Annual Report & Consolidated Accounts
Year ended 31 December 2021
THIS DOCUMENT IS IMPORTANT AND REQUIRES
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adviser. If you have sold or otherwise transferred all of your shares in Standard
Life Investments Property Income Trust Limited, please forward this document
as soon as possible to the purchaser or transferee, or to the stockbroker,
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effected, for delivery to the purchaser or transferee.
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Investment
Manager’s Review
Financial Statements
Independent
Auditor’s Report
Corporate
Governance Report
Sustainability
Committee Report
Consolidated
Cash Flow Statement
Annual General Meeting
Notice of Annual
General Meeting
Chairman’s
Statement
Statement of Directors’
Responsibilities
Directors’
Report
Consolidated Statement
of Changes in Equity
Information
for Investors
Performance
Summary
Directors’
Remuneration Report
Governance
Board of
Directors
Consolidated
Balance Sheet
Additional Information
Unaudited EPRA
Performance and
Sustainability Measures
& Additional Information
Strategic Report
Financial and
Portfolio Review
Audit
Committee Report
Stakeholder
Engagement
Strategic
Overview
Environmental,
Social and Governance
Taskforce for
Climate-related
Financial Disclosures
Consolidated
Statement of
Comprehensive Income
Notes to the
Consolidated Financial
Statements
1Year ended 31 December 2021
Contents
Loan-to-Value
*
19.2
PERCENT
Dividends paid
*
3.7725p
Low Loan-to-value of 19.2% (2020: 23.0%)
at the year end with scope to increase gearing
through available revolving credit facilities.
Dividends paid of 3.7725p in the year
(2020: 3.8080p) with a further increase
announced for Q4 2021 to an annualised
rate of 4.0p per share. Dividends paid in
2021 equated to a yield of 4.6% based
on the share price at 31 December 2021,
compared to the FTSE Index yield of 3.1% and
the FTSE All-Share REIT Index yield of 2.6%.
Financial resources
*
50
MILLION
POUNDS
Financial resources of £50 million as at
31 December 2021 (2020: £55 million) available
for investment to enhance earnings in the form of
the Company’s low cost revolving credit facility.
Dividend yield
*
4.6 PERCENT
Dividend yield – FTSE All-Share Index
3.1 PERCENT
Dividend yield – FTSE All-Share REIT Index
2.6 PERCENT
Yields based on stats at 31 December 2021
(based on share price at 31 December 2021 of 81.5p).
* These Alternative Performance Measures (“APMs”)
are defined in the glossary on pages 104 to 105.
2021 NAV total return
*
28.6
PERCENT
NAV total return of 28.6% (2020: –4.6%)
as valuations recovered. NAV has
outperformed the AIC peer group over
the longer term delivering a total return
of 188.9% compared to AIC peer group
total return of 54.6% over 10 years.
2021 Share price total return
*
43.4
PERCENT
Share buybacks
6
MILLION
POUNDS
Share price total return of 43.4% (2020: –29.8%)
as sentiment improved towards the UK commercial
real estate sector. The share price has delivered
strong returns over the longer term with a share
price total return over 10 years of 184.8%
compared to the AIC peer group of 40.9%.
Share buybacks totalling £6m in 2020 and
2021 at significant discounts to NAV which are
accretive to both NAV performance and earnings.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 2
Strategic Report
2021 Financial Review
Portfolio well positioned
54.7
%
11.3
%
40.1
%
20.5
%
Portfolio is well positioned towards sectors forecast to outperform by our
Investment Manager with a 54.7% (2020: 48.2%) weighting in Industrials
(MSCI benchmark: 40.1%, 2020: 35.1%).
11.3% weighting in Retail (2020: 11.7%) (MSCI benchmark: 20.5%, 2020: 22.8%)
with 9.6% positioned in Retail Warehousing (MSCI benchmark: 11.7%), a sector
that is expected to outperform the benchmark.
2021 Portfolio total return
*
22.6
PERCENT
Portfolio total return of 22.6% (2020: –1.8%)
well ahead of the MSCI benchmark return of
18.6% and the Company has outperformed its
benchmark over all time periods.
Positive asset management
2.32
MILLION
POUNDS
Positive asset management
7.4
PERCENT
A total of 10 lease renewals and
restructurings were undertaken, securing
£2,323,217 pa in rent, and a total of
9 lettings securing £1,494,451 pa.
5 rent reviews were settled with uplifts in rent,
securing an additional £106,379 (an average
increase of 7.4% on previous rent).
PV schemes
The Company has 6 operational
PV schemes totalling 1.2 MWp and is
actively engaged in 14 additional schemes
that would add a further 4.6 MWp.
* These Alternative Performance Measures (“APMs”) are defined in the glossary on pages 104 to 105.
Rent collection
*
96 PERCENT
Rent collection for 2021 of 96% of rent due (2020: 93.6%) as
rent collection rates began to normalise towards the end of 2021.
Occupancy rate
90.3 PERCENT
Occupancy rate of 90.3% (2020: 91.7%) compared to the
MSCI rate of 90.0% (2020: 90.8%).
MSCI benchmark
Industrials
Retail MSCI benchmark
3Year ended 31 December 2021
Strategic Report
2021 Portfolio Review
*
Calculated as profit for the period before tax (excluding capital items
& swaps costs) divided by weighted average number of shares in
issue in the period (see page 91 for further details). EPRA stands for
European Public Real Estate Association.
**
Based on dividend paid of 3.7725p and the share price at
31 December 2021 of 81.5p.
***
Calculated as investment manager fees, auditor’s fees, directors’
fees and other administrative expenses divided by the average
NAV for the year.
†
Calculated as bank borrowings less all cash as a percentage
of the open market value of the property portfolio as at the end
of each year.
‡
Assumes re-investment of dividends excluding transaction costs.
Sources: abrdn, MSCI.
Alternative Performance Measures (“APMs”) including NAV total
return, share price total return, dividend cover, Loan-to-value
dividend yield and portfolio total return are defined in the glossary
on pages 104 to 105.
Strategic Report
Performance Summary
Earnings, Dividends & Costs
31 December
2021
31 December
2020
IFRS Earnings per share 21.54 (3.88)
EPRA earnings per share (excl capital items & swap movements)* 3.69 4.10
Dividends paid per ordinary share (p) 3.7725 3.8080
Dividend cover (%) 98 108
Dividend Yield (%)** 4.6 6.3
FTSE All-Share Real Estate Investment Trusts Index Yield (%) 2.6 3.1
FTSE All-Share Index Yield (%) 3.1 3.4
Ongoing Charges***
As a % of average net assets including direct property costs 2.2 2.0
As a % of average net assets excluding direct property costs 1.2 1.2
Capital Values & Gearing
31 December
2021
31 December
2020
Change
%
Total assets (£million) 526.6 459.6 14.6
Net asset value per share (p) (note 22) 101.0 82.0 23.2
Ordinary Share Price (p) 81.5 60.0 35.8
(Discount)/Premium to NAV (%) (19.3) (26.8)
Loan-to-value (%)† 19.2 23.0
Total Return 1 year % return 3 year % return 5 year % return 10 year % return
NAV‡ 28.6 27.7 60.1 188.9
AIC Property Direct – UK Commercial (weighted average) NAV Total Return 17.0 20.3 23.4 54.6
Share Price‡ 43.4 18.8 23.9 184.8
AIC Property Direct – UK Commercial (weighted average) Share Price Total Return 26.5 20.7 9.8 40.9
FTSE All-Share Real Estate Investment Trusts Index 29.4 41.8 39.3 177.1
FTSE All-Share Index 18.3 27.2 30.2 110.7
Portfolio Returns & Statistics (%)
31 December
2021
31 December
2020
Portfolio income return 4.7 4.9
MSCI Benchmark income return 4.4 4.7
Portfolio total return 22.6 (1.8)
MSCI Benchmark total return 18.6 (1.6)
Void rate 9.7 8.3
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 4
James Clifton-Brown
BACKGROUND
The COVID-19 pandemic continued to affect all of our
lives in 2021. The summer relaxation of restrictions
was relatively short lived as new variants caused
renewed Government intervention. The extent of
the vaccine roll-out, however, meant that the impact
on the economy, and by extension the real estate
market, was very different from 2020. In April 2022
it appears we are learning how to live with the
virus whilst maintaining more normality in our
day-to-day lives. At this time, we are also seeing the
distressing consequences of the war in Ukraine.
The human devastation is clear and, economically,
further increases in global inflation, and supply chain
issues are inevitable.
REAL ESTATE MARKET
The pandemic has had a significant impact on
the UK real estate market, but the Company’s portfolio
has been well positioned to benefit from some of
the structural changes. In particular, the industrial
sector has benefited from the surge in online retail,
accelerating a trend that had begun already. With
many people likely to continue to work from home
at least partially, this trend is likely to continue,
as the thorny problem of the last mile delivery is
solved by having someone to answer the door. We
expect the outperformance of industrial properties
to continue, given continued occupational demand,
and a restricted supply response.
The boom in online retail has, of course, been at the
expense of physical retail. In particular, high street
and shopping centre investments have suffered,
and we do not yet think they will recover in the short
term. Retail warehouse investments, however, have
already seen a pick-up in demand and values, and
this should continue throughout 2022.
Demand for offices remains an area of great
debate as many people became used to working
from home. It will take several years to fully play
out, but hybrid working appears to be here to stay,
and many employers are looking to upgrade their
offices to attract and encourage skilled employees
to come into the office. The Board and Investment
Manager have reviewed the Company’s office
holdings to focus on assets that will continue to
meet occupier needs. Four office disposals were
made during the year to realign the portfolio.
5Year ended 31 December 2021
Strategic Report
Chairman’s Statement
KIRKGATE, EPSOM
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 6
Strategic Report
Chairman’s Statement continued
WALTON SUMMIT INDUSTRIAL ESTATE, PRESTON
188.9
PERCENT
Strong Net Asset Value
(NAV) total return over 10 years
ONE STATION SQUARE, BRACKNELL
Fitted suites ready for occupation
Environmental, Social and Governance (ESG)
issues have continued to increase in importance
and focus. SLIPIT has actively embraced this,
through activities at asset level, investment
decisions, and the purchase of land for reforestation.
The Board has created a Sustainability Committee
that sits alongside the Audit and Property Valuation
Committees to give greater focus to the Company’s
activities and responsibilities in this space.
Inflation has started to rear its ugly head again,
something we have not had to contend with for
many years now. Real estate can offer a partial hedge
against inflation as a real asset, with some leases
having rents linked to CPI or RPI. Owning good quality
assets with prospects for rental growth is, in my
opinion, one of the best defences against inflation.
PORTFOLIO AND
CORPORATE PERFORMANCE
The Company provided shareholders with a share price
total return of 43.4% over the 12 months of 2021,
which was ahead of the NAV total return of 28.6% for
the same period as the share price discount to NAV
reduced. The real estate investment portfolio returned
22.6%, which compared favourably to the MSCI
benchmark return of 18.6%. The Company’s portfolio
has outperformed the MSCI quarterly version of the
monthly index benchmark over 1, 3, 5 and 10 years.
Although the discount to NAV reduced during the
year, the Company’s shares traded on a discount
for the whole period. The Board pursued its share
buyback programme into early 2021 and bought
a total of 7.4m shares at an average discount of
25.2%. The Board continues to monitor, as a priority,
the discount of the share price against NAV.
IFRS earnings have increased significantly, to 21.54p
per share from -3.88p for 2020. This reflects the
significant recovery in valuations during the year.
EPRA earnings have, however, fallen from 4.10p
to 3.69p per share largely reflecting the impact of
disposals in 2020 on rental income. The Company is
seeking to reinvest in assets with a better outlook in
order to grow the earnings per share again.
7Year ended 31 December 2021
RENT COLLECTION
The Board and its Investment Manager have been
conscious of their ESG obligations to act as a
responsible landlord throughout the pandemic.
We have worked closely with tenants who have
suffered acute financial pressures and negotiated
with them on rental assistance where appropriate,
whilst balancing the Company’s and shareholder’s
interests. Wherever possible, revised terms
exchanged short-term assistance for longer
lease commitments, to enhance returns.
As we closed 2021, rent collection rates were
beginning to normalise, reflecting the constructive
relationships developed with our tenants during
this time. This has allowed us to announce a further
increase in our dividend, paid in February 2022.
DIVIDENDS
The Board is aware that many of the Company’s
shareholders have invested in SLIPIT because of
the attractive level of income generated. The Board
aims to invest in good quality assets that have the
potential to provide an above market level of total
return as well as an attractive level of income that
has scope to grow. The Board paid out a top-up
dividend in respect of the 2020 financial year and,
as rent collections recovered in 2021, increased
the dividend twice in 2021. In the first quarter the
dividend was increased by 25%, and by a further
12% in the fourth quarter to an annualised rate
of 4p per share.
The Company previously announced a dividend
cover figure of 102% for 2021, however, following
an adjustment for lease incentives as set out on
page 73, the figure has been finalised as 98%. Full
details of the calculation are set out on page 104.
The new dividend level is still below pre-pandemic
levels, and further growth is likely to be dependent
on reinvesting capital from the sales undertaken
over the last 18 months. New purchases, however,
are likely to be in lower-yielding assets as the
Company positions itself for the next real estate
cycle, where high quality assets with strong ESG
credentials will provide greater income security
prospects for rental and capital growth.
FINANCIAL RESOURCES &
PORTFOLIO ACTIVITY
The Company continues to be in a strong financial
position with significant unutilised financial resources
of approximately £50m available for investment
in the form of its low cost, revolving credit facility
net of existing cash and financial commitments.
The low Loan-to-value (“LTV”) ratio of 19.2% at
the year end, means the Company is well placed
to deploy capital into accretive assets which fit the
portfolio strategy. Discussions have begun to renew
this facility and the term loan, both of which are due
to expire in 2023.
SPEEDYHIRE FULLARTON DRIVE, GLASGOW
PINNACLE, READING
Fitted suites ready for occupation
19.2
PERCENT
Loan-to-value (LTV)
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 8
Strategic Report
Chairman’s Statement continued
ANNUAL GENERAL MEETING (“AGM”)
In a return to the familiar arrangements prior to
the disruption caused by COVID-19, the Annual
General Meeting (“AGM”) will be held at 10.30am on
Wednesday 15 June 2022 in the Manager’s offices at
Bow Bells House, 1 Bread Street, London EC4M 9HH.
The Board looks forward to welcoming shareholders
in person where they will have the opportunity to
put questions to the Board and/or the Manager.
Shareholders are also invited to submit questions
to property.income@abrdn.com.
The Board has decided to hold an interactive Online
Shareholder Presentation at 2.00pm on Tuesday
14 June 2022. As part of the presentation, shareholders
will receive updates from the Chairman and Manager as
well as the opportunity to participate in an interactive
question and answer session. Further information
on how to register for the event can be found on
www.workcast.com/register?cpak=4656942387252659
RALIA ESTATE, NEWTONMORE
THE BOARD
Huw Evans will be standing down at the forthcoming
AGM, having spent nine years on the Board. Huw
has provided valuable advice and knowledge to the
Board and Investment Manager, as well as to me
personally as I stepped up to the role of Chairman
in 2020. I am pleased his role as Senior Independent
Director will be taken on by Jill May. I am also pleased
that Mike Bane has joined the Board to replace Huw.
Mike has had a distinguished career as both auditor
and advisor to financial services and real estate
businesses and brings much knowledge to the role.
I would like to thank all the Board for their
contribution this last year: we have had more
meetings than normal as a result of the challenges
of COVID-19 but were able to hold two of the main
Board meetings in person.
INVESTMENT POLICY
The Board is proposing to amend its existing
Investment Policy by extending the main commercial
property sectors within which the Company can
hold the majority of its portfolio. The proposed
amendments, to be voted on at the AGM, relate to
the ‘other’ sector, including leisure, data centres,
student house, hotels, (and apart-hotels) and
healthcare. The amendment would allow the
Company to adapt to some of the key changes
in the UK commercial property industry.
COMPANY NAME
The Investment Manager has changed its name
to abrdn, and has sold the rights to use the
name Standard Life. The Board has considered
a number of options and is recommending to
shareholders a change of name to abrdn Property
Income Trust Limited. By aligning its name with the
Investment Manager, the Company should be
able to benefit from brand awareness and the
marketing spend of the abrdn Group.
OUTLOOK
Over the last five years all companies have faced
a number of challenges, including political
uncertainty, Brexit, a global pandemic and now
inflation. Your Company has weathered these storms,
and I believe is well positioned to face the future.
The Board and Investment Manager will continue to
manage the portfolio actively so that it is structured
to benefit from change. We will continue to put ESG at
the forefront of our decision making, as we believe it
to be intrinsically linked to maximising returns in the
future, and therefore providing the best opportunity
to grow value, rents and, in turn, dividends.
27 April 2022
James Clifton-Brown
Chairman
9Year ended 31 December 2021
2021 was once again a year characterised by the
COVID-19 pandemic, and the key theme for the
year was recovery. As the year progressed and the
vaccine roll out continued apace, positive economic
momentum returned, but was quickly dented by the
emergence of the Delta variant, followed by Omicron
towards the end of the year. However, the economy
recovered once more and, by November 2021,
UK GDP was above the level seen pre-pandemic.
Overall, the UK economy grew by 7.5% over the
course of the year.
The UK real estate market also recovered in 2021,
with a total return of 16.5% according to the
MSCI Quarterly Index, a level of performance not
seen since 2014. Transaction volumes reached
£73.9 billion over the course of the year, which
was ahead of 2019 (prior to the outbreak of the
pandemic). Indeed, the fourth quarter of 2021
was the strongest quarter since the same period in
2019. However, this recovery was highly polarised
and the spread between the best and worst
performing sectors was the highest on record.
As measured by the MSCI quarterly index, the
industrial and logistics sector again produced
the best performance, achieving a total return
of 36.4%, whereas shopping centres achieved
a total return of -5.2% and was the worst
performing sector over the course of 2021.
The office sector again underperformed against
the Index with a total return of 5.3%.
Retail continues to be the sector most negatively
affected, as restrictions and changing consumer
habits accelerated the pace of structural change
already present prior to the pandemic. However,
whilst high street and discretionary based retailers
have struggled, retail warehouse assets showed
a significant recovery in the latter half of the year.
Polarisation within sectors is evident elsewhere,
including within the office sector. As occupiers
and investors have become more mindful of
ESG considerations, their focus has increasingly
narrowed to best-in-class assets and, as a result,
we have seen demand for secondary
accommodation weaken.
Following a poor year in 2020, the FTSE UK
REIT index returned to positive territory and
recorded a strong total return of 28.9% in 2021.
This outperformed the FTSE UK All-Share Index,
which recorded a total return of 18.3%. Following
a significant sell off in September 2021, UK REITs
broadly recovered and finished the year at, or close
to, all-time highs. The hierarchy of favoured sectors
remained broadly the same as in recent years,
with the industrial and logistics sector leading the
way. However, overall sentiment was positive for
all sectors towards the end of the year, with the
exception of secondary offices with which there are
broad structural concerns. New capital raising has
been predominantly tilted towards the industrial
sector and, increasingly, the alternatives sector.
MARKET REVIEW
Although 2021 was again impacted heavily by the COVID-19
pandemic, it was a year of recovery for the wider UK economy,
and for real estate. Structural changes continued to drive
returns, with the industrial sector again leading the way.
