SLI property fund sells Slough office for almost £10m premium

By James Wallace - Monday, April 09, 2018 11:25

Standard Life Investments Property Income Trust (SLIPIT) has completed the sale of a multi-let office in Slough, Charter Court, for £13.25m, 9.6% ahead of the end December valuation.

SLIPIT said the sale proceeds from the building at 50 Windsor Road will be reinvested when suitable opportunities are identified.

Charter Court was acquired by SLIPIT in January 2016 as part of a 22-strong portfolio bought from Aviva Investors’ UK Real Estate Recovery Fund II for £165m.

Jason Baggaley, fund manager of SLIPIT said: “We decided to sell this asset to realise a profit, but also to reduce future risk. The property had one floor vacant, and the other leases expire in 2020 and 2021 when a comprehensive refurbishment will be required. The sale avoids the need for large scale capex and loss of income during the refurbishment.”

Just under three weeks ago, SLIPIT completed the £20m sale of of Elstree Tower in Borehamwood, which was the company’s largest asset, representing 5% of the total portfolio annual rent.

Further to the RNS released in September 2017 the Board of Standard Life Investments Property Income Trust Limited (SLIPIT) confirms that the sale has completed for £20m. Baggaley said at the time the motivation was to reduce asset specific risk as the lease had a break option in just under two years-time.

On Friday, SLIPIT, which manages £433.2m in UK commercial property, announced a 14.5% NAV total return in 2017, driven by overweight exposure to the outperforming industrial sector.

During 2017, the SLIPIT portfolio was repositioned towards assets that offer more secure income and reduce risk. SLIPIT completed eight new lettings generating £512,000 and 14 lease renegotiations/rent reviews securing £740,000 per annum.

Robert Peto, Chairman, stated: “The shadow of increasing political uncertainty, initially created by the unknowns of Brexit, but further increased by the worrying development of trade wars and the rising tensions with Russia, are hanging over the UK. Brexit, in particular, has resulted in a slowdown in the growth of the UK economy which remains positive if unspectacular. GDP grew by 1.7% in 2017, ahead of many forecasts at the start of the year but lower than in 2016. This contrasts with the strong pick-up in growth in both the US and the Eurozone.”

Against this backdrop, the performance of the real estate market has surprised on the upside. The Group’s benchmark (IPD quarterly version of IPD Monthly Index Funds) produced a total return of 10.5% in 2017, coming in ahead of the IPF Consensus expectations for the year of 3.2%. Capital growth was robust over the year with values rising by 5.5%, driven by the buoyant performance of the industrial sector. On the income side, rental growth was recorded in all sectors resulting in overall rental growth of 1.9% and an income return of 4.8%.

James Wallace is a freelance consultant and can be reached via Linkedin or email: jawallace32@gmail.com

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