REG - Value & Index Prop - Half-year Report
16/11/2023 07:00
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RNS Number : 6024T Value and Indexed Prop Inc Tst PLC 16 November 2023
VALUE AND INDEXED PROPERTY INCOME TRUST PLC
Unaudited Half-Yearly Report
For the Six Months Ended 30 September 2023
Summary
Value and Indexed Property Income Trust PLC (VIP - previously Value and Income
Trust PLC) is an investment trust company listed on the London Stock Exchange.
It invests directly in UK commercial property to deliver long, strong,
index-related income. Its performance benchmark is the MSCI UK Quarterly
Property Index, the main benchmark for commercial property performance. OLIM
Property Limited is the Investment Manager.
VIP's property portfolio delivered a total return of -1.8% over the six months
to end September against -0.5% for the MSCI UK Quarterly Property Index. Over
the past 5 years the VIP property return was 4.0% p.a. (Index 1.1% p.a.) and
over 10 years it was 7.7% p.a. (Index 5.9% p.a.).
VIP's dividend per share has risen every year since 1986 when OLIM's
management began. It has risen by 963% against the Retail Price Index rise of
276%. The medium term dividend policy is for increases at least in line with
inflation, underpinned by VIP's index-related property income. A first interim
dividend of 3.2p per share was paid on 27 October 2023. The second interim
dividend of 3.2p per share will be paid on 26 January 2024 to Shareholders on
the register on 29 December 2023, with an ex-dividend date of 28 December
2023. It is intended that a third interim dividend of 3.2p per share will be
paid on 26 April 2024 to all Shareholders on the register on 2 April 2024,
with an ex-dividend date of 28 March 2024. The targeted total dividend for the
full year is 13.2p (+2.3%).
30 September 2023 31 March 2023
Portfolio £m % £m %
UK property* 135.5 94.6 150.5 98.5
Cash 7.8 5.4 2.3 1.5
143.3 100.0 152.8 100.0
* Savills valuation
Over the six months to end September, four overrented properties (two pubs, a
convenience store and a petrol filling station) were sold for £8.1 million,
2.9% above their valuation. Since the end of September VIP have reinvested
part of the proceeds in an RPI-linked Virgin Active health and fitness club at
Brentwood in Essex. Several other acquisitions are under active negotiation to
reinvest the remaining proceeds, with higher yields and better growth
prospects. Rent reviews were completed on five properties, and 100% of rent
due was collected.
The portfolio is fully let, with no voids (MSCI UK Quarterly Property Index
void rate: 8.5%). VIP has no exposure to offices, high street retail or
shopping centres. The top six tenants have sixteen leases: Marks &
Spencer, HM Government and Local Authorities, Ten Entertainment Group, Premier
Inn, Sainsbury's and Parkdean Resorts, representing 65% of the contracted
income.
Borrowings 30 September 2023 31 March 2023
Average interest rate* 4.0% 3.9%
Total loans (loan to value ratio) £50 million (35%) £50 million (33%)
Loan maturity 7.4 years 7.9 years
*96.5% of VIP's borrowings are at a fixed rate, with 3.5% variable.
Performance 30 September 2023 31 March 2023
Net Asset Value per Share 228.0p 246.9p
(valuing debt at par)
Ordinary Share price 191.0p 204.5p
Dividend per Share 6.4p 12.9p
(first and second interims) (total)
Over the six months to 30 September 2023, VIP's share price fell by 6.6%,
while the Net Asset Value per share, valuing debt at par, fell by 7.7%.
230,000 shares were bought back for £0.45 million. VIP's independent property
revaluation declined by 5.0% over the period, giving a total return of -1.8%
against -0.5% for the MSCI UK Quarterly Property Index. The portfolio
outperformed on the income front and underperformed on capital.
ENQUIRIES:
Matthew Oakeshott
OLIM Property Limited
Email: matthew.oakeshott@olimproperty.co.uk
Tel: 020 7846 3252
Louise Cleary
OLIM Property Limited
Email: louise.cleary@olimproperty.co.uk
Tel: 020 7846 3252
Website:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
(https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html)
Manager's Report
Portfolio summary
VIP invests directly in UK commercial properties to deliver long, strong,
index-related income.
The portfolio comprises 35 properties across 7 well diversified sub-sectors,
all let on 38 full repairing and insuring leases Weighted Average Unexpired
Lease Term - WAULT - 11.9 years to the tenants' option to break) to 20
different tenant covenants across England, Scotland and Wales. All are
freehold except two which are long leasehold with 108 and 82 years to run
(Doncaster and Fareham).
Portfolio 30 September 2023 31 March 2023
Capital value: £135,450,000 £150,500,000
Contracted income (rent collected 100%): £8,795,396 £9,338,302
Running yield 6.5% 6.2%
Number of properties: 35 39
Total Number of Tenants
(Portfolio is 100% let): 38 42
Contracted indexed income: 95.9% 96.2%
(WAULT) 11.9 Years 12.6 Years
Performance and independent revaluation
Savills' independent valuation as at end September 2023 totalled £135.45
million on 35 properties against £150.50 million on 39 properties at 31 March
2023. This reflects a net initial yield of 6.1% (31 March 2023: 5.8%) after
deducting notional purchase costs. The average lot size is £3.9 million.
The valuation reflects a 5.0% like-for-like reduction in capital value of the
35 properties held over the six months. Three properties rose in value over
the six months, all pubs where the rents rose by a third; five were unchanged
- four small convenience stores and the recently acquired bowling investment
at Coventry. The rest fell in value due to the impact of rising interest rates
across the property investment market and economic and political turbulence.
The property portfolio has been upgraded further over the six month period
with the sale of four overrented properties - two pubs, a convenience store
and a petrol filling station for a gross total of £8.1 million (+2.9% on
March 2023 valuation) and an average net sale yield of 7.1%.
No properties were purchased over the six months to end September. In
November, the acquisition of a freehold purpose built health and fitness club
on a 6.8 acre site with over 190 car parking spaces in Brentwood, Essex
completed for a total of £6.4 million at a net initial yield of 7.6%, rising
to 8.4% in July 2024. It is let to Virgin Active Limited until July 2036
(WAULT just under 13 years) with annual RPI-linked rent increases with a
minimum 1% pa and maximum 4% pa. Several other acquisitions are under active
negotiation to reinvest the remaining proceeds of the four sales, in
properties with longer leases and stronger long term growth prospects at a
higher initial yield.