JASON BAGGALEY
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 10
Strategic Report
Investment Manager’s Review
101 PRINCES STREET, MANCHESTER
11Year ended 31 December 2021
OFFICES
The office sector delivered a total return of 5.3% to
December 2021 according to the MSCI Quarterly
Index, an improvement on the -1.7% recorded in
2020. However, office capital values were relatively
stagnant over the course of 2021, with growth of
just 1.3%. The worst performing sector geographically
was the North East where capital values fell by -3.6%.
Once again, the performance of the office market
was significantly impacted by the COVID-19
pandemic. As restrictions eased over the course of
2021, occupiers began returning to workplaces.
However, the outbreak of the Omicron variant and
the subsequent reintroduction of working from home
guidance further emphasised the pressure the sector
faces. The rise of hybrid working has led occupiers to
re-evaluate their office accommodation requirements
and, whilst vacancy rates began to show signs of
stabilisation, levels of occupation remain far below
pre-pandemic levels.
In Central London by the end of 2021, availability
remained 71% higher than the ten-year average.
However, take-up did recover somewhat, and
9.1m sq ft of accommodation was let during the year.
This was 63% above the total for 2020, but down
25% on the long-term average. Polarisation within the
sector, however, is becoming ever more apparent as
occupier focus pulls towards best-in-class assets with
strong ESG and wellbeing credentials. Second-hand
availability in central London has almost doubled
from pre-pandemic levels and in Q4 2021 accounted
for 74% of total office supply.
Occupier demand is therefore focused on a relatively
small section of the market. As a result, we expect
this trend to drive an increasing wedge between
rental growth for the best and the rest across the UK’s
major office markets. We expect investor
appetite to follow a similar pattern, with those
assets not meeting current occupational demand
at risk of significant value erosion.
RETAIL
Following a number of years of poor performance,
the retail sector showed some signs of recovery
in 2021, despite continued structural headwinds.
However, we believe this is driven primarily by
market factors and is a product of the market cycle,
rather than sector-specific confidence. As a result,
performance was highly polarised within the sector.
As was expected, those assets deemed as “essential
retail” showed strong performance over the year,
whereas retailers selling discretionary items, and those
susceptible to greater online penetration, struggled
once more against the backdrop of the pandemic.
Whilst retail warehouse assets experienced a strong
recovery, particularly in the second half of the year,
recording a total return of 21.9% for retail parks,
shopping centres continued to drag on the sector
and provided a total return of -5.2% in 2021.
High Street shops also showed continued poor
performance as retailers struggled with ongoing
restrictions and a consumer shift to e-commerce.
Capital values for retail assets within Central London
fell by -5.8%, continuing the trend seen in 2020.
The reintroduction of restrictions towards the end
of the year also put further pressure on high streets,
as footfall once again fell. On the other hand,
supermarkets again provided robust performance
due to an increase in consumer spending and their
embracing online deliveries. Supermarkets provided
a total return of 15.7%, predominantly driven by yield
compression, as investors were attracted by secure,
index linked, long income.
Consumer habits have changed over the course of
the pandemic and it is clear from footfall data that
many now prefer to visit units which provide ‘drive
to convenience’ and perceived safety from COVID-19.
As a result, investor attention also turned to retail
warehouse accommodation, with those assets led
by discount or DIY operators. In response, yields
within this sector reduced by between 150-250bps
during 2021.
Schemes with significant exposure to fashion-led
retailers have, however, generated less interest as
occupational concerns remain. From an owner’s
perspective, the situation remains fragile, as
government support is withdrawn and the risk of
further retailer defaults remains elevated. The prospect
for rental growth across the sector is remote. Moving
forward, the sector is likely to remain highly polarised
but overall retail performance is anticipated to improve
when compared to 2021, as the shopping centre and
high street retail sectors stabilise.
INDUSTRIAL
Once again, the industrial and logistics market
retained its position as the best performing UK
commercial real estate sector delivering a total
return of 36.4%. Sentiment remained extremely
positive over the course of the year as investors
were attracted by a wide supply-demand imbalance
with consequential rental growth across the sector.
This was most keenly felt in supply constrained
locations such as London, which remained the best
performing market, with total returns for London
industrial achieving 43.1% over the year.
As investors have sought to buy into the sector,
transactional volumes totalled £17.3bn, the highest
level ever recorded, and 80% higher than the total
transacted in 2020. As a result, transactions involving
the sector accounted for 25.6% of total UK real estate
investment activity. From an occupational perspective,
demand for accommodation remains extremely
high, with take up in 2021 totalling over 55m sq ft,
another new all-time record. Distribution and
online retailers continue to dominate take-up and,
with the UK-wide vacancy rate now below 2.0%,
the market fundamentals remain supportive for
continued strong rental growth.
Moving forward, rental growth is likely to be the
predominant driver of returns as further yield
compression, which has been the key driver over the
course of 2021, is unsustainable, and particularly so
in the prime sector of the market. Yields reduced by
between 50-125bps during 2021 across the sector,
and prime London estates are now commanding
yields of 3.10%, and arguably lower for best-in-class
assets, according to Cushman & Wakefield. Sentiment
remains very strong for the industrial and logistics
market and the sector is well placed structurally to see
continued robust growth.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 12
Strategic Report
Investment Manager’s Review continued
ALTERNATIVES
The UK real estate alternative sector, or “Other
Property” as it is categorised by MSCI, represents
real estate which falls outside the traditional ‘Retail’,
‘Office’ or ‘Industrial’ definitions. Investor interest in
the alternatives sector has increased and a total of
£15.7 billion was transacted over the course of 2021,
up 25.2% on 2020 and 37.0% above the 10-year
average. Total return within this sector was 9.2%
which, whilst below the all property total return, was
a significant improvement on the total return achieved
in 2020 of -5.3%. The reasons for this were largely the
result of ongoing restrictions and a change in consumer
habits as a result of the COVID-19 pandemic.
The leisure and hotel sectors, which form a large
component of the “Other Property” sector, suffered
at the beginning of 2020 due to strict government
restrictions, with many operators not reopening until
Q2 2021 or later. Over the remainder of the year,
however, the sector underwent a gradual recovery
and regional hotels in particular experienced record
bookings, as international travel restrictions boosted
the demand for domestically driven ‘staycations.’
As a result, total returns in the hotel and leisure
sectors for 2021 were 7.7% and 7.8% respectively.
Healthcare also finished the year in a strong position
and recorded a total return of 9.5%.
Investor appetite for the Build to Rent (BTR)
residential sector also continued its strong trajectory
and a record of £4.1 billion was invested into
the sector over the course of 2021, beating the
previous record of £3.5 billion achieved in 2020.
The Purpose Built Student Accommodation (PBSA)
sector also performed well in 2021, despite a muted
start to the year. Large platform deals have placed
further downward pressure on yields, with those
assets with index-linked leases now commanding
yields of 3.0% according to CBRE. However,
performance is polarised, with those assets serving
the UK’s top universities best placed to outperform.
Moving forward, the ‘alternatives’ sector is likely to
become more ‘mainstream’ as it grows in prominence
due to its continued resilient performance.
MARKET OUTLOOK 2022
It is clear that we have entered 2022 with significant
uncertainty, as geopolitical concerns weigh on the
global economy. Whilst it appears we have now passed
the worst of the COVID-19 pandemic, the outbreak
of conflict in Ukraine in February 2022 has sent
shockwaves throughout the world. Whilst the conflict
has not materially altered our outlook for UK real estate
in 2022, new considerations have emerged as a result.
The initial impacts of the Russian invasion of Ukraine,
and the subsequent sanctions placed on the Russian
economy, are expected to be negligible, primarily as
a result of Russian capital having little exposure to
UK commercial real estate. This should mean there
is a limited impact on market liquidity and a low risk
of depressed asset values as a result. In fact, due to
increased volatility in other financial markets,
UK real estate may benefit due to being viewed as
a ‘safe haven’ investment destination.
However, the Ukraine conflict is likely to have wider
consequences and the position of UK real estate
must be set in the context of the macroeconomic
environment. Prior to the outbreak of conflict, there
were already significant concerns over rising inflation
and tightening of monetary policy, and the conflict has
skewed risks even further to the upside.
We now expect inflation to peak around 8.00% in
April, before declining through the second half of this
year, largely as a result of mechanical base effects.
We forecast that the UK CPI rate for 2022 will be
significantly over 6.0%, illustrating that inflationary
pressures are likely to moderate in the latter half of
the year, but remain significantly above the Bank
of England’s target rate. There are also significant
risks that inflation could remain higher for a more
prolonged period of time, particularly as the war
in Ukraine, and sanction measures on the Russian
economy, impact on pricing in the energy sector and
on key raw materials.
The high inflation environment is likely to have an effect
on households across the UK and we expect consumer
sentiment and real wage growth to suffer as a result;
however, a build-up in household savings over the
course of the previous two years will help to cushion
this impact. That said, the distribution of these savings
tends to be very heavily skewed towards high income
households, with increased pressure on low income
households possibly translating to weakening overall
consumer consumption.
In response to these inflationary factors, the Bank
of England is expected to continue tightening
monetary policy over the course of the year, with
the base rate expected to reach 1.25% by the end
of 2022. The base rate is then expected to peak at
1.75% in 2023, but there is an elevated risk that this
could surprise to the upside and peak above 2.00%.
Although low in a historical context, base rates and the
feed through to the bond market has the potential to
act as a natural cap on any further yield compression,
particularly for the lower yielding areas of the real
estate market. Despite this, a healthy margin between
bonds and real estate will be maintained, and
investors should continue to view UK real estate as
an attractive investment destination, becoming more
selective when approaching investment decisions at
both the sector and asset level.
13Year ended 31 December 2021
Prior to the Russian invasion of Ukraine, GDP growth
was forecast to be closer to 4.4% in 2022 but we
now expect economic growth to be relatively subdued.
This leads to the possibility that we face an environment
of weakening economic growth at a time when inflation
is running considerably above target. This is likely
to impact more heavily on the UK real estate sector
as a result of depressed job growth and falling
disposable incomes, weighing on the office and retail
sectors in particular.
As such, the bifurcation of the office sector is likely
to become more pronounced. Demand for prime
assets should remain robust but weaker for secondary
accommodation. Those office assets not deemed
to be “future fit” are likely to see limited occupational
and investor demand as ESG considerations become
more prominent in investor decision making.
The industrial and logistics market is anticipated
to remain robust in 2022 but unlikely to match the
extremely strong performance achieved over the
course of 2021. The prospect of further yield
compression, particularly on prime assets, is limited
and rental growth is expected to be the main driver
of performance in this sector. Demand continues
to outstrip supply and although there has been
a pick-up in supply in the sector, increasing land
values, a shortage of suitable development sites,
and increasing build costs mean there are no signs
of a correction in the short term.
We still expect the recovery in the retail sector to
continue, primarily driven by market factors rather
than sector specific confidence. Investor demand
will remain focused on discount and food led retail
warehouse schemes whilst the occupational market
will continue to be heavily impacted by the pandemic
induced change in consumer habits and the continued
growth of e-commerce. As discussed above, the
impact of inflation on household disposable incomes
is also likely to weigh heavily on the retail sector,
and particularly on discretionary based retailers,
throughout the course of 2022 and the prospect of
rental value growth remains remote. The alternatives
sector will build on strong transactional volumes
achieved in 2021 and will grow more prominent in
investor focus. We expect the hotel sectors to recover
over the course of 2022 as travel and other restrictions
ease. The Purpose Built Student Accommodation
(PBSA) and build-to-rent (BtR) residential sectors will
continue their positive momentum.
Overall, we expect a positive year for UK real estate but
the spread in performance seen in 2021 is unlikely
to be repeated and sector performance will begin to
converge in 2022, predominantly as a result of where
we are in the UK real estate cycle. Geopolitical events,
inflationary and base rate pressures are likely to weigh
and, as a result, more care will be required when
assessing any investment decisions in the year ahead.
101 PRINCES STREET, MANCHESTER
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 14
Strategic Report
Investment Manager’s Review continued
PERFORMANCE
There are a number of different measures of
performance one can employ, from individual assets
to shareholder return. These are detailed below:
Portfolio return:
The Company uses a MSCI Benchmark to measure
performance of the underlying assets against the
general market. The portfolio is not constructed
with reference to the MSCI index, but it can be useful
to measure the performance of the Investment
Manager. Against this measure, the portfolio
demonstrates strong performance relative to the
market over 1, 3, 5 and 10 years.
The outperformance results from a combination
of structure (having a greater exposure to strongly
performing sectors and low exposure to poorly
performing sectors), and the active approach to
managing the portfolio. Turnover in the portfolio has
been higher than the market, indicating a willingness
to take profits and reinvest in new productive assets.
0
5
10
15
20
25
30
35
10 Year5 Year3 Year1 Year
NAV Total Returns to 31 December 2021
1 year
(%)
3 years
(%)
5 years
(%)
10 years
(%)
Standard Life Investments Property Income Trust 28.6 27.7 60.1 188.9
AIC Property UK Commercial (weighted average) 17.0 20.3 23.4 54.6
Investment Association Open Ended Commercial
Property Funds sector
9.6 7.1 18.2 56.4
Source: AIC, abrdn
Share Price Total Returns to 31 December 2021
1 year
(%)
3 years
(%)
5 years
(%)
10 years
(%)
Standard Life Investments Property Income Trust 43.4 18.8 23.9 184.8
FTSE All-Share Index 18.3 27.2 30.2 110.7
FTSE All-Share REIT Index 29.4 41.8 39.3 17 7.1
AIC Property UK Commercial (weighted average) 26.5 20.7 9.8 40.9
Source: AIC, abrdn
Share Price:
For the investor, share price total return is the
real measure of their experience, measuring the
share price performance along with the dividends
they received. The Company’s market capitalisation
at 31 December 2021 was £323.5m against
£242.6m a year earlier.
NAV return:
The NAV total return is perhaps the best indication
of the Company’s performance, rather than just the
property portfolio, as it takes all costs and manager-
controlled factors (such as borrowing) into account.
The chart above shows NAV total returns alongside the
portfolio and market returns. The table compares the
NAV total return of SLIPIT against the AIC peer group,
and as a further source of comparison against the IA
open ended fund sector average.
Portfolio total return
(per annum)
MSCI Benchmark return
(per annum)
NAV total return
(per annum)
PORTFOLIO TOTAL RETURN
Source: MSCI, abrdn
15Year ended 31 December 2021
SYMPHONY, ROTHERHAM
VALUATION
The portfolio is valued quarterly by Knight Frank
LLP under the provisions of the RICS Red Book.
As at 31 December 2021 the portfolio, including
the Ralia Estate, was valued at £499.9m (£437.7m at
31 December 2020) and the Company held cash of
£13.8m (£9.4m at 31 December 2020). The portfolio
consisted of 48 assets at year end (51 assets at
31 December 2020).
INVESTMENT STRATEGY
The Company has a clearly stated investment
strategy: “To provide investors with an attractive
income return, with the prospect of income and
capital growth, through investing in a diversified
portfolio of commercial real estate assets in the UK”.
The word “Income” features in both the Company’s
name, and prominently in the investment strategy.
Our investment activities are centred around
providing an attractive level of income. However,
you will read throughout the report about the
importance of ESG in future returns. The Investment
Manager and Board want to provide a level of
income that is attractive to investors today, that is
sustainable and has scope to grow in the future.
We also want to provide a reasonable total return
(i.e. not sacrifice capital value to deliver an
unsustainable level of income).
We had already begun the process of repositioning the
portfolio through the sale of assets in 2019 and 2020
with poorer ESG credentials and this will continue
as we invest in better quality assets with improved
prospects of future income and capital growth.
ESG
ESG is central to our investment philosophy and, to
reflect its importance, the Annual Report now includes
a dedicated section on pages 22 to 31 and we have
also adopted early Taskforce for Climate-related
Financial Disclosures on pages 32 and 33.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 16
Strategic Report
Investment Manager’s Review continued
DEBT
The Company has two debt facilities, both with the
Royal Bank of Scotland. The term loan of £110m is fully
drawn and is subject to an interest rate swap to fix the
cost at a rate of 2.725%. The swap value is marked to
market each quarter in the NAV and at 31 December
2021 a liability was recorded of £568,036 (down from
£3,735,254 in the prior year). The Company also has
a revolving credit facility (RCF) of £55m that is currently
undrawn. The facility was undrawn throughout 2021.
At year end the gearing level or LTV was 19.2%. This is
below the target range of 25% – 35% that the Board
has set. It is anticipated that the RCF will be utilised
again in 2022 to fund new purchases.
Both loan facilities mature in April 2023 and the
Investment Manager and Board are in the process of
finding a new facility. Early conversations have been
encouraging, although with rising interest rates there
is a risk that the cost of debt may increase from the
current 2.725%.
ASSET MANAGEMENT
The disruption caused by the pandemic impacted
on tenants’ ability to pay rent, their desire to make
decisions on future occupancy, and in many cases
led to changes in the contacts we had at different
properties. In this difficult context, the Company’s
asset managers worked hard to maintain good
communication lines with tenants, and delivered
strong returns through lease regears. It was necessary
to give further rent concessions to some tenants
where trade was constrained by restrictions imposed
by the Government. However, supporting tenants
where required is in the best interests of the Company
compared with the prospect of tenant failure.
Over the course of 2021 ten leases were renewed or
regeared to extend the term, with a rental value of
£2,323,217 pa. Five rent reviews were settled,
generating an increase in income of £106,379 pa,
and nine lettings completed, securing £1,494,451 pa
of new rent. Since the year end a further three
lettings have been completed, securing an additional
£353,600 pa.
The portfolio vacancy rate at the end of 2021 was
9.7%. This is higher than the Investment Manger
targets (5%) and is predominantly within the office
portfolio. With a return to the office expected from
spring onwards, and with the affordable, good quality
fitted suites on offer within our portfolio, we expect
to see further progress in reducing vacancy rates over
the course of 2022.
Rent collection remained an area of focus. Various
restrictions/lockdowns impacted our tenants and
their businesses, but we continued to have a flexible
approach. We aim to work with tenants based on
their individual circumstances. Bad debt provisions
increased by £0.4m during the year, against
a £2.4m increase for 2020, with the fall in the charge
to earnings reflecting the improving rent collection
rates. In total, 96% of the rent due in 2021 has been
collected, with several tenants repaying arrears
on agreed plans over the next couple of years.
This compares to 98% for 2020. We anticipate
further improvements in the 2021 recovery rate from
repayment plans, and additional expected receipts.
Rent Collection Quarter % Received
2020 1 99%
2 98%
3 98%
4 96%
2020 FY 98%
2021 1 96%
2 95%
3 96%
4 97%
2021 FY 96%
PURCHASES
During 2021 the Company made three investments,
two into commercial real estate assets, and one
land purchase (detailed under the Carbon Offsetting
section on page 26).
Glass Futures, St Helens:
The Company is funding the development of a
101,085 sq ft industrial facility that will be let for
15 years to St Helens Borough Council at an initial
rent of £658,000 pa. The total cost to SLIPIT will
be £15.05m. The property will be occupied by
Glass Futures in early 2023, a not-for-profit
organisation seeking to develop lower carbon
solutions for the manufacture of glass.
Griffiths Textiles, Washington:
The Company acquired a 96,693 sq ft industrial
unit with 3.5 acres of unused land. The unit was
recently let for 15 years to a carpet manufacturer.
