Interim Report. Standard Life Investments UK Property Feeder Trust

Transcription

1 Interim Report Standard Life Investments UK Property Feeder Trust Interim Short Report for the half year ended 31 July 2015

2

3 Contents 1 Trust Profile 3 Trust Information 4 Investment Report 6 Standard Life Investments UK Property Accumulation Feeder Fund 8 Standard Life Investments UK Property Income Feeder Fund

4 Trust Profile This short report covers the six month period from 1 February 2015 to 31 July The long report is available on request from our Edinburgh address or by calling Stay informed You can keep up to date with how your investment is performing by visiting Alternatively, if you would rather speak to us, please call our Customer Information Team from 9.00 am to 5.00 pm Monday to Friday. At Standard Life Investments, we are committed to producing the best possible results for our clients, whatever the market conditions. As the Trust is involved in a qualifying maser scheme with the Standard Life Investments PAIF, and as the Standard Life Investments UK Property Feeder Trust invests solely in the PAIF, the annual and half-year short reports for the Standard Life Investments UK Property Fund (PAIF) can be obtained on request at the Customer Information Team on General Trust (the Trust ) is an authorised unit trust in umbrella form and is authorised by the Financial Conduct Authority with effect from 12 June Funds There are two Funds available in the Trust, the Standard Life Investments UK Property Accumulation Feeder Fund and the Standard Life Investments UK Property Income Feeder Fund, both of which are wholly invested in the relevant Share Class of the Standard Life UK Property Fund ( the PAIF ). Investment objective The investment objective of the Trust is to provide a return from capital appreciation and income over the longer term. Cautionary note It should be remembered that past performance is not a guide to future performance. The value of investments may go down as well as up and, therefore, investors may not get back the amount originally invested. Alternative Investment Fund Managers Directive Standard Life Investments (Mutual Funds) Limited was authorised by the Financial Conduct Authority (FCA), as a full scope UK Alternative Investment Fund Manager (AIFM), in accordance with the newly created, European wide, Alternative Investment Fund Managers Directive (AIFMD) with permission to manage Alternative Investment Funds (AIFs). As such, at this time the Standard Life Investments UK Property Feeder Trust, as a non-ucits scheme, became an AIF. The Alternative Investment Fund Managers Directive is intended to strengthen the monitoring of companies managing Alternative Investment Funds and enhances transparency towards investors and as such Standard Life Investments (Mutual Funds) Limited complies with all the relevant requirements of the Directive in full. Remuneration Policy Following the implementation of AIFMD in the UK, all authorised AIFM s are required to comply with the AIFMD Remuneration Code. On 7 July 2014 Standard Life Investments (Mutual Funds) Limited became an AIFM. The AIFM s Financial Year end is 31 December, it is therefore anticipated that the AIFM s Remuneration Policy and associated financial disclosures will be made within these Annual Reports from 31 December 2015, following its first full performance period. Prior to this date the AIFM would be part way through its first performance period and the information available would not be relevant or provide a proper basis for comparison. Risk profile Investors should be aware of the following risk factors: (a) Investment property is less liquid than other asset classes such as bonds or equities. Selling property can be a lengthy process so investors in the fund should be aware that they may not be able to sell their investment when they want to. (b) Investment property transaction charges are higher than those which apply in other asset classes. Investors should be aware that a high volume of transactions would have a material impact on fund returns. (c) Investment valuation is a matter of judgement by an independent valuer and is therefore a matter of the valuer s opinion rather than fact. 1

5 Trust Profile (continued) Leverage The term leverage is defined under the AIFMD as any method by which the Manager increases the exposure of the Trust whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means. The Manager has, in accordance with the FUND Sourcebook and the Level 2 Regulation, set the maximum level of leverage which the Trust will employ. This is intended to reduce the extent that leverage may magnify a loss in value of Scheme Property resulting from fluctuations in the value of assets in which it invests, exposure to other market participants or to systemic risks. The maximum level of leverage is expressed as a percentage of exposure compared to the net asset value of the Trust, with exposure being calculated in accordance with a gross and commitment method. The gross method, generally speaking, takes account of the absolute exposure of the Trust while the commitment method takes into account netting or hedging arrangements put in place. The fund was not levereraged at the period end. The maximum level of exposure to be employed by the ACD on behalf of the Company, calculated in accordance with the gross method, is 300%. The maximum level of exposure to be employed by the ACD on behalf of the Company, calculated in accordance with the commitment method, is 200%. 2