The property portfolio total return on all assets, taking capital and income
together and deducting all costs was -1.8% over the six months, against -0.5%
for the MSCI UK Quarterly Property Index. VIP's portfolio outperformed on the
income front but underperformed on capital.
Responsible impact based ESG management and EPCs
OLIM Property has always taken a cautious and responsible approach to managing
VIP's property portfolio, with environmental impact, social responsibility and
governance (ESG) taken fully into account in selecting high quality properties
with suitable tenants for acquisition, long term management and disposal.
Occupier relationships are crucial. We engage with our tenants to understand
and establish sustainable rental levels and grow future income streams,
working closely with them to address value add energy performance targets. All
VIP's properties are regularly reviewed, Energy Performance Certificates
(EPCs) and ESG improvements implemented wherever possible, and properties sold
where performance may be negatively impacted by ESG factors. 97% of the
portfolio now has EPC ratings A to C (31 March 2023: 96%). We continue to work
with our tenants to upgrade properties and improve energy efficiency.
Indexed rent reviews
Contracted income from the 35 properties is £8.795 million per annum as at 30
September 2023 where 95.9% (37 out of 38 tenancies) have index-linked or fixed
increases. 69.3% of the rental income is linked to RPI, 11.5% linked to CPI
and 15.2% with fixed increases. Seven tenancies (26.1%) have annual rent
reviews and thirty (69.8%) have five yearly reviews. Only one property, the
industrial at Fareham, has three yearly open market upwards only reviews
(4.1%).
Annual rent increases were completed at five properties over the six months,
with an average uplift of +3.8% on their passing rents (three with RPI-linked
increases and two with fixed uplifts), which contributed to a 0.8% increase on
income on all held properties. Three rent reviews due in January 2024 have
been settled early with their passing rents rising by 33.1% (in line with RPI)
over the five years from January 2019. Including five further rent reviews due
before 31 March 2024, current contracted rental income on the portfolio should
increase by around £350,000 (4.0%) on all held properties over the 12 months.
Market Report
Winter has arrived early this year in the UK commercial property market. There
was a short-lived stabilisation in values in the spring when 10 year gilt
yields traded below 3.5%. But property valuation yields have been rising
again, and capital values falling since April. Property values have now fallen
by almost a quarter on average on the MSCI UK Quarterly Property Index from
their peak last summer after property yields were pushed down to 40 year lows.
QE (Quantitative Easing) had been going on too far, for too long, in the
United Kingdom as in most Western economies, forcing interest rates
unsustainably low and capital values, especially of low yielding assets,
unsustainably high.
The Bank of England had dropped its guard and lost its focus on its key
target: to keep consumer price inflation at 2%. It has remained well behind
the curve of what was necessary to rebuild international and local investors'
confidence, as it raised base rate repeatedly from 0.1% to 5.25% since
December 2021. This meant that UK gilt yields have had to shoot up to take the
strain; and it will ultimately be necessary to raise short-term interest rates
further to get inflation down even to hailing distance of 2%.
The dire state of the UK public finances, the costly over-issuance of
index-linked gilts, and the dangerously short (under 4 years average) maturity
of the UK gilt market makes us effectively a forced seller to foreigners of
vast quantities of gilts every year for the foreseeable future. So no
Chancellor of the Exchequer or Governor of the Bank of England can now afford
to take risks with inflation. Consumer price inflation is still rising at over
6% on an annual basis, with average earnings up by over 8%, although both
rates of increase are now slowing at last.
Bond and currency markets stabilised in the spring after the economic and
interest rate chaos of the Truss-Kwarteng administration last autumn. But gilt
yields have since broken through their panic peaks of a year ago, being pushed
up to 4.7% in mid-October by stubbornly high wage and consumer price inflation
and rising oil prices following Hamas' attack on Israel and the growing crisis
in the Middle East. Turnover in commercial property is exceptionally thin,
well down on 2023 already, languishing around the worst levels of 2009 in the
Global Financial Crisis and 2020 at the start of COVID.
The collapse in office capital values has gathered pace, falling by 11% over
the first nine months of 2023, with retail down 3%, alternatives down 4% and
industrials 1% ahead according to the MSCI UK Quarterly Property Index. But
valuers are further behind this thin and falling market than usual. Rental
values are generally flat in the office, retail and alternatives sectors but
are still rising gently in the industrial sector. Rental growth has been
slowing across all sectors recently.
Retail and industrial property void rates are now back down to their pre-COVID
levels, as shown in the Vacancy Rates table in the Interim Report, office void
rates have shot up from 13% pre-COVID to 22% now, well above the previous
record high of 15% for office voids in 2013. This has dragged the average void
rate for all property back up to its previous 2009 peak near 11%. Retail void
rates have stabilised around 6% and retail tenants are now generally
benefitting from lower business rates bills from April, although many shoppers
are still strapped for cash. Industrial void rates, although still below their
long-term averages, have risen from 5% two years ago to 7% today and higher
business rates bills and tenancy failures in this sector will accentuate that
trend.
The main pain from voids will be in the office sector for many years to come.
Most office owners cannot cope with the long-term structural shift to hybrid
working, with two-fifths of UK adults now working from home at least one day a
week, against an eighth pre-pandemic. Commuters into London and other large
cities are now less visible on Mondays and an endangered species on Fridays.
Even where prestige occupiers are taking expensive new space, they are
invariably downsizing, usually by at least half, as with HSBC at Canary Wharf.
Most older office buildings simply cannot be upgraded to meet the requirements
of potential occupiers (or achieve the necessary Energy Performance
Certificate ratings) at reasonable, or often any cost. The office oversupply
problem is even more serious than that facing retail property 10-15 years ago,
and valuers are only just starting to get to grips with it.
Property valuers marked capital values down much further and faster in the
second half of 2022 than in previous property market downturns, despite low
deal volumes. For some reason, they are proving more reluctant to move
valuations down again now on "sentiment" as they call it, rather than evidence
of actual deals completed, although values are clearly again under downward
pressure. Both rental values and rent collection may also come under pressure
in 2024, especially in the office and industrial sectors as weaker tenants
struggle and leases expire.
The key to outperformance by property portfolios on both the income and total
return fronts in this harsh economic climate, with interest rates and
inflation both staying stubbornly high, will be reducing risk and sticking to
strong tenants, paying affordable, preferably index-linked, rents on long
leases for sustainable buildings in prosperous locations. Above all, that
means avoiding office investments for the foreseeable future.
