ISIS Property Trust Limited
Interim Management Statement
For the Three-Month Period from 1 July 2011 to 30 September 2011
Investment Objective
The investment objective is to provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
Performance Summary
Total Return * | For the three month period ended 30 September 2011 | For the nine month period ended 30 September 2011 |
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Net asset value per share | (0.7)% | 1.0% |
Ordinary share price | 1.9% | (0.2)% |
Investment Property Databank UK Quarterly and Monthly Index Funds | 1.9% | 6.4% |
Portfolio ungeared return | 1.8% | 2.9% |
FTSE All-Share Index | (13.5)% | (10.9)% |
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Capital Values - 3 months | As at 30 September 2011 | As at 30 June 2011 | % Change |
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Net asset value per share | 98.5p | 101.2p | (2.6)% |
Ordinary share price | 99.4p | 99.5p | (0.1)% |
FTSE All-Share Index | 2,654.38 | 3,096.72 | (14.3)% |
Premium/(discount) to net asset value | 0.9% | (1.6)% |
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Net gearing # | 34.6% | 35.8% |
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Capital Values - 9 months | As at 30 September 2011 | As at 31 December 2010 | % Change |
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Net asset value per share | 98.5p | 103.4p | (4.7)% |
Ordinary share price | 99.4p | 105.8p | (6.0)% |
FTSE All-Share Index | 2,654.38 | 3,062.9 | (13.3)% |
(Discount) / premium to net asset value | 0.9% | 2.3% |
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Net gearing # | 34.6% | 31.0% |
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Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.
* - All total returns are based on net dividends re-invested
# - Gearing: Bank debt (less net current assets) / fair value of investment properties
Dividends
A second interim dividend for the year ending 31 December 2011 of 2.0 pence per share was paid on 26 August 2011 to shareholders on the register on 5 August 2011.
A third interim dividend for the year to 31 December 2011 of 2.0 pence per share will be paid on 25 November 2011 to shareholders on the register on 11 November 2011. In the absence of any unforeseen circumstances, the Board expects to pay a total dividend of 8.0 pence per share for the year ending 31 December 2011.
Review of the third quarter
Property Market Overview
The third quarter of 2011 registered a total return of 1.9%, as measured by the IPD Quarterly Index. In the first three quarters of 2011, property delivered a total return of 6.4%.
Total returns have edged lower, on a quarterly basis, during the course of 2011 as the pace of inward yield movement slowed. This has been reflected in a deceleration in capital growth over the past nine months with capital values registering a 0.4% uplift in 3Q 2011 and 2% for the January-September 2011 period. Rental growth remains subdued at 0.1% in the latest quarter and 0.6% in the first nine months of the year.
The latest quarter has seen retail property come under some pressure, with the shops market particularly affected. The difference in performance between Central London and provincial offices has persisted but the latest quarter has seen some cooling in the City office market to narrow the gap. The industrial sector slightly outperformed in the latest quarter following a period of relative weakness; the improvement was driven by higher total returns for standard industrial property in the South East.
Prime property has continued to outperform secondary stock in most segments of the market.
Portfolio Overview
The value of the Company's portfolio as at 30 September 2011 was £128.5m. During the quarter, the portfolio produced an income return of 1.8%, ahead of the benchmark income return of 1.4%. With the total capital value of the portfolio remaining unchanged, total returns for the quarter were 1.8% broadly in line with the IPD Quarterly Index return of 1.9%.
The majority of the performance during the quarter derived from the Company's office properties. The Company's best performing asset during the quarter was 14 Berkeley Street, London where the value increased to £15.7m due to a number of asset management initiatives including the refurbishment of the 1st and 4th floors. A letting of the 4th floor at a rent equating to £75 per sq ft has been completed and terms have also been agreed to let the 1st floor. Relative performance, however, was held back by industrial properties, particularly those with shorter lease lengths.
The Company sold 3-5 Church Street, Kingston Upon Thames, which was let to Telefonica O2 Limited until March 2020 at £146,200pa, for £2.96m representing a net initial yield of 4.66%. The sale price was in excess of valuation and 41% above the original book value.
During the quarter there were no purchases of property; however, as previously announced, Halls Mill Retail Park in Bury was purchased in June 2011 at a price of £7.05 million, a net initial yield of 6.95%. The retail park is fully let and at 30 September 2011 the value increased to £7.6m.
Several value-adding lease events have been completed, including the restructuring of two leases at Foundry Lane, Horsham which improved the average weighted unexpired income of this asset to 7.2 years. At 15 London Road, Redhill, following the completion of an RPI rent review, the rent increased by 16% to £244,781 pa.
At 30 September 2011, the Company's portfolio had a relatively low void rate of 3.7% of ERV compared with the IPD benchmark of 8.6%. The average unexpired lease length was 8.9 years, assuming all breaks exercised.
Top Ten Holdings
Property | Sector | 30/09/2011 Percentage of portfolio |
London W1, 14 Berkeley Street | Offices | 12.5 |
Chelmsford, County House, County Square | Offices | 7.7 |
Luton, Enterprise Way | Retail warehouses | 6.6 |
New Malden, 7 Beverley Way | Retail warehouses | 6.1 |
Halls Mill Retail Park,Bury | Retail warehouses | 6.1 |
Andover, Keens House, Anton Mill | Offices | 5.7 |
Hull, King William House, Market Place | Offices | 5.0 |
St Alabans,16,18&20 Upper Marlborough Road | Offices | 4.8 |
Weybridge, Unit D300, Brooklands Industrial Estate | Industrial | 4.7 |
Bracknell,1/2 Network Bracknell, Eastern Road | Industrial | 4.7 |
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Total |
| 63.9% |
Geographical Analysis
Location | 30/09/2011 Percentage of Portfolio |
| 30/06/2011 Percentage of Portfolio |
South East | 39.3 |
| 38.5 |
Eastern | 15.5 |
| 15.3 |
West End | 12.2 |
| 11.5 |
Rest of London North West | 9.5 5.9 |
| 11.5 5.8 |
Yorkshire and Humberside | 5.8 |
| 5.6 |
South West | 4.6 |
| 4.6 |
East Midlands | 3.1 |
| 3.1 |
West Midlands | 2.8 |
| 2.7 |
North East | 1.3 |
| 1.4 |
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Total | 100.0 |
| 100.0 |
Sector Analysis
Location | 30/09/2011 Percentage of Portfolio |
| 30/06/2011 Percentage of Portfolio |
Offices | 37.2 |
| 36.5 |
Industrial | 23.2 |
| 23.7 |
Retail | 18.0 |
| 18.3 |
Retail warehouses | 21.6 |
| 21.5 |
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Total | 100.0 |
| 100.0 |
The Board is not aware of any significant events or transactions which have occurred since 30 September 2011 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Quarterly and Key Information
Further information regarding the Company, including performance since launch and the most recent annual and interim reports, can be found at the Company's website www.isispropertytrust.com, or at www.fandc.com.
This interim management statement has been prepared solely to provide information to meet
the requirements of the UK Listing Authority's Disclosure and Transparency Rules.
For further information please contact:
Ian McBryde/Scott Macrae
F&C Investment Business Limited
Tel: 0207 628 8000