As part of the purchase process we engaged with
the tenant about ESG enhancements including
PV on the roof, which would take the EPC from its
current B to an A. The vacant land had no value
attributed to it in our appraisal, but provides a
number of opportunities. The purchase price of
£7.7m reflected an income yield of 5.75%.
Subsequent to the year end, the Company has
made one further investment into commercial real
estate assets:
Motorpoint, Stockton-on-Tees:
In April 2022, the Company completed the
purchase of the Motorpoint car showroom in
Stockton-on-Tees for £5m. The transaction was
a sale and leaseback, with Motorpoint selling the
property and simultaneously taking a lease over
it for a period of 25 years, with the option to end
the lease after 15 and 20 years. The annual rent
will be £350,000 and the lease includes 5-yearly
CPI-linked rent reviews. The property itself extends
to just over 46,500 sq ft on a 5.2 acre site.
SALES
The Company sold six assets in 2021 for a total
of £31.8m. Four office assets were sold for £21m.
The decision to sell these properties was based on
a comprehensive review of the portfolio in light of the
changes in the office market we expect as a result of
COVID-19. Several of the assets had recently had the
leases extended, providing the optimum exit point to
maximise returns.
One industrial unit was sold as it had poor ESG
credentials, and we believed that would impact future
performance. In addition, a small retail warehouse
unit was sold for £2.65m as we felt the rents were
relatively unsustainable.
OUTLOOK AND FUTURE STRATEGY
With the increasing importance of ESG driven by both
legislation and corporate / individual commitments,
the Company will continue to seek to provide
buildings that enable tenant businesses to perform
well. The current high exposure to the industrial
sector is likely to remain beneficial and we will seek
to maintain it, although we might rotate out of some
assets. We will selectively seek to buy into the retail
warehouse sector, and into alternatives such as
apart-hotels, student housing, and hotels. The office
sector continues to undergo change, and although
four assets have already been sold, we will monitor
how our retained assets are meeting the future needs
of occupiers and investors.
Inflation is of course a significant concern at the
moment. The Company has approximately 21% of
its leases (by rental value) subject to fixed or indexed
rent reviews, however the Investment Manager
also expects rental growth to continue from the
industrial sector, providing some mitigation against
the impacts of inflation. We will continue to seek to
hold assets where we can grow rents.
17Year ended 31 December 2021
Total 5 year band 0–5 years 6–10 years 11–15 years 16–20 years 21–25 years
Rent expiring £ 14,637,593 7,311, 966 1,684,835 766,915 1,230,519
Rent expiring % 57.1% 28.5% 6.6% 3.0% 4.8%
LEASE EXPIRY
PROFILE
Hollywood Green £14m–£16m
London Other (2.9%)
Mucklow Hill £24m–£26m
Halesowen Retail (5.0%)
The Pinnacle £14m-£16m
Reading Office (2.9%)10
Atos Data Centre £14m–£16m
Birmingham Other (3.2%)
9
Walton Summit Ind Est £14m-£16m
Preston Industrial (3.1%)8
Marsh Way £20m–£22m
Rainham Industrial (4.1%)
7
Tetron 141 £14m–£16m
Swadlincote Industrial (3.2%)
6
Timbmet £18m–£20m
Shellingford Office (3.6%)5
4
Symphony £24m–£26m
Rotherham Industrial (4.8%)3
2
54 Hagley Road £26m–£28m
Birmingham Office (5.3%)1
TOP TEN
PROPERTIES
Thyssenkrupp Materials (UK) Ltd
Passing Rent: £643,565 2.5%10
Time Wholesale Services (UK) Ltd
Passing Rent: £656,056 2.6%9
8
Public Sector
Passing Rent: £732,210 2.9%
7
ATOS IT Services UK Ltd
Passing Rent: £780,727 3.0%
6
Timbmet Limited
Passing Rent: £799,683 3.1%
B&Q Plc
Passing Rent: £1,560,000 6.1%
5
4
3
2
Schlumberger Oilfield UK PLC
Passing Rent: £1,138,402 4.4%
Jenkins Shipping Group Ltd
Passing Rent: £843,390 3.3%
CEVA Logistics Ltd
Passing Rent: £840,000 3.3%
The Symphony Group Plc
Passing Rent: £1,225,000 4.8%
1
Total: £9,219,033
% of Total Rent: 36.0%
Total Group Passing Rent: £25,631,828
TOP TEN
TENANTS
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 18
Strategic Report
Investment Manager’s Review continued
Rank Name Location Sub-sector Market value Tenure Area sq ft Occupancy
1 54 Hagley Road Birmingham Office £26m–£28m Leasehold 136,959 70.8%
2 Mucklow Hill Halesowen Retail £24m–£26m Freehold 92,400 100%
3 Symphony Rotherham Industrial £24m–£26m Leasehold 364,974 100%
4 Marsh Way Rainham Industrial £20m–£22m Leasehold 82,090 100%
5 Timbmet Shellingford Industrial £18m–£20m Freehold 214,882 100%
6 Atos Data Centre Birmingham Other £14m–£16m Freehold 40,146 100%
7 Tetron 141 Swadlincote Industrial £14m–£16m Freehold 141,459 100%
8 Walton Summit Industrial Estate Preston Industrial £14m–£16m Freehold 147,946 100%
9 Hollywood Green London Other £14m–£16m Freehold 64,503 100%
10 The Pinnacle Reading Office £14m–£16m Freehold 39,447 82.2%
11 Badentoy Aberdeen Industrial £14m–£16m Freehold 67,843 100%
12 CEVA Logistics Corby Industrial £12m–£14m Freehold 195,225 100%
13 New Palace Place London Office £12m–£14m Leasehold 18,723 86.6%
14 15 Basinghall Street London Office £12m–£14m Freehold 17,485 62.9%
15 Tetron 93 Swadlincote Industrial £10m–£12m Freehold 93,836 100%
16 P&O Warehouse Dover Industrial £10m–£12m Freehold 84,376 100%
17 Ocean Trade Centre Aberdeen Industrial £10m–£12m Freehold 103,120 83.6%
18 Swift House Rugby Industrial £10m–£12m Leasehold 100,564 100%
19 Flamingo Flowers Limited Sandy Industrial £10m–£12m Freehold 125,774 100%
20 One Station Square Bracknell Office £8m–£10m Freehold 42,429 61.8%
21 Explorer 1 & 2 & Mitre Court Crawley Office £8m–£10m Freehold 43,533 49.8%
22 Causeway House Edinburgh Office £8m–£10m Freehold 39,522 100%
23 Kings Business Park Bristol Industrial £8m–£10m Freehold 58,413 100%
24 Mount Farm Milton Keynes Industrial £8m–£10m Freehold 74,709 100%
25 101 Princess Street Manchester Office £8m–£10m Freehold 41,096 51.0%
26 The Kirkgate Epsom Office £8m–£10m Freehold 26,333 69.4%
27 82–84 Eden Street Kingston Upon Thames Retail £8m–£10m Freehold 24,234 100%
28 Howard Town Retail Park High Peak Retail £8m–£10m Mixed 48,796 100%
29 Alston Road Washington Industrial £8m–£10m Freehold 96,693 100%
30 Speedy Hire Unit Glasgow Industrial £8m–£10m Freehold 61,033 100%
19Year ended 31 December 2021
Strategic Report
Investment Manager’s Review
Property Investments as at 31 December 2021 continued
# Name Location Sub-sector Market value Tenure Area sq ft Occupancy
31 Wincanton Bristol Industrial £8m–£10m Leasehold 196,914 100%
32 Units 1 & 2 Cullen Square Livingston Industrial £6m–£8m Freehold 81,288 100%
33 Ralia Estate, Newtonmore Ralia Land £6m–£8m Freehold N/a* 100%
34 Opus 9 Industrial Estate Warrington Industrial £6m–£8m Freehold 54,904 100%
35 Endeavor House Kiddlington Office £6m–£8m Freehold 23,414 100%
36 Units H1, H2 & G, Nexus Point Birmingham Industrial £6m–£8m Freehold 46,495 100%
37 Stephenson Industrial Estate Washington Industrial £6m–£8m Freehold 150,257 100%
38 Unit 2 Fareham Industrial £6m–£8m Freehold 38,217 100%
39 31–32 Queen Square Bristol Office £4m–£6m Freehold 13,124 100%
40 Victoria Shopping Park Hednesford Retail £4m–£6m Leasehold 37,096 100%
41 Grand National Retail Park Liverpool Other £4m–£6m Leasehold 38,223 100%
42 The Point Retail Park Rochdale Retail £4m–£6m Freehold 42,224 100%
43 21 Gavin Way Birmingham Industrial £4m–£6m Freehold 36,376 100%
44 Unit 4 Monkton Business Park Newcastle Industrial £4m–£6m Freehold 33,021 100%
45 Olympian Way Leyland, Bradford Retail £4m–£6m Leasehold 31,781 100%
46 Unit 14 Interlink Park Bardon Industrial £2m–£4m Freehold 32,747 100%
47 Unit 4 Easter Park Bolton Industrial £2m–£4m Leasehold 35,534 100%
48 Stadium Way St Helens Industrial £2m–£4m Freehold 101,085 100%
Total property portfolio, including Ralia (not classified as an Investment Property) 499,915,250
*The land at Ralia Estate, Newtonmore covers an area of 1,471 hectares.
Portfolio allocation by Sector Portfolio allocation by Region
* Other includes land at Ralia
Source: abrdn, 31 December 2021
Industrial (55%)
Office (25%)
Retail (11%)
Other* (9%)
South East (28%)
Scotland (12%)
South West (5%)
North West (9%)
London West End (3%)
East Midlands (12%)
London City (3%)
North East (9%)
West Midlands (19%)
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 20
Strategic Report
Investment Manager’s Review
Property Investments as at 31 December 2021 continued
Made up of
27 Industrial
11 Offices
6 Retail
3 Other
1 Land
FORTY
EIGHT
PROPERTIES
40
8
42
3
2
28
15
7
12
4
16
21
26
13
9
27
30
17
11
23
39
24
45
35
34
38
44
42
47
48
46
36
22
32
31
37
29
19
41
5
6
14
1
10
20
18
25
33
21Year ended 31 December 2021
ESG
ESG is central to our investment philosophy, where we
seek to invest in assets that tenants want to occupy and
where their businesses can thrive. ESG might not be
new, but it has grown in scope and importance over the
last 12 months. With such a rapid pace of change, it is
important to have a considered approach to ESG, based
on the best information available. The Company is
going through a period of data gathering, and planning
of future initiatives, as well as implementing strategies
now. Reflecting the importance of ESG, the Annual
Report now has this dedicated section on these matters
where we set out what we are doing to protect and
enhance future shareholder value.
ESG POLICY
ESG Strategy.
ESG factors have come to the fore during the
recent pandemic. The Board and Investment Manager
have, over the last 5 years, incorporated ESG into
their decision making, however it is now a much
more prominent consideration externally as well
internally and so deserves a place in the Company’s
Strategic Report.
The Board has created a separate Sustainability
Committee to ensure that sufficient focus is placed
on ESG, an area it believes will be fundamental to
future corporate performance. ESG might be viewed
as a cost today, but in the future, it will be viewed
as business as usual, and underinvestment today
will adversely impact value tomorrow. As such, the
Company is actively seeking to embrace ESG and
to enhance fund performance through adopting a
calculated programme of upgrades to its assets.
ESG Priorities.
The Company has identified two main areas of focus
that have the most relevance for the activities it
undertakes – Planet and People.
Under Planet, the Company has a primary focus on
Energy and Carbon; Climate resilience; and Biodiversity.
The report below provides details on the approach and
measures, with a particular focus on Energy and Carbon.
People involves our tenants and the users of our
properties. It is a wide-ranging theme, covering
wellness, supplier management, community
engagement, social values, and tenant engagement.
Energy efficiency and decarbonisation.
In 2021, COP26 served to reinforce the need for
the rapid decarbonisation of the global economy.
The Board and Investment Manager believe the real
estate sector has made some progress in the past,
but the pace must accelerate from here.
The Company has an active approach to managing
carbon emissions across the portfolio and has been
implementing energy efficiency improvements and
renewable energy projects for several years.
In 2021, we undertook work to establish the operational
carbon footprint baseline of the portfolio and model
our pathway to net zero. This involved benchmarking
the performance of each asset, modelling our future
footprint including embodied and operational carbon
and identifying the types of measures necessary to fully
decarbonise the portfolio by 2050.
Operational Performance Summary.
The Investment Manager has processes in place to
ensure operational sustainability performance is
monitored and actions are implemented to drive
continual improvement. The effect of COVID-19
on occupancy has had an impact on energy
consumption and greenhouse gas emissions.
It is unfortunately not possible to fully disaggregate
this impact from improvement measures undertaken
at assets. The performance figures for 2021 should
be viewed in this context. Full details of performance
against material EPRA sBPR indicators are included
on pages 98 to 103.
EPRA Sustainability Best Practice
Recommendations Guidelines.
We have adopted the 2017 EPRA Sustainability Best
Practice Recommendations Guidelines (sBPR) to inform
the scope of indicators we report against. We have
reported against all EPRA sBPR indicators that are
material to the Company. We also report additional data
not required by the EPRA sBPR where we believe it to be
relevant (e.g. like-for-like greenhouse gas emissions).
A full outline of the scope of reporting and
materiality review in relation to EPRA sBPR
indicators is included on pages 98–103, which also
provides disclosures required under Streamlined
Energy and Carbon Reporting (SECR).
2021 GRESB Assessment
The GRESB Assessment is the leading global
sustainability benchmark for real estate vehicles.
The Company has been submitted to GRESB since
2012. In the 2021 assessment, the Company
achieved a three star rating, an improvement on
2020’s two stars.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 22
Strategic Report
Environmental, Social and Governance (ESG)
Our pipeline of solar PV opportunities would
generate electricity equivalent to boiling a kettle
32,745,455 times.
GENERATE
ELECTRICITY
EQUIVALENT TO
BOILING A KETTLE
32,745,455 TIMES
The potential carbon credits over the
lifetime of the Ralia reforestation and
peatland restoration.
373,000
CARBON CREDITS
Climate Resilience:
As described in the section on TCFD disclosures
(pages 32 and 33) the Company considers the risks
and impact of climate change on the portfolio.
At a portfolio level we already monitor the flood risk
for each asset and how that might change over time.
We have also recently completed a study to quantify
the value at risk resulting from physical climate
impacts and changes to heating and cooling demand
under a high emissions scenario of 4.3°C of warming
by 2100. The results are summarised in the TCFD
section (pages 32 and 33).
Biodiversity:
Biodiversity is a relatively new focus for the Company.
We have initiated a programme of best practice with
our managing agents to ensure each asset is assessed
with a view to optimising landscaping regimes to
support greater biodiversity.
The Company’s land purchase of Ralia provides an
opportunity to consider biodiversity on a greater
scale, as we start with a baseline survey to be able to
measure net biodiversity gain.
Ralia:
The Company has acquired over 1,400 hectares of
unproductive open moorland in the Cairngorm National
Park which represents one of the largest afforestation
and peatland restoration projects in the UK.
The aim is to regenerate more than 900ha of
woodland, planting over 1.5m trees and to
restore at least 150ha of degraded peatland.
It is estimated the project will deliver up to
195,000 tonnes of claimable carbon to 2060
at a cost of £22 per tonne on a discounted cash
flow basis.
Focusing on native broad-leaved trees and
Scots pine, the woodland creation element of the
project will improve amenity, enhance biodiversity,
mitigate flooding and improve air quality.
The site was previously used for grouse shooting
and some hunting, but that is no longer viable and
the land is not productive for farming.
One aspect of the estate that appealed was that it
had no one living on the land, or directly employed
on it. The Company will seek to employ local workers
and enhance employment on the site through the
planned projects.
CLIMATE CHANGE
As part of the Company’s investment process we take
long term climate impacts into account. For many
years, we have been ensuring that we have a clear
understanding of the flood risk of an asset, and what
flood mitigation there is in place, before we will invest.
If our analysis indicates that there is an unacceptable
risk of damage or harm to life, then we will not proceed.
With changing weather patterns as a result of climate
change, we know we need to not only assess historic
incidents of flooding but also understand potential
future risks. We are now assessing not only flooding
from rivers, sea and surface water, but also other risks
including water scarcity, heat stress, extreme wind
and fires – issues that in the past may not have been
considered a concern in a UK context. With increased
modelling out to 2080 we are better able to forecast
future changes and adapt our strategies accordingly.
Rising temperatures will, at some point, require
increased cooling of workplaces, something that will
require increased energy consumption. Our modelling
indicates that whilst physical risks present long term
concerns, the increased operational costs associated
with cooling demands may be far more significant in
the future under a high warming scenario. It is for this
reason that we are focusing our efforts on improving the
design and operation of the buildings in the portfolio to
ensure that they are low carbon and fit for the future.
23Year ended 31 December 2021
GLASS FUTURES, ST HELENS
NET ZERO CARBON
During the course of 2021 the Company undertook
a study of its carbon footprint, and what would be
required to be net zero by 2050. The key finding
was that landlord controlled energy accounts for
only 10% of the Company’s carbon footprint and
we, as landlords, have little direct control over 90%
of the output determined by tenants. Following the
study, the Company has set a target to be net zero for
emissions associated with landlord-procured energy
by 2030, and has determined that it will work with
tenants to establish a reasonable and realistic target
for total carbon emissions over the medium term.
The Company has already taken a number of steps
towards achieving its target. All Landlord consumed
electricity is certified green energy; and refurbishment
decisions are focused around energy performance
improvements. The route to net zero for the UK is
going to evolve, and so are regulations and solutions/
technology that we can use.
At the moment, the Company’s strategy is to
focus on ensuring compliance with EPC (Energy
Performance Certificates) regulations. At present
it is unlawful to lease properties that have an F or
G rating. The Government has proposed legislation
that will increase the threshold to C in 2027,
and B in 2030.
The portfolio currently has a range of EPC ratings
and we are working through all assets below
C to understand the route to get a C by 2027,
and also how to get to B by 2030. Within the
office portfolio this takes the form of a detailed
maintenance and upgrading programme from now
through to 2030 to understand the best times for
intervention, and what work will be required.
In most cases, the route to EPC B requires
electrification of the buildings. The technology
enabling this is developing, and we are identifying
the right time for the intervention rather than trying
to do everything today, only to find a better solution
becomes available in the future.
The Company has six demises (out of circa 150)
that have an EPC rating of G. Four of them are in
Scotland (on a twenty five unit multi let industrial
estate), where there is different legislation and the
rating does not prevent a letting, one is a small old
unit on the edge of a retail park, and the other is
a large Cinema complex in North London where we
are exploring options.
% Estimated Rental Value (ERV)
EPC Rating 2021 2020
A 2% 0%
B 21% 16%
C 33% 31%
D 35% 39%
E 8% 9%
F 0% 4%
G 1% 1%
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 24
Strategic Report
Environmental, Social and Governance (ESG) continued
RENEWABLE ENERGY
One of the ways we can reduce the carbon footprint
of the Company is through the use of renewable
energy. All landlord supplied energy comes from
a green tariff, however on-site generation is even
better. We have been working with an external party
to increase the provision of on site power in the
form of photo voltaic (PV) cells on building roofs.
We have also looked at wind power on a couple of
sites, but the planning regime is not supportive.
