Guernsey: 19 September 2019
UK Commercial Property REIT
Limited
(“UKCM” or the “Company”)
LEI: 213800JN4FQ1A9G8EU25
INTERIM RESULTS
FOR THE HALF YEAR ENDED 30 JUNE
2019
UK Commercial Property REIT Limited (FTSE 250, LSE: UKCM) which
is managed and advised by Aberdeen Standard Investments and owns a
diversified portfolio of high quality income-producing UK
commercial property announces its interim results for the half year
ended 30 June 2019.
Financial Highlights – Positive
returns delivered with low gearing
- NAV total return of 1.9% (30 June
2018: 12.2%) achieved with low relative net gearing of 16.2%
as property portfolio continued to outperform benchmark.
- 19% increase in EPRA Earnings per share to 1.70p compared to
the same period last year, as income accretive acquisitions and
successful asset management boosted earnings, equating to dividend
cover of 92% for the six months.
- Debt refinancing in February 2019
achieved the following:
- Increased maturity profile of debt from 4.1 years to 8.5
years
- Increased flexibility of debt through revolving credit
facility
- Increased quantum of debt available by £50 million
- Decreased cost from 2.89% to 2.78%
- Up to £90 million available for investment being the unutilised
portion of the Company’s low cost, flexible, revolving credit
facility.
Portfolio Highlights – Continued
portfolio outperformance delivered by a reversionary portfolio
which is overweight to favoured industrial sector
- Portfolio total return of 2.1% ahead of MSCI IPD benchmark
total return of 1.2% as strategic overweight position in industrial
sector (now 48% of portfolio by value) and successful asset
management initiatives continued to drive performance.
- £5.2 million of annualised income, after rent free periods,
secured through a number of successful asset management initiatives
that boosted earnings and captured longer term, secure income.
- High occupancy rate of 92.5% with over half of remaining
vacancy in well located industrial properties.
- Net initial yield on portfolio of 4.2% with reversionary yield
of 5.2% highlighting opportunity to grow earnings by capturing
future reversion.
- 99% of rent collected within 21 days underlining the continued
strength of the tenant base
Commenting on the results,
Andrew Wilson, Chair of UKCM,
said:
“The Company’s strategy to create a diverse commercial portfolio
continues to produce sustainable, high quality rental income, and
has once again outperformed the benchmark in the first half of this
year. A successful debt refinancing in February provides greater
flexibility and firepower whilst the refreshed investment policy
enables further potential investment into alternative sectors. With
a high quality portfolio of assets located throughout the UK, a
strong balance sheet and the lowest gearing amongst the Company’s
peer group, UKCM is well positioned to add value to its property
portfolio and enhance returns for its shareholders.”
Will
Fulton, Lead Manager of UKCM at Aberdeen Standard
Investments added:
“Successful asset management initiatives and high tenant
occupancy across the portfolio has created value while providing
reliable income to shareholders, ensuring positive results for UKCM
during the period. Our portfolio’s strategic weighting towards
industrial is now up to 48% and we continue to reduce our exposure
to the retail sector. Following the change in our investment policy
earlier this year, we are now looking to explore attractive
investment opportunities in alternative sectors, while upholding
our ability to recycle capital into high quality assets that are
well positioned to deliver growing and sustainable income.”
For further information:
Will Fulton/Graeme McDonald, Aberdeen Standard
Investments
Tel: 0131 245 2799/0131 245 3151
Richard Sunderland /Claire Turvey/Eve Kirmatzis, FTI Consulting
Tel: 020 3727 1000
PERFORMANCE SUMMARY
CAPITAL VALUES AND
GEARING |
|
30
June
2019 |
31
December 2018 |
%
Change |
Total assets less
current liabilities (excl Bank loan & swap) £’000 |
|
1,468,879 |
1,462,982 |
0.4 |
Net asset value
£’000 |
|
1,211,335 |
1,212,619 |
(0.1) |
Net asset value per
share (p) |
|
93.2 |
93.3 |
(0.1) |
Ordinary share price
(p) |
|
88.5 |
83.2 |
6.4 |
Discount to net asset
value (%) |
|
(5.0) |
(10.8) |
n/a |
Gearing
(%): Net*
Gross** |
|
16.2
17.7 |
14.6
17.1 |
n/a
n/a |
|
|
|
|
|
TOTAL
RETURN |
6
month
% return |
1
year
% return |
3
year
% return |
5
year
% return |
NAV † |
1.9 |
2.5 |
21.7 |
47.1 |
Share Price † |
8.3 |
4.7 |
39.2 |
34.3 |
UKCM Property
portfolio |
2.1 |
3.3 |
23.3 |
50.1 |
MSCI IPD Balanced
Monthly and Quarterly Funds Benchmark |
1.2 |
3.9 |
20.5 |
51.3 |
FTSE All-Share Real
Estate Investment Trusts Index |
9.7 |
(5.2) |
13.6 |
24.5 |
FTSE All-Share
Index |
13.0 |
0.6 |
29.5 |
35.8 |
|
|
|
|
|
EARNINGS AND
DIVIDENDS |
|
30
June 2019 |
30
June 2018 |
|
EPRA Earnings per
share (p) |
|
1.70 |
1.43 |
|
Dividends declared per
ordinary share (p) |
|
1.84 |
1.84 |
|
Dividend Yield (%)
*** |
|
4.2 |
4.2 |
|
IPD Benchmark Yield
(%) |
|
4.7 |
4.7 |
|
FTSE All-Share Real
Estate Investment Trusts Index Yield (%) |
|
4.5 |
3.9 |
|
FTSE All-Share Index
Yield (%) |
|
4.1 |
3.6 |
|
|
|
|
|
|
* Calculated as net
borrowings (gross borrowings less cash) divided by total assets
less cash and current liabilities.
** Calculated as gross borrowings divided by total assets
less current liabilities.
† Assumes re-investment of dividends excluding
transaction costs.
***
Based on an annual dividend of 3.68p and the share price at 30
June.
Sources: Aberdeen Standard Investments, MSCI Investment Property
Databank (“IPD”)
Chair’s Statement
In my final statement as your Chair I am pleased to report that
UK Commercial Property REIT Limited (“UKCM”) continues to make
significant progress against a background of political and economic
uncertainty. The Company delivered a NAV total return of 1.9% in
the six months to June 2019. This
performance was driven by a £1.46 billion property portfolio which
continues to outperform its benchmark primarily as a result of its
industrial weighting and following a number of successful asset
management initiatives. UKCM also delivered double digit percentage
growth in its EPRA earnings, assisted largely by the positive
contribution from the high quality industrial portfolio acquired by
the Company in December 2018. As
referenced in its Annual Report, the Company also completed a
successful debt refinancing in the first quarter of this year that
increased the flexibility of the Company’s overall debt profile.
