Interim Management Statement/
UK Commercial Property Trust Limited
Interim Management Statement/Net Asset Value
For the three month period from 1 July 2008 to 30 September 2008
Investment Objective
The investment objective of the Company is to provide Ordinary Shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
Net asset value
The unaudited net asset value per share of UK Commercial Property Trust Limited as at 30 September 2008 was 81.0p. This represents a decrease of 5.6 per cent. from the net asset value per share as at 30 June 2008.
The net asset value per share is based on the external valuation of the property portfolio prepared by CB Richard Ellis Limited as at 30 September 2008 of £643 million.
The net asset value per share is calculated under International Financial Reporting Standards ('IFRS').
The net asset value per share includes all current period income and is calculated after deduction of all dividends paid prior to 30 September 2008. It does not include provision for any unpaid dividends for the periods prior to 30 September 2008 including the dividend for the quarter to 30 September 2008. It is expected that the shares will go ex-dividend on 12 November 2008 and that the dividend of 1.3p per share will be paid on 28 November 2008. The adjusted net asset value per share after deducting such quarterly dividend is 79.7p.
The NAV per share at 30 September 2008 is based on 867,126,287 Ordinary shares of 25p each, being the total number of shares in issue at that time.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited net asset value per share calculated under IFRS over the period from 30 June 2008 to 30 September 2008.
|
UK Commercial Property Trust Limited |
Per Share (p) |
Attributable Assets (£m) |
|
Net assets as at 30 June 2008 |
85.8 |
744.4 |
|
Unrealised decrease in valuation of property portfolio |
(3.8) |
(33.5) |
|
Realised loss on sales of properties during the period |
(0.8) |
(7.2) |
|
Income earned for the period |
1.3 |
11.5 |
|
Expenses for the period |
(0.2) |
(1.6) |
|
Dividend paid on 29 August 2008 |
(1.3) |
(11.4) |
|
Net assets as at 30 September 2008 |
81.0 |
702.2 |
|
UK Commercial Property Trust Limited |
|
|
|
Net Asset Analysis as at 30 September 2008 |
£m |
% |
|
Property Portfolio |
|
|
|
Office |
333.5 |
47.5 |
|
Retail |
191.2 |
27.2 |
|
Industrial |
118.7 |
16.9 |
|
Total Property |
643.4 |
91.6 |
|
Net Current Assets |
58.8 |
8.4 |
|
Total Net Assets as at 30 September 2008 |
702.2 |
100.0 |
The annualised total expense ratio of the Company for the period 1 July 2008 to 30 September 2008, based on the value of the assets as at 30 September 2008 and on the basis of annualised expenses, was 0.8% of the average total assets of the Company. For the purposes of this calculation, 'expenses' includes the costs of running the Group, including the investment management fee, administration fees, Directors' fees, insurance costs, Board costs, registrar costs and any irrecoverable VAT, but excludes issue costs, capital expenditure and refurbishment and irrecoverable property running costs.
Over the period the Company had no borrowings. However, as per the 20 June 2008 announcement, the Company has an £80 million seven year term loan facility with Lloyds TSB Scotland plc now in place.
Over the period from 22 September 2006 (launch) to 30 September 2008 the unaudited net asset value per share calculated under IFRS has decreased by 16.7% from 97.2p to 81.0p.
Review of the period
The economic outlook weakened considerably over the three months to 30 September 2008 as the global financial crisis unfolded. Preliminary estimates suggest output grew by only 0.2% in Q2 2008 and there is now a strong likelihood that the UK economy will tip into recession during the second half of the year. GDP growth looks like being zero at best between now and the end of 2009, with an increasing risk of it being significantly lower than this mark if world leaders fail to address the current banking problem adequately.
The property market has continued to decline over the period since the Company's last NAV announcement covering the period to the 30th June. Whilst references are made to the 'wall of money' awaiting investment, it is mostly foreign investors (predominantly German money) which is being invested in the market. The volume of transactions has fallen to approx £6bn in Q2 2008 from £17bn a year earlier. There is evidence that there is money available, but given the current financial and economic conditions, timing of expected investment has been pushed back into 2009 or later.
From the latest available version of the IPD Monthly Index, there has been an overall decline in capital value of approx 11.7% since the start of the year. Whilst individual monthly figures have varied, the general perception is that the rate of capital decline has picked up again. Over the last three month period to 30 September 2008, quarterly annualised data from the IPD Monthly Index implies that capital decline is now of the order of 20.0% for 2008. Equally, Goldman Sachs derivative pricing currently suggests a total return of somewhere in the region of -17.0% for the full calendar year (a capital decline of the order of -23.0%).
Against this background the Company's portfolio has declined further than in Q2 2008. The decline has been reasonably evenly spread through the three sectors, with Industrial stocks faring worst and Offices the best. The worst performing sub sector over the quarter for the Company was its retail warehouses. Bulky goods retail warehousing has, and remains, out of favour and the yield profile on this type of stock has moved accordingly. At the other end of the spectrum, the Central London office stocks held up relatively well due to lettings at Arlington Street and adjustments to the ERV of one or two assets where reversions have been positively reassessed.
During the third quarter, the Company sold its holding at Queen Street, Cardiff for £18.1m. In addition to the sale price, the Company has a profit share arrangement in place with the purchaser.
The Company now has a cash reserve of £64.4m; in addition to this, the facility with Lloyds TSB remains in place and undrawn.
The Company will continue to monitor opportunities to re-invest the cash and facility over the next 6-12 month period.
Breakdown in valuation movements over the period 30 June 2008 to 30 September 2008
Set out below is a breakdown of the movement in the external valuation of the property portfolio over the period from 30 June to 30 September 2008.
|
UK Commercial Property Trust Limited |
Exposure % as at 30 September 2008 |
Capital Value Shift % |
£m |
|
External Valuation at 30 June 2008 |
|
|
701.13 |
|
Sub Sector Analysis |
|
|
|
|
Retail |
29.71 |
-6.15 |
-12.54 |
|
High St - South East |
9.15 |
-4.07 |
-2.50 |
|
Shopping Centres |
9.73 |
-5.98 |
-3.98 |
|
Retail Warehouses |
10.83 |
-8.00 |
-6.06 |
|
|
|
|
|
|
Offices |
51.83 |
-4.90 |
-17.17 |
|
West End |
20.85 |
-3.75 |
-5.22 |
|
South East |
12.50 |
-6.12 |
-5.25 |
|
Rest of UK |
18.48 |
-5.33 |
-6.70 |
|
|
|
|
|
|
Industrial |
18.46 |
-7.13 |
-9.12 |
|
South East |
10.54 |
-7.45 |
-5.46 |
|
Rest of UK |
7.92 |
-6.70 |
-3.66 |
|
|
|
|
|
|
Adjustment for disposals- Queen St, Cardiff |
|
|
-18.89 |
|
Adjustment for acquisitions |
|
|
0.00 |
|
External valuation at 30 September 2008 |
|
|
643.41 |
Material Events
The Board is not aware of any significant events or transactions which have occurred between 30 September 2008 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Enquiries
The Company Secretary, Northern Trust International Fund Administration Services (Guernsey) Limited - 01481 745338
Gary Hutcheson/Gerry Brady, Resolution Investment Services Limited - 0141 222 8000
Important Note
The above information is unaudited and has been calculated by Resolution Investment Services Limited
This information is provided by RNS
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