September 2019 Standard Life Investments Property Income Trust (SLIPIT)
Jason Baggaley - Fund Manager
For Professional Investors Only – Not for public distribution Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. Global Performance Signals: Q3 2019 - UK Political uncertainty extended, likely to have greater impact than previously assumed
Current Performance Signals Outlook Comment Signal
Base case of election; no deal risk has risen. Polls Economic fundamentals suggest Brexit Party could be largest
Gilt yields have fallen further; upward pressure on real Margin over bonds estate yields but both reflect rising risk aversion Macro Still highly accommodative but not feeding into Monetary policy traditional positives associated with low rates
Mixed. Near term supply increase in CL offices and Supply regional logistics; retail already oversupplied
Dramatic slowdown in activity and base case assumes Flows of capital no certainty to improve sentiment in short term
Little appetite to lend, limited to core and low risk Lending lending. Retail refinancing challenges are huge.
Funds still net sellers; prolonged uncertainty will not Real Estate Fund flows help. Retail valuation tipping point could increase flows
Low liquidity in secondaries market, NAV discounts 360° view wide but stable. Appetite for core debt funds strong
Sources: MSCI/IPD;Thomson Reuters Eikon; PMA; RCA; CBRE, Investment Association; Aberdeen Standard Investments, June 2019.
Key: Trend: Performance signal:
2 Stable Supportive Upward trend Neutral Downward trend Unsupportive Investor expectations – RICS survey of capital value expectations Consensus forecasts suggest continuation of current sector divergence
Source: Thomas Reuters DataStream, RICS, Aberdeen Standard Investments. July 2019
3 Pressures on retail have been building for years E-commerce is just the final straw
Source: Aberdeen Standard Investments
4 High street services shrinking or even disappearing As needs-based trips reduce there are fewer ‘accidental’ discretionary purchases
Source:Aberdeen Standard Investments © owned by each of the corporate entities named in the respective logos. Companies selected for illustrative purposes only
5 It’s a contraction of physical retail not the end of it There are ways to successfully invest and some assets will be oversold
• Retail is dog-eat-dog • Locations can be successful but this will always be at the expense of somewhere else • Investors need to identify, create, curate and maintain “winning” retail • Retailers need to be omni-channel but physical stores must justify themselves • Grocery-led, convenience-oriented retail is defensive • Barriers to higher online penetration for grocery are high • Consumers begrudge delivery costs for items that are least cost-effective to deliver • Schemes embedded in dense residential are convenient and can be community hubs • Transport-oriented retail has a captive audience • Whether airports or railway stations, footfall is high and motivated to spend • Consumers less price sensitive in some categories allowing higher margins • Destination, placemaking and mixed use • Sense of place is critical for true discretionary shopping • Widest possible offer expected/demanded and retailers are consolidating too • Outlet schemes are destinations with clear differentiation and appeal to psychology
6 Investment objective To provide an attractive level of income along with the prospect of income and capital growth from investing in a diversified UK commercial property portfolio
• 5.4% dividend yield on 9 August 2019 share price (88.9p)
• Dividend paid quarterly – 4.76p per share (current annual rate)
• Covered dividend policy – 102% cover H1 2019
• NAV total return 6.5% for 12 months to end June 2019
• Debt – LTV 23.4 % 30 June 2019 at a cost of 2.7%
Source: Aberdeen Standard Investments, 09 August 2019. Past performance is not a guide to future results. © Owned by each of the corporate entities named in the respective logos. https://www.moneywise.co.uk/investing/funds/moneywise-investment-trust-awards-2017 https://s3-eu-west-1.amazonaws.com/minisites.specialist.titles/FTspecialist/members-2018.html http://fitawards.ajbell.co.uk/winners
7 Sector allocation Diversified by asset and location
SLIPIT Portfolio allocation by Sector Portfolio allocation by Region
7% 14%
7% 31% 37% 3%
17% 53% 9% 5% 3% 4% 10%
South East Scotland South West Office Retail Industrial Other North West London West End East Midlands London City North East West Midlands
Source: Aberdeen Standard Investments, IPD, 30 June 2019. Subject to change.