Finally, UKCM also received shareholder approval to expand its
investment policy, providing flexibility to consider appropriate
opportunities from a wider universe of alternative real estate
sectors that have evolved and matured since the Company was
formed.
Portfolio Performance &
Activity
The property portfolio generated a total return of 2.1% in the
six month period, well in excess of the 1.2% total return delivered
by the Company’s benchmark. This outperformance was driven by a
5.2% total return from the Company’s industrial assets (benchmark
return: 3.4%) which now represent 48% by value of the total
portfolio. A major contributor to this return was the
pre-letting of a 180,000 square feet industrial unit in Wembley,
North London to an international
e-commerce provider. The lease is for 10 years and is index-linked.
The letting secured long term income, increased capital value and
removed a potentially significant void. The Company’s office
portfolio also outperformed. It generated a total return of 3.0%
compared to the benchmark return of 2.1%, boosted by another
successful asset management initiative at our holding in
Hemel Hempstead. The Company was
not immune to the ongoing travails of the retail market, with the
use of company voluntary arrangements, the impact of online retail
on high street performance and the increasingly negative sentiment
to this sector regardless of individual property fundamentals.
These factors contributed to a total return of -2.4% (benchmark:
-2.2%). It should, however, be noted that the Company’s retail
portfolio is predominantly in well located, high demand areas
demonstrated by a number of lettings undertaken in this sector over
the period. Most notable was a new 20 year index-linked lease with
Aldi, for a 27,000 sq.ft. unit at Great Lodge Retail Park,
Tunbridge Wells, which was
formerly sub-let by B&Q to Toys R Us. As well as securing
longer term income from a high quality tenant and thereby
increasing the capital value of this asset in the second quarter,
UKCM also negotiated a substantial surrender premium from B&Q,
further boosting earnings in the period.
Looking back on the Company’s track record, it is pleasing to
see that of the leases due for expiry in the 12 months to
30 June 2019, 81% of rental income
was renewed with the existing tenants or let to new tenants thereby
avoiding void periods.
At a time when investment activity in the market is muted, the
key driver of performance will be through successful asset
management initiatives. The examples above are a selection of those
which demonstrate UKCM’s ongoing ability to extract latent value
from such initiatives across all sectors. Over half the Company’s
low 7.5% vacancy (as at 30 June 2019)
is in well located industrial units that should provide
opportunities to secure longer term rental income.
Corporate Performance
The 1.9% NAV total return is a solid return in an environment
where there has been a decline in capital values for some assets
and demonstrates the relative benefit of UKCM’s low gearing
compared to other more highly leveraged vehicles. The share price
total return for the period was 8.3%, as the discount at which the
Company’s shares trade versus their net asset value narrowed from
10.8% at the end of December 2018 to
5.0% at 30 June 2019.
Over a five year term, the Company has performed well with a NAV
total return of 47.1% and share price total return of 34.3%, both
ahead of the FTSE All-Share REIT index of 24.5%. In addition,
UKCM’s returns are ahead of the Investment Association Open Ended
Funds UK Direct Property sector return of 29.6% over the same
period.
Financial Resources
UKCM continues to be in a strong financial position with a NAV
of over £1.1 billion and contracted annual rent of £71.3 million.
This position has been further enhanced by the debt refinancing
completed in February 2019 which
achieved the following:
- Increased the maturity profile of the Company’s debt from 4.5
years to 8.1 years at end of June
2019;
- Increased flexibility of debt with 43% of the Company’s total
debt facilities (£150 million) now in the form of a variable rate
revolving credit facility (“RCF”);
- Increased resources available by securing additional debt of
£50 million;
- Decreased the cost of the Company’s debt from 2.89% to 2.78% as
at 30 June.
The Company currently has net gearing of 16.2% (gross gearing
17.7%) and remains one of the lowest geared companies in the REIT
sector, which should position the Company well in the current
property cycle. In addition, UKCM still has up to £90 million of
low cost, flexible firepower being the undrawn element of the RCF,
which can be used to take advantage of opportunities both at a
portfolio and corporate level should they arise.
Earnings & Dividends
EPRA earnings per share grew by 19% to 1.70p for the six months
compared to the same period last year. This was boosted by the
£85.4 million Midlands industrial
portfolio acquisition in December
2018 and the various earnings-accretive asset management
initiatives successfully undertaken. This equates to dividend cover
of 92% for the six months compared to 82% for the whole of 2018. As
I highlighted in the 2018 annual report, one of the key objectives
of the Board is to create sustainable earnings growth and it is
pleasing to see this metric on an upward trajectory. While there
will inevitably be fluctuations in earnings due to portfolio
investment activity, the Company’s proven track record through its
asset management activities, financial resources and reversionary
portfolio should combine to ensure continued earnings momentum in
the medium term. It is also fortunate in having a committed manager
in Aberdeen Standard Investments focussed on delivering performance
for UKCM.
The Company paid and declared dividends totalling 1.84p per
share in the six month period to 30 June
2019. This equates to an annual dividend yield of 4.2% based
on the period end share price of 88.5p. In the current economic and
political environment, this represents an attractive income yield,
underpinned by a prime portfolio and a strong tenant base that pays
99% of its rent within 21 days. Also worthy of note is that 18% of
rents are now fixed or inflation-linked, a figure which should grow
once our new lettings referred to earlier come on-stream.
Outlook
The UK economy continues to stagnate as Brexit uncertainty holds
back corporate investment, thereby negatively impacting GDP growth.
Our investment manager is forecasting GDP growth of 1.4% in both
2019 and 2020 in its base case, although it should be highlighted
downside risks exist and leading indicators have weakened in recent
months.
Given the macroeconomic environment, the UK commercial property
market is holding up well with positive total returns still
forecast. While investment volumes are considerably down compared
to previous years, occupancy is generally high, apart from the
much-publicised problems in the retail sector. Conversely, the
industrial sector benefits from this trend as retailers move more
of their business online, increasing the need for storage and
distribution space. The property market continues to be underpinned
by strong fundamentals: relatively high yields compared to other
asset classes, limited development, high occupancy rates and, in
most cases, controlled leverage.
The Board and I believe that against such a backdrop, UKCM is
strategically well-positioned both at a portfolio and corporate
level. The Company has a prime portfolio that is diversified by
both sector and geography, but importantly is overweight in the
industrial sector, which is anticipated to be the strongest driver
of returns over the next three years. In addition, the portfolio is
underweight to the retail sector, which it is anticipated will
continue to have challenges. In terms of occupancy levels, UKCM has
a proven track record of delivering successful asset management
initiatives. Coupled with the fact that over half of the Company’s
vacancies are in the industrial sector, this represents an
opportunity to increase earnings in a portfolio that is
reversionary in nature.