Property prospects by sector
Warehouse / Industrials - Values sliding on low/negligible volumes
Market momentum continued to decline this quarter. Volumes remain extremely
low with only £4.66 billion traded so far in 2023 compared to £9.84 billion
for the same period for 2022 (53% down). Only £1.46 billion was sold during
the last quarter and Q4 has so far been extremely quiet. 2023 will have the
lowest trading volumes since 2009.
There are few genuine buyers and even those few have become increasingly
selective. One or two big Pension Funds are looking for perfection - the very
rare absolutely prime, ESG excellent, high calibre buildings in the best
locations with undoubted covenants. But even in the rest of the market - now
more than ever - building quality and ESG credentials are topping the wish
list. Developers who helped fuel the 3% yields of last year have all but
vanished, along with those never to be repeated yields. Some North American
Private Equity money is now back looking at industrial property but, given the
high costs of financing, their bids are well below what vendors want and after
many weeks in due diligence, they often wait until the eleventh hour to chip
the price and renegotiate the agreed deal. Sellers have no choice but to
accept this behaviour if they need funds quickly.
Occupational activity in the industrial market is more subdued and now back to
pre-pandemic levels after the "mega deal" furore of recent years, which was
fuelled by online retailing. Total take-up of units in the UK of over 50,000
sq ft stood at 19.2 million sq ft for the first half of 2023 which is down 28%
on activity in the same period in 2022 and 33% below the five-year half-yearly
average. Q3 figures, once published, will show further decline as the wider
economic turmoil reduces occupier appetite and ability to pay rent. Like
investors, occupiers have developed much more discerning attitudes towards
quality, ESG credentials and energy efficiency and demand has slowed
significantly - as an example, Grade A space accounted for 73% of take-up in
the first half of 2023. Rental growth forecasts will continue to be revised.
Rents grew by over 13% in 2022 and forecasts have been gradually scaled back
over the year from 7% for 2023 to sub 4% for the year.
Offices - An emasculated sector, weakening further
Structural change, lack of occupational demand and refinancing, redemption and
ESG pressures all continue to hammer the office market with buyers scarce and
hyper cautious. Only the very best assets attract some interest, although
heavy discounts and double-digit yields are now available for the "rest".
Turnover for the UK office market to date now stands at £2.0 billion, 53%
below the five yearly average.
The occupational story is equally grim. The vacancy rate for offices in the
MSCI monthly index has risen further to 22.0% from 15.2% in January 2021, the
height of Covid, an increase of 45%. Like investors, occupiers are only
looking for quality and this is difficult to find. 62% of London's office
stock is now at least 30 years old with a similar level across the rest of the
UK. With office to residential conversions no longer cost effective and
prohibitive refurbishment costs, these buildings may well remain empty once
vacated and will be so for a substantial period of time.
The most pertinent example of the state of the occupational office market is
the recent surrender premium paid by Meta, (ex Facebook) to their landlord,
British Land, in order to vacate their refurbished, BREEAM outstanding, EPC
excellent, revolutionary low carbon, eight storey office building near Regents
Park, London, 1 Triton Square. Having leased the 300,000 sq ft of space in
2021 on a 20 year lease, they never occupied and attempted to sublet the space
for over two years without success. Earlier this month, in desperation, the
tenant paid the owner, £149m to exit the building - a payment equal to around
seven years' worth of rent.
Prices need to fall further for offices to accommodate the need for
significant refurbishment and redevelopment. The bottom of the office market
is not in sight and empty offices will be a blot on the landscape, in and out
of town, as retail once was.
Retail - Valuers not yet reflecting weaker sentiment
According to the GfK Consumer Confidence Barometer, UK consumer confidence
fell sharply in October 2023 back to the level in April underlining the cost
of living crisis with many consumers not having enough money to make ends
meet. In addition, concerns over the cost of gas, electricity and fuel,
mortgage rates and rents, a slowing jobs market and uncertainty due to the
conflict in the Middle East are contributing to consumer worries. This
sentiment will be of concern to retailers in the run up to Christmas and is
confirmed in the latest ONS Retail Sales statistics where overall retail sales
volumes fell by -0.9% in September.
Non-food sales volumes fell by -1.9%. Unseasonably warm weather reduced sales
of autumn-weather clothing (September was the joint warmest September on
record) in addition to the impact of continuing increases in the cost of
living. Despite this, several strong brands are actively taking high street
space including Greggs, B&M, Savers, Gails Bakery, Mint Velvet and Oliver
Bonas.
Wilko went into administration in August, the largest retail failure since
Woolworths in 2008. They closed 52 shops in September, with rival B&M
agreeing to take 51, but most of their other 300 stores lie empty. Boots
announced in June that a series of 300 closures would take place as part of a
consolidation programme. M&S are to close a further 20 stores as part of
its turnaround plan but are expanding M&S Simply Food out of town. Argos
have closed 100 stores, moving to concessions inside owner Sainsbury's stores.
Hundreds of Lloyds Pharmacies have closed or been sold. Shopping habits
generally have changed, with more frequent but lower spending shopping trips.
The retail warehouse occupational market is generally more active but
discretionary spending is still under pressure, as households continue to
delay big-ticket and non-essential purchases.
Food store sales volumes growth remained positive at +0.2% but growth is
slowing in comparison to a rise of +1.4% in August. Annual grocery price
inflation is still very high, but for the first time since last year, the
prices of some staple foods are now dropping month to month. Tesco's market
share is 27.4% followed by Sainsbury's 14.8% and Asda 13.7%. In 2010 the "big
four" accounted for over 75% of market share - today this figure is just under
65% with Morrisons market share having fallen to 8.6% - to the benefit of the
two main discount retailers Aldi and Lidl which account for 9.9% and 7.6%
respectively - the former having overtaken Morrisons over the last 12 months.
This increase in the discount retailers' market share is due to consumers
taking advantage of cheaper products in the current economic climate.
Aldi opened its 1,000th British store in Woking in September. Today £1 in
every £10 spent on groceries is at Aldi and the retailer has plans to open
another 500 shops. Lidl has 960 stores and opened its largest warehouse yet in
Luton costing £300m. M&S returned after four years to the FTSE 100 in
September and is now the third fastest growing food retailer (mainly at
Waitrose's expense) after Aldi and Lidl.
During 2023, monthly retail rental value growth has largely been consistent,
with the MSCI UK Quarterly Property Index recording growth of +0.8% over the
nine months to September, the lowest of the three main property sectors and in
comparison to +2.7% for all property.
Retail investment transaction volumes are down by around 80% over the year to
date. There is a little activity in small lot sizes, but the bigger end of the
market is desperately quiet.