8 Asset Management Utilising relationships with tenants to drive value
Bourne House Staines
• Fully let to Ricoh with tenant break in 2021
• Joint marketing approach
• SLI found potential new tenant
• New 10 year lease completed at higher rent than previous lease
Source: Aberdeen Standard Investments, 30 June 2019
9 Recent Purchase
54 Hagley Rd Birmingham
• £23.75m 7.6%
• Multi let office with diverse tenant base and affordable rents
• Future infrastructure projects to enhance location
Source: Aberdeen Standard Investments, 30 June 2019
10 Sale Reducing risk at a profit
Silbury House Milton Keynes
• Single let, tenant in occupation of part only
• 2021 lease expiry
• Sale price £6m realised profit on valuation of £1m
• Sale reduces future void and capex risk, whilst realising upside of any refurbishment.
Source: Aberdeen Standard Investments, 30 June 2019
11 KIDs Stated costs in KIIDs are misleading…
Ongoing charges (irrecoverable property costs, admin fees etc for 2017 divided by average 2017 0.78% NAV
Mgmt Fee for 2017 divided by average NAV for 2017 0.95%
Debt costs for 2017 divided by average NAV for 2017 1.01%
TOTAL 2.75%
Average Transaction costs (SDLT, legal fees etc on all purchases and sales over 2015,2016,2017 0.78% divided by average NAV over the three years)
TOTAL IN KID 3.53%
Source: Aberdeen Standard Investments, September 2018
12 Solar PV programme
Comprehensive review of PV feasibility across the whole portfolio
Benefits include: • Zero carbon electricity generation • Income generated from selling power to occupiers and government Feed in Tariff • Improved attractiveness/ marketability Feasibility and returns depend on: • Roof orientation • Tenant electrical load • Agreed power purchase rate • Lease length Installations progressing or underway at: • 141 Tetron, Swadlincote (50kWp) • Unit 2, Fareham (50 kWp) • Interlink Park, Bardon (50 kWp) • Flamingo Flowers (800 kWp, roof + ground mounted)
• Potential additional opportunities at P&O, Dover and Swift House, Rugby
Source: Aberdeen Standard Investments, 30 March 2019
13 Summary Focussed on Income
• Active approach to managing the portfolio
• Cautious approach to risk
• Structured for outperformance with low exposure to weaker market sectors
• Uncertain outlook means focus remains on doing the basics well
Source: Aberdeen Standard Investments
14 Appendices Investment portfolio performance – total return
Total Return (measured against the IPD Quarterly version of the Monthly Index)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0% 3 months to 30 June 2019 12 months to 30 June 2019 3 years to 30 June 2019 5 years to 30 June 2019 10 years to 30 June 2019 (pa) (pa) (pa)
NAV return Portfolio IPD Quarterly Index
Source: Aberdeen Standard Investments, IPD, 30 June 2019. Past performance is not a guide to future results
16 Top ten assets
Market Value % of Portfolio Rank Property Name Sector Band (excl. cash)
1 54 Hagley Road >£18m Office 4.6%
2 Denby 242 >£18m Industrial 3.7%
3 The Symphony Group PLC >£18m Industrial 3.7%
4 Pinnacle £14m - £16m Office 3.0%
5 Ground Floor, New Palace Place £14m - £16m Office 2.9%
6 Hollywood Green £14m - £16m Other 2.9%
7 Chester House £14m - £16m Office 2.9%
8 UNIT 1/1A £14m - £16m Industrial 2.9%
9 Timbmet Distribution £14m - £16m Industrial 2.8%
10 Building 3300 £12m - £14m Other 2.6%
32.1%
Source: Aberdeen Standard Investments 30 March 2019. Past performance is not a guide to future results. Subject to change. Top ten assets represent 32.1% of the portfolio by value
17 Top ten tenants
Rank Tenant group Passing rent As % of total rent
1 BAE Systems 1,257,640 4.3 %
2 Techno Cargo Logistics Ltd 1,242,250 4.3 %
3 Public Sector 1,158,858 4.0 %
4 The Symphony Group Plc 1,080,000 3.7 %
5 Jenkins Shipping Group Ltd 813,390 2.8 %
6 Hadleigh PVT Limited 799,683 2.7 %
7 Bong UK 771,752 2.7 %
8 Atos IT Services UK Ltd 750,000 2.6 %
9 Ricoh UK Limited 696,995 2.4 %
10 CEVA Logistics Ltd 652,387 2.2 %
9,222,955
Source: Aberdeen Standard Investments, 30 December 2018. Subject to change.