From a corporate perspective, the Company is financially strong
with prudent, low cost, flexible gearing and significant financial
resources available for future opportunities that can now be
sourced from a wider pool of potential investments following the
updating of the Company’s investment strategy to include additional
real estate sectors. In addition, the Company’s earnings are also
on an upward trajectory over the medium term as cash has been
invested in assets that should generate long term, secure income.
This is crucial given that sustainable income will be the main
component of returns in the current phase of the property
cycle.
I believe that UKCM, which continues to be one of the largest
diversified REITs in the UK, is delivering on its strategy and
should continue to do so with a Board of Directors and an
Investment Manager who are committed to maximising shareholder
value.
I would also like to take this opportunity to thank all our
shareholders, advisors, other stakeholders and my fellow Directors
for all their invaluable support during my tenure at UK Commercial
Property REIT since its formation in 2006. As I prepare to
step down, I firmly believe your company is very well placed for
the future and in very capable hands.
Andrew Wilson
Chair
18 September 2019
Manager’s Review
Market Commentary
Although UK GDP recorded robust growth in Q1, inventory building
was key to this, as companies stockpiled resources ahead of the
anticipated disruption to supply chains caused by a potential
“cliff edge” withdrawal from the EU at the end of March. The
eventual six-month extension to the Article 50 process averted
this, but UK GDP was estimated to have fallen by -0.2% in Q2, amid
the unwinding of stockpiling activity. As long as questions remain
around the Brexit process, we expect business investment to remain
subdued.
In spite of a relatively tight labour market, accommodative
monetary policy and high corporate profit margins, inflation
remains stubbornly low. Although the Bank of England has given hawkish signals, we expect
interest rates to remain lower for longer if they are to support
the backdrop of decelerating growth, particularly until greater
clarity on the UK’s future relationship with the EU emerges.
Indeed, we have taken very modest tightening cycles in the UK and
the Eurozone out of our forecasts entirely, with the US Federal
Reserve expected to cut interest rates twice this year and monetary
policy easing also expected in most major economies. Low inflation
globally, slowing growth and trade war uncertainty, on top of those
more UK- specific risks, are pointing toward a longer period of
ultra-low interest rates.
Commercial Property
According to MSCI IPD, UK real estate continued to deliver a
positive total return of 1.2% for the first six months of 2019.
While retail returns have been negative as expected, and have borne
the brunt of the capital decline, growth in the industrial sector
has moderated after a period of record capital value gains but
remains positive, resulting in a 3.4% total return within MSCI
IPD’s index over the six month period.
The second quarter has seen a fall in transaction activity to
levels last seen in 2012. Overseas investors have been net sellers
of the UK office market with Chinese capital controls now appearing
to have a significant effect on global real estate markets.
Although New York has perhaps
borne the brunt of Chinese disinvestment, London is not immune, and there are
indications that other global investors are displaying more caution
towards London too, which could
see London office pricing soften
in the second half of the year.
Despite this, take-up in the office sector remains robust and
central London take-up has
recovered, following a muted period around the EU referendum, and
is now back close to the high watermark set in 2015. However this
is largely driven by flexible office providers; traditional take-up
has been broadly flatlining since early 2016. The now roughly 20%
of take-up accounted for by flexible office providers does not
actually absorb supply, as it must all be re-let into the market
and, importantly, at higher densities of occupation.
Regionally, office headline rents are steadily rising in the big
six office markets, boosted by the trend towards consolidation
among some of the largest corporate occupiers, as well as the
public sector’s shift towards large regional hubs. Vacancy rates
have been steadily falling in these markets since 2017, with high
net absorption pushing rents on and virtually no new construction
in the last two years. While supply has tightened, the economic
backdrop is expected to negatively affect demand going forward and,
therefore, rents. A similar dynamic has been playing out in office
markets in the South East, although vacancy has not fallen as
dramatically – indeed, demand has gravitated towards those
sub-markets with critical mass and good infrastructure, such as
Reading.
The retail sector has a very shallow pool of buyers tending to
be opportunistic in nature with a large amount of stock being
quietly marketed. The lack of demand in the occupier market and
uncertainty about where rental values will settle mean investors
are, in many retail sub-sectors, demanding discounts to valuation.
The share price discount to net asset value for listed stocks with
a high retail weighting provides an indication of sentiment towards
this sector which is catch all in nature and often ignores the
underlying fundamentals of individual assets.
Furthermore, a wave of company voluntary arrangements (CVAs) in
retail has put negative pressure on rental values in the sector,
and on risk premia requirements, and so also on certain
valuations.
Industrial demand, however, remains especially high in
London and the South East, while
logistics has had another strong start to the year with a number of
significant lettings of speculatively developed space in core
markets.
Portfolio Performance
It is pleasing to report outperformance for the first half, with
a total return from the Company’s property portfolio of 2.1% versus
1.2% for its MSCI IPD benchmark. The table below breaks down this
return by sector for the six month period to 30 June 2019; all valuations are undertaken by
the Company’s external valuer, CBRE Ltd.
|
Exposure |
Total
Return |
Income
Return |
Capital Growth |
|
|
|
UKCM |
Benchmark |
UKCM |
Benchmark |
UKCM |
Benchmark |
|
|
|
% |
% |
% |
% |
% |
% |
Office |
16% |
£234m |
3.0 |
2.1 |
2.1 |
2.0 |
0.8 |
0.1 |
Industrials |
48% |
£701m |
5.2 |
3.4 |
1.5 |
2.1 |
3.7 |
1.3 |
Retail |
25% |
£366m |
-2.4 |
-2.2 |
3.0 |
2.7 |
-5.2 |
-4.7 |
Alternatives |
11% |
£158m |
-1.3 |
2.7 |
2.5 |
2.2 |
-3.8 |
0.5 |
Total |
100% |
£1,459m |
2.1 |
1.2 |
2.1 |
2.3 |
0.0 |
-1.1 |
Source: MSCI/IPD, Aberdeen Standard Investments
Assumes reinvestment of income in capital gain/loss
The main drivers of outperformance arose from a strategic
overweight position to the industrial (including logistics
distribution) sector which, from summer 2017, became the Company’s
largest sector exposure; the Company benefited from both the scale
of its weighting in this sector and the relative outperformance of
its industrial assets. Meanwhile the Company’s retail and
alternative* exposure acted as a brake on outperformance with the
alternatives portfolio, historically weighted to leisure with an
element of ex-growth rent (over- renting), posting negative capital
growth. A similar result arose in retail where, despite the
Company’s largest exposure to out of town retail warehouses
outperforming its benchmark peer assets, it posted a relative
decline when adding returns from the single shopping centre asset
and south east shops.
The Company’s income profile continues to provide a stable and
reliable element of the portfolio return, delivering 2.1% for the
six month period against relatively constant portfolio occupancy
over the period of 92%; positively over half of the remaining
vacancy rests in well located industrial assets.