6 Trust Information Reporting dates Payment date Accumulation Interim 31 July Interim 30 April, 31 July, 31 October Annual 31 January Annual 31 January Distribution record date Payment date Income Interim 30 April, 31 July, 31 October Interim 30 June, 30 September, 31 December Annual 31 January Annual 31 March Standard Life Investments UK Property Accumulation Feeder Fund Launch date 26 August 2013 Investment policy The Fund will invest all or substantially all of its capital in the feeder accumulation shares of the Standard Life Investments UK Property Fund. To the extent the Fund is not fully invested in the Standard Life Investments UK Property Fund, the Fund will hold its remaining assets in cash. Standard Life Investments UK Property Income Feeder Fund Launch date 26 August 2013 Investment policy The Fund will invest all or substantially all of its capital in the feeder income shares of the Standard Life Investments UK Property Fund. To the extent the Fund is not fully invested in the Standard Life Investments UK Property Fund, the Fund will hold its remaining assets in cash. Manager and Alternative Investment Fund Manager Directors of the Manager Secretary of the Manager Trustee Standard Life Investments (Mutual Funds) Limited 1 George Street Edinburgh EH2 2LL A.S. Acheson S.A. Fitzgerald J. Lowe R.J. McKillop L. Scott D.E. Thomas S.R. Wemyss S.E. Crewes (resigned 26 May 2015) H.S. Kidd (appointed 26 May 2015) Citibank International Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB Independent Auditors Registrar Investment Adviser Standing Independent Valuer ** Pricewaterhouse Coopers LLP Atria One 144 Morrison Street Edinburght EH3 8EX International Financial Data Services Limited* IFDS House St Nicholas Lane Basildon Essex SS15 5F Standard Life Investments Limited 1 George Street Edinburgh EH2 2LL Jones Lang LaSalle 22 Hanover Square London W1S 1JA *Prior to 13 July 2015 the Registrar was The Bank of New York Mellon (International) Limited **for the property investment held within the master fund Standard Life Investments UK Property PAIF. 3

7 Investment Report Fund Manager: Nigel R. Chapman Investment background UK commercial real estate recorded positive returns during period under review. Gains in capital values and a more competitive investment market for real estate buyers were key factors. Income and rental growth are also emerging as fellow drivers of future returns. The improving domestic economic backdrop continued to support commercial real estate. A clear result in the 2015 general election was also positive, providing a fillip for occupier and investor confidence. Interest in the asset class was robust throughout most of the review period, with a broad range of investors active in the market. This included overseas investors, UK institutions and private companies. As a result, bidding for individual properties became increasingly competitive and capital values subsequently increased. Rents also grew in most sectors, with London offices initially leading the way. However, as robust demand and dwindling supply pushed rents higher, tenants increasingly looked outside the capital and towards the regions. Meanwhile, the ongoing UK economic recovery led to increased demand for industrial units and distribution warehouses. Coupled with a lack of stock, this resulted in strengthening rents for the industrials sector. The retail sector continued to lag behind although there was some evidence that rents were beginning to stabilise as consumers finances improved. Performance Over the period under review, the Fund returned 3.57% against the IMA Property Sector UK Direct return of 3.59%.* Robust investor demand for quality Central London assets boosted performance from our holdings in the office sector. For example, our properties in Charlotte Street and Southwark Street both performed well as yields continued to compress. Outside London, our grade A office in Birmingham also performed well following successful lettings and interest among investors for prime grade A offices in strong UK regional centres. Our industrial holdings also made a generally positive contribution, with the completion of a letting at our distribution in facility in Doncaster adding value. Initially, our retail investments outperformed given evidence of rental growth in Tunbridge Wells and successful asset management initiatives in Barrow-in-Furness. However, our Rest of UK retail assets subsequently held back performance slightly as they did not enjoy the same yield compression that more value-add investment opportunities did. *Source: Standard Life Investments (Fund) and Morningstar (benchmark), retail accumulation share class. Investment activity Activity during the period included the purchase of a retail unit in Guildford for 8.5 million. This unit adjoins our existing holding in the town and creates a combined holding worth almost 20 million in one of the UK s most desirable retail sites. We also acquired a retail park in Beckton, East London, for 48 million, which represents a yield of 6.2%. A number of potential asset management initiatives could drive performance of this asset in the near term. Finally, we bought a distribution warehouse in Belvedere, Greater London, let to Office Depot for a further 11 years. The unit has been sub-let to Asda, which has a number of operational bases in the locality. Asset management initiatives at this asset include a rental uplift at the next rent review in 2016, and exploring some lease restructuring opportunities with Office Depot and Asda. In line with our strategy of improving portfolio efficiency, we sold Century House in Altrincham, which was the Fund s smallest asset, for 775,000. We also sold Cavendish Place in London, which crystallised a significant profit on book value and was in line with our house forecasts that anticipate a reduction on London returns relative to other sub-sectors. We remained very active in terms of asset management. For example, we restructured the lease terms of our office building at Stockley Park near Heathrow, which delivered both income and capital performance to the Fund. Two further lettings were also completed at our grade A office building in central Birmingham, which cemented the rental level in the building. At Palace Exchange shopping centre, Enfield, we completed the letting of a unit to JD Sports, and negotiated the removal of a break clause with TK Maxx. Outlook and future strategy We expect compelling positive total returns for UK real estate investors over a three-year period, driven by reasonable yield and capital appreciation. With improving economic drivers and a constrained but growing pipeline of future new developments, real estate remains attractive. Rising interest rates are an emerging risk but there is a reasonable buffer in pricing to compensate if investors price in any further acceleration of rate rises. The Fund continues to receive strong inflows. As a result, we are seeking to invest in assets valued between million in the key UK commercial sectors, namely office, retail and industrial. We are particularly interested in sub-sectors such as retail warehousing, prime high street and leisure and good quality/well located industrial assets. In general, we prefer locations in the south east of the UK. We remain focused on asset management initiatives, and also plan to complete further sales during the remainder of 2015, typically smaller assets. We also intend to take on more development exposure, primarily in the industrial sector. In addition, we plan to acquire properties with asset management opportunities, including vacancies, in order to capitalise on the improving occupational trend particularly in the office and industrial sectors. 4