18 SLIPIT ESG Track Record – GRESB/EPRA
Source: GRESB/EPRA December 2018. Past performance is not a guide to future results. © Owned by each of the corporate entities named in the respective logos.
19 Discrete performance
Discrete year D 30 June 2019 % 30 June 2018 % 30 June 2017 % 30 June 2016 % 30 June 2015 % NAV Total Return 6.5 13.4 8.7 10.4 18.4 Share Price Total Return 6.5 9.8 19.1 -0.1 16.0 IPD Benchmark 3.4 10.2 4.3 8.9 15.6
Source: Aberdeen Standard Investments, GBP Net portfolio performance, 30 June 2019 Please note that the figures are based on net price performance. This will include the effects of fees, charges and any share pricing swings. Past performance is not a guide to future results
20 Standard Life Investments Property Income Trust
The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because the Company is not able to pay you.
The risk indicator assumes you keep the product for 5 years. The actual risk can vary significantly if you cash in at an early stage and you may get back less.
This product does not include any protection from future market performance so you could lose some or all of your investment.
Further information on risks are detailed in the Company’s Annual Report available in the literature library on https://uk.standardlifeinvestments.com/consumer/funds/investment_trusts/index.html
21 Standard Life Investments Property Income Trust
Jason Baggaley Fund Manager [email protected] 0131 245 2833
Oli Lord Deputy Fund Manager [email protected] 0131 245 6077
22 For professional clients only – Not for public distribution
Past performance is not a guide to future results. The value of investments, and the income from them, can go down as well as up and clients may get back less than the amount invested.
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments
The views expressed in this presentation should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain or sell a particular investment. The information contained in the presentation is for exclusive use by professional customers/eligible counterparties (ECPs) and not the general public. The information is being given only to those persons who have received this document directly from Aberdeen Asset Managers Limited or Standard Life Investments Limited (together “Aberdeen Standard Investments”) and must not be acted or relied upon by persons receiving a copy of this document other than directly from Aberdeen Standard Investments. No part of this document may be copied or duplicated in any form or by any means or redistributed without the written consent of Aberdeen Standard Investments.
No information, opinions or data in this document constitute investment, legal, tax or other advice and are not to be relied upon in making an investment or other decision. Subscriptions for shares in the Fund may only be made on the basis of the latest prospectus, relevant Key Investor Information Document (KIID). These can be obtained free of charge from Aberdeen Standard Investments, 1 George Street, Edinburgh, EH2 2LL, Scotland and are also available on www.aberdeenstandard.com
Property is a relatively illiquid asset class, the valuation of which is a matter of opinion. There is no recognised market for property and there can be delays in realising the value of assets.
Copyright and database right Investment Property Databank Limited and its licensors 2018. All rights reserved. IPD has no liability to any person for any losses, damages, costs or expenses suffered as a result of any use of or reliance on any of the information which may be attributed to it.
Standard Life Investments Property Income Trust Limited closed-ended investment company registered in Guernsey, with Real Estate Investment Trust (“REIT”) status, which is listed on the London Stock Exchange
The information contained herein including any expressions of opinion or forecast have been obtained from or is based upon sources believed by us to be reliable but is not guaranteed as to the accuracy or completeness.
Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life Aberdeen*. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen* or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.
* Standard Life Aberdeen means the relevant member of Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time.
Aberdeen Asset Managers Limited is registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL, Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL, and both companies are authorised and regulated in the UK by the Financial Conduct Authority.
GB-030919-98202-1
23 Disclaimer
Risk factors you should consider prior to investing: • The value of investments and the income from them can fall and investors may get back less than the amount invested. • Past performance is not a guide to future results. • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years. • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV. • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares. • The Company may charge expenses to capital which may erode the capital value of the investment. • Movements in exchange rates will impact on both the level of income received and the capital value of your investment. • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value. • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen. • The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down. • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
24 Disclaimer
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Bloomberg data are for illustrative purposes only. No assumptions regarding future performance should be made.
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