* The term commercial property generally refers to buildings or
land intended to generate a profit, either from capital gain or
rental income; over recent years the sectors understood to fall
within this definition have broadened to include additional
sectors such as healthcare, student housing, hotels, car parks,
pubs, petroleum and automotive, and the commercially-managed
private residential rental sector, amongst others. Over the last
five years these additional sectors have come to be regarded as
mainstream and are commonly referred to in the property industry as
“alternative sectors”.
Industrial
Of particular note, and turbo-charging the period’s industrial
performance, was the Company’s new pre-letting of its distribution
warehouse at Neasden, Wembley, to an international company for ten
years. This will secure £2.7 million per annum in rental income,
after completion of landlords’ works expected in the last quarter
of this year, representing an approximate 30% increase from the
rent payable up to March 2018 (after
which the previous tenant was granted a temporary lease extension
at a higher rent, £2.35 million per annum). This investment
delivered a total return of 27% over the first six months of the
year and was the best performing asset within the Company’s
ownership for the period.
As anticipated the Company’s industrial portfolio delivered the
strongest performance during the period where active management
accelerated total returns to 5.2% against 3.4% for the benchmark.
This performance was achieved despite this portfolio holding the
Company’s largest vacancy, XDock377 logistics warehouse located at
Magna Park, Lutterworth, one of the UK’s premier national
distribution spots. Reinvigorated to a high specification in
February 2019, the warehouse accounts
for 40% of the Company’s total 7.5% vacancy measured by rental
value. Interest from occupiers has been good and leasing remains a
case of matching the warehouse to a particular requirement.
The Company’s portfolio has a strategic mix of ‘south-east /
regional’ and ‘urban / non-urban’ strategic distribution in ratios
of approximately 60:40 and 55:45 respectively; this balance of
higher yielding ‘regional/ non-urban’ and stronger growth
‘south-east/ urban’, combined with opportunities for active asset
management as demonstrated above, continues to position the Company
well.
Office
The Company’s office portfolio also out-performed its benchmark,
recording a total return of 3.0% v 2.1%; in fact all office sub-
sectors within the portfolio out-performed, with the one exception
of the Company’s last, low yielding London West End asset. Question
marks over the prospects of the central London office market, as a result of political
uncertainty and the large amount of space leased by WeWork (who by
the nature of their business are a somewhat artificial tenant
requiring ‘real’ occupiers to fill their space thus muddying
potential vacancy rates), has led to the Company’s strategically
underweight position in central London offices. It has only one investment in
each of the West End and City markets accounting for a combined 5%
of its total portfolio, both are fully let. Vacancy in the office
portfolio sits at a relatively modest 7% and is focused in
Birmingham and Reading, both locations experiencing
significant infrastructure and public realm improvement with a
subsequent rise in tenant demand.
Retail
Despite delivering the highest income return for the Company,
3.0% for the six month period versus the benchmark’s 2.7%, retail
produced the weakest total return of the four principal commercial
property sectors, broadly in line with the benchmark, recording
-2.4% versus -2.2% respectively. When analysing
attribution, two of the Company’s assets were the principal
culprits for this performance. The Company’s one remaining shopping
centre investment in Swindon,
where an asset management plan has been completed to improve the
attractiveness and liquidity of the asset. The other is one of the
Company’s larger retail parks, Junction 27, Leeds, which, despite being adjacent to the
draw of a large and successful regional Ikea store and being fully
let, experienced a sentiment driven decline in rental value and
softening yield.
Following a number of retail asset sales in recent years, the
Company continues to have a strategically underweight position to
the retail sector which represents 25% of its portfolio.
Alternatives
Within the alternatives sector, two leisure assets offset some
of the strong industrial performance over the period. While still
producing good income at 2.5% for the first six months (benchmark
2.2%) the assets, in Kingston-upon-Thames and Swindon, came under pressure from a
combination of some over-renting, a number of restaurant CVAs and a
resultant softening of yield. Overall performance was lacklustre at
-1.3% v 2.7% for the benchmark. In isolation, the Company’s newer
hotel investment in Newcastle-upon-Tyne saw both good capital and
income returns.
Investment Activity
While the Company continues to look for suitable investment
opportunities, it remains prudent in its approach and no purchases
or disposals were undertaken in the period. Having completed an
asset management plan the Company was able to sell its one
remaining shopping centre, The Parade, Swindon. While the Company continues to look
for suitable investment opportunities, it remains prudent in its
approach and no purchases were undertaken in the period.
Successful debt refinancing further
strengthens Balance Sheet
As the Chair has noted, the Company successfully restructured
its debt facilities in February 2019
providing shareholders with greater ‘firepower’, flexibility,
weighted maturity profile, and all at a lower cost whilst retaining
one of the lowest gearing ratios in the Company’s peer group and
the quoted REIT sector.
Asset management and leasing momentum
underpinning performance
During the first half of the year the Company continued its
drive to strengthen income streams, extend lease lengths and add
value to the portfolio. A total of £5.2 million of annual income
was secured after rent free periods and incentives from eighteen
new leases and nine lease renewals/rent reviews. The Company’s
portfolio now has 18% of its rent secured from leases with either
inflation linked or fixed uplifts in rent.
Furthermore, it was pleasing to see that all open market rent
reviews agreed during the period, with one exception, saw increases
and settlements ahead of rental value.
Overall, occupancy of the portfolio remained relatively constant
at 92% as at 30 June 2019, with over
half the remaining vacancy in well located industrial assets with
good prospects to increase occupancy.
Asset management highlights within the
period included;
Pre-letting the entire 180,000 sq ft Wembley logistics
distribution centre at Central Way, Neasden, ahead of the previous
tenant, Marks & Spencer, moving out at the end of March 2019. The Company exchanged contracts for a
new 10 year index-linked lease with an international business at a
rent of £2.7 million per annum capturing and exceeding the
property’s reversionary rental value. The new occupier is expected
to take occupation in October 2019
following a comprehensive refurbishment by the Company, with work
well underway on site.
After landlord works, completion of leases at St George’s Retail
Park, Leicester, to Home Bargains
securing £200,000 per annum under a new 15 year lease where they
replaced Wickes on lease expiry, and four new 10 year leases to
Wren Living, Tapi Carpets, Costa Coffee & Laura Ashley, generating £658,000 per annum
after lease incentives. The new terrace and Costa ‘pod’ unit,
together with reconfiguration of the park’s entrance to improve
accessibility, greatly enhances shoppers’ experience.
81/85 George Street, Edinburgh,
is now 100% occupied. This followed the letting of the third floor
office suite on a 10 year lease, with a break option at year five,
to a global information technology company at a rent of £304,399
per annum, in line with estimated rental value.
Reletting of an ex-Carpetright unit at Junction 27 Retail Park,
Leeds, a prime retail destination
adjacent to a large Ikea store, to Natuzzi for a 10 year term at a
rent of £225,450 per annum in line with both ERV and the previous
tenant’s rent.