Progress has been slow. At the end of December
2020, we had six operational schemes totalling
1.2Mwp, but that had not changed by the end of
2021; however, we are actively engaged in 14 new
projects, securing grid connections, undertaking
structural surveys, and agreeing terms with tenants.
The 14 schemes would add a further 4.6Mwp –
enough to power 958 homes for a year, or boil
the kettle 32,745,455 times! We have had to put
two further schemes on hold because of a lack of
Grid capacity – something that is going to limit the
speed of electrification possible in the UK.
Existing SLIPIT Projects (Historical)
System
Size
(kWp)
System
Output
Panels
Tennis
Courts
Area
Kettles
Boiled
Households
Powered
Electric
Cars
Charged
Street
Lights
Powered
C0
2
Emissions
Reduced
Trees
Planted
Flamingo Flowers, Great North Road, Sandy (22/06/2020) 918 1,182,267 2,295 19 10,747,882 314 522 8,239 273 13,012
Causewayside House, 160 Causewayside, Edinburgh (27/11/2020) 90 62,722 225 2 570,200 17 28 437 14 690
Pinnacle, 20 Tudor Road, Reading (27/03/2017) 42 150,938 105 1 1,372,164 40 67 1,052 35 1,661
Unit 14, Interlink Park, Bardon (29/03/2019) 50 133,317 125 1 1,211,973 35 59 929 31 1,467
Tetron 141, William Nadin Way, Swadlincote (11/12/2018) 50 135,272 125 1 1,229,745 36 60 943 31 1,489
Unit 2, Brunel Way, Segensworth East, Fareham (20/03/2019) 50 96,515 125 1 877,409 26 43 673 22 1,062
Wingates, Bolton (18/05/2012) 50 395,880 125 1 3,598,909 105 175 2,759 91 4,357
Total 1,250 2,156,911 3,125 26 19,608,282 573 954 15,032 497 23,738
Proposed SLIPIT Projects
System
Size
(kWp)
System
Output
Panels
Number
of Tennis
Courts
Kettles
Boiled
Households
Powered
Electric
Cars
Charged
Street
Lights
Powered
C0
2
Emissions
Reduced
Trees
Planted
Yarm Road, Stockton-on-Tees 168 134,000 420 3 1,218,182 36 59 934 31 1,475
SNOP, Washington 644 508,000 1,610 13 4,618,182 135 224 3,540 117 5,591
Alston Road, Washington 1,177 932,000 2,943 24 8,472,727 248 412 6,495 215 10,257
Speedy, Glasgow 364 271,000 910 7 2,463,636 72 120 1,889 63 2,983
Explorer 1&2, Crawley 75 71,000 188 2 645,455 19 31 495 16 781
Interlink Park, Bardon 112 92,000 280 2 836,364 24 41 641 21 1,013
Drilco, Aberdeen 365 276,000 913 7 2,509,091 73 122 1,923 64 3,038
Unit 4, Easter Park, Bolton 286 210,000 715 6 1,909,091 56 93 1,463 49 2,311
The Point Retail Park, Rochdale 150 78,000 375 3 709,091 21 34 544 18 858
Atos Data Centre, Birmingham 365 306,000 913 7 2,781,818 81 135 2,132 71 3,368
Mount Farm, Milton Keynes 357 233,000 893 7 2,118,182 62 103 1,624 54 2,564
Wincanton, Bristol 150 136,000 375 3 1,236,364 36 60 948 31 1,497
One Station Square, Bracknell 163 150,000 408 3 1,363,636 40 66 1,045 35 1,651
Swift House, Rugby 240 205,000 600 5 1,863,636 55 91 1,429 47 2,256
Total 4,616 3,602,000 11,543 92 32,745,455 958 1,591 25,102 832 39,643
25Year ended 31 December 2021
CARBON OFFSETTING
The Company believes that carbon offsetting is
a last resort measure once all other efforts have
been made to reduce the carbon emissions of
the portfolio. The path to net zero will, however,
take time, and some offsetting will be required.
During 2021 the Company acquired 1,471
hectares of open moorland in the Scottish
Highlands. The intention is a mix of reforestation
(planting approximately 1.5m natural broadleaf
trees), peatland restoration and other forms of
biodiversity gain.
This is a large scale project and we are working
with a number of parties to gain approvals for
the planting. Where possible, we utilise local
labour and expertise, and we have recently
been collecting seeds on site to promote
regeneration of native trees. The opportunity has
the potential to create 373,000 carbon credits
over the lifetime of the project at a known fixed
cost today. We anticipate significant future cost
increases in carbon credits making this asset
progressively more valuable economically as well
as environmentally.
ELECTRIC VEHICLE CHARGING
Although installing EV charge points does not
reduce the Company’s energy consumption, it does
help with decarbonisation, and provides further
amenity to tenants. We have tendered a package
of rapid chargers for our retail warehouse parks,
where a third party will pay the capital cost of
installing the chargers and will operate them,
with a small rent coming back to the Company.
In our office properties we are generally installing
the chargers directly, mainly offering one or two
fast chargers as we see how demand develops.
At Hagley Road we have agreed terms for an
operator to provide rapid and fast chargers for the
public and tenants to use – again adding to the
amenity offer at the building.
NET ZERO STRATEGY
Our net zero principles.
Although the goal may seem clear, definitions and
standards on net zero and the policy mix to support it
remains immature. In this context we have established
several key principles that underpin our strategy to
ensure it has integrity, is robust and delivers value:
Practical:
Asset-level action – focusing on energy efficiency
and renewables is our priority to ensure compliance
with energy performance regulations. Our analysis
shows that meeting proposed future Energy
Performance Certificate standards is a sensible
stepping stone towards net zero. This improves
the quality of assets for occupiers and reduces
the exposure to regulatory and market risk.
Our investment in nature-based carbon removal
is an addition to asset-level decarbonisation.
Timing – we aim to align improvements at our
properties with existing plant replacement cycles and
planned refurbishment activities wherever possible.
This ensures we are not unnecessarily replacing
functional plant ahead of its useful life unless
necessary, which reduces cost and embodied carbon.
Realistic:
Target – long-term objectives must be stretching but
deliverable and complimented by near-term targets
and actions.
Policy support – to fully decarbonise before 2050
the real estate sector requires a supportive policy mix
to incentivise action and level the playing field.
Collaborative:
Occupiers – we recognise that we can’t achieve
net zero for the portfolio in isolation. We will work
closely with occupiers on this journey, many of whom
have their own decarbonisation strategies covering
their leased space. To put this into context, Scope
3 emissions for the company, i.e. the consumption
by our tenants, accounts for 90% of the Company’s
carbon output.
Suppliers – we will work with our suppliers including
property managers and consultants so that everyone
is clear on their role in achieving net zero.
Measurable:
Clear key performance indicators at the asset and
portfolio level.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 26
Strategic Report
Environmental, Social and Governance (ESG) continued
Our baseline.
Our operational carbon footprint for 2019 is shown
in the adjacent table. We have used 2019 as a
baseline for our work as it was unaffected by changes
in occupancy due to COVID-19. This shows a total
operational footprint of 20,651 tonnes of carbon
dioxide equivalent (Co
e). Of this, 10% is associated
with Scope 1 and 2 emissions that are directly
controlled by the Company, with 90% coming from
Scope 3 emissions from tenant procured energy.
For 2019 we gathered energy consumption
data for 46% of the portfolio by floor area with
representative industry standard benchmarks used
to estimate the rest. Based on these assumptions
for 2019 the energy intensity at the portfolio level
was 237kWh/m
2
and the operational emissions
intensity was 45 kgCO
e/m
2
across Scopes 1, 2
and 3. These will be key metrics as we progress with
our delivery strategy.
Our delivery strategy.
Scope 1 and 2 – These are emissions that directly result
from the landlord’s activities where there is operational
control, either through the purchase and consumption
of energy or refrigerant losses.
Scope 3 – These are emissions that occur in our supply
chains and downstream leased assets (i.e. tenant spaces over
which we have a degree of influence but limited control).
SLIPIT 2019 Carbon Footprint (tCOe)
Landlord Gas (4.5%) – Scope 1
Landlord Electricity (5.5%) – Scope 2
Tenant Gas (35%) – Scope 3
Tenant Electricity (55%) – Scope 3
Landlord Waste (<0.1%) – Scope 3
Landlord Water (<0.1%) – Scope 3
Near-term (to 2030) Long-term (2030–2050)
Targets Achieve net zero emissions for Scope 1 and 2 by 2030.
Improve emissions intensity across all scopes by 50% by 2030
from 2019 baseline.
Net zero across all emissions scopes before 2050.
Context We see these 2030 targets as a sensible stepping-stone towards long-term
decarbonisation. In the near term our activities are focused on occupier
engagement and compliance with energy performance regulations which will
mean significant investment in energy efficiency, heat decarbonisation and
renewable energy, whilst acknowledging the Landlord only has direct control
over approximately 10% of the energy consumed, it will work with tenants and
upgrade properties when it can to try and achieve this challenging target.
We anticipate that actions taken to decarbonise heat before 2030 will mean
the company has very low Scope 1 emissions at this date.
Buildings in the UK will have to be fully decarbonised by 2050 through
energy efficiency and the decarbonisation of heat and electricity. We will aim
to reach our long-term target through these measures with as little use of
offsets as possible.
We will keep our long-term target under review and potentially bring it forward
as policy measures and market drivers become clearer in the coming years.
Near-term delivery
actions
Standing portfolio:
Improve ability to obtain tenant energy data through improved
engagement, lease agreements and smart metering
Build improved understanding of tenant decarbonisation strategies
and extent of tenant renewable energy procurement
Implement low-carbon refurbishments to ensure regulatory
compliance focusing on energy efficiency and heat decarbonisation
and start to quantify and reduce embodied carbon
Continue to implement solar PV projects and establish power
purchase agreements with occupiers
Progress with nature-based carbon removal strategy in parallel with
asset decarbonisation
Acquisitions and developments:
In line with the Investment Manager’s policies:
Benchmark assets pre-acquisition, understand costs and build
decarbonisation into asset management plan from the start of ownership
Direct development and development funding to be designed to whole life net
zero principles
Measurement indicators % of tenants data coverage
Absolute portfolio emissions (tCOe)
Energy and emissions intensity (kwh/m/year; kg CO2e/m/year)
Installed solar capacity (MWp)
Embodied carbon of development projects
27Year ended 31 December 2021
NET ZERO STRATEGY
AND OVERSIGHT
Baselining of portfolio
Benchmarking of all assets
High level cost estimates to
decarbonise all assets
KEY IMPLEMENTATION
ACTIONS
Data coverage and occupier engagement
Data coverage improved to 46% by floor area
Installation of smart meters commenced
Green lease clauses improved to facilitate data sharing
Afforestation
Implemented strategy to invest in nature-based solutions to deliver income return and
offset future residual carbon
Standing portfolio
Improve ability to obtain tenant energy data through improved engagement, lease agreements
and smart metering
Build improved understanding of tenant decarbonisation strategies and extent of tenant
renewable energy procurement
Implement low-carbon refurbishments to ensure regulatory compliance focusing on energy
efficiency and heat decarbonisation and start to quantify and reduce embodied carbon
Continue to implement solar PV projects and establish power purchase agreements with occupiers
Progress with nature-based carbon removal strategy in parallel with asset decarbonisation
Renewables and electric vehicles
14 solar PV and multiple EV schemes in feasibility and design stages
Energy efficiency and heat decarbonisation
Full, costed retrofit plans established for multi-let offices to achieve regulatory
compliance and decarbonise heat
Scale of decarbonisation cost established for all assets ready for refinement
Annual review and assessment
of progress towards full
decarbonisation of Scope 1 and
2 and 50% intensity target
Assessment of all acquisitions /
disposals on portfolio footprint
and assess asset-level progress
towards targets
Continue to review policy and market drivers and technological advancements
in the context of the Company’s long term net zero objective
2030–2050 2022–2030 2021 PROGRESS
Acquisitions and developments
In line with the Investment Manager’s policies:
Benchmark assets pre-acquisition, understand costs and build decarbonisation
into asset management plan from the start of ownership
Direct development and development funding to be designed to whole life net zero principles
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 28
Strategic Report
Environmental, Social and Governance (ESG) continued
CASE STUDY
Mount Farm, Milton Keynes
SLIPIT owns a logistics unit in Milton Keynes.
The building extends to 74,709 sq ft, and was let
at a rent of £320,000 pa on a lease expiring in
May 2022. Sarah MacDougall, the Asset Manager at
abrdn responsible for the asset, met with the tenant
early in 2021 and quickly established they wanted to
remain in the building, but also wanted to invest in
enhancements to the specification. Sarah worked
with the tenant and ESG consultants to agree
a scope of works to target a minimum EPC B at the
unit. SLIPIT agreed to fund some of the works instead
of the tenant receiving a rent free period on the new
lease. In addition, an agreement was reached for
SLIPIT to install PV panels on the roof and to sell the
power to the tenant (anticipated installation in the first
half of 2022).
The original EPC rating was an F, so the tenant
undertook the works of improvement itself to enable
the new lease to be entered into. Following the
works, the unit has been certified with an EPC rating
of A. Both tenant and landlord are happy with the
improvements to the property, and the longer agreed
lease term. The asset provided a total return of 56.8%
in 2021. The new rent is £488,250 pa, and SLIPIT
contributed £336,000 to the building upgrade.
MOUNT FARM, MILTON KEYNES
29Year ended 31 December 2021
CASE STUDY
Hagley Road, Birmingham
Hagley Road, Birmingham is the single biggest
investment in the portfolio, comprising an office
building of 136,959 sq ft. Cameron Mackay,
the Asset Manager at abrdn responsible for the
asset, led a team of experts to look at the energy
rating, amenity offer, and appeal of the building.
A refurbishment was undertaken of the ground
floor to provide high quality shower and changing
rooms, secure bike storage, a multi-faith and
a mothering room and shared meeting rooms for
tenant use (one of which is large enough for social
functions and used to offer Yoga classes for the
building’s occupiers).
The biggest change in appearance was an upgrade
of the café and break out space to create a user
friendly experience. Several of the vacant office
suites were fully fitted as “plug and go” to enable
easy and quick access for tenants. As a result,
in a difficult year for offices, Cameron completed
five new lettings and one lease renewal totalling
15,150 sq ft at rents ahead of the original business
plan. The asset provided a total return of 6.1% in
2021 even with the expenditure on the upgrades.
Further work is planned for 2022 to move the EPC
from a D to a C, in anticipation of expected legislation.
HAGLEY ROAD, BIRMINGHAM
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts
Strategic Report
Environmental, Social and Governance (ESG) continued
30
SOCIAL AND WELLNESS
Two of our main principles are to own
buildings that work for our tenants, and to
do the right thing for people who work at
those properties. For example, our supplier
agreements for on-site staff require a living
wage to be paid. Our property managing agent
is JLL, who have a very strong commitment to
being an ethical company.
Within the industrial sector we have added
new requirements when we undertake
refurbishments, to include biodiversity
measures and wellness considerations for the
workers, as well as the normal PV, LED lighting
and general upgrades. Such actions will help
our tenants recruit and retain staff, enhancing
the appeal of the unit.
The office sector is where we can have the
greatest impact, ensuring we create places
that attract people to work. This is done by
assessing the offering we provide in terms of
Flexibility, Amenity, Connectivity, Technology,
and Sustainability. As well as providing
great on-site amenities such as shower and
changing facilities, break out areas with coffee
machines and shared meeting rooms, we also
try to create a sense of community through
seasonal engagement packs, education and
support, charity stalls and cake bakes, and
local charity involvement.
SOCIAL, COMMUNITY AND
EMPLOYEE RESPONSIBILITIES
The Group has no direct social, community or employee
responsibilities. The Group has no employees and
accordingly no requirement to report separately in this
area as the management of the portfolio has been
delegated to the Investment Manager. In light of the
nature of the Group’s business there are no relevant
human rights issues and hence there is no requirement
for a human rights policy. The Board does, however,
closely monitor the policies of its suppliers to ensure
that proper provision is in place.
HEALTH & SAFETY
Alongside environmental principles the Group
has a health & safety policy which demonstrates
commitment to providing safe and secure buildings
that promote a healthy working/customer experience
that supports a healthy lifestyle. The Group, through
the Investment Manager, manages and controls
health & safety risks as systematically as any other
critical business activity using technologically
advanced systems and environmentally protective
materials and equipment. The aim is to achieve a
health & safety performance the Group can be proud
of and allow the Group to earn the confidence and
trust of tenants, customers, employees, shareholders
and society at large. The Board reviews health &
safety on a regular basis in Board meetings.
31Year ended 31 December 2021
Taskforce for Climate-related Financial Disclosures
(TCFD) was established to provide a standardised
way to disclose and assess climate-related
risks and opportunities. Recommendations
are structured around four key topics: Governance,
Strategy, Risk Management and Metrics & Targets.
The Company is committed to implementing the
recommendations of the TCFD to provide investors
with information on climate risks and opportunities
that are relevant to SLIPIT.
TCFD covers risks and opportunities associated with
two overarching categories of climate risk: transition
and physical:
Transition risks are those that relate to an asset,
portfolio or company’s ability to decarbonise.
An entity can be exposed to risks as a result of
carbon pricing, regulation, technological change
and shifts in demand related to the transition.
Physical risks are those that relate to an asset’s
vulnerability to factors such as increasing
temperatures and extreme weather events as a
result of climate change. Exposure to physical risks
may result in, for example, direct damage to assets,
rising insurance costs, health and safety or supply
chain disruption.
There is still significant uncertainty and
methodological immaturity in assessing climate
risks and opportunities and there is not yet a
widely recognised net zero standard. Nonetheless,
as outlined above we have progressed already
with work to model the implications of decarbonising
the portfolio in line with a 1.5°C scenario and
undertaken analysis to understand potential
future physical climate risks. This is the first year
that the Company is reporting against TCFD
recommendations and we expect our disclosures
to evolve over time as methodologies improve
and our work develops further.
TCFD Recommendation Company Approach Further information
Governance
Board oversight of climate-
related risks and opportunities
The Board has created a separate Sustainability Committee to monitor and oversee the Investment Manager’s ESG
undertakings. This includes the consideration of climate-related risks and opportunities.
Sustainability Committee
Report on page 52.
Management’s role in assessing
and managing climate-related
risks and opportunities
At an operational level, the Investment Manager is responsible for integrating a consideration of climate risks
and opportunities into the investment and asset management process. In the first instance this is undertaken by
adopting abrdn real estate’s internal process and policies, and reporting to the Board.
The Company’s approach is
set out in the Environmental,
Social and Governance section
on pages 22 to 31.
Risk Management
The Company’s processes for
identifying and assessing
climate-related risks
Climate-related risks and opportunities are considered and assessed by the Company’s Sustainability Committee. Sustainability Committee
Report on page 52 and our
approach to environmental risk
as set out on page 42.
Metrics and Targets
The metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
We disclose our emissions in line with EPRA Sustainability Best Practices Recommendations. As part of our
decarbonisation strategy we will track progress against our long term aim using interim energy and emissions
intensity targets at the portfolio and asset levels.
Data on emissions is set out
pages 98 to 103.
Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse
gas (GHG) emissions and the
related risks.
We disclose our emissions in line with EPRA Sustainability Best Practices Recommendations (see pages 98 to 103).
This covers Scope 1 and 2 emissions associated with landlord-procured energy as well as Scope 3 emissions
from energy sub-metered to occupiers.