A glut of supermarket stock is now on the market at unrealistic pricing
(around 29 assets quoting around £540m). There is no investment market for
the larger, often over-rented stores and weaker tenants except at much higher
yields. John Lewis are trying to raise £150m from the sale and leaseback of
12 well located Waitrose supermarkets with 20-year inflation linked leases.
The uncertainty in the market should present some interesting retail
investment opportunities with higher yields offering better protection against
current debt costs.
Alternatives - The trend of "flight to quality" gains momentum
Property in the "Alternatives" sector - i.e. everything except offices, retail
and industrial/warehouse property - accounts for 23% of the MSCI UK Quarterly
Property Index. Volatile, often disappointing returns in the traditional
office, retail and industrial sectors have led investors to search for higher
returns and lower risk to diversify their portfolios over the past decade.
Properties in this sector often offer strong defensive characteristics such as
long, index-linked leases and a wide range of property types and tenants.
Capital values are, however, now under pressure from rising bond yields in
this sector like others. Private property companies and individual investors
are still active in the sector, but generally for sub £5 million lot sizes.
Funds that were buying the larger lot sizes are now selling, with redemption
pressures on the increase.
In some cases, index-linked rents have risen too high and the additional
burden of increasing operating costs is clearly hitting tenants who were
already struggling post pandemic. This is particularly true of the leisure
sector and there are warning signs from independent operators and those backed
by private equity. But robust tenants who run a well-managed business are
thriving like Shepherd Neame, Britain's oldest brewer, and owner and operator
of 296 pubs in Kent and the Southeast. Its recent results showed record
revenues and an increase in underlying profits with consumer demand strong,
but increased costs across the business, such as the national living wage
rising 40% over the past 5 years.
Recovery of confidence in London pubs and restaurants continues as visitor
numbers top pre-pandemic levels and office workers return to the capital
(except on Mondays and Fridays). Good quality pubs in the country with outside
space have generally been trading well, with inevitable weather-related
fluctuations. Consumers remain eager to eat and drink out despite the pressure
on disposable incomes, but they are increasingly selective about where they
spend their money. Well financed operators who keep investing and upgrading
their properties, like Greene King, Wetherspoons and Youngs are gaining market
share but stretched private equity-backed chains like Stonegate are suffering
where they let standards slide.
Cinemas benefitted briefly from the double bubble of 'Barbie' and
'Oppenheimer' but are still seriously structurally challenged by rising costs
and competition from streaming. The fourth largest UK player, Empire Cinemas,
has just gone into administration - they will not be the last.
Bowling remains one of the only affordable family outings and both main
operators (Ten Entertainment Group & Hollywood Bowl) are reporting strong
trading figures. Ten Entertainment does not expect to raise pricing in the
near term (pricing having been frozen since 2019) with increase in footfall
apparently more than sufficient to offset mid-single digit % inflation.
Modern budget hotels and caravan parks in rural areas and tourist hot spots
are well placed to benefit from the more cost-conscious consumer who are
reconsidering holidays abroad amid a cost-of-living crisis. City centre hotels
are also benefiting from returning tourists. Whitbread, the parent company of
Premier Inn, recently reported that pre-tax profits have risen by almost a
third in the past 6 months with London bookings rising by nearly a quarter
year-on-year. Premier Inn remain a much more secure investment than Travelodge
or other weaker operators, but capital values are under pressure from rising
yields as pension funds focus on selling rather than buying.
Capital values for Health and Fitness clubs have been falling, particularly
those in city centres affected by the decline in commuting.
Care homes are still struggling. Staff shortages and insufficient public
sector funding remain a cause for concern with no short-term solution in
sight. Only the strongest operators in both sectors are likely to attract
investment, particularly where value is underpinned by the future residential
development potential of sites they occupy.
Established Garden Centre operators have continued to invest in their sites
expanding their offer by focusing on better restaurants, soft play areas for
children, toys, books, pet food, clothes etc, with concession partnerships now
being more carefully considered with the consumer in mind. Operators occupy
large sites and so investments in affluent locations are in demand,
particularly as they are infrequently offered to the market.
Student numbers are rising and investments on long leases to well-established
universities have been in great demand. But capital values of student housing,
as of other residential investment types, are declining as investment
competition had driven prices up too far. However, many universities are
facing a critical shortage of student housing with new local supply limited
and likely to remain so with construction costs rising, so values should now
be near the bottom in strong locations.
The economy
The UK economy is still stagnating, after a slightly stronger recovery from
COVID than the Central Statistical Office first reported. The main Eurozone
economies are flat or weakening. Russia is at war, China has serious problems
in the property sector and most of the developing world is growing well behind
their long term averages.
US economic growth is still running at 2%-3% a year, with the Treasury bond
market under considerable strain. This is hard to explain on the normal market
metrics of investors' concern about rising inflation or short term interest
rates. It may just be a symptom of a wider malaise among international bond
investors, worried about a vast overhang of debt worldwide, partly from
Central Banks turning from buyers to sellers of their bond holdings built up
during Quantitative Easing, (The Bank of England, for example, now holds £750
billion of the £2.5 trillion of UK national debt. Our annual debt interest
bill averaged 2% of national income between 2000 and 2020, rose to 4.4% in
2022-23 and will still settle at over 3% a year, costing the country more than
any other public service except the NHS). Investors may also be concerned
about geopolitical instability in the Middle East and Ukraine, and the
possible return of President Trump next year. As the 10-year government bond
yield chart, displayed in the Interim Report shows, the 40 year long bull
market in bonds is well and truly over and yields have clearly turned upwards
for the foreseeable future.
UK consumer price inflation, despite last month's rise in petrol prices, will
clearly fall back down soon through 5% on an annual basis. But keeping it in a
3%-5% range will be very hard, with wages rising at over 6% a year and
productivity growth negligible. 2% is, therefore, now clearly an unrealistic
and unachievable target number for inflation for the UK, and for many Central
Banks in the developed world. Underlying inflation in the USA, UK and Eurozone
did average around 2% with relatively minor fluctuations between the early
2000's and COVID in 2020 but is now well above that level, and squeezing
inflation back down to 2% in the Western economies will be a long, hard slog.
The Bank of England has been slow since the pandemic to raise their forecasts
for inflation for one year ahead - but at least they have raised them. Their
forecasts for two years ahead have, however, stuck firmly in cloud cuckoo land
around 2% p.a., falling to 1% from 2023!