Cineworld, Glasgow - Comic
Enterprises, trading as The Glee Club, signed a new 15 year lease
at a rent of £100,000 per annum, completing the asset management
plan for this asset which is now 100% let on indexed leases with an
average weighted lease length of over 30 years to earliest
termination.
At the logistics Cargo Centre, Newton’s Court, Dartford a lease renewal completed with
Veerstyle Limited which has entered into a new unbroken 10 year
lease at a rent of £575,237 per annum. This represents a 31%
increase over the previous rent passing of £440,000 per annum and
in line with the ERV for the unit.
A new letting to Aldi took place on Great Lodge Retail Park,
Tunbridge Wells, which took
occupation of a 27,000 sq ft unit that was formerly occupied by
Toys R Us under a sublease from B&Q. The Company negotiated a
partial surrender of the space from B&Q, obtaining a
substantial surrender premium in doing so, and simultaneously let
the space to Aldi on a new 20 year lease, with a rent of £500,000
per annum after lease incentives, and incorporating five yearly
rent reviews geared to RPI indexation with a collar and cap of 1%
and 3% compounded annually. In contrast to the general retail
warehouse market it was pleasing to see a capital value increase at
this property as a result.
On the multi let M8 Interlink Estate, Glasgow, SPL Powerlines took occupation of No.
7 Kirkshaws Road on a new 10 year lease with a tenant only break
option in year 5 at a rent of £88,416 per annum in line with
ERV.
An important lease renewal took place with Hertfordshire County
Council at the Apsley One office in Hemel
Hempstead, where a new 10 year reversionary lease was
entered into at an improved level of rent of £825,000 per annum.
This showed an uplift of 36% from the previous rent of £607,068 per
annum, 19% ahead of rental value. Liquidity of this asset is
considerably improved as a result.
At the Company’s multi let industrial estate in Sunbury a rent
review was settled with Trans Global Freight Management Ltd. This
was secured at a new annual rent of £704,000 per annum, 16% ahead
of ERV at the review date, and an uplift of £192,150 per annum on
the previous passing rent.
Rent Collection, Voids and Leasing Tone
Tenant covenants are monitored on a quarterly basis. The Company
collected rent efficiently with the last 12 months’ statistics
showing 99% of rent was collected within 21 days of the due date,
indicative of the quality of the Company’s tenant profile.
Environmental Social Governance
(ESG)
The Company was proud to receive the GRESB European Sector
Leader award in 2018 following a 9% annual improvement in its ESG
KPIs and an EPRA Gold Award for improved reporting. Highlights
included a 12% reduction in greenhouse gas emissions intensity and
a 99% diversion of waste away from landfill. The Company is
undertaking an ongoing feasibility into the use of Solar
Photovoltaic Cells on the roofs of various industrial and retail
properties and investigating the potential for biodiversity
projects.
Investment Outlook
The UK economy continues to be affected by political and
macroeconomic uncertainty which looks likely to persist in the near
term, holding back growth. We have revised our GDP growth
expectations downwards to 1.4% in both 2019 and 2020 in its base
case, although downside risks exist and leading indicators have
weakened in recent months.
Occupier markets are, overall, holding up relatively well with
office demand being supported by the rapid expansion of flexible
office providers and, in the regions, by corporate and public
sector consolidation. The polarisation of retail is an ongoing
trend and weaker locations are under increasing pressure, however,
the twin engines of urbanisation and the rise of e-commerce
continue to propel the industrial sector.
Whilst the investment market has slowed this year, and with
political uncertainty causing many to adopt a cautious approach to
investment, there remains considerable capital with potential for
deployment attracted to UK real estate’s income yield and, retail
sector aside, good occupational fundamentals.
Portfolio Strategy
Your Company aims to deliver an attractive level of income,
together with the potential for capital and income growth, through
investment in a diversified UK commercial property portfolio. Our
strategy to achieve this combines investment, sales, and proactive
asset management, including disciplined investment in existing
stock where accretive.
Whilst we have had major successes in extending leases, removing
risk, and reletting space our occupancy has remained similar over
the last six months and our portfolio focus remains firmly on
further increasing occupancy and generating income.
Having undertaken a number of portfolio transactions in 2018,
and after refinancing and rearranging its debt, we have access to
cash of £90 million from the Company’s revolving credit facility
for new investment, after allowing for dividend and existing
capital expenditure commitments.
Repositioning undertaken from 2015 has intentionally led to a
strategic overweight position in the industrial/logistics sector,
the Company’s largest exposure, which has outperformed through a
mix of picking well located assets and successful asset management
initiatives. Whilst the Company has successfully been reducing its
retail exposure since 2015 we will continue to consider
opportunities to make further disposals in the right circumstances.
There is a delicate balance between declining value risk and what
is becoming a better yielding sector – it is important to
understand on an asset by asset basis the accurate rental value
trajectory and have an appreciation of any ‘bonus’ value from a
potential underlying use.
When looking to deploy cash resources we continue our focus on
sustainable income streams that would be accretive to recurring
dividend cover. We will consider funding the construction of
‘pre-let’ development property, where planning and leasing risk has
been removed and we may benefit from an edge on pricing through our
experience operating in this field. With the advantage of an
enhanced investment policy allowing us to invest in the growing
alternatives sector, we actively monitor opportunities for
investments we believe will produce sustainable income and exhibit
growth potential within the better yielding sub- sectors, and not
necessarily through long leases. We are also increasingly alert to
exploring opportunistic pricing through potential vendor distress
in assets situated in vibrant economies with strong demographics;
with political uncertainty seemingly nearing a crescendo as the
path to Brexit evolves, we believe interesting opportunities may be
available if, for example, owners require to increase liquidity
quickly.
The Company is in good shape with, we believe, a sustainable
income stream and potential to grow earnings, a good portfolio
allocation weighted towards urban and regional industrial
distribution with flexibility to expand into the growing
alternatives sector, low gearing and a strong balance sheet with
capital available to deploy.