Data on emissions is set out
pages 98 to 103.
The targets used by the
organisation to manage climate-
related risks and opportunities
and performance against targets
We have set long term and short term decarbonisation targets and defined a practical delivery strategy and KPIs.
The Company aims to achieve net zero emissions for Scope 1 and 2 by 2030 and is also targeting net zero across
all scopes before 2050. Whilst acknowledging the Landlord only has direct control over approximately 10% of
the energy consumed, it will work with tenants and upgrade properties when it can to target reducing all scopes
by 50% by 2030, based upon the 2019 baseline.
Our delivery strategy is set out
on page 27.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 32
Strategic Report
Taskforce for Climate-Related Financial Disclosures
TCFD Recommendation Company Approach Further information
Strategy
Climate-related risks and
opportunities the organisation
has identified over the short,
medium, and long term
As part of our investment and asset management process we consider climate-related risks and
opportunities over a range of timescales. A summary of our initial assessment over the short, medium
and long term is as follows.
In the short term (0–5 years) we anticipate regulations affecting the energy performance and emissions of buildings
to tighten to align more closely with Government targets for economy-wide decarbonisation. Whilst this will provide
clarity of direction to the sector it is likely to increase development and refurbishment costs and will start to affect
valuations. These trends, however, will also create opportunities to benefit from moving occupier and investor
demand to low-carbon, future-fit assets.
Over the medium term (5–15 years) these trends will continue, and we expect regulations and market sentiment
to further drive energy efficiency and decarbonisation. We anticipate significant technological change in this
period particularly in relation to heat pump solutions which will improve the technical and financial feasibility of
decarbonising heat in buildings.
Over the long term (15+ years) we are likely to see climate-related extreme weather events increase in frequency and
severity which may impact built environment assets depending on their location and characteristics.
The impact of climate-related
risks and opportunities on the
organisation’s businesses,
strategy, and financial planning
where material
The Board recognises that climate change will affect the built environment, both through decarbonisation and
increased physical risks. The trends summarised above are therefore expected to affect the Company’s strategy and
operations in the coming years.
Alongside our net zero planning, a detailed exercise has been completed by the Manager to assess the portfolio’s
compliance with anticipated Minimum Energy Efficiency Standards legislation. This reviews the measures and
associated costs of compliance and ensures that any necessary interventions can be appraised and included with
the individual asset plans.
We have also recently completed an assessment of value at risk as a result of physical climate risks under the
RCP8.5 climate scenario which implies a 4.3° C temperature rise by 2100. Initial results are described below.
In assessing new investment opportunities, and making hold / sell decisions, the Board has adopted the
Investment Manager’s policy to have a stronger recognition of the potential impact of climate change on the
asset’s future performance. A particular focus is on flood risk and energy performance.
The EPC profile of the Company’s
properties is set out on page 101.
The resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower scenario
We have set out our short-term target to be net zero for company-controlled emissions (Scope 1 and 2) by 2030
and to reduce the emissions intensity of our assets by 50% over the same period. Our long-term target for full
decarbonisation aligns with the UK-wide date of 2050 although this will be continually reviewed in the context of
the market and policy drivers. We will track progress against our long term aim using interim energy and emissions
intensity targets at the portfolio and asset levels.
Our work to establish a net zero pathway for the company is informed by industry benchmarks including the Carbon
Risk Real Estate Monitor (CRREM) 1.5°C Paris-aligned emissions trajectories. As part of this work we have identified
high level cost estimates for transitioning assets to net zero. We consider that the portfolio and Company strategy
is well-positioned to decarbonise in line with this trajectory assuming national energy and climate policy is also
supportive of this goal.
We will continue to engage with industry bodies such as the Better Building Partnership to standardise net zero
definitions across the industry. We recognise that we cannot act in isolation and that achieving this level of
decarbonisation will require supportive climate policy and the cooperation of our occupiers and suppliers.
Our recent work on understanding value at risk as a result of physical climate risk has highlighted the importance
of considering changes in wind speeds and flood risk over time as well as the implications of rising temperatures
on the demand for cooling within buildings. Our initial assessment of these results is that in general under the
RCP8.5 high emissions scenario, physical climate risks generally result in a valuation impact to assets of below
1% by 2080 and there are no meaningful affects until after 2040. Most of the impact is associated with additional
cooling demand due to rising temperatures. We consider that our existing portfolio and Company strategy is resilient
to physical climate risks in the short to medium term. We will keep this under regular review, particularly
as methodologies for physical risk assessment improve.
Our delivery strategy is set out
on page 27.
33Year ended 31 December 2021
OCEAN TRADE CENTRE, ABERDEEN
15 BASINGHALL STREET, LONDON
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 34
Strategic Report
Stakeholder Engagement
The Board regularly reviews the performance
of the Investment Manager, and its other service
providers, to ensure they manage the Company,
and its stakeholders, effectively and that their
continued appointment is in the best long term
interests of the stakeholders as a whole.
The Board also reviews its own performance annually
to ensure it is meeting its obligations to stakeholders.
Engagement with key stakeholders is considered
formally as part of the annual evaluation process.
STRATEGIC ACTIVITY
DURING THE YEAR
Notable transactions where the interests of
stakeholders were actively considered by the Board
during the year, and subsequently, include:
All decisions relating to the Company’s dividends –
the Board recognised the importance of dividends
to its shareholders and have increased the
dividend from the 0.714p per share paid in
respect of Q4 2020 to 1.0p per share which has
been paid in respect of Q4 2021 subsequent to
the year end. In addition, a top-up dividend of
0.381p per share was paid in relation to 2020.
Buyback of shares – the Board bought back
7,394,036 ordinary shares into treasury.
The Board believes that investment by the
Company in its own shares at the levels of
discount to net asset value during the year
offered an attractive investment opportunity for
its shareholders against the financial resources
the Company had available.
This section, which serves as the Company’s section
172 statement, explains how the Directors have
promoted the success of the Company for the benefit
of its members as a whole during the financial year
to 31 December 2021, taking into account the
likely long term consequences of decisions, the
need to foster relationships with all stakeholders
and the impact of the Company’s operations on the
environment, in accordance with the AIC Code on
Corporate Governance.
THE ROLE OF THE DIRECTORS
The Company is a REIT and has no Executive
Directors or employees and is governed by a Non-
Executive Board of Directors. Its main stakeholders
are Shareholders, the Investment Manager, Tenants,
Service Providers, Debt Providers, the Environment
and the Community.
As set out in the Corporate Governance Report, the
Board has delegated day-to-day management of the
assets to the Investment Manager and either directly
or through the Investment Manager, the Company
employs key suppliers to provide services in relation
to property management, health & safety, valuation,
legal and tax requirements, auditing, depositary
obligations and share registration, amongst others.
All decisions relating to the Company’s investment
policy, investment objective, dividend policy, gearing,
corporate governance and strategy in general are
reserved for the Board. The Board meets quarterly,
with numerous other ad-hoc meetings, and receives
full information on the Company’s performance,
financial position and any other relevant information.
At least once a year, the Board also holds a meeting
specifically to review the Group’s strategy.
Ongoing investment activity – the Company,
with oversight from the Board, disposed of
six property assets. The disposals reflected
concerns over asset-specific matters such as
rent sustainability, ESG credentials and also
the pandemic-accelerated structural drivers
around office demand. Following these sales,
the Company invested into two industrial assets
with good ESG credentials in addition to the
acquisition of open moorland in the Scottish
Highlands as part of our Net Zero strategy.
The Board’s primary focus is to promote the long
term success of the Company for the benefit of its
stakeholders as a whole. The Board oversees the
delivery of the investment objective, policy and
strategy, as agreed by the Company’s shareholders.
As set out above, the Board considers the long term
consequences of its decisions on its stakeholders to
ensure the sustainability of the Company.
INTERFLEET HOUSE, DERBY
35Year ended 31 December 2021
The Board hopes that as many shareholders as
possible will be able to attend the meeting. As set
out in the Chairman’s Statement, shareholders are
encouraged to submit questions in advance of the
AGM by email to:
property.income@abrdn.com
The Board has decided to hold an interactive Online
Shareholder Presentation at 2.00pm on Tuesday
14 June 2022. As part of the presentation, shareholders
will receive updates from the Chairman and Manager
as well as the opportunity to participate in an interactive
question and answer session. Further information
on how to register for the event can be found on
www.workcast.com/register?cpak=4656942387252659
TENANTS
Another key stakeholder group is that of the underlying
tenants that occupy space in the properties that the
Company owns. The Investment Manager works closely
with tenants to understand their needs through regular
communication and visits to properties.
The Board believes that tenants benefit from a
trusting and long term working relationship with
the Investment Manager, sustainable buildings
and tenancies, value for money and a focus on the
community, health & safety and the environment.
The Investment Manager consults with tenants and,
on the Board’s behalf, invests in our buildings to
improve the quality and experience for our occupiers
as well as reduce voids and improve values, helping
to produce stronger returns. The Board receives
reports on tenant engagement and interaction at
every Board meeting. The Board also expects the
Investment Manager to undertake extensive financial
due diligence on potential tenants to mitigate the risk
of tenant failure or inability to let properties.
During the COVID-19 pandemic, the Company’s
Investment Manager has worked closely with
tenants to understand their needs. The Board
believes that this is a crisis that has impacted on
individuals as much as companies and takes the
Social aspects of ESG very seriously. The Board firmly
believes that by helping tenants during the pandemic
and building relationships the Company will have
better occupancy over future months and years,
which will in turn benefit the Company’s cash flow.
SHAREHOLDERS
Shareholders are key stakeholders and the Board
places great importance on communication with them.
The Board welcomes all shareholders’ views and aims
to act fairly to all shareholders. The Board believes that
the Company’s shareholders seek an attractive and
sustainable level of income, the prospect of growth of
income and capital in the longer term, a well-executed
sustainable investment policy, responsible capital
allocation and value for money.
The Investment Manager and Company’s Broker
regularly meet with shareholders, and prospective
shareholders, to discuss Company initiatives and seek
feedback. The views of shareholders are discussed by
the Board at every Board meeting, and action taken
to address any shareholder concerns. The Investment
Manager provides regular updates to shareholders
and the market through the Annual Report, Half-Yearly
Report, Quarterly Net Asset Value announcements,
Company Factsheets and its website.
The Chair offers to meet with key shareholders at
least annually, and other Directors are available
to meet shareholders as required. This allows the
Board to hear feedback directly from shareholders
on the Company’s ongoing strategy. Despite the
challenges arising from COVID-19, the Chairman
and Senior Independent Director have met virtually
with shareholders and the Investment Manager
undertook several meetings with large shareholders
to provide reports on the progress of the Company
and receive feedback, which was then provided to
the full Board.
The Company’s AGM provides a forum, both formal
and informal, for shareholders to meet and discuss
issues with the Directors and Investment Manager
of the Company.
The Board welcomes correspondence from
shareholders, addressed to the Company’s
registered office. All shareholders have the
opportunity to put questions to the Board at
the Annual General Meeting.
This year’s AGM is being held on Wednesday
15th June 2022 at 10.30am at the Investment
Manager’s offices at Bow Bells House, 1 Bread
Street, London EC4M 9HH.
DEBT PROVIDER
The Company has a term loan facility and revolving
credit facility with The Royal Bank of Scotland
International Limited (“RBSI”). RBSI seeks responsible
portfolio management and ongoing compliance
with the Company’s loan covenants. The Company
maintains a positive working relationship with RBSI
and provides regular updates on business activity
and compliance with its loan covenants.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 36
Strategic Report
Stakeholder Engagement continued
S
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OTHER SERVICE PROVIDERS
The Board via the Management Engagement
Committee also ensures that the views of its
service providers are heard and at least annually
reviews these relationships in detail. The aim is
to ensure that contractual arrangements remain
in line with best practice, services being offered
meet the requirements and needs of the Company
and performance is in line with the expectations
of the Board, Investment Manager and other
relevant stakeholders. Reviews will include
those of the company secretary, broker and share
registrar. The Company’s auditor is reviewed annually
by the Audit Committee.
INVESTMENT MANAGER
The Chairman’s Statement (pages 5–9) and
Investment Manager’s Review on pages 10–21
detail the key investment decisions taken
during the year and subsequently. The Investment
Manager has continued to manage the Company’s
assets in accordance with the mandate provided
by shareholders, with the oversight of the Board.
The Board receives presentations from the
Investment Manager at every Board meeting to
help it to exercise effective oversight of the
Investment Manager and the Company’s Strategy.
The Board formally reviews the performance of
the Investment Manager, and the fees it receives,
at least annually. More details on the conclusions
from the Board’s review is set out on page 50.
THE COMMUNITY AND
THE ENVIRONMENT
The Board and the Investment Manager are
committed to investing in a responsible manner.
There are a number of geopolitical, technological,
social and demographic trends underway globally
that can, and do, influence real estate investments –
many of these changes fall under the umbrella of
ESG considerations. As a result, the Investment
Manager fully integrates ESG factors into its
investment decision making and governance process.
To reflect the importance of ESG factors, and how
they shape the decision making of the Company,
the Board has created a Sustainability Committee.
This Committee shall give greater focus to the
responsibilities and actions of the Company
in this critical area.
The Board has adopted the Investment Manager’s
ESG Policy and associated operational procedures
and is committed to environmental management in
all phases of the investment process
The Company aims to invest responsibly, to achieve
environmental and social benefits alongside returns.
By integrating ESG factors into the investment process,
the Company aims to maximise the performance of
the assets and minimise exposure to risk. Please see
our section on Environmental, Social and Governance
starting on page 22, our Taskforce for Climate-related
Financial Disclosures on pages 32 and 33, page 40
of our Strategic Overview and the EPRA Financial
and Sustainability Reporting from page 98, for more
information on the Company’s approach to ESG.
37Year ended 31 December 2021
KIRKGATE, EPSOM
OBJECTIVE
The objective, and purpose, of the Group is to provide
shareholders with an attractive level of income together
with the prospect of income and capital growth.
INVESTMENT POLICY
AND BUSINESS MODEL
The Board intends to achieve the investment objective
by investing in a diversified portfolio of UK commercial
properties. The majority of the portfolio will be invested
in direct holdings within the three main commercial
property sectors of retail, office and industrial although
the Group may also invest in other commercial property
such as hotels, nursing homes and student housing.
Investment in property development and investment
in co-investment vehicles, where there is more than
one investor, is permitted up to a maximum of 10%
of the property portfolio.
In order to manage risk, without compromising
flexibility, the Board applies the following restrictions
to the property portfolio, in normal market conditions:
No property will be greater by value than 15%
of total assets.
No tenant (excluding the Government) will be
responsible for more than 20% of the Group’s
rent roll.
Gearing, calculated as borrowings as a percentage of
gross assets, will not exceed 65%. The Board’s current
intention is that the Group’s Loan-to-value ratio
(calculated as borrowings less all cash as a proportion
of property portfolio valuation) will not exceed 45%.
As part of its strategy, the Board has contractually
delegated the management of the property portfolio,
and other services, to Aberdeen Standard Fund
Managers Limited (“the Investment Manager”).
PROPOSED CHANGE TO
INVESTMENT POLICY
Since the formal investment policy was put in place
the real estate market has changed in structure
and the Company has matured. As part of a review
the Board is proposing to change the Company’s
investment policy, as follows:
“The Directors intend to achieve the investment
objective by investing in a diversified portfolio of UK
real estate assets in the industrial, office, retail and
‘other’ sectors, where ‘other’ includes leisure, data
centres, student housing, hotels (and apart-hotels)
and healthcare.
Investment in property development and investment
in co-investment vehicles where there is more than
one investor is permitted up to a maximum of 10%
of the Property Portfolio.
In order to manage risk in the Company, without
compromising flexibility, the Directors apply the
following restrictions to the Property Portfolio:
No property will be greater by value than 15% of
total assets.
No tenant (with the exception of the Government)
shall be responsible for more than 20% of the
Company’s rent roll.
Gearing, calculated as borrowings as a percentage
of the Group’s gross assets, may not exceed 65%.
The Board’s current intention is that the Company’s
gearing will not exceed 45%.
All investment restrictions apply at the time of
investment. The Company will not be required to
dispose of an asset or assets as a result of a change
in valuation.
Any material change to the investment policy of the
Company may only be made with the prior approval
of its Shareholders.”
The Board is seeking shareholder approval to the
new investment policy under Resolution 12 at the
AGM to be held on 15 June 2022.
PINNACLE, READING
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 38
Strategic Report
Strategic Overview
STRATEGY
Each year the Board undertakes a strategic review, with
the help of its Investment Manager and other advisers.
The overall intention is to continue to distribute
an attractive income return alongside growth in
the NAV and a good overall total return relative to
the peer group.
At the property level, it is intended that the Group
remains primarily invested in the commercial sector,
while keeping a watching brief on other classes
such as student accommodation and care homes as
well as other sectors which will enable the Company
to meets its environmental targets.
An ordinary resolution has been proposed to modernise
the Investment Policy, which previously referred to the
three main sectors of office, industrial and retail. As retail
has diminished in importance so the “Other” sector
has increased, and the Company is actively seeking
investments in this area, including hotels, apart-hotels,
data centres and student housing – some of which will
be more operational in nature. The Company is also
undertaking some development to ensure its assets
meet the highest standards and will perform well. The
development risk is split between pre-let developments
and speculative developments (where there is no
lease in place for the completed unit). Speculative
development will not exceed 10% of the fund.
The Board’s preference is to buy into good, but not
necessarily prime, locations, where it perceives there
will be good continuing tenant demand, and to seek
out properties where the asset management skills of
the Investment Manager can be used to beneficial
effect. The Board will continue to have very careful
regard to tenant profiles.
attributes of the existing portfolio as well as
consideration for all acquisition opportunities.
Where required, and in consultation with tenants,
the Group refurbishes and manages the owned
assets to improve the tenants’ experience, including
consideration of health & safety and environmental
factors, with the aim being to generate greater tenant
satisfaction and retention and hence lower voids,
higher rental values and stronger returns.
The Board continues to seek out opportunities
for further, controlled growth in the Group.
The Group continues to maintain a tax efficient
structure, having migrated its tax residence to the
UK and becoming a UK REIT on 1 January 2015.
THE BOARD
As at 31 December 2021, the Board consisted of
a Non-Executive Chairman and four Non-Executive
Directors. Mike Bane has since been appointed to
the Board on 31 January 2022 and brings a wealth
of industry experience and skills which will
complement the existing Board. The names and
biographies of those Directors who held office at
31 December 2021 and at the date of this report
appear on pages 44 and 45 and indicate their range
of property, investment, commercial and financial
experience. There is also a commitment to achieve
the proper levels of diversity.
SWIFT HOUSE, RUGBY
NEXUS POINT, BIRMINGHAM
As part of this investment strategy, the Group
recognises that tenants are a key stakeholder
and an important objective is therefore to foster
a culture whereby the experience of tenants is seen
as paramount to the future success of the Group.
The Investment Manager works closely with
tenants to understand their needs through regular
communication and visits to properties.
The Board recognises the importance of strong
ESG credentials within the portfolio. The Investment
Manager provides the Board with frequent updates
regarding ongoing work to enhance the ESG
39Year ended 31 December 2021
KEY PERFORMANCE INDICATORS
The Board meets quarterly and at each meeting
reviews performance against a number of key
measures which are considered to be alternative
performance measures (“APMs”). These APMs are in
line with recognised industry performance measures
both in the Real Estate and Investment Trust industry
and help to assess the overall performance of the
portfolio and the wider Group:
Property income and total return against the
Quarterly Version of the MSCI Balanced Monthly
Funds Index (“the Index”).