The Bank of England's Monetary Policy Committee should be restructured to make
it genuinely independent, with more outside economists and professional
investors who really understand how the UK economy works and fewer Bank
insiders and, especially, retired Treasury officials reinforcing conventional
groupthink. The end of ultra-low interest rates has inevitably been a
stressful and uneven process, but it is ultimately helpful for the economy.
Too much cheap money has inflated asset bubbles, encouraged speculative
frenzies ranging from over-hyped technology stocks to crypto currencies,
diverted too much capital into financial engineering by private equity, pushed
up UK house prices unaffordably and unsustainably and kept too many zombie
companies alive for too long. Bankruptcies are now clearly rising.
Investment in the UK has suffered not only from constantly chopping and
changing Government policy over the past decade, but also from the effects of
perverse and over prescriptive regulation of pension funds for far longer. 30
years ago, UK pension funds typically held over half their assets in UK
equities and property, with nearly a quarter in bonds and a quarter overseas.
Then strict new accounting rules post the Maxwell scandal forced them into
artificial annual valuations of notional surpluses and deficits depending on
short-term fluctuations in bond yields and based on highly hypothetical
assumptions about how and when pension funds might be wound up. As bond yields
were forced down almost to zero after the Great Financial Crash in 2008, so
called pension fund deficits ballooned, companies had to make large and
unforeseeable contributions to their pension funds, and the pension fund
investment climate changed from calm, balanced long-term analysis to extreme
short-term myopic risk aversion. Funds were forced to invest ever more heavily
in bonds guaranteeing rotten long term negative real returns. This highly
artificial process of "derisking" pension funds culminated in the actually
extremely risky debacle of LDI (Liability Driven Investment) in 2022. This has
predictably produced much hand-wringing and no action from the Bank of England
and the other relevant regulators.
Radical reform and simplification of pension regulation is urgently needed, to
enable UK pension funds to go back to prudent long-term investment policies
based on common sense, not artificial rules, with substantial investment again
in their natural homes, UK equities, property and infrastructure which provide
high yields and positive prospective long term real returns, instead of
dangerous costly debt-driven private equity funds and "structured products".
Reform of savings taxation for private investors would also help stimulate
investment, especially in UK mid and small cap companies quoted on The London
Stock Exchange, and rebuild the City of London's competitive position in
raising capital for growing companies post Brexit. British ISA and personal
pension fund tax breaks, worth many billions a year, could be redirected to
focus on UK shares and investments - it makes no economic sense for UK
taxpayers' money to subsidise British investors buying shares in Amazon,
Chinese property, Singapore small company equities or Saudi Aramco.
The UK housing market, with prices and rents both significantly higher than in
our main Western competitor countries, remains a real hindrance to
productivity and growth. The ongoing mortgage crisis proves yet again that it
is both a source of financial instability and a barrier to geographic and
social mobility. Only 210,000 homes were completed in the year to April 2023,
against 330,000 in 1972 and about 400,000 in 1962, and this year will be even
worse. Private sector completions have shown little change, but social
housebuilding by local authorities and housing associations has collapsed.
Changes to stamp duty, interest deductibility and tenure for private landlords
in recent years have also led to an exodus of small landlords and explosive
upward pressure on rents.
Only 30% of households now have mortgages, against 40% in the late 1980s, but
there are more renters (9.2 million against 7.4 million mortgage holders) who
are also often now facing unaffordable housing costs, especially as private
landlords sell up. The last two occasions that mortgages were this
unaffordable were in 1989 and 2007. Real house prices then fell by 20% each
time, and they are well on their way there in this downturn. The obvious
sustainable solution to the UK housing crisis is to rebuild the long lost
genuinely affordable social housebuilding programme, along with radical reform
of the planning system to stop the so called major "housebuilders" being
really land speculators with little building businesses on the side.
The international economic outlook and business confidence are flat at best,
but three big question marks remain over economic forecasts until end-2024. On
the upside, if the war in Ukraine were to end in an effective Russian defeat,
inflation and interest rates would move lower worldwide. But that becomes less
likely, the more the West turns its foreign policy focus and resources to the
intractable crisis in Israel and Palestine. On the downside, world bond
markets are showing serious signs of strain. A non-bank credit crunch may have
already started in the USA and UK as the private equity bubble bursts. Most
significant of all, global warming is here and now, with 2022 the world's
hottest year and June and part of October 2023 easily England's hottest on
record.
Conclusion - UK commercial property now attractive at real deal prices, not
historic valuations
Valuers are further behind the real market than usual in UK commercial
property, because genuine cash buyers are few and far between. But at average
yields, now really around 7%, UK non-office property now offers a realistic
yield premium over UK equities and conventional long-dated gilts, despite
short term UK interest rates having to stay at or above current levels for
some time until inflation falls much nearer the Bank of England's target.
Rising bond yields and lower liquidity are never good for property prices,
commercial or residential, but property has always been a cyclical market and
always will be. The key to long term outperformance in any market, but
especially property where so many players overdose on debt, is to buy from the
frightened and sell to the greedy. The real bargain is lower down the risk
curve. Safe, non-office property let at sustainable rents on long,
index-linked leases to strong tenants in prosperous parts of the UK, typically
available at initial yields of 5%-6%, now offers both very good absolute
investment value and an outstandingly high 4 point margin over long dated UK
index-linked gilts, now trading at only 1% real.
Matthew Oakeshott & Louise Cleary
OLIM Property Limited
15 November 2023
Interim Board Report
Management and administration of VIP
Value and Indexed Property Income Services Limited (VIS), a wholly owned
subsidiary of the Company, is the Company's Alternative Investment Fund
Manager (AIFM). As AIFM, VIS has responsibility for the overall portfolio
management and risk management of the assets of the Company. VIS has delegated
its portfolio management responsibilities for the property portfolio to OLIM
Property Limited (OLIMP) (the Investment Manager). The delegation by VIS of
its portfolio management responsibilities is in accordance with the delegation
requirements of the Alternative Investment Fund Managers Directive (AIFMD).
The Investment Manager remains subject to the supervision and direction of
VIS. The Investment Manager is responsible to VIS and ultimately to the
Company in regard to the management of the investment of the assets of the
Company in accordance with the Company's investment objective and policy. VIS
has a risk committee which reviews the effectiveness of the Company's internal
controls and risk management systems and procedures and identifies, measures,
manages and monitors the risks identified as affecting the Company's business.
BNP Paribas Trust Corporation UK Limited is the Company's Depositary and
oversees the Company's custody and cash arrangements.