Will
Fulton
Fund Manager
18 September 2019
HALF YEARLY CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE HALF YEAR ENDED 30 JUNE
2019
|
|
Half Year
Ended
30 June 2019 (unaudited) |
Half Year
Ended
30 June 2018
(unaudited) |
Year Ended
31 December
(audited)
2018 |
|
Notes |
£’000 |
£’000 |
£’000 |
Revenue |
|
|
|
|
Rental income |
|
35,777 |
32,851 |
65,936 |
Service charge income |
|
2,430 |
2,721 |
5,950 |
Gains on investment properties8 |
2 |
558 |
31,090 |
18,947 |
Interest income |
|
152 |
263 |
510 |
Total income |
|
38,917 |
66,925 |
91,343 |
Expenditure |
|
|
|
|
Investment management fee2 |
|
(4,405) |
(4,780) |
(9,567) |
Direct property expenses3 |
|
(2,381) |
(1,515) |
(3,569) |
Service charge expenses |
|
(2,430) |
(2,721) |
(5,950) |
Other expenses3 |
|
(2,888) |
(3,646) |
(5,446) |
Total expenditure |
|
(12,104) |
(12,662) |
(24,532) |
Operating profit before finance
costs |
|
26,813 |
54,263 |
66,811 |
Finance costs |
|
|
|
|
Finance costs |
|
(4,186) |
(4,145) |
(7,976) |
Loss on derecognition of interest
rate swap |
|
(703) |
- |
- |
|
|
(4,889) |
(4,145) |
(7,976) |
Net profit from ordinary activities
before taxation |
|
21,924 |
50,118 |
58,835 |
Taxation on profit on ordinary
activities |
9 |
- |
(5,830) |
(5,830) |
Net profit for the period |
4 |
21,924 |
44,288 |
53,005 |
Other comprehensive income to be
reclassified to Profit or Loss |
|
|
|
|
Net change in fair
value of swap reclassified to profit and loss |
|
703 |
- |
- |
(Loss)/Gain arising on
effective portion of interest
rate swap |
|
(1) |
972 |
1,388 |
Other comprehensive income |
|
702 |
972 |
1,388 |
Total comprehensive income for the
period |
|
22,626 |
45,260 |
54,393 |
|
|
|
|
|
Basic and diluted earnings per
share |
3 |
1.69p |
3.41p |
4.08p |
EPRA earnings per share |
|
1.70p |
1.43p |
3.03p |
HALF YEARLY CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2019
|
Notes |
30 June 2019 (unaudited)
£’000 |
30 June 2018 (unaudited)
£’000
|
Year
ended
31 December 2018 (audited)
£’000 |
Non-current
assets |
|
|
|
|
Investment
properties |
2 |
1,404,363 |
1,403,690 |
1,430,851 |
Interest rate
swap |
|
- |
- |
166 |
|
|
1,404,363 |
1,403,690 |
1,431,017 |
Current
assets |
|
|
|
|
Investment properties
held for sale |
|
36,275 |
- |
- |
Trade and other
receivables |
|
26,617 |
19,499 |
23,765 |
Cash and cash
equivalents |
|
26,851 |
84,080 |
43,505 |
|
|
89,743 |
103,579 |
67,270 |
Total assets |
|
1,494,106 |
1,507,269 |
1,498,287 |
Current
liabilities |
|
|
|
|
Trade and other
payables |
|
(25,227) |
(29,252) |
(35,139) |
Interest rate
swap |
|
- |
(867) |
(868) |
|
|
(25,227) |
(30,119) |
(36,007) |
Non-current
Liabilities |
|
|
|
|
Bank loan |
|
(257,544) |
(249,503) |
(249,661) |
Interest rate
swap |
|
- |
(251) |
- |
|
|
(257,544) |
(249,754) |
(249,661) |
Total liabilities |
|
(282,771) |
(279,873) |
(285,668) |
Net assets |
6 |
1,211,335 |
1,227,396 |
1,212,619 |
Represented by: |
|
|
|
|
Share capital |
|
539,872 |
539,872 |
539,872 |
Special distributable
reserve |
|
567,614 |
573,208 |
570,158 |
Capital reserve |
|
103,849 |
115,434 |
103,291 |
Revenue reserve |
|
- |
- |
- |
Interest rate swap
reserve |
|
- |
(1,118) |
(702) |
Equity shareholders’
funds |
|
1,211,335 |
1,227,396 |
1,212,619 |
|
|
|
|
|
Net asset value per
share |
|
93.2p |
94.5p |
93.3p |
EPRA Net asset value
per share |
|
93.2p |
94.6p |
93.4p |
HALF YEARLY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 30 JUNE
2019
|
Notes |
Share Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital
Reserve
£’000 |
Revenue
Reserve
£’000 |
Interest
Rate Swap Reserve £’000 |
Equity Shareholders’ funds
£’000 |
At 1 January 2019 |
|
539,872 |
570,158 |
103,291 |
- |
(702) |
1,212,619 |
Net profit for the
period |
|
- |
- |
- |
21,924 |
- |
21,924 |
Other comprehensive
income |
|
- |
- |
- |
- |
702 |
702 |
Total comprehensive
income |
|
- |
- |
- |
21,924 |
702 |
22,626 |
Dividends Paid |
7 |
- |
- |
- |
(23,910) |
- |
(23,910) |
Transfer in respect of
gains on investment property |
|
- |
- |
558 |
(558) |
- |
- |
Transfer from special
distributable reserve |
|
- |
(2,544) |
- |
2,544 |
- |
- |
At 30 June 2019 |
|
539,872 |
567,614 |
103,849 |
- |
- |
1,211,335 |
|
Notes |
Share Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital
Reserve
£’000 |
Revenue
Reserve
£’000 |
Interest
Rate Swap Reserve £’000 |
Equity Shareholders’ funds
£’000 |
At 1 January 2018 |
|
539,872 |
583,920 |
84,344 |
- |
(2,090) |
1,206,046 |
Net profit for the
period |
|
- |
- |
- |
44,288 |
- |
44,288 |
Other comprehensive
income |
|
- |
- |
- |
- |
972 |
972 |
Total comprehensive
income |
|
- |
- |
- |
44,288 |
972 |
45,260 |
Dividends
Paid
|
|
- |
- |
- |
(23,910) |
- |
(23,910) |
Transfer in respect of
gains on investment property |
|
- |
- |
31,090 |
(31,090) |
- |
- |
Transfer from special
distributable reserve |
|
- |
(10,712) |
- |
10,712 |
- |
- |
At 30 June 2018 |
|
539,872 |
573,208 |
115,434 |
- |
(1,118) |
1,227,396 |
|
Notes |
Share
Capital
£’000 |
Special
Distributable
Reserve
£’000 |
Capital
Reserve
£’000 |
Revenue
Reserve
£’000 |
Interest
Rate Swap
Reserve
£’000 |
Equity Shareholders’ funds
£’000 |
At 1 January 2018 |
|
539,872 |
583,920 |
84,344 |
- |
(2,090) |
1,206,046 |
Net profit for the
year |
|
- |
- |
- |
53,005 |
- |
53,005 |
Other comprehensive
income |
|
- |
- |
- |
- |
1,388 |
1,388 |
Total comprehensive
income |
|
- |
- |
- |
53,005 |
1,388 |
54,393 |
Dividends Paid |
|
- |
- |
- |
(47,820) |
- |
(47,820) |
Transfer in respect of
gains on investment property |
|
- |
- |
18,947 |
(18,947) |
- |
- |
Transfer from special
distributable reserve |
|
- |
(13,762) |
- |
13,762 |
- |
- |
At 31 December
2018 |
|
539,872 |
570,158 |
103,291 |
- |
(702) |
1,212,619 |