The Index provides a benchmark for the performance
of the Group’s property portfolio and enables the
Board to assess how the portfolio is performing
relative to the market. A comparison is made of
the Group’s property returns against the Index
over a variety of time periods (quarter, annual,
three years, five years and ten years).
ESG
The Board and Investment Manager strive to
position SLIPIT as a leader in ESG. The Company
has undertaken an initial assessment of its carbon
footprint to inform decision making as the Company
progresses to net zero. A programme is underway
to fully understand the pathway to have all assets
EPC B rated within 5 years, and a clear framework
for refurbishment and development standards
is in place. The Company now has a separate
Sustainability Committee made up of the
Non-Executive Directors to monitor progress
against the ESG targets set.
Property voids.
Property voids are unlet properties. The Board
reviews the level of property voids within the Group’s
portfolio on a quarterly basis and compares the
level to the market average, as measured by MSCI.
The Board seeks to ensure that, when a property
becomes void, the Investment Manager gives proper
priority to seeking a new tenant to maintain income.
Rent collection.
The Board assesses rent collection by reviewing the
percentage of rents collected within 21 days of each
quarter end.
Net asset value total return.
The net asset value (“NAV”) total return reflects both
the net asset value growth of the Group and also the
dividends paid to shareholders. The Board regards
this as the best overall measure of value delivered
to shareholders. The Board assesses the NAV total
return of the Group over various time periods (quarter,
annual, three years, five years and ten years) and
compares the Group’s returns to those of its peer
group of listed, closed-ended property investment
companies, as set out on page 15.
Premium or discount of the share price to net
asset value.
The Board closely monitors the premium or discount
of the share price to the NAV and believes that a key
driver for the level of the premium or discount is the
Group’s long-term investment performance. However,
there can be short-term volatility in the premium or
discount and the Board takes powers at each Annual
General Meeting (“AGM”) to enable it to issue or buy
back shares with a view to limiting this volatility.
Dividend per share and dividend cover.
A key objective of the Group is to provide
an attractive, sustainable level of income to
shareholders and the Board reviews, at each Board
meeting, the level of dividend per share and the
dividend cover, in conjunction with detailed financial
forecasts, to ensure that this objective is being met
and is sustainable.
The Board considers the performance measures both
over various time periods and against similar funds.
A record of these measures is disclosed in the
Financial and Portfolio Review, Chairman’s Statement
and Investment Manager’s Review.
FLAMINGO FLOWERS SANDY
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 40
Strategic Report
Strategic Overview continued
PRINCIPAL RISKS AND UNCERTAINTIES
The Board ensures that proper consideration of risk
is undertaken in all aspects of the Group’s business
on a regular basis. During the year, the Board carried
out an assessment of the risk profile of the Group,
including consideration of risk appetite, risk tolerance
and risk strategy. The Board regularly reviews the
principal and emerging risks of the Group, seeking
assurance that these risks are appropriately rated and
ensuring that appropriate risk mitigation is in place.
The Group’s assets consist of direct investments in UK
commercial property. Its principal risks are therefore
related to the commercial property market in general,
but also the particular circumstances of the properties
in which it is invested, and their tenants. The Board
and Investment Manager seek to mitigate these
risks through a strong initial due diligence process,
continual review of the portfolio and active asset
management initiatives. All of the properties in the
portfolio are insured, providing protection against
risks to the properties and also protection in case of
injury to third parties in relation to the properties.
The overarching risk throughout 2021 was COVID-19,
which impacted all areas of society in the UK and
abroad. This pandemic caused significant loss of life
and global economic disruption. It arguably affects
all areas of risk on which the Company reports and
maintained the increased risk profile, from the prior
year, of the Company.
Although we have seen the successful vaccination
roll-out in the UK, and a return towards pre-pandemic
normality, we remain vigilant to further strains of
the virus as well as the emerging geopolitical risk
that exists at the time of writing this report. In the
section following, particular consideration has been
given to how COVID-19 and geopolitical threats are
impacting on the specific risks that are reviewed at
each Board meeting.
The Group and its objectives become unattractive
to investors, leading to widening of the discount.
This risk is mitigated through regular contact
with shareholders, a regular review of share price
performance and the level of the discount or premium
at which the shares trade to net asset value and
regular meetings with the Group’s broker to discuss
these points and address any issues that arise.
COVID-19 and geopolitical risk have increased the
volatility of the Company’s share price and, reflecting
wider market sentiment, has resulted in the Company’s
shares trading at a discount to prevailing NAV of
11.9% as at 31 March 2022, in-line with other
diversified peers in the Company’s AIC peer group.
Net revenue falls such that the Group cannot
sustain its level of dividend, for example due
to tenant failure or inability to let properties.
This risk is mitigated through regular review of forecast
dividend cover and of tenant mix, risk and profile.
Due diligence work on potential tenants is undertaken
before entering into new lease arrangements and
tenants are kept under constant review through
regular contact and various reports both from the
managing agents and the Investment Manager’s own
reporting process.
Contingency plans are put in place at units that have
tenants that are believed to be in financial trouble.
The Group subscribes to the MSCI Iris Report which
updates the credit and risk ranking of the tenants and
income stream, and compares it to the rest of the UK
real estate market.
During 2021, the impact of lockdown restrictions
continued to have a severe impact upon retail,
particularly traditional, high street locations.
SWIFT HOUSE, RUGBY
41Year ended 31 December 2021
The Group has partially mitigated the risk by having
an underweight position to the retail sector (11.3%,
against the MSCI benchmark of 20.5%). Reflecting
the better performing retail warehouse sub-sector,
the Group has a holding of 9.6% which is broadly in
line with the 11.7% benchmark level.
As lockdown restrictions were lifted and market
uncertainty eased, rent collection rates have
improved towards the end of the year and the
Board increased the dividend to reflect this. The full
extent of the heightened geopolitical risk has yet to
be seen but inflationary pressures and vulnerabilities
in supply chain could impact upon our tenants’ ability
to trade profitably.
Uncertainty or change in the macroeconomic
environment results in property becoming an
undesirable asset class, causing a decline in
property values.
This risk is managed through regular reporting from,
and discussion with, the Investment Manager and
other advisers. Macroeconomic conditions form part
of the decision making process for purchases and
sales of properties and for sector allocation decisions.
The impact of COVID-19 on the UK economy had
seen the largest fall in GDP in over 300 years.
This impacted both property values and the ability
of tenants to pay rent. The success of the vaccination
programme and easing of restrictions has seen an
improvement in appetite for real estate, reflected in
improving property values.
The full macroeconomic impact of the conflict in
Ukraine has not yet materialised but will disrupt
supply chains and contribute to inflationary
pressures. Real estate holdings of good quality
and rental growth prospects can appear more
attractive at such times to offer a partial hedge
against inflationary pressures.
Environmental.
Environmental risk is considered as part of each
purchase and monitored on an ongoing basis by the
Investment Manager. However, with extreme weather
events both in the UK and globally becoming a more
regular occurrence due to climate change, the impact
of the environment on the property portfolio and on
the wider UK economy is seen as an increasing risk.
Please see the Environmental, Social and Governance
Policy section, our Taskforce for Climate-related
Financial Disclosures and the Investment Manager’s
Review for further details on how the Company
addresses environmental risk, including climate change.
Other risks faced by the Group include the following:
Strategic – incorrect strategy, including sector
and property allocation and use of gearing, could
all lead to a poor return for shareholders.
Tax efficiency – the structure of the Group or
changes to legislation could result in the Group no
longer being a tax efficient investment vehicle for
shareholders.
Regulatory – breach of regulatory rules could lead
to the suspension of the Group’s Stock Exchange
Listing, financial penalties or a qualified audit report.
Financial – inadequate controls by the Investment
Manager or third party service providers could
lead to misappropriation of assets. Inappropriate
accounting policies or failure to comply with
accounting standards could lead to misreporting
or breaches of regulations.
Operational – failure of the Investment Manager’s
accounting systems or disruption to the Investment
Manager’s business, or that of third party service
providers, could lead to an inability to provide
accurate reporting and monitoring, leading to
loss of shareholder confidence.
Business continuity – risks to any of the
Company’s service providers or properties,
following a catastrophic event e.g. terrorist attack,
cyber-attack, power disruptions or civil unrest,
leading to disruption of service, loss of data etc.
Refinancing – risk that the Company is unable
to renew its existing facilities, or does so on
significantly adverse terms, which does not support
the current business strategy.
The Board seeks to mitigate and manage all
risks through continual review, policy setting and
enforcement of contractual obligations. It also
regularly monitors the investment environment
and the management of the Group’s property
portfolio, levels of gearing and the overall structure
of the Group.
Details of the Group’s internal controls are described
in more detail in the Corporate Governance Report
on pages 48 to 51.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 42
Strategic Report
Strategic Overview continued
VIABILITY STATEMENT
The Board considers viability as part of its ongoing
programme of financial reporting and monitoring risk.
The Board continually reviews the prospects for the
Company over the longer term taking into account the
Company’s current financial position, its operating
model, and the diversified constituents of its portfolio.
In addition the Board considers strong initial due
diligence processes, the continued review of the
portfolio and the active asset management initiatives.
Given the above, the Board believes that the Company
has a sound basis upon which to continue to deliver
returns over the long term.
In terms of viability, the Board has considered the
nature of the Group’s assets and liabilities and
associated cash flows and has determined that five
years is the maximum timescale over which the
performance of the Group can be forecast with a
material degree of accuracy and so is an appropriate
period over which to consider the Group’s viability.
The Board has also carried out a robust assessment
of the principal and emerging risks faced by the
Group, as detailed on pages 41 to 42. The main risks
which the Board considers will affect the business
model are: future performance, solvency, liquidity,
tenant failure leading to a fall in dividend cover and
macroeconomic uncertainty.
These risks have all been considered in light of the
financial and economic impact that arose from COVID-19
and considering the emerging geopolitical risks.
The Board takes any potential risks to the ongoing
success of the Group, and its ability to perform, very
seriously and works hard to ensure that risks are
consistent with the Group’s risk appetite at all times.
In assessing the Group’s viability, the Board has
carried out thorough reviews of the following:
Detailed NAV, cash resources and income forecasts,
prepared by the Company’s Investment Manager,
for a five year period under both normal and
stressed conditions;
The Group’s ability to pay its operational expenses,
bank interest, tax and dividends over a five year period;
Future debt repayment dates and debt covenants, in
particular those in relation to LTV and interest cover;
The ability of the Company to refinance its debt facilities
in April 2023;
Demand for the Company’s shares and levels of
premium or discount at which the shares trade to NAV;
Views of shareholders; and
The valuation and liquidity of the Group’s property
portfolio, the Investment Manager’s portfolio
strategy for the future and the market outlook.
Despite the uncertainty in the UK regarding the
future impact of the COVID-19 pandemic, including
the potential for new strains of the virus, and the
emerging geopolitical conflict, the Board has a
reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as
they fall due over the next five years. This assessment
is based on the current financial position of the
Company, its performance track record and feedback
it receives from shareholders.
APPROVAL OF STRATEGIC REPORT
The Strategic Report comprises the Financial
and Portfolio Review, Performance Summary,
Chairman’s Statement, Investment Manager’s Review,
Environmental, Social and Governance, Taskforce for
Climate-related Financial Disclosures, Stakeholder
Engagement and Strategic Overview. The Strategic
Report was approved by the Board and signed on its
behalf by:
27 April 2022
James Clifton-Brown
Chairman
OCEAN TRADE CENTRE, ABERDEEN
43Year ended 31 December 2021
Jill May
Board member
Jill May is a UK resident. She is an External Member of the Prudential
Regulation Committee of the Bank of England, Council member of the
Duchy of Lancaster and is also a Non-Executive Director of JPMorgan
Claverhouse Investment Trust plc, Alpha Financial Markets Consulting
plc and Ruffer Investment Company. Jill was a Non-Executive Director
of the CMA from its inception in 2013 until October 2016. Prior to this
she spent 25 years in investment banking, 13 years in mergers and
acquisitions with SG Warburg & Co. Ltd and 12 years at UBS AG.
Contribution: The Board, through the Nomination Committee,
has reviewed the contribution of Jill May in light of her forthcoming
re-election at the AGM in June 2022 and has concluded that
she continues to provide excellent strategic, risk and investment
management insight to the Board discussions.
James Clifton-Brown
Chairman
James Clifton-Brown is a UK resident. He joined CBRE Global Investors
in 1984 as a fund manager on the Courtaulds Pension Scheme
Account (now Akzo Nobel Pension Scheme) and became the firm’s
UK Chief Investment Officer (“CIO”) in 1996. He retired from this role
on 30 April 2017. In his role as UK CIO, James had responsibility for
the firm’s UK house strategy and risk management as well as client
and investor relationship management. Since 2004, he has also been
a Director on a number of boards relating to CBRE Global Investors
Limited. He is a voting member on the USA and European Investment
Committees of CBRE Global Investors.
Contribution: The Board, through the Nomination Committee,
has reviewed the contribution of James Clifton-Brown in light of his
forthcoming re-election at the AGM in June 2022 and has concluded
that he remains a strong Chair of the Company and continues to
provide excellent strategic and investment insights into portfolio
management and wider corporate strategy.
Sarah Slater
Board member
Sarah Slater is a UK resident. She is the Chief Executive of
The Eyre Estate, a private family trust, a former trustee of Dulwich
Estate and was a Board member of GRIP REIT Plc, one of the UK’s
largest residential REITs. During her career, Sarah held senior
positions at The Canada Pension Plan Investment Board (CPPIB),
ING Real Estate Investment Management (now CBRE GI) and
Henderson Global Investors (now Nuveen) with responsibility for
the delivery of major real estate programmes.
Contribution: The Board, through the Nomination Committee, has
reviewed the contribution of Sarah Slater in light of her forthcoming
re-election at the AGM in June 2022 and has concluded that she
brings valuable property expertise and insight into the outlook for
property to the Board, and continues to Chair the Property Valuation
Committee strongly.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 44
Governance
Board of Directors
Mike Bane
Board member
Mike Bane is a resident of Guernsey. Mike is a member of the Institute
of Chartered Accountants of England & Wales and retired as an
assurance partner in Ernst & Young LLP (“EY”) in 2018. He has over
35 years’ experience in practice with a focus on the asset management
and real estate industries. He was a member of EY’s EMEIA Wealth
and Asset Management Board and was responsible for EY’s services
to those industries in the Channel Islands. Mike is a Non-Executive
Director and Chairman designate, of HICL plc. In addition, he is
a Non-Executive Director of The Health Improvement Commission
for Guernsey & Alderney LBG.
Contribution: The Board, through the Nomination Committee, has
reviewed the contribution of Mike Bane in light of his forthcoming
election at the AGM in June 2022 and has concluded that his industry
experience benefits the Audit Committee in particular alongside his
knowledge of the real estate sector and the regulatory and operating
environment in Guernsey.
Mike Balfour
Board member
Mike Balfour is a UK resident. He is a member of the Institute of
Chartered Accountants of Scotland and was Chief Executive at
Thomas Miller Investment Ltd from 2010 to January 2017. Prior to
this, he was Chief Executive at Glasgow Investment Managers and Chief
Investment Officer at Edinburgh Fund Managers Limited. Mike has
30 years of investment management experience and was appointed
to the Board on 10 March 2017. He is also a Director of Fidelity China
Special Situations PLC, Schroder BSC Social Impact Trust plc and chairs
the Investment Committee of TPT Retirement Solutions.
Contribution: The Board, through the Nomination Committee, has
reviewed the contribution of Mike Balfour in light of his forthcoming
re-election at the AGM in June 2022 and has concluded that his
chairmanship of the Audit Committee is strong, particularly during the
financial challenges arising from COVID-19. Mike has also led the Board
in the establishment of the newly created Sustainability Committee,
and he continues to provide the Board with expert knowledge of
investment companies, financing and capital markets.
Huw Evans
Board member
Huw Evans is a resident of Guernsey. He qualified as a Chartered
Accountant with KPMG (then Peat Marwick Mitchell) in 1983.
He subsequently worked for three years in the corporate finance
department of Schroders before joining Phoenix Securities Limited in
1986. Over the next twelve years he advised a wide range of companies
in financial services and other sectors on mergers and acquisitions and
more general corporate strategy. Since moving to Guernsey in 2005,
he has acted as a Non-Executive Director for a number of Guernsey
based funds. He is currently Chairman of VinaCapital Vietnam Opportunity
Fund Limited and also a Director of Third Point Investors Limited.
Contribution: The Board, through the Nomination Committee, has
reviewed the contribution of Huw Evans and has concluded that he
continues to chair the Management Engagement Committee effectively,
is a strong Senior Independent Director and brings strategic insights
into Board discussions. Huw will be retiring at the AGM in June 2022
having served nine years on the Board.
45Year ended 31 December 2021
The Directors of Standard Life Investments Property
Income Trust Limited (“the Company”) present their
Annual Report and Audited Consolidated Financial
Statements for the year ended 31 December 2021.
PRINCIPAL ACTIVITY AND STATUS
The Company was incorporated in Guernsey on
18 November 2003 and commenced activities on
19 December 2003. The Company is a closed ended
investment company and is registered under the
provisions of The Companies (Guernsey) Law, 2008
(as amended). The principal activity and status of the
Company’s subsidiaries is set out in note 10 on page 86.
The Company’s registered number is 41352.
On 1 January 2015 the Company migrated its tax
residence to the UK and became a UK REIT.
LISTING
The Company is listed on the London Stock Exchange
(premium listing).
The Company has complied with the relevant
provisions of, and the requirements set out in,
the United Kingdom Listing Authority (‘UKLA’)
regulations throughout the year under review.
THE GROUP
At 31 December 2021, the Group consisted of
the Company and five subsidiaries: Standard Life
Investments Property Holdings Limited, a company
with limited liability incorporated in Guernsey;
Standard Life Investments (SLIPIT) Limited
Partnership, a limited partnership established in
England; Standard Life Investments SLIPIT (General
Partner) Limited, a company with limited liability
incorporated in England; Standard Life Investments
SLIPIT (Nominee) Limited, a company with limited
liability incorporated in England; and Hagley Road
Limited, a company incorporated in Jersey.
RESULTS AND DIVIDEND
The Group generated an IFRS profit of £85.7 million
(2020: Loss £15.8 million) in the year equating to
earnings per share of 21.54p (2020: -3.88p). In addition
the Group generated cash of £4.4 million (2020:
generated cash of £2.9 million) in the year and had cash
at the year-end of £13.8 million (2020: £9.4 million).
The Group paid out dividends totalling £15.0 million
(2020: £15.5 million) in the year which were
substantially covered by the net income of the Group.
SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2021 and 31 March 2022, the
following entities had notified the Company of a holding
of 3% or more of the Company’s issued share capital.
Holdings (%)
31.12.21 31.03.22
Hargreaves Lansdown 10.1 10.3
Mattioli Woods 9.4 9.2
Interactive Investor 7.8 7.9
Brewin Dolphin 6.3 5.9
AJ Bell 5.6 5.7
BlackRock 4.6 4.7
Handelsbanken 4.5 4.5
Brooks Macdonald N/A 3.1
DIRECTORS
The names and short biographies of the Directors
of the Group at the date of this Report, are shown
on pages 44 and 45.