Principal and Emerging Risks and Uncertainties
The Board carries out a regular review and robust assessment of the principal
and emerging risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity. These principal and
emerging risks and uncertainties are set out in full in the Strategic Report
within the 2023 Annual Report, and remain applicable to the rest of the
financial year.
Climate Change and Social Responsibility Risk
The Board recognises that climate change is an important emerging risk that
all companies should take into consideration within their strategic planning,
but as an investment trust company, the Company has no direct employee or
environmental responsibilities. The Board encourages the Manager to take
environmental, social and governance matters fully into account, as set out in
the 2023 Interim Report.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
• the condensed set of Financial Statements within the Half-Yearly
Financial Report has been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting'; and
• the Interim Report includes a true and fair review of the information
required by 4.2.7R and 4.2.8R of the FCA's Disclosure, Guidance and
Transparency Rules.
For and on behalf of the Board of Value and Indexed Property Income Trust PLC
John Kay
Chairman
15 November 2023
Group Statement of Comprehensive Income
6 months ended 6 months ended Year ended
30 September 2023 (unaudited) 30 September 2022 (unaudited) 31 March 2023 (audited)
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Income
Rental income 2 4,540 - 4,540 4,053 - 4,053 8,358 - 8,358
Investment income 2 - - - 168 - 168 168 - 168
Other income 2 100 - 100 33 - 33 314 - 314
4,639 - 4,639 4,254 - 4,254 8,840 - 8,840
Gains and losses on investments
Realised gains on held-at-fair-value investments and investment properties - 108 108 - 1,355 1,355 - 1,446 1,446
Unrealised (losses)/gains on held-at-fair-value investments and investment - (7,405) (7,405) - (4,432) (4,432) - (24,695) (24,695)
properties
Total income 4,639 (7,297) (2,658) 4,254 (3,077) 1,777 8,840 (23,249) (14,409)
Expenses
Investment management fees (440) - (440) (515) - (515) (990) - (990)
Other operating expenses (443) - (443) (412) - (412) (895) - (895)
Finance costs (1,078) - (1,078) (1,197) (6,269) (7,466) (1,779) (6,269) (8,048)
Total expenses (1,961) - (1,961) (2,124) (6,269) (8,393) (3,664) (6,269) (9,933)
Profit/(loss) before taxation 2,678 (7,297) (4,619) 2,130 (9,346) (7,216) 5,176 (29,518) (24,342)
Taxation (644) - (644) (395) 1,648 1,253 (979) 1,425 446
Profit/(loss) attributable to equity shareholders of parent company 2,034 (7,297) (5,263) 1,735 (7,698) (5,963) 4,197 (28,093) (23,896)
Earnings per Ordinary Share (pence) 3 4.76 (17.06) (12.30) 3.99 (17.71) (13.72) 9.70 (64.92) (55.22)
The total column of this statement represents the Statement of Comprehensive
Income of the Group, prepared in accordance with IFRS. The revenue return and
capital return columns are supplementary to this and are prepared under
guidance issued by the Association of Investment Companies. All items in the
above statement derive from continuing operations.
All income is attributable to the equity holders of Value and Indexed Property
Income Trust PLC, the parent company. There are no minority interests.
The Board has declared a first quarterly dividend of 3.20p per share (2023 -
3.00p) which was paid on 27 October 2023 to all Shareholders on the register
on 29 September 2023 (ex-dividend date of 28 September 2023). A second
quarterly dividend of 3.20p per share (2023 - 3.10p) will be paid on 26
January 2024 to those Shareholders on the register on 29 December 2023 with
and ex-dividend date of 28 December 2023. It is intended that a third
quarterly dividend of 3.20p (2023 - 3.20p) will be paid on 26 April 2024 to
those Shareholders on the register on 2 April 2024. The ex-dividend date will
be 28 March 2024.
The Notes form part of these Financial Statements.
Group Statement of Financial Position
As at As at As at
30 September 2023 31 March 2023 30 September 2022
(unaudited) (audited) (unaudited)
Note £'000 £'000 £'000 £'000 £'000 £'000
Assets
Non current assets
Investment properties 135,660 150,636 158,572
Investments held at fair value through profit or loss - - -
8 135,660 150,636 158,572
Deferred tax asset 3,893 4,537 5,344
Receivables 2,366 2,366 2,161
141,919 157,539 166,077
Current assets
Cash and cash equivalents 7,808 2,273 13,519
Receivables 2,787 599 433
10,595 2,872 13,952
Total assets 152,514 160,411 180,029
Current liabilities
Payables (3,012) (2,376) (621)
(3,012) (2,376) (621)
Total assets less current liabilities 149,503 158,035 179,408
Non-current liabilities
Payables (2,918) (2,845) (2,849)
Borrowings (49,036) (49,000) (49,430)
(51,954) (51,845) (52,279)
Net assets 97,549 106,190 127,129
Equity attributable to equity shareholders
Called up share capital 4,555 4,555 4,555
Share premium 18,446 18,446 18,446
Retained earnings 6 74,547 83,189 104,128
Total equity 97,549 106,190 127,129
Net asset value per Ordinary Share (pence) 228.01 246.88 294.37
These Financial Statements were approved by the Board on 15 November 2023 and
were signed on its behalf by:
John Kay
Chairman
The Notes form part of these Financial Statements.
Group Statement of Changes in Equity
6 months ended 30 September 2023 (unaudited)
Note Share capital Share premium Retained earnings Total
£'000 £'000 £'000 £'000
Net assets at 31 March 2023 4,555 18,446 83,189 106,190
Profit for the year - - (5,264) (5,264)
Dividends paid 4 - - (2,925) (2,925)
Buyback of Ordinary Shares for Treasury - - (453) (453)
Net assets at 30 September 2023 4,555 18,466 74,548 97,549
Year ended 31 March 2023 (audited)
Note Share capital Share premium Retained earnings Total
£'000 £'000 £'000 £'000
Net assets at 31 March 2022 4,555 18,446 113,899 136,900
Loss for the year - (23,896) (23,896)
Dividends paid 4 - (5,507) (5,507)
Buyback of Ordinary Shares for Treasury - (1,307) (1,307)
Net assets at 31 March 2023 4,555 18,446 83,189 106,190
6 months ended 30 September 2022 (unaudited)
Note Share capital Share premium Retained earnings Total
£'000 £'000 £'000 £'000
Net assets at 31 March 2022 4,555 18,446 113,899 136,900
Loss for the year - - (5,963) (5,963)
Dividends paid 4 - - (2,875) (2,875)
Buyback of Ordinary Shares for Treasury - - (933) (933)
Net assets at 30 September 2022 4,555 18,446 104,128 127,129
The Notes form part of these Financial Statements.