HALF YEARLY CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 30 JUNE
2019
|
Notes |
|
30 June 2019 (unaudited)
£’000 |
30 June 2018
(unaudited)
£’000 |
Year ended
31 December 2018 (audited)
£’000 |
Cash flows from
operating activities |
|
|
|
|
|
Net profit for the
period before taxation |
|
|
21,924 |
50,118 |
58,835 |
Adjustments for: |
|
|
|
|
|
Gains on investment
properties |
2 |
|
(558) |
(31,090) |
(18,947) |
Movement in lease
incentives |
2 |
|
(3,718) |
(1,328) |
2,408 |
Movement in provision
for bad debts |
|
|
(74) |
(545) |
71 |
Decrease/(Increase) in
operating trade and other receivables |
|
|
940 |
(981) |
(7,996) |
(Decrease)/Increase in
operating trade and other payables |
|
|
(8,731) |
4,543 |
4,571 |
Finance costs |
|
|
4,186 |
3,737 |
7,976 |
Loss on derecognition
of interest rate swap |
|
|
703 |
- |
- |
Cash generated by
operations |
|
|
14,672 |
24,454 |
46,918 |
Tax paid |
|
|
(1,778) |
- |
(1,010) |
Net cash inflow from
operating activities |
|
|
12,894 |
24,454 |
45,908 |
Cash flows from
investing activities |
|
|
|
|
|
Purchase of investment
properties |
2 |
|
- |
(46,572) |
(156,030) |
Sale of investment
properties |
2 |
|
1,156 |
75,481 |
171,928 |
Capital
expenditure |
2 |
|
(10,386) |
(14,198) |
(40,490) |
Net cash
(outflow)/inflow from investing activities |
|
|
(9,230) |
14,711 |
(24,592) |
Cash flows from
financing activities |
|
|
|
|
|
Net proceeds from
utilisation of bank loan |
|
|
7,989 |
- |
- |
Dividends paid |
7 |
|
(23,910) |
(23,910) |
(43,008) |
Bank loan interest
paid |
|
|
(3,510) |
(2,983) |
(6,215) |
Payments under
interest rate swap arrangement |
|
|
(184) |
(635) |
(1,031) |
Swap breakage
costs |
|
|
(703) |
- |
- |
Net cash outflow from
financing activities |
|
|
(20,318) |
(27,528) |
(50,254) |
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
|
|
(16,654) |
(11,637) |
(28,938) |
|
|
|
|
|
|
Opening cash and cash
equivalents |
|
|
43,505 |
72,443 |
72,443 |
|
|
|
|
|
|
Closing cash and cash
equivalents |
|
|
26,851 |
84,080 |
43,505 |
Represented by: |
|
|
|
|
|
Cash at bank |
|
|
16,968 |
20,536 |
16,363 |
Money market
funds |
|
|
9,883 |
63,544 |
27,142 |
|
|
|
26,851 |
84,080 |
43,505 |
The accompanying notes are an integral part of this
statement.
NOTES TO THE ACCOUNTS
1. ACCOUNTING
POLICIES
The condensed consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standard (‘IFRS’) IAS 34 ‘Interim Financial Reporting’ and, except
as described below, the accounting policies set out in the
statutory accounts of the Group for the year ended 31 December 2018.
The condensed consolidated financial statements do not include
all of the information required for a complete set of IFRS
financial statements and should be read in conjunction with the
consolidated financial statements of the Group for the year ended
31 December 2018, which were prepared
under full IFRS requirements.
2. INVESTMENT
PROPERTIES
Freehold and Leasehold
Properties |
£’000 |
Opening valuation |
1,430,851 |
Capital expenditure |
10,386 |
Gain on revaluation to fair
value |
3,474 |
Disposal at prior year
valuation |
(355) |
Adjustment for lease incentives |
(3,718) |
Total fair value at 30 June
2019 |
1,440,638 |
Less: reclassified as held for
sale |
(36,275) |
Fair value as at 30 June 2019 |
1,404,363 |
|
|
Gain on Investment Properties at
Fair Value Comprise |
|
Valuation Gains |
3,474 |
Movement in provision for lease
incentives |
(3,718) |
Gain on disposal |
802 |
|
558 |
|
|
3. BASIC AND DILUTED
EARNINGS PER SHARE
The earnings per ordinary share are based on the net profit for
the period of £21,924,000 (30 June
2018 net profit of £44,288,000) and 1,299,412,465
(30 June 2018: 1,299,412,465)
Ordinary Shares, being the weighted average number of shares in
issue during the period.
4. EARNINGS
Earnings for the period to 30 June
2019 should not be taken as a guide to the results for the
year to 31 December 2019.
5. SHARES
As at 30 June 2019 the total
number of shares in issues is 1,299,412,465 (30 June 2018: 1,299,412,465).
6. NET ASSET
VALUE
The net asset value per ordinary share is based on net assets of
£1,211,335,000 (30 June 2018:
£1,227,396,000) and 1,299,412,465 (30 June
2018: 1,299,412,465) ordinary shares.
7. DIVIDENDS
PERIOD TO 30 JUNE 2019 |
Rate
(pence per share) |
£’000 |
2018 Fourth interim of 0.92p (PID:
0.775p, Ordinary dividend: 0.145p) paid 28 February 2019
(2017 Fourth Interim: 0.92p) |
0.92 |
11,955 |
2019 First interim of 0.92p (PID:
0.92p) paid 31 May 2019 (2018 First Interim: 0.92p) |
0.92 |
11,955 |
|
|
23,910 |
8. RELATED PARTY
TRANSACTIONS
No Director has an interest in any transactions which are or
were unusual in their nature or significant to the nature of the
Group.
Aberdeen Standard Fund Managers Limited received fees for their
services as investment managers. The total management fee charged
to the Statement of Comprehensive Income during the period was
£4,405,000 (30 June 2018: £4,780,000,
which was received by Standard Life Investments (Corporate Funds)
Limited) of which £2,217,000 (30 June
2018: £2,405,000) remained payable at the period end. In the
prior period, the investment manager also received an
administration fee of £50,000.
The Directors of the Company are deemed as key management
personnel and received fees for their services. Total fees for the
period were £184,000 (30 June 2018:
£139,000) of which £Nil (30 June
2018: £Nil) was payable at the period end.
The Group invests in the Aberdeen Standard Investments Liquidity
Fund which is managed by Aberdeen Standard Investments Limited. As
at 30 June 2019 the Group had
invested £9.8 million in the Fund (30 June
2018: £63.5 million). No additional fees are payable to
Aberdeen Standard Investments as a result of this investment.
