of the lowest debt margins in the sector (150bps) the Company is exposed to the high Sonia rate. The all-in cost of debt for Q4 was 6.7% (Q3 6.7%). With expectations of lower interest rates the value of the interest rate cap the Company holds on its term loan fell over the quarter by £1.2m and although there are expectations of further falls in interest rates the focus has been to reduce borrowings. We completed the sale of a small industrial estate in Livingston Scotland in December for £6.25m. The sale price was £300,000 below valuation. Terms were also agreed for the sale of our City of London office and Manchester Office for a combined £14.75m (year-end valuation £15.35m) reducing office exposure by 3.5% to 13%. Sales have also been agreed of two industrial assets for a total of £24.4m (year-end valuation £22.4m). We are also exploring the sale of the open moorland at Far Ralia with encouraging indications of value above the year-end valuation (£8.25m).
Investment Manager’s UK Real Estate Market Outlook – Q4 2023
- UK inflation unexpectedly ticked higher in December, with the headline CPI rate increasing from 3.9% year-on-year to 4%. The increase was largely driven by an increase in tobacco duty, while food prices were once again a drag on inflation. Underlying inflation pressures were also slightly stronger than expected. Core inflation was flat at 5.1% year-on-year. Inflation may move higher again in January, following a slight uptick in the Ofgem price cap. However, the bigger picture is that headline inflation is still set to fall further over the next few months. It could be below 2% by the second quarter of 2024, aided by favourable base effects. Meanwhile, cooling wage growth should help to bring underlying inflation pressure down too.
- UK gross domestic product (GDP) growth rebounded in November, expanding 0.3% month-on-month, which was slightly better than the consensus of 0.2%. The monthly profile of GDP remains extremely volatile after a contraction of 0.3% in October, with the broad trend remaining one of sustained stagnation. Recession-like conditions look set to continue into 2024, but the prospect of further fiscal easing to be announced in March should help to limit the extent of the downturn.
- While UK real estate capital values declined over the course of 2023, the pace of decline has moderated. There are tentative signs of stabilisation for some sectors but not all. There is a risk that further price discovery in the first half of 2024 will result in softer pricing, particularly for out-of-favour sectors. Performance has been varied across sectors, with those benefiting from structural and thematic tailwinds proving more resilient in the face of a weaker macroeconomic environment. The logistics and living sectors are a clear example of this trend, both outperforming the wider market over the course of 2023.
- UK real estate capital values fell by 2.6% in the fourth quarter of 2023. This resulted in value declines of 5.6% for the year, according to the MSCI Monthly Index. In line with our expectations, the living and logistics sectors outperformed the wider market, with capital value growth of 1.9% and 0.1% during 2023. The office sector remains the laggard. It recorded a capital decline of 16.6% over the same period, as the sector struggles with changing working habits, higher financing costs, and weak investor sentiment.
- At the All-Property level, total returns for the calendar year 2023 were -0.1%. The largest negative contributor to performance was the office sector, which returned -11.9%. The residential sector was once again the strongest performing sector, returning 8.2%. The industrial sector returned 5.1% over the same period.
Outlook
- Monetary policy and the wider macroeconomic backdrop were in the driving seat in 2023 and we believe this will continue in 2024. Towards the end of 2023, market expectations for interest-rate cuts picked up pace as underlying inflation pressures eased. Softer economic data added weight to the argument that the BoE’s ‘Table mountain’ profile was less likely to be sustainable. Despite the outlook for monetary policy becoming more positive from this point, an improvement in UK real estate performance is not expected until the second half of 2024. It is likely that sectors that saw the greatest outward yield shift as interest rates rose will see the strongest performance as they fall, in particular logistics assets where rental growth remains robust. Higher yield risk assets are less likely to benefit from this re-rating.
- While the macro environment will continue to dominate as we move through 2024, sector allocation will remain crucial. Polarisation in performance from both a sector and asset-quality perspective will remain key differentiators for performance. Real estate refinancing poses a risk to our outlook in 2024, but we believe this risk is more heavily skewed towards the office sector, given the amount of outstanding debt and lack of appetite for lending in this sector.
- A UK general election is mandated to occur no later than 28 January 2025, and a date in November of 2024 looks most likely at the moment. The Labour party has opened-up a 20-point lead in the polls, relative to the Conservative party. At this stage, it appears likely there will be a change of government in the UK over the next 12 months, however that does not appear to be impacting markets at the present time.
- With the increased prospect of interest-rate cuts in 2024, we expect an improvement in UK real estate performance as we move through 2024. This will be driven primarily by improved investor confidence and greater liquidity in the market. The downside risk to our forecasts remains elevated, given weaker economic growth prospects and the potential uncertainty created by the upcoming election in the UK.
