TIDMUKCM
RNS Number : 2022N
UK Commercial Property REIT Ltd
23 September 2019
Guernsey: 19 September 2019
UK Commercial Property REIT Limited
("UKCM" or the "Company")
INTERIM RESULTS FOR THE HALF YEARED 30 JUNE 2019
This is a restatement of the Company's half year results to 30
June 2019 announced on 19 September 2019 but with wording corrected
in the paragraph headed "Investment Activity" of the Managers
Review. This correction confirms that "Having completed an asset
management plan, the Company was able to sell three small units in
its one remaining shopping centre in Swindon and is considering its
options for the rest of the asset." The previous wording stated:
"Having completed an asset management plan, the Company was able to
sell its one remaining shopping centre, The Parade, Swindon." All
other references to the asset were correct.
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 GBP50 million
-- Decreased cost from 2.89% to 2.78%
-- Up to GBP90 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.
-- GBP5.2 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 31 December % Change
2019 2018
Total assets less current liabilities
(excl Bank loan & swap) GBP'000 1,468,879 1,462,982 0.4
Net asset value GBP'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* 16.2 14.6 n/a
Gross** 17.7 17.1 n/a
TOTAL RETURN 6 month 1 year 3 year 5 year
% return % return % return % 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 DIVIDS 30 June 30 June
2019 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
GBP1.46 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 GBP1.1 billion and contracted annual rent of GBP71.3
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 (GBP150 million) now in the form of a variable rate
revolving credit facility ("RCF");
-- Increased resources available by securing additional debt of GBP50 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 GBP90 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
GBP85.4 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% GBP234m 3.0 2.1 2.1 2.0 0.8 0.1
----- ---------- ----- ---------- ----- ---------- ----- ----------
Industrials 48% GBP701m 5.2 3.4 1.5 2.1 3.7 1.3
----- ---------- ----- ---------- ----- ---------- ----- ----------
Retail 25% GBP366m -2.4 -2.2 3.0 2.7 -5.2 -4.7
----- ---------- ----- ---------- ----- ---------- ----- ----------
Alternatives 11% GBP158m -1.3 2.7 2.5 2.2 -3.8 0.5
----- ---------- ----- ---------- ----- ---------- ----- ----------
Total 100% GBP1,459m 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 GBP2.7 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, GBP2.35
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 material
purchases or disposals were undertaken in the period. Having
completed an asset management plan, the Company was able to sell
three small units in its one remaining shopping centre in Swindon
and is considering its options for the rest of the asset.
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 GBP5.2 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 GBP2.7 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 GBP200,000 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 GBP658,000 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 GBP304,399 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 GBP225,450 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 GBP100,000 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 GBP575,237 per annum. This
represents a 31% increase over the previous rent passing of
GBP440,000 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 GBP500,000 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 GBP88,416 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 GBP825,000 per annum. This showed an uplift of 36% from the
previous rent of GBP607,068 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 GBP704,000 per annum, 16% ahead
of ERV at the review date, and an uplift of GBP192,150 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 GBP90 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 Half Year Year Ended
Ended Ended 31 December
30 June 30 June (audited)
2019 (unaudited) 2018
(unaudited) 2018
------------------------------------- --------- ------------------- -------------- -------------------
Notes GBP'000 GBP'000 GBP'000
------------------------------------- --------- ------------------- -------------- -------------------
Revenue
Rental income 35,777 32,851 65,936
Service charge income 2,430 2,721 5,950
Gains on investment properties
8 2 558 31,090 18,947
Interest income 152 263 510
------------------------------------- --------- ------------------- -------------- -------------------
Total income 38,917 66,925 91,343
------------------------------------- --------- ------------------- -------------- -------------------
Expenditure
Investment management fee
2 (4,405) (4,780) (9,567)
Direct property expenses 3 (2,381) (1,515) (3,569)
Service charge expenses (2,430) (2,721) (5,950)
Other expenses 3 (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 (4,186) (4,145) (7,976)
Loss on derecognition of interest (703) - -
rate swap
------------------------------------- --------- ------------------- -------------- -------------------
(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 12 (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 7 3 1.69p 3.41p 4.08p
------------------------------------- --------- ------------------- -------------- -------------------
EPRA earnings per share 7 1.70p 1.43p 3.03p
------------------------------------- --------- ------------------- -------------- -------------------
HALF YEARLY CONDENSED Consolidated Balance Sheet As at 30 JUNE
2019
30 June
2018 (unaudited) Year ended 31
30 June 2019 GBP'000 December 2018
(unaudited) (audited)
Notes GBP'000 GBP'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 Notes Interest
year ended Special Rate
30 JUNE 2019 Share Distributable Capital Revenue Swap Equity
Capital Reserve Reserve Reserve Reserve Shareholders'
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 funds GBP'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 Interest
Special Rate
Share Distributable Capital Revenue Swap Equity
Capital Reserve Reserve Reserve Reserve Shareholders'
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 funds GBP'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
-------------- ------------------ -------------------- -------------- ------- -------- --------- --------------
Special Interest
Notes Share Distributable Capital Revenue Rate Swap
Capital Reserve Reserve Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Equity
Shareholders'
funds GBP'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
Year ended
31 December
2018 (audited)
30 June 2018 GBP'000
30 June
2019 (unaudited) (unaudited)
Notes GBP'000 GBP'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 GBP'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 GBP21,924,000 (30 June 2018 net profit of
GBP44,288,000) 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
GBP1,211,335,000 (30 June 2018: GBP1,227,396,000) and 1,299,412,465
(30 June 2018: 1,299,412,465) ordinary shares.
7. DIVIDS
PERIOD TO 30 JUNE 2019 Rate
(pence per GBP'000
share)
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
GBP4,405,000 (30 June 2018: GBP4,780,000, which was received by
Standard Life Investments (Corporate Funds) Limited) of which
GBP2,217,000 (30 June 2018: GBP2,405,000) remained payable at the
period end. In the prior period, the investment manager also
received an administration fee of GBP50,000.
The Directors of the Company are deemed as key management
personnel and received fees for their services. Total fees for the
period were GBP184,000 (30 June 2018: GBP139,000) of which GBPNil
(30 June 2018: GBPNil) 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 GBP9.8 million in the Fund
(30 June 2018: GBP63.5 million). No additional fees are payable to
Aberdeen Standard Investments as a result of this investment.
9. TAXATION
TAXATION ON PROFIT ON ORDINARY ACTIVITIES GBP'000
COMPRISES
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 Level 2 Level 3 Total fair value
GBP'000 GBP'000 GBP'000 GBP'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 Level 2 Level 3 Total fair value
GBP'000 GBP'000 GBP'000 GBP'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 Level 2 Level 3 Total fair value
GBP'000 GBP'000 GBP'000 GBP'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 GBP100 million facility,
which is due to mature in April 2027, with Barings Real Estate
Advisers.
The Company has fully utilised the GBP100 million facility,
which is due to mature in February 2031, with Barings Real Estate
Advisers.
The Company has in place a GBP150 million revolving credit
facility with Barclays Bank Plc of which GBP60 million (30 June
2018: GBPNil) 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
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
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END
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