9. TAXATION
TAXATION ON PROFIT ON ORDINARY
ACTIVITIES COMPRISES |
£’000 |
Net profit from ordinary activities
before tax |
21,924 |
UK corporation tax at a rate of 19
per cent |
4,166 |
Effects of: |
|
UK REIT exemption on rental profits
and gains |
(4,166) |
Total tax charge |
- |
The Group operates as a UK REIT therefore, the income profits of
the Group’s UK property rental business are exempt from corporation
tax as are any gains it makes from the disposal of its properties,
provided they are not held for trading or sold within three years
of completion of development. The Group is otherwise subject to UK
corporation tax at the prevailing rate.
As the principal company of the REIT, the Company is required to
distribute at least 90% of the income profits of the Group’s UK
property rental business. There are a number of other conditions
that also are required to be met by the Company and the Group to
maintain REIT tax status. These conditions were met in the period
and the Board intends to conduct the Group’s affairs such that
these conditions continue to be met for the foreseeable future.
10. FINANCIAL INSTRUMENTS AND
INVESTMENT PROPERTIES
The Group’s investment objective is to provide ordinary
shareholders with an attractive level of income together with the
potential for income and capital growth from investing in a
diversified UK commercial property portfolio.
Consistent with that objective, the Group holds UK commercial
property investments. The Group’s financial instruments consist of
cash, receivables and payables that arise directly from its
operations and loan facilities.
The main risks arising from the Group’s financial instruments
are credit risk, liquidity risk, market risk and interest rate
risk. The Board reviews and agrees policies for managing its risk
exposure. These policies are set out in the statutory accounts of
the Group for the year ended and remained unchanged
during the period.
Fair value hierarchy
The following table shows an analysis of the fair values of
investment properties recognised in the balance sheet by level of
the fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at
the
measurement date.
Level
2
: Use of a model with inputs (other than quoted prices included in
level 1) that are directly or indirectly observable market
data.
Level 3: Use of a model with inputs that are not based on
observable market data.
30 June 2019 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Investment properties |
- |
- |
1,440,638 |
1,440,638 |
The lowest level of input is the underlying yields on each
property which is an input not based on observable market data.
The fair value of investment properties is calculated using
unobservable inputs as described in the annual report and accounts
for the year ended 31 December
2018.
The following table shows an analysis of the fair value of bank
loans recognised in the balance sheet by level of the fair value
hierarchy:
30 June 2019 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Loan Facilities |
- |
270,660 |
- |
270,660 |
The lowest level of input is the interest rate applicable to
each borrowing as at the balance sheet date which is a directly
observable input.
The fair value of the bank loans is estimated by discounting
expected future cash flows using the current interest rates
applicable to each loan.
30 June 2019 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total fair value
£’000 |
Trade and other receivables |
- |
26,617 |
- |
26,617 |
Trade and other payables |
- |
(25,227) |
- |
(25,227) |
The table above shows an analysis of the fair values of
financial instruments and trade receivables and payables recognised
at amortised cost in the balance sheet by level of the fair value
hierarchy.
The carrying amount of trade and other receivables and payables
is equal to their fair value, due to the short-term maturities of
these instruments. Expected maturities are estimated to be the same
as contractual maturities.
There have been no transfers between the levels of fair value
hierarchy during the period.
11. FINANCING
The Company has fully utilised the £100 million facility, which
is due to mature in April 2027, with
Barings Real Estate Advisers.
The Company has fully utilised the £100 million facility, which
is due to mature in February 2031,
with Barings Real Estate Advisers.
The Company has in place a £150 million revolving credit
facility with Barclays Bank Plc of which £60 million (30 June
2018: £Nil) was utilised at the period end.
12. SUBSIDIARY UNDERTAKINGS
The Company owns 100 per cent of the issued ordinary share
capital of UK Commercial Property Finance Holdings Limited (UKCFH),
a company incorporated in Guernsey, whose principal business is to
hold and manage investment properties for rental income.
UKCFH owns 100 per cent of the issued ordinary share capital of
UK Commercial Property Holdings Limited (UKCPH), a company
incorporated in Guernsey, whose principal business is to hold and
manage investment properties for rental income. UKCFH owns
100 per cent of the issued share capital of UK Commercial Property
GP Limited, (GP), a company incorporated in Guernsey, whose
principal business is to hold and manage investment
properties for rental income. UKCFH also owns 100 per cent of the
issued share capital of UK Commercial Property Nominee
Limited, a company incorporated in Guernsey, whose principal
business is that of a nominee company.
The Company owns 100 per cent of the issued share capital of UK
Commercial Property Estates Holdings Limited (UKCPEH), a company
incorporated in Guernsey, whose principal business is to hold and
manage investment properties for rental income. UKCPEH Limited owns
100 per cent of the issued share capital of UK Commercial Property
Estates Limited, a company incorporated in Guernsey, whose
principal business is to hold and manage investment properties for
rental income. UKCPEH also owns 100 per cent of Brixton Radlett
Property Limited and UK Commercial Property Estates (Reading) Limited, companies incorporated in
UK, whose principal business is to hold and manage investment
properties for rental income.
UKCPT Limited Partnership, (GLP), is a Guernsey limited
partnership. UKCPH and GP, have a partnership interest of 99 and 1
per cent respectively in the GLP. The GP is the general partner and
UKCPH is a limited partner of the GLP.
In addition, the Group wholly owns four Jersey Property Unit
Trusts (JPUTs) namely Junction 27 Retail Unit Trust, St Georges
Leicester Unit Trust, Kew Retail Park Unit Trust, and Rotunda
Kingston Property Unit Trust. The principal business of the Unit
Trusts is that of investment in property.
13. POST BALANCE SHEET EVENTS
The Company has no post balance sheet events.
Principal Risks and Uncertainties
The Group’s assets consist of direct investments in UK
The Group’s assets consist of direct investments in UK
commercial property. Its principal risks are therefore related to
the UK commercial property market in general, but also the
particular circumstances of the properties in which it is invested
and their tenants. Other risks faced by the Group include those
relating to strategy, investment & asset management,
macroeconomics & finance, operations, regulation and
shareholder engagement. These risks, and the way in which they are
mitigated and managed, are described in more detail under the
heading Principal Risks and Uncertainties within the Report of the
Directors in the Company’s Annual Report for the year ended
31 December 2018 on pages 31 to 37.
The Group’s principal risks and uncertainties have not changed
materially since the date of that report and are not expected to
change materially for the remaining six months of the Group’s
financial year.
Statement of Directors’
Responsibilities in Respect of the Half Yearly Financial Report to
30 June 2019
We confirm that to the best of our knowledge:
The condensed set of half yearly financial statements have been
prepared in accordance with IAS 34 “Interim Financial Reporting”,
and give a true and fair view of the assets, liabilities, financial
position and return of the Company.
The half yearly Management Report includes a fair value review
of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
company during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
On behalf of the Board
Andrew
Wilson
Chair
18 September 2019
End of announcement