Net Asset analysis as at 31 December 2023 (unaudited)
|
| £m | % of net assets |
| Industrial | 250.1 | 83.6 |
| Office | 72.6 | 24.3 |
| Retail | 72.4 | 24.2 |
| Other Commercial | 35.9 | 12.0 |
| Land | 8.2 | 2.7 |
| Total Property Portfolio | 439.2 | 146.9 |
| Adjustment for lease incentives | -9.2 | -3.1 |
| Fair value of Property Portfolio | 430.0 | 143.8 |
| Cash | 6.7 | 2.2 |
| Other Assets | 18.6 | 6.2 |
| Total Assets | 455.3 | 152.2 |
| Current liabilities | -14.9 | -5.0 |
| Non-current liabilities (bank loans) | -141.3 | -47.2 |
| Total Net Assets | 299.1 | 100.0 |
Breakdown in valuation movements over the period 01 October 2023 to 31 December 2023
|
| Portfolio Value as at 31 Dec 2023 (£m) | Exposure as at 31 Dec 2023 (%) | Like for Like Capital Value Shift (excl transactions & CAPEX) | Capital Value Shift (incl transactions (£m) |
|
| (%) | |||
| External valuation at 30 Sep 23 |
|
|
| 449.6 |
|
|
|
|
|
|
| Retail | 72.4 | 16.5 | (1.4) | (1.0) |
| South East Retail |
| 1.7 | (3.8) | (0.3) |
| Retail Warehouses |
| 14.8 | (1.1) | (0.7) |
|
|
|
|
|
|
| Offices | 72.6 | 16.5 | (9.4) | (7.4) |
| London City Offices |
| 2.2 | (6.6) | (0.7) |
| London West End Offices |
| 1.8 | (6.4) | (0.5) |
| South East Offices |
| 5.2 | (12.9) | (3.3) |
| Rest of UK Offices |
| 7.3 | (8.3) | (2.9) |
|
|
|
|
|
|
| Industrial | 250.1 | 57.0 | 0.5 | 0.4 |
| South East Industrial |
| 8.8 | (1.0) | (0.3) |
| Rest of UK Industrial |
| 48.2 | 0.8 | 0.7 |
|
|
|
|
|
|
| Other Commercial | 35.9 | 8.2 | (6.1) | (2.4) |
|
|
|
|
|
|
| Land | 8.2 | 1.8 | 0.0 | 0.0 |
|
|
|
|
|
|
| External valuation at 31 Dec 23 | 439.2 | 100.0 | (2.2) | 439.2 |
Yields
|
| Initial Yield (%) | Equivalent Yield (%) | EPRA NIY (%) |
| Portfolio | 5.8 | 7.1 | 4.9% |
Top 10 Properties
|
| 31 Dec 23 (£m) |
| Halesowen, B&Q | 20-25 |
| Rotherham, Ickles Way | 20-25 |
| Birmingham, 54 Hagley Road | 15-20 |
| Welwyn Garden City, Morrison’s | 15-20 |
| Swadlincote, Tetron 141 | 15-20 |
| Shellingford, White Horse Business Park | 15-20 |
| London, Hollywood Green | 10-15 |
| Washington, Rainhill Road | 10-15 |
| Corby, 3 Earlstrees Road | 10-15 |
| St Helens, Stadium Way | 10-15 |
The top ten assets represent 38.2% of portfolio value
Top 10 tenants
| Tenant Name | Passing Rent | % of total Passing Rent |
| B&Q Plc | 1,560,000 | 5.7% |
| Public Sector | 1,365,203 | 5.0% |
| WM Morrisons Supermarkets Ltd | 1,252,162 | 4.6% |
| The Symphony Group Plc | 1,225,000 | 4.5% |
| Schlumberger Oilfield UK plc | 1,138,402 | 4.2% |
| Timbmet Limited | 904,768 | 3.3% |
| Atos IT Services UK Limited | 872,466 | 3.2% |
| CEVA Logistics Limited | 840,000 | 3.1% |
| ThyssenKrupp Materials (UK) Ltd | 643,565 | 2.4% |
| Hermes Parcelnet Ltd | 591,500 | 2.2% |
| Top ten tenants | 10,393,066 | 38.1% |
Regional Split
| South East | 23.0% |
| West Midlands | 18.7% |
| North West | 15.4% |
| East Midlands | 13.5% |
| North East | 12.0% |
| Scotland | 10.1% |
| South West | 3.3% |
| City of London | 2.2% |
| London West End | 1.8% |
Except as described above, the Board is not aware of any significant property events or transactions which have occurred between 31 December 2023 and the date of publication of this statement which would have a material impact on the financial position of the Company. The company announced on 19 January 2024 its intention to merge with Custodian REIT.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014). Upon the publication of this announcement via Regulatory Information Service this inside information is now considered to be in the public domain.
Details of the Company may also be found on the Investment Manager’s website at: www.abrdnpit.co.uk
For further information:-
For further information:-
Jason Baggaley – API Fund Manager, abrdn
Tel: 07801039463 or jason.baggaley@abrdn.com
Mark Blyth – API Deputy Fund Manager, abrdn
Tel: 07703695490 or mark.blyth@abrdn.com
Craig Gregor - Fund Controller, abrdn
Tel: 07789676852 or craig.gregor@abrdn.com
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Ltd
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: 01481 745001
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