Group Statement of Cashflows
6 months ended 6 months ended Year ended
30 September 2023 (unaudited) 30 September 2022 (unaudited) 31 March 2023
(audited)
Note £'000 £'000 £'000 £'000 £'000 £'000
Cash flows from operating activities
Rental income received 2,759 2,950 8,936
Dividend income received - 168 266
Interest and other income received/(paid) 105 33 295
Operating expenses paid (798) (1,238) (1,974)
Taxation paid - - (29)
Net cash inflow from operating activities 2,066 1,913 7,494
Cash flows from investing activities
Purchase of investments held at fair value through profit or loss - (7,215) (7,215)
Purchase of investment properties (7,300) (11,376) (25,353)
Sale of investments held at fair value through profit or loss - 35,720 35,720
Sale of investment properties 15,158 8,399 9,746
Net cash inflow/(outflow) from investing activities 7,857 25,528 12,898
Cash flow from financing activities
Repayment of debenture stock - (26,380) (26,380)
Drawdown of loan - 13,000 13,000
Fees paid on new loan - - (176)
Interest paid on new loans (969) (1,844) (2,815)
Finance costs of leases (40) (39) (78)
Payment of lease liabilities (5) (4) (9)
Dividends paid (2,925) (2,875) (5,507)
Buyback of Ordinary Shares for Treasury (451) (933) (1,307)
Net cash outflow from financing activities (4,389) (19,075) (23,272)
Net increase /decrease in cash and cash equivalents 5,535 8,366 (2,880)
Cash and cash equivalents at the start of the period 2,273 5,153 5,153
Cash and cash equivalent at the end of the period 7,808 13,519 2,273
The Notes form part of these Financial Statements.
Notes to the Financial Statements
1. Accounting policies
The Financial Statements have been prepared in accordance with UK adopted
international accounting standards.
The functional and presentational currency of the Group is pounds sterling
because that is the currency of the primary economic environment in which the
Group operates. The Financial Statements and the accompanying notes are
presented in pounds sterling and rounded to the nearest thousand pounds except
where otherwise indicated.
(a) Basis of preparation
The Financial Statements have been prepared on a going concern basis and on
the historical cost basis, except for the revaluation of investment properties
and investment in subsidiaries, both of which are valued at fair value through
profit and loss. Where presentational guidance set out in the Statement of
Recommended Practice Financial Statements of Investment Trust Companies and
Venture Capital Trusts (the SORP) issued by the Association of Investment
Companies (AIC) in July 2022 is consistent with the requirements of IFRSs, the
Directors have sought to prepare the Financial Statements on a basis compliant
with the recommendations of the SORP.
The Board has considered the requirements of IFRS 8, 'Operating Segments'. The
Board is charged with setting the Group's investment strategy. The Board has
delegated the day to day implementation of this strategy to the Investment
Manager but the Board retains responsibility to ensure that adequate resources
of the Group are directed in accordance with its decisions. The Board is of
the view that the Group is engaged in a single segment of business, being
investments in UK commercial properties. The view that the Group is engaged in
a single segment of business is based on the fact that one of the key
financial indicators received and reviewed by the Board is the total return
from the investment portfolio taken as a whole. A review of the investment
portfolio is included in the Investment Manager's Report in the Interim
Report.
All expenses and finance costs are accounted for on an accruals basis.
Expenses are presented as capital where a connection with the maintenance or
enhancement of the value of investments can be demonstrated. In this respect
and in accordance with the SORP, the investment management fees are allocated
100% to income, in line with the general practice of property companies.
The Group's Financial Statements have been prepared using the same accounting
policies as those applied for the Financial Statements for the year ended 31
March 2023 which received an unqualified audit report.
(b) Going concern
The Group's business activities, together with the factors likely to affect
its future development and performance, are set out in the Interim Report. The
financial position of the Group as at 30 September 2023 is shown in the
Statement of Financial Position. The cash flows of the Group for the half year
to 30 September 2023, which are not untypical, are set out in the Group
Statement of Cashflows in the Interim Report. The Group had fixed debt
totalling £49,036,225 as at 30 September 2023; none of the borrowings is
repayable before 2026. As at 30 September 2023, the Group's total assets less
current liabilities exceeded its total non current liabilities by a factor of
over 2.8.
The assets of the Group consist mainly of investment properties that are held
in accordance with the Group's investment policy, as set out in the Interim
Report. The Directors, who have reviewed carefully the Group's forecasts for
the coming year and having taken into account the liquidity of the Group's
investment portfolio and the Group's financial position in respect of cash
flows, borrowing facilities and investment commitments (of which there is none
of significance), are not aware of any material uncertainties that may cast
significant doubt upon the Group's ability to continue as a going concern.
Accordingly, the Directors believe that it is appropriate to continue to adopt
the going concern basis in preparing the Group's Financial Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of
the Company and the entity controlled by the Company (its subsidiary). An
investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has ability to affect those
returns through its power over the investee. The Company consolidates the
investee that it controls. All intra-group transactions, balances, income and
expenses are eliminated on consolidation. The investment in the subsidiary is
recognised at fair value in the Financial Statements of the Company. This is
considered to be the net asset value of the Shareholders' funds, as shown in
its Statement of Financial Position.
Value and Indexed Property Income Services Limited is a private limited
company incorporated in Scotland under company number SC467598. It is a wholly
owned subsidiary of the Company and has been appointed to act as the
Alternative Investment Fund Manager of the Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income. In accordance with the Company's Articles, net capital returns may be
distributed by way of dividend.
(e) Dividends payable
Interim dividends are recognised as a liability in the period in which they
are paid as no further approval is required in respect of such dividends.
Final dividends are recognised as a liability only after they have been
approved by Shareholders in general meeting.
(f) Investments
Investment properties
Investment properties are initially recognised at cost, being the fair value
of consideration given, including transaction costs associated with the
investment property. Any subsequent capital expenditure incurred in improving
investment properties is capitalised in the period incurred and included
within the book cost of the property.
After initial recognition, investment properties are measured at fair value.
Gains and losses arising from changes in fair value are included in net profit
or loss for the period as a capital item in the Statement of Comprehensive
Income and are ultimately recognised in retained earnings.