The Directors each hold the following number of
ordinary shares in the Company (audited):
Ordinary Shares held
31.12.21 31.12.20
Huw Evans 60,000 60,000
James Clifton-Brown 21,500 21,500
Jill May 128,592 128,592
Mike Balfour 125,000 125,000
Robert Peto — 57,435*
Sarah Slater — —
Mike Bane — —
*
As at date of retirement on 25 August 2020
There have been no changes in the above interests
between 31 December 2021 and 27 April 2022.
DIRECTORS’ INDEMNITY
The Group maintains insurance in respect of
Directors’ and Officers’ liabilities in relation to their
acts on behalf of the Group. The Company’s Articles
of Association provide, subject to the provisions of
Guernsey legislation, for the Group to indemnify
Directors in respect of costs which they may incur
relating to the defence of any proceedings brought
against them arising out of their position as Directors
in which judgement is given in their favour or they
are acquitted.
DISCLOSURE OF INFORMATION
TO AUDITOR
In the case of each of the persons who are
Directors at the time when the Annual Report and
Consolidated Financial Statements are approved,
the following applies:
So far as the Director is aware, there is no relevant
audit information of which the Group’s auditor is
unaware; and
They have taken all the steps that they ought
to have taken as a Director in order to make
themselves aware of any relevant audit information
and to establish that the Group’s auditor is aware of
that information.
GOING CONCERN
The Group’s strategy and business model, together
with the factors likely to affect its future development,
performance and position, including principal risks
and uncertainties, are set out in the Strategic Report.
The Directors have reviewed detailed cash flow, income
and expense projections in order to assess the Group’s
ability to pay its operational expenses, bank interest
and dividends for the foreseeable future. The Directors
have examined significant areas of possible financial
risk including cash and cash requirements and the
debt covenants, in particular those relating to LTV and
interest cover.
They have not identified any material uncertainties,
including COVID-19 and geopolitical risk, which
might cast significant doubt on the ability to continue
as a going concern for a period of not less than
12 months from the date of the approval of the
consolidated financial statements.
The Directors have satisfied themselves that the
Group has adequate resources to continue in
operational existence for the foreseeable future
and the Board believes it is appropriate to adopt the
going concern basis in preparing the consolidated
financial statements.
CORPORATE GOVERNANCE
The Directors report on Corporate Governance is detailed
on pages 48 to 51 and forms part of the Directors’ Report.
CRIMINAL FINANCES ACT
The Directors are fully committed to complying with
all legislation and appropriate guidelines designed
to prevent tax evasion and the facilitation of tax
evasion in the jurisdictions in which the Group, its
service providers and business partners operate.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 46
Governance
Directors’ Report
SHARE CAPITAL AND VOTING RIGHTS
At 31 December 2021 there were 396,922,386
ordinary shares of 1p each in issue and 9,943,033
ordinary shares held in treasury.
During the year, the Company bought back
7,394,036 ordinary shares of 1p each into treasury.
There have been no changes to the ordinary shares
in issue, or treasury, since the year end. All ordinary
shares rank equally for dividends and distributions
and carry one vote each. There are no restrictions
concerning the transfer of ordinary shares in the
Company, no special rights with regard to control
attached to the ordinary shares, no agreements
between holders of ordinary shares regarding their
transfer known to the Company and no agreement
which the Company is party to that affects its control
following a takeover bid.
ISSUE OF SHARES
As required by the Listing Rules, the Directors will
only issue shares at prices which are not less than
the net asset value of the ordinary shares unless
such shares are first offered on a pre-emptive basis
to existing shareholders or otherwise with the
approval of shareholders.
INDEPENDENT AUDITOR
A resolution to re-appoint Deloitte LLP as the Group’s
auditor will be proposed to the shareholders at the
AGM on 15 June 2022.
ANNUAL GENERAL MEETING
The notice of the Annual General Meeting,
which will be held this year at Bow Bells House,
1 Bread Street, London EC4M 9HH on Wednesday
15 June 2022 at 10:30am may be found on
pages 111 and 112.
The Board welcomes correspondence from
shareholders, addressed to the Company’s
registered office. All shareholders have the
opportunity to put questions to the Board at the
Annual General Meeting.
The Board hopes that as many shareholders as
possible will be able to attend the meeting.
The Board has decided to hold an interactive Online
Shareholder Presentation at 2.00pm on Tuesday
14 June 2022. As part of the presentation, shareholders
will receive updates from the Chairman and Manager
as well as the opportunity to participate in an interactive
question and answer session. Further information
on how to register for the event can be found on
www.workcast.com/register?cpak=4656942387252659
The following resolutions are being proposed in
relation to approval of the Company’s dividend
policy, proposed change to the investment policy,
the Directors’ authorities to buy back and allot shares
and the proposed change of name of the Company.
Dividend policy (resolution 4)
As a result of the timing of payment of the
Company’s quarterly dividends in February, May,
August and November, it is impractical for the
Company’s shareholders to approve a final dividend
each year. As an alternative, the Board puts forward
the Company’s dividend policy to shareholders for
approval on an annual basis.
Resolution 4 which is an ordinary resolution, relates
to the approval of the Company’s dividend policy
which is to pay four quarterly interim dividends with
the ability to pay further interim dividends should the
need arise i.e. to comply with the REIT rules.
Proposed change to the investment policy
(resolution 12)
The Board is seeking, under ordinary resolution 12,
shareholders’ approval of a revised investment
policy. Additional information may be found in the
Chairman’s Statement on page 9 and in the Strategic
Overview on page 38.
Directors authority to buy back shares
(resolution 13)
During the year to 31 December 2021, the Company
bought back 7,394,036 ordinary shares of 1p each
into treasury. Unless renewed, the current authority
of the Company to make market purchases of shares
expires at the end of the Annual General Meeting.
Consequently, special resolution 13 as set out in the
notice of the Annual General Meeting seeks authority
for the Company to make market purchases of up to
14.99 percent of the issued ordinary share capital,
such authority to last until the conclusion of the annual
general meeting in 2023 or if earlier on the expiry
of 15 months from the passing of the resolution.
Any buy back of ordinary shares will be made subject
to Guernsey law, the UKLA’s Listing Rules and within
any guidelines established from time to time by the
Board and the making and timing of any buy backs
will be at the absolute discretion of the Board.
Purchases of ordinary shares will only be made
through the market for cash at prices below the
prevailing net asset value of the ordinary shares
(as last calculated) where the Directors believe
such purchases will enhance shareholder value.
The price paid will not be less than the nominal
value of 1p per share.
Such purchases will also only be made in accordance
with the rules of the UK Listing Authority which
provide that the price to be paid must not be more
than the higher of; (i) 105 percent of the average
of the middle market quotations (as derived from
the Daily Official List of the London Stock Exchange)
for the ordinary shares for the five business days
before the shares are purchased; and (ii) the higher
of the last independent trade and the highest current
independent bid on the trading venue on which the
purchase is carried out. Any shares purchased under
the authority will be cancelled or held in treasury.
Directors authority to allot shares on a non
pre-emptive basis (resolution 14)
Resolution 14 as set out in the notice of the Annual
General Meeting gives the Directors, for the period
until the conclusion of the annual general meeting
in 2023 or if earlier on the expiry of 15 months from
the passing of the special resolution, the necessary
authority to either allot securities or sell shares held
in treasury, otherwise than to existing shareholders
on a pro-rata basis, for cash, up to an aggregate
nominal amount of £396,922. This is equivalent
to approximately 10% of the issued ordinary share
capital of the Company as at 27 April 2022. It is
expected that the Company will seek this authority
on an annual basis. The Directors will only exercise
this authority if they believe it advantageous and
in the best interests of shareholders and in no
circumstances would result in a dilution to the net
asset value per share.
The Directors believe that the resolutions being put
to the shareholders at the Annual General Meeting
are in the best interests of the shareholders as a
whole. Accordingly the Directors recommend that
shareholders vote in favour of all of the resolutions
to be proposed at the Annual General Meeting,
as the Directors intend to do in respect of all of their
own beneficial shareholdings.
Change of Company Name (resolution 15)
Resolution 15, which will be proposed as a special
resolution, seeks shareholder approval to change
the Company’s name to “abrdn Property Income
Trust Limited”. The change of name is proposed
in order to align the Company’s name with the
Manager’s business, which changed name in 2021.
If shareholders approve Resolution 15, the Board
will effect the change in name as soon as practicable
following the Annual General Meeting.
Approved by the Board on
27 April 2022
James Clifton-Brown
Chairman
47Year ended 31 December 2021
INTRODUCTION
The Company is committed to high standards of
corporate governance.
The Board has considered the Principles and
Provisions of the AIC Code of Corporate Governance
2019 (AIC Code). The AIC Code addresses the
Principles and Provisions set out in the UK Corporate
Governance Code (the UK Code), as well as setting
out additional Provisions on issues that are of
specific relevance to the Company.
The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council
and the Guernsey Financial Services Commission
provides more relevant information to shareholders.
The Company has complied with the recommendations
of the AIC Code, except as set out below:
Interaction with the workforce
(provisions 2, 5 and 6);
The role and responsibility of the Chief
Executive (provisions 9 and 14);
Previous experience of the Chairman of
a Remuneration Committee (provision 32); and
Executive Directors’ remuneration
(provisions 33 and 36 to 40).
The Board considers these provisions are not
relevant to the Company, being an externally
managed investment company. In particular, all
of the Company’s day-to-day management and
administrative functions are outsourced to third
parties. As a result, the Company has no Executive
Directors, employees or internal operations.
The Company has therefore not reported further
in respect of these provisions.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation
of how the AIC Code adapts the Principles and
Provisions set out in the UK Code to make them
relevant for investment companies.
THE BOARD
The Board comprises solely Non-Executive Directors
of which James-Clifton Brown is Chairman and Huw
Evans is Senior Independent Director. Biographical
details of each Director are shown on pages 44 and 45.
All Directors are considered by the Board to be
independent of the Investment Manager and free
of any relationship which could materially interfere
with the exercise of their independent judgement
on issues of strategy, performance, resources and
standards of conduct.
The Board has delegated day-to-day management
of the assets to the Investment Manager. All decisions
relating to the Group’s investment policy, investment
objective, dividend policy, gearing, corporate
governance and strategy in general are reserved for
the Board. The Board meets quarterly and receives
full information on the Company’s performance,
financial position and any other relevant information.
At least once a year, the Board also holds a meeting
specifically to review the Group’s strategy.
Individual Directors are entitled to have access to
independent professional advice at the Group’s
expense where they deem it necessary to discharge
their responsibilities as Directors. The Group maintains
appropriate Directors and Officers liability insurance.
The Directors have access to the company secretarial
and administration services of the Company
Secretary, Northern Trust International Administration
Services (Guernsey) Limited, through its appointed
representatives. The Company Secretary is
responsible to the Board for:
Ensuring that Board procedures are complied with;
Under the direction of the Chairman, ensuring good
information flows to the Board and its Committees,
as well as facilitating inductions and assisting with
professional developments; and
Liaising, through the Chairman, on all corporate
governance matters.
The Board has a procedure in place to deal with
a situation where a Director has a conflict of interest.
As part of this process, the Directors prepare a list of
other positions held and all other conflict situations
that may need authorising either in relation to the
Director concerned or his/her connected persons.
The Board considers each Director’s situation and
decides whether to approve any conflict, taking into
consideration what is in the best interests of the Group
and whether the Director’s ability to act in accordance
with his or her wider duties is affected. Each Director
is required to notify the Company Secretary of any
potential or actual conflict situations which require
authorising by the Board. Any authorisations given by
the Board are reviewed at each Board meeting.
CHAIRMAN AND SENIOR
INDEPENDENT DIRECTOR
The Chairman is responsible for providing effective
leadership to the Board, demonstrating objective
judgement and promoting a culture of openness
and debate. The Chairman facilitates the effective
contribution, and encourages active engagement,
by each Director. In conjunction with the Company
Secretary, the Chairman ensures that Directors
receive accurate, timely and clear information
to assist them with effective decision-making.
The Chairman leads the evaluation of the Board
and individual Directors, and acts upon the results
of the evaluation process by recognising strengths
and addressing any weaknesses. The Chairman also
engages with major shareholders and ensures that
all Directors understand shareholder views.
The Senior Independent Director acts as a sounding
board for the Chairman and acts as an intermediary
for other directors, when necessary. Working
closely with the Nomination Committee, the Senior
Independent Director takes responsibility for an
orderly succession process for the Chairman,
and leads the annual appraisal of the Chairman’s
performance. The Senior Independent Director is
also available to shareholders to discuss any
concerns they may have. Huw Evans is the Senior
Independent Director and, following his retirement
at the AGM on 15 June 2022, will be succeeded by
Jill May.
EXTERNAL AGENCIES
The Board has contractually delegated the following
services to external firms:
The function of Alternative Investment Fund
Manager, including management of the
investment portfolio
Company secretarial and administration services
Shareholder registration services
The contracts, including the investment management
agreement with the Investment Manager, were
entered into after full and proper consideration
by the Directors of the quality and cost of services
offered, including the financial control systems
in operation in so far as they relate to the Group.
These contracts are reviewed regularly by the
Management Engagement Committee.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 48
Governance
Corporate Governance Report
Key members of staff from the Investment
Manager and Company Secretary attend Board
meetings to brief the Directors on issues
pertinent to the services provided.
BOARD COMMITTEES
The Board has appointed a number of Committees
– the Property Valuation Committee, the Audit
Committee, the Sustainability Committee,
the Management Engagement Committee,
the Nomination Committee and the Remuneration
Committee. Copies of their terms of reference,
which clearly define the responsibilities and duties
of each Committee, are available on request from
the Company Secretary or may be downloaded
from the Company’s website at www.slipit.co.uk.
At the time of reporting, the Sustainability Committee
is refining its terms of reference.
Property Valuation Committee
The Property Valuation Committee, chaired by
Sarah Slater, comprises the full Board and meets
four times a year. The Committee is convened for
the purpose of reviewing the quarterly independent
property valuation reports prior to their submission
to the Board. The Chair of the Property Valuation
Committee meets with the independent property
valuer at least annually.
Audit Committee
The Audit Committee, chaired by Mike Balfour,
comprises the full Board, apart from the Board
Chair, and meets at least three times a year.
James Clifton-Brown, Chair of the Board, attends the
Audit Committee by invitation. The Audit Committee
has set out a formal report on pages 54 and 55.
Management Engagement Committee
The Management Engagement Committee is
chaired by Huw Evans and comprises the full Board.
The Committee meets at least twice a year to review
the performance of the Investment Manager and
other service providers, together with the terms
and conditions of their appointments.
Nomination Committee
The Nomination Committee, chaired by Jill May,
comprises the full Board and meets at least once
a year. The Nomination Committee believes that,
given the size of Board, it is appropriate for all
Directors to serve as members of the Nomination
Committee. Appointments of new Directors are
considered by the Committee taking account of the
need to maintain a balanced Board.
In respect of the appointment of Mike Bane, who was
appointed to the Board as an independent non-
executive Director on 31 January 2022, the Board
used the services of an external search consultant,
Sapphire Partners. Sapphire Partners is independent
of the Company and Board of Directors.
New Directors appointed to the Board receive a
formal induction and appropriate training is arranged
for new and current Directors as required. Although
the Group does not have a formal policy on diversity,
the Board and Committee are cognisant of the
debate around the recommendations of the Davies
Report on Women on Boards and the Hampton
Alexander Review and recognises the benefits of
diversity in its broadest sense and the value this
brings to the Company in terms of skills, knowledge
and experience.
During the year the Nomination Committee met
twice. The Nomination Committee met to consider
succession planning and committee composition.
The Nomination Committee is also responsible for
arranging the Company’s annual evaluation of the
Board and Committees and individual Directors.
Remuneration Committee
The Remuneration Committee chaired by Jill May,
comprises the full Board and meets at least once
a year. The Remuneration Committee believes that,
given the size of Board, it is appropriate for all
Directors to serve as members of the Remuneration
Committee. The Committee reviews the level of
Directors’ fees, ensuring that they reflect the time
commitment and responsibilities of the role and are
fair and comparable with those of similar companies.
Sustainability Committee
The Sustainability Committee, established in
November 2021, is chaired by Mike Balfour,
comprises the whole Board, and will meet at least
twice per year.
The Committee seeks to understand the views of
key stakeholders of the Company on ESG matters
and takes responsibility for the Company’s TCFD
reporting and setting and monitoring the Company’s
ESG strategy and Carbon Net Zero pathway.
Tenure Policy
The Board’s policy on tenure is that continuity and
experience are considered to add significantly to the
strength of the Board. The Board also takes the view
that independence is not compromised by length of
tenure on the Board. However, in accordance with
corporate governance best practice and the need
for regular refreshment and diversity on the Board,
the Board does not expect any of the Group’s
Directors, including the Chairman, to serve on
the Board for more than nine years.
There are no service contracts in existence between
the Group and any Directors but each of the Directors
was appointed by letter of appointment which sets
out the main terms of his or her appointment.
The Directors’ appointment dates are as follows:
Huw Evans (11 April 2013), Mike Balfour (10 March
2016), James Clifton-Brown (17 August 2016),
Jill May (12 March 2019), Sarah Slater (27 November
2019) and Mike Bane (31 January 2022).
Pursuant to the Articles of Association of the
Company, one third, or the number nearest to but
not exceeding one third, of the Directors are required
to retire and stand for re-election at the Annual
General Meeting each year, provided that each
Director shall retire and stand for re-election at the
Annual General Meeting immediately following
their appointment then at intervals of no more
than three years. However, in accordance with the
recommendations of the AIC Code, the Board has
agreed that all Directors will retire annually and,
if appropriate, will seek re-election.
Mike Bane will stand for election and all other
Directors will stand for re-election at the forthcoming
Annual General Meeting other than Huw Evans, who
retires as a Director at the conclusion of the meeting.
The Board has reviewed the skills and experience of
each Director and believes that each contributes to
the long-term sustainable success of the Company.
The Board has no hesitation in recommending their
re-election to shareholders.
49Year ended 31 December 2021
Board
Audit
Committee
Property
Valuation
Committee
Management
Engagement
Committee
Nomination
Committee
Remuneration
Committee
Huw Evans 4/4 4/4 4/4 2/2 2/2 2/2
Mike Balfour 4/4 4/4 4/4 2/2 2/2 2/2
James Clifton-Brown 4/4 –/–* 4/4 2/2 2/2 2/2
Jill May 4/4 4/4 4/4 2/2 2/2 2/2
Sarah Slater 4/4 4/4 4/4 2/2 2/2 2/2
PERFORMANCE OF THE BOARD
The Committee undertook an annual evaluation of
the Chairman of the Board, individual Directors and
the performance of Committees and the Board as a
whole with respect to the year ended 31 December
2021. This involved the completion of questionnaires
by each Director and follow-on discussions between
the Chairman and each Director. The appraisal
of the Chairman was undertaken by the Senior
Independent Director. The collated results of the
annual evaluation were discussed by the Committee,
following its completion. The Board is satisfied
with the performance of the Board, each individual
Director and the Chairman. Details of the individual
contribution made by each Director may be found on
pages 44 and 45.