8 Investment Report (continued) Standard Life Investments UK Property Accumulation Feeder Largest Holding (by market value) % as at 31 July 2015 Standard Life Investments UK Property Fund (Feeder Accumulation Shares) The composition and material holdings for the underlying PAIF is detailed below. Composition of Portfolio % as at 31 July 2015 Car Park (1.44%) 1.29 Commercial (3.22%) 2.85 Industrial (8.90%) Standard Life Investments UK Property Income Feeder Largest Holding (by market value) as at 31 July 2015 Standard Life Investments UK Property Fund (Feeder Income Shares) % Office (33.23%) Retail (28.69%) Collective Investment Scheme (9.96%) 9.95 Net other assets (14.56%) The percentage figures in brackets show the comparative holding as at 31 January Ten Largest Holdings (by market value) % as at 31 July 2015 SLI Seabury GBP VNAV Liquidity Fund 9.95 Palace Exchange, Enfield 5.66 Slough Retail Park, Slough Church Street, Birmingham 4.24 Gateway Retail Park, London 3.50 Isis Reach, Belvedere Charlotte Street, London 2.70 St Paul's House, London 2.65 One Eton Street, Richmond /89 Southwark Street, London

9 Standard Life Investments UK Property Accumulation Feeder Fund Comparative Tables 31 July 2015 Accounting Net asset Net asset value Units period value per unit in issue 000 p Retail accumulation 31 January , ,931, January , ,500, July , ,481,599 Institutional accumulation 31 January , ,197, January , ,595, July , ,903,430 Standard Life accumulation 31 January , ,197, January , ,253, July , ,500,098 Standard Life B accumulation 31 January , ,902, January , ,344, July , ,081,445 Platform 1 accumulation 31 January , ,537, January , ,159, July , ,056, July 2015 Calendar Distribution Highest Lowest year per unit unit price unit price p p p Retail accumulation 2013* ** Institutional accumulation 2013* ** Standard Life accumulation 2013* ** Standard Life B accumulation 2013* ** Platform 1 accumulation 2013 * ** *from launch of the Trust on 24 August **to 31 July 6

10 Standard Life Investments UK Property Accumulation Feeder Fund Comparative Tables (Continued) Ongoing Charges Figure (OCF) 31 July January 2015 Retail accumulation 1.70% 1.70% Institutional accumulation 0.90% 0.90% Standard Life accumulation 0.10% 0.10% Standard Life B accumulation 0.02% 0.02% Platform 1 accumulation 1.00% 1.00% The ongoing charges figure (OCF) shows the annualised operating expenses of each share class as a percentage of the average net asset value of the class over the same period. Property Expense Ratio (PER) 31 July January 2015 Retail accumulation 0.35% 0.35% Institutional accumulation 0.35% 0.35% Standard Life accumulation 0.35% 0.35% Standard Life B accumulation 0.35% 0.35% Platform 1 accumulation 0.35% 0.35% Property Expense Ratio (PER) These relate to immovable property related expenses incurred by the master fund Standard Life Investments UK Property PAIF 7

11 Standard Life Investments UK Property Income Feeder Fund Comparative Tables 31 July 2015 Accounting Net asset Net asset value Units period value per unit in issue 000 p Retail income 31 January , ,719, January , ,874, July , ,035,070 Institutional income 31 January , ,870, January , ,032, July , ,484,261 Platform 1 income 31 January , ,867, January , ,959, July , ,278, July 2015 Calendar Distribution Highest Lowest year per unit unit price unit price p p p Retail income 2013* ** Institutional income 2013* ** Platform 1 income 2013* ** *from launch of the Trust on 24 August **to 31 July 8

12 Standard Life Investments UK Property Income Feeder Fund Comparative Tables (Continued) Ongoing Charges Figure (OCF) 31 July January 2015 Retail income 1.70% 1.70% Institutional income 0.90% 0.90% Platform 1 income 1.00% 1.00% The ongoing charges figure (OCF) shows the annualised operating expenses of each share class as a percentage of the average net asset value of the class over the same period. Property Expense Ratio (PER) 31 July January 2015 Retail income 0.35% 0.35% Institutional income 0.35% 0.35% Platform 1 income 0.35% 0.35% Property Expense Ratio (PER) These relate to immovable property related expenses incurred by the master fund Standard Life Investments UK Property PAIF. 9

13

14

15

16 Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training Standard Life, images reproduced under licence INVRT637b UD 0915