The Group leases out all of its properties on operating leases. A property
held under an operating lease is classified and accounted for as an investment
property where the Group holds it to earn rental, capital appreciation or
both. Any such property leased under an operating lease is carried at fair
value. Fair value is established by half-yearly professional valuation on an
open market basis by Savills (UK) Limited, Chartered Surveyors and Valuers,
and in accordance with the RICS Valuation - Global Standards January 2020 (the
'RICS Red Book'). The determination of fair value by Savills is supported by
market evidence.
Leases
The Group leases properties that meet the definition of investment property.
These right-of-use assets are presented as part of Investment Properties in
the Statement of Financial Position and held at fair value.
2. Income
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March 2023
£'000 £'000 £'000
Other operating income
Rental income 4,540 4,053 8,358
Interest receivable on short term deposits 100 33 155
Other income - - 159
Investment income
Dividends from listed investments in UK - 168 168
Total income 4,639 4,254 8,840
3. Return per Ordinary Share
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March 2023
£'000 £'000 £'000
The return per Ordinary Share is based on the following figures:
Revenue return 2,034 1,735 4,197
Capital return (7,297) (7,698) (28,093)
Weighted average Ordinary Shares in issue 42,782,464 43,447,217 43,272,601
Return per share - revenue 4.76p 3.99p 9.70p
Return per share - capital (17.06p) (17.71p) (64.92p)
Total return per share (12.30p) (13.72p) (55.22p)
4. Dividends paid
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March 2023
£'000 £'000 £'000
Dividends on Ordinary Shares:
Third quarterly dividend of 3.20p per share (2023 - 3.00p) paid 28 April 2023 1,376 1,307 1,307
Final dividend of 3.60p per share (2022 - 3.60p) paid 2 August 2023 1,548 1,568 1,568
First quarterly dividend of 3.00p per share paid 28 October 2022 * - - 1,296
Second quarterly dividend of 3.10p per share paid 27 January 2023* - - 1,336
Dividends paid in the period 2,925 2,875 5,507
* First and second quarterly dividends for the year to 31 March 2024 have been
declared with pay dates falling after 30 September 2023. These have not been
included as liabilities in these Financial Statements. See Note 5.
5. Interim dividend
A first quarterly dividend of 3.20p per Ordinary Share was paid on 27 October
2023 to Shareholders registered on 29 September 2023, with an ex dividend date
of 28 September 2023 (2022 - 3.00p). A second quarterly dividend of 3.20p per
share will be paid on 26 January 2024 to Shareholders registered on 29
December 2023, with an ex dividend date of 28 December 2023 (2022 - 3.10p).
It is intended that a third quarterly dividend of 3.20p (2023 - 3.20p) will be
paid on 26 April 2024 to those Shareholders on the register on 2 April 2024,
with an ex-dividend date of 28 March 2024.
6. Retained earnings
The table below shows the movement in retained earnings analysed between
revenue and capital items.
Revenue Capital Total
£'000 £'000 £'000
As at 31 March 2023 (5,873) 89,062 83,189
Movement during the period:
Profit/(loss) for the period 2,032 (7,297) (5,265)
Dividends paid (see Note 4) (2,925) - (2,925)
Buyback of Ordinary Shares for Treasury - (453) (453)
As at 30 September 2023 (6,765) 81,312 74,547
7. Transaction costs
During the period, expenses were incurred in acquiring and disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains and losses on
investments in the Statement of Comprehensive Income.
The total costs are as follows:-
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March 2023
£'000 £'000 £'000
Purchases 109 9 9
Sales 117 32 32
226 41 41
8. Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 13 Fair Value
hierarchy:
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
At 30 September 2023 (unaudited)
Investment properties - - 135,660 135,660
- - 135,660 135,660
Borrowings - (45,295) - (45,295)
- (45,295) 135,660 90,365
At 31 March 2023 (audited)
Investment properties - - 150,636 150,636
- - 150,636 150,636
Borrowings - (48,748) - (48,748)
- (48,748) 150,636 101,888
At 30 September 2022 (unaudited)
Investment properties - - 158,572 158,572
- - 158,572 158,572
Borrowings - (44,219) - (44,219)
- (44,219) 158,572 114,353
Fair value categorisation within the hierarchy has been determined on the
basis of the degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value measurement in
its entirety as follows:-
Level 1 - inputs are unadjusted quoted prices in an active market for
identical assets
Level 2 - inputs, not being quoted prices, are observable, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
Level 3 - inputs are not observable
The fair value of the loans is determined by a discounted cash flow
calculation based on the appropriate inter-bank rate plus the margin per the
loan agreement. These instruments are, therefore, considered to be Level 2 as
defined above. There were no transfers between Levels during the period. All
other assets and liabilities of the Group are included in the Balance Sheet at
fair value.
9. Relationship with the Investment Manager and other Related Parties
Matthew Oakeshott is a Director of OLIM Property Limited which has an
agreement with the Group to provide investment management services.
OLIM Property Limited receive an investment management fee of 0.60% of the
capital assets that it manages.
OLIM Property Limited received an investment management fee of £440,343 (half
year to 30 September 2022: £515,000 and year to 31 March 2023: £990,000). At
the period end, the balance owed by the Group to OLIM Property Limited was
£64,154 (31 March 2023: £52,747) comprising management fees for the month of
September 2023, subsequently paid in October 2023.
Value and Indexed Property Income Services Limited is a wholly owned
subsidiary of the Value and Indexed Property Income Trust PLC and all costs
and expenses are borne by Value and Indexed Property Income Trust PLC. Value
and Indexed Property Income Services Limited has not traded during the period.
10. Half Yearly Report
The financial information contained in this Half Yearly Financial Report does
not constitute statutory accounts as defined in sections 434 - 436 of the
Companies Act 2006. The financial information for the six months ended 30
September 2023 and 30 September 2022 has not been audited.
The information for the year ended 31 March 2023 has been extracted and
abridged from the latest published audited financial statements and do not
constitute the statutory accounts for that year. Those Financial Statements
have been filed with the Registrar of Companies and included the Report of the
Independent Auditor, which contained no qualification or statement under
section 498 of the Companies Act 2006.
This Half-Yearly Report was approved by the Board on 15 November 2023.
Other information
A full copy of the 2023 Interim Report and Financial Statements will be
printed and issued to Shareholders. In due course, a copy will be available on
the Company's website at:
https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html
(https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html)
.
The 2023 Interim Report and Financial Statements will be submitted to the
National Storage Mechanism and will be available for inspection at:
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
(https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism)
.
Neither the content of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
By order of the Board
Maven Capital Partners UK LLP
Company Secretary
0141 306 7400
15 November 2023
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