In relation to the previous year ended 31 December
2020, the Company engaged Lintstock Ltd, an
independent external service provider which has
no other connection to the Company, to undertake
a board evaluation. Assisted by Lintstock Ltd, the
Board assessed that it had in place the appropriate
balance of skills, experience, length of service and
knowledge of the Company, while also recognising
the advantages of diversity. The intention is that
the annual evaluation is externally facilitated at
least every three years, the next such review to be
conducted for the year ending 31 December 2023.
MEETING ATTENDANCE
The table below sets out the Directors’ attendance
at each scheduled quarterly Board and Committee
meetings. The number of meetings which the Directors
were eligible to attend are shown in brackets.
In addition to the scheduled meetings detailed
below, there were a further 15 ad hoc Board and
Committee meetings held during the year.
INVESTMENT MANAGEMENT
AGREEMENT
Following the merger of Standard Life plc with
Aberdeen Asset Management PLC in August 2017,
the Company appointed Aberdeen Standard Fund
Managers Limited as its AIFM with effect from
10 December 2018. The appointment was on
identical terms to the arrangements previously in
place with Standard Life Investments (Corporate
Funds) Limited and the terms of the previous
management agreement have been novated across
to Aberdeen Standard Fund Managements Limited.
Under the terms of the Investment Management
Agreement, subsequently amended, between the
Investment Manager and the Company (“the IMA”),
the Investment Manager is entitled to an annual fee
equal to 0.70% of total assets up to £500 million
and 0.60% of total assets over £500 million.
The IMA is terminable by either party on not less
than one year’s notice.
The Management Engagement Committee reviews
the performance of, and contractual arrangements
with, the Investment Manager on an annual basis.
The Board has considered the appropriateness of the
continuing appointment of the Investment Manager in
view of the performance of the Investment Manager,
the fees payable to the Investment Manager and the
notice period under the IMA. The Board has concluded
that the continuing appointment of the Investment
Manager on the terms agreed is in the best interest of
shareholders as a whole.
INTERNAL CONTROLS
The Board is ultimately responsible for the Group’s
system of internal controls and risk management and
for reviewing its effectiveness. The Board confirms
that there is an ongoing process for identifying,
evaluating and managing the significant risks
faced by the Group in accordance with the Financial
Reporting Council publication – Guidance on Risk
Management, Internal Control and Related Financial
and Business Reporting (‘the FRC Guidance’).
* The Chairman of the Board is not a member of the Audit Committee but may attend meetings at the invitation of the Committee Chairman.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 50
Governance
Corporate Governance Report continued
This process has been in place for the year under
review and up to the date of approval of this Annual
Report and Consolidated Financial Statements and
is regularly reviewed by the Board and accords with
the FRC Guidance. The process is based principally
on a risk-based approach to internal control
whereby a risk matrix is created that identifies
the key functions carried out by the Board, the
Investment Manager and the other service providers,
the individual activities undertaken within those
functions, the risk associated with each activity
and the controls employed to minimise those risks.
A risk rating is then applied. The risk matrix is
regularly updated and the Board is provided with
regular reports highlighting any material changes
to risk ratings and confirming action which has been,
or is being, taken.
Twice a year the Board, via the Audit Committee,
carries out an assessment of internal controls by
considering the risk matrix and documentation
from the Investment Manager and the Company
Secretary, including reports from their internal
audit and compliance functions.
The Board has reviewed the effectiveness of the
Investment Manager’s system of internal control
including its annual internal controls report prepared
in accordance with the International Auditing
and Assurance Standards Board’s International
Standard on Assurances Engagements (“ISAE”)
3402, “Assurance Reports on Controls at a Service
Organisation”. This report sets out the Investment
Manager’s internal control policies and procedures
with respect to the management of their clients’
assets and contains a report from independent
external auditors.
At each Board meeting, the Board monitors the
investment performance of the Group in comparison
to its stated objective and against comparable
companies and relevant indices. The Board also
reviews the Group’s activities since the last Board
meeting to ensure that the Investment Manager
adheres to the agreed investment policy and
guidelines and, if necessary, approves changes to
such policy and guidelines. In addition, at each
Board meeting, the Board receives reports from the
Company Secretary in respect of compliance matters
and duties performed on behalf of the Group.
The Board has adopted appropriate procedures
designed to prevent bribery, including regular
reviews of anti-bribery policies of suppliers.
The Board has also reviewed a statement from
the Investment Manager detailing arrangements
in place whereby the Investment Manager’s staff
may, in confidence, escalate concerns about
possible improprieties in matters of financial
reporting or other matters.
With effect from 7 July 2014, the Group entered
into arrangements to comply with AIFMD. The Group
appointed Standard Life Investments (Corporate
Funds) Limited as its AIFM, which was replaced by
Aberdeen Standard Fund Managers Limited on
10 December 2018, and Citibank Europe plc as
its Depositary. On 23 October 2021, the Depositary
contract was novated to Citibank UK Limited.
This novation arose as a result of UK regulatory
changes brought about by the UK’s decision to leave
the European Union.
The Depositary’s responsibilities include cash
monitoring, safe keeping of any financial
instruments held by the Group and monitoring
the Group’s compliance with investment limits
and leverage requirements.
The AIFM has a permanent risk management function
to ensure that effective risk management policies and
procedures are in place to monitor compliance with
risk limits. The AIFM has a risk policy which covers
the risks associated with the management of the
portfolio and the adequacy and appropriateness of
this policy is reviewed at least annually by the AIFM.
The AIFM presents a report to the Board, via the Audit
Committee, on a six monthly basis confirming its
compliance with AIFMD in relation to the Company.
RELATIONS WITH SHAREHOLDERS
As set out in the Stakeholder Engagement Section,
the Board welcomes correspondence from
shareholders, addressed to the Company’s registered
office or by email to property.income@abrdn.com.
This year’s AGM is being held at Bow Bells House,
1 Bread Street, London EC4M 9HH on Wednesday
15 June 2022.
To promote a clear understanding of the Group,
its objectives and financial results, the Board aims
to ensure that information relating to the Group is
disclosed in a timely manner and once published,
quarterly factsheets, the interim report and annual
report are available on the Company’s website which
can be found at: www.slipit.co.uk
The Chairman and the Investment Manager continue
to offer individual meetings to the largest institutional
and private client manager shareholders and they
report back to the Board on these meetings.
ACCOUNTABILITY AND AUDIT
The Statement of Directors’ Responsibilities in
respect of the Consolidated Financial Statements
is on page 58 and the Statement of Going Concern
is included in the Directors’ Report on page 46 and
the Viability Statement can be found on page 43.
The Independent Auditor’s Report is on pages 60 to 66.
Approved by the Board on
27 April 2022
James Clifton-Brown
Chairman
51Year ended 31 December 2021
ROLE OF THE SUSTAINABILITY
COMMITTEE
Established in November 2021, the Sustainability
Committee seeks to understand the views of key
stakeholders of the Company on ESG matters
and takes responsibility for the Company’s TCFD
reporting, oversight of the Manager’s ESG and
climate approach, and setting and monitoring
the Company’s ESG strategy and Carbon Net Zero
pathway.
COMPOSITION OF THE
SUSTAINABILITY COMMITTEE
The Sustainability Committee is chaired by Mike
Balfour, comprises the whole Board, and meets
at least twice per year.
The key stakeholders in the Company are considered
to be the shareholders, Investment Manager,
tenants, debt providers, suppliers, service providers
and the community at large.
KEY RESPONSIBILITIES OF THE
SUSTAINABILITY COMMITTEE
The Sustainability Committee will discharge its
responsibilities in the following areas:
Assess and monitor culture to ensure alignment
with the Company’s purpose, values and strategy.
Oversee and monitor the Company’s Health &
Safety systems and practices.
Oversee and monitor the Company’s processes
and mechanisms for building relationships with
shareholders, suppliers and other key stakeholders
and understanding their views.
Understand the impact of the Company’s
operations on the community and environments
Along with the Manager, understand the reporting
requirements.
Oversee and monitor the Company’s impact on
the climate and establish a pathway to net zero by
2050 or preferably sooner.
REVIEW OF ACTIVITIES
Following its establishment in November 2021,
the Committee convened formally in April 2022
for the first time and considered its terms of
reference, together with the design of the reporting
framework required for the Committee to discharge
its responsibilities.
The Company has, this year, included a section
dedicated to ESG in the Annual Report together with
early adoption of the Taskforce for Climate-related
Financial Disclosures. The Sustainability Committee
looks forward to further developing disclosures in
this area as part of its work during 2022.
27 April 2022
Mike Balfour
Sustainability Committee Chairman
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 52
Governance
Sustainability Committee Report
31–32 QUEEN SQUARE, BRISTOL
53Year ended 31 December 2021
ROLE OF THE AUDIT COMMITTEE
The main responsibilities of the Audit Committee are:
Monitoring the integrity of the consolidated
financial statements of the Group and any public
announcements relating to the Group’s financial
performance and reviewing significant reporting
judgements contained in them;
Reviewing the effectiveness of the Group’s internal
financial controls and risk management systems
and bringing material issues to the attention of
the Board;
Whistleblowing and oversight – reviewing an
annual statement from the Investment Manager
detailing the arrangements whereby the Investment
Manager’s staff may, in confidence, escalate
concerns about possible improprieties in relation
to financial reporting or other matters;
Making recommendations to the Board, for it to
put to shareholders for their approval at a general
meeting, in relation to the appointment of the
external auditor and to approve the remuneration
and terms of engagement of the external auditor;
Reviewing the external auditor’s independence
and objectivity and the effectiveness of the
audit process, taking into consideration relevant
professional and regulatory requirements;
Making recommendations to the Board in relation
to the engagement of the external auditor to supply
non-audit services, taking into account ethical
guidance regarding the provision of non-audit
services by the external audit firm;
Where requested by the Board, providing advice
on whether the annual report and consolidated
financial statements, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess
the Group’s position and performance, business
model and strategy.
The Audit Committee reports to the Board on
its findings, identifying any matters in respect
of which the Audit Committee considers that
action or improvement is needed and making
recommendations as to the steps to be taken.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee comprises the full Board,
except the Chairman of the Board, all of whom are
independent at the year end and have recent and
relevant financial experience. Three members of the
Audit Committee are Chartered Accountants, one of
whom, Mike Balfour, chairs the Audit Committee.
REVIEW OF SIGNIFICANT ISSUES
AND RISKS
In planning its work, and reviewing the audit
plan with the Auditor, the Audit Committee takes
account of the most significant issues and risks,
both operational and financial, likely to impact on
the Group’s consolidated financial statements.
This included an assessment of risks, such as COVID-19,
Brexit, Climate Change and Geopolitical Risk, and
the impact these could have on the Group and its
underlying portfolio.
The property investment portfolio is the most
substantial figure on the Balance Sheet. The
valuation of the properties, and in conjunction
with this the confirmation of ownership and title,
is therefore a key risk that requires the attention
of the Audit Committee. Specifically the risk is that
the properties are not recognised and measured
in line with the Group’s stated accounting policy
on the valuation of investment properties.
The investment properties are valued at the year
end, and at each quarter end, by Knight Frank,
independent international real estate consultants.
The valuations are prepared in accordance with the
RICS Valuation – Professional Standards, published
by the Royal Institution of Chartered Surveyors, and
are reviewed by the Property Valuation Committee
(quarterly), the Audit Committee (six monthly) and
the external auditor (annually).
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 54
Governance
Audit Committee Report
Full details of the valuation methodology are
contained in note 7 to the consolidated financial
statements.
As rental income is the Group’s major source of
revenue and a significant item in the Statement
of Comprehensive Income, a key risk relates to
the recognition and collection of rental income.
Specifically the risk is that the Group does not
recognise rental income in line with its stated
policy on rental income recognition. The Audit
Committee reviews the controls in place at the
Investment Manager in respect of recognition of
rental income on a regular basis and, along with
the external auditor, reviews the rental income policy,
the pattern of rental income received and the
amount recognised in the consolidated financial
statements at each year end. In addition it considers
the detailed process in place at the Investment
Manager to identify potential provision for bad
debts, also referred to as the impairment of trade
receivables, based on the intelligence and knowledge
the Manager has of each individual tenant.
REVIEW OF ACTIVITIES
The Audit Committee met four times during the year
under review, in April, May, August and November
2021. Following the year end, the Audit Committee
met in April 2022.
At each April and August meeting, the Audit
Committee reviews the Group’s compliance with
the AIC Code and carries out a detailed assessment
of the Group’s internal controls, including:
A review of the Group’s risk framework,
including its risk appetite statement and full
risk matrix, enabling the on-going identification,
evaluation and management of the significant
risks facing the Group;
A review of Investment Manager’s internal
controls report;
A review of the Group’s anti-bribery policy and
those of its service providers;
A review of the Investment Manager’s arrangements
for staff to escalate concerns, in confidence, of
possible improprieties; and
Reviewing the performance of the auditor.
At each April meeting, the Audit Committee
reviews the Annual Report and Consolidated
Financial Statements and receives the external
auditor’s audit findings report. The external auditor
is in attendance at this meeting. Following its
review, the Audit Committee provides advice to
the Board on whether the Annual Report and
Consolidated Financial Statements, taken as
a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s position and
performance, business model, viability and strategy.
At each April and August meeting the Audit
Committee reviews the compliance of the
Investment Manager, as AIFM, and the depositary
in relation to their obligations under AIFMD in
respect of the Company.
At each August meeting, the Audit Committee
reviews the Interim Report and Consolidated
Financial Statements.
Each November, the Audit Committee meets
with the external auditor and reviews the audit
plan and identifies significant risks and audit
responses to those risks.
EXTERNAL AUDIT PROCESS
The Audit Committee meets twice a year with
the external auditor. The audit partner for the
Company is John Clacy who is in his third year in
the audit. The auditor provides a planning report
in advance of the annual audit and a report on
the annual audit. The Audit Committee has the
opportunity to question and challenge the auditor in
respect of these reports.
The Audit Committee Chair also meets the
audit partner at least twice a year.
At least once a year, the Audit Committee has the
opportunity to discuss any aspect of the auditor’s
work with the auditor in the absence of the
Investment Manager. Overall the Committee believes
the external audit process has been effective.
AUDITOR ASSESSMENT
AND INDEPENDENCE
The Audit Committee reviews the performance,
effectiveness, value for money and general
relationship with the external auditor each year.
This review takes into consideration the standing, skills
and experience of the audit firm and the audit team.
In addition, on an annual basis, the Audit Committee
reviews the independence and objectivity of the
external auditor through the completion of a
questionnaire which scores the auditor on various
aspects of their performance. The Committee is
cognisant of audit fee levels and will keep these
under review to ensure Deloitte LLP continue to offer
value for money for shareholders.
The Audit Committee also reviews the provision
of non-audit services by the external auditor.
All non-audit work to be carried out by the external
auditor has to be approved in advance by the
Audit Committee, to ensure such services are not a
threat to the independence and objectivity of the
conduct of the audit.
The Group’s external auditor is Deloitte LLP
(“Deloitte”). The Company appointed Deloitte as
auditor for the year ended 31 December 2019,
following a tender process carried out during
2018. Shareholders approved the re-appointment
of Deloitte LLP as the Group’s auditors at the
AGM in June 2021. In accordance with regulatory
requirements Deloitte rotates the Senior Statutory
Auditor responsible for the audit every five years.
There are no contractual obligations which restrict
the Audit Committee’s choice of external auditor.
During the year ended 31 December 2021, Deloitte
received fees of £nil in relation to non-audit services
(2020: £nil).
AUDITOR
On the recommendation of the Audit Committee,
it is the Board’s intention to propose to shareholders
at the AGM on 15 June 2022 that Deloitte LLP be
re-appointed as the Group’s auditor.
27 April 2022
Mike Balfour
Audit Committee Chairman
55Year ended 31 December 2021
2021
£
2020
£
% change in
Director fees
Robert Peto* — 30,077 (100.0%)
Huw Evans 36,000 36,000 0.0%
Mike Balfour 40,000 40,000 0.0%
James Clifton-Brown** 47,000 39,638 18.6%
Jill May 36,000 36,000 0.0%
Sarah Slater 36,000 36,000 0.0%
Employers national insurance contributions 17,338 18,737
212,338 236,452
Directors’ expenses 9,404 501
221,742 236,953
REMUNERATION POLICY
The Group’s Remuneration Policy is that fees payable
to Directors should reflect the time spent by the
Board on the Group’s affairs and the responsibilities
borne by the Directors and should be fair and
comparable with those of similar companies.
The level of fees should also be sufficient to attract
and retain the high calibre of Directors needed to
oversee the Group properly and to reflect its specific
circumstances.
Directors are remunerated in the form of fees
payable quarterly in arrears. Directors are not
eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits.
The fees for the Directors are determined within
the limit set out on the Company’s Articles of
Incorporation. The Board has not received any
views from shareholders in respect of the aggregate
or individual levels of Directors’ remuneration.
At the AGM on 30 June 2020, shareholders approved
an increase in the limit of the aggregate fees payable
to the Board of Directors to £350,000 per annum.
The Board consists entirely of Non-Executive Directors
and the Board has agreed that all Directors will
retire annually and, if appropriate, seek re-election.
There are no service contracts in existence between
the Group and any Directors but each Director
was appointed by a letter of appointment which
sets out the main terms of his or her appointment.
A Director may resign by notice in writing to the
Board at any time; there are no set notice periods
and no compensation payable to a Director on
leaving office.
The Directors’ Remuneration Policy and the level
of Directors’ fees are reviewed annually by the
Remuneration Committee. This review includes
for each Director, taking into account the time,
commitment and committee responsibilities
of each Director and fees paid to Directors of
comparable companies invested in real estate.
The fees for 2021 were as follows:
£46,000 for the Chairman, increasing to
£48,000 from 1 July 2021 (2020: £46,000),
£40,000 for the Audit Committee Chairman
(2020: £40,000) and £36,000 for each of the
other Directors (2020: £36,000).
Following a review by the Remuneration Committee,
with consideration to inflation and the fees paid to
Directors within the peer group, it was agreed that the
Directors’ annual fees would be revised to the following
rates with effect from 1 January 2022; £50,000 for the
Chairman, £41,500 for the Audit Committee Chairman
and £37,000 for each other Director.
It is intended that the above Remuneration Policy
will continue to apply for the forthcoming financial
year and subsequent years. The Remuneration Policy
was approved by shareholders at the Annual General
Meeting on 13 June 2019. The Remuneration Policy
is put to a shareholder’s vote at the AGM at least
once every three years and, accordingly, Resolution
3 will be put to shareholders at the AGM on 15 June
2022 to approve the Remuneration Policy.
At the Annual General Meeting on 16 June 2021
the results in respect of the resolution to approve
the Group’s Remuneration Report were as follows:
REMUNERATION COMMITTEE
The Remuneration Committee comprises the full Board
and is chaired by Jill May. The Committee considers,
at least annually, the level of Directors’ fees and makes
recommendations to the Board. The Board determines
the level of Directors’ fees in accordance with Group’s
Remuneration Policy, as detailed below, and in
accordance with the UK Corporate Governance
Code and AIC Code on Corporate Governance.
DIRECTORS’ FEES
The Directors who served during the year
received fees as shown in the table opposite
(audited).
* Retired from the Board on 25 August 2020.
** Appointed as Chairman from 25 August 2020.
Percentage of votes
cast for
Percentage of votes
cast against
or abstained
99.5 0.5
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 56
Governance
Directors’ Remuneration Report
0
20
40
60
80
100
120
140
160
Dec-16
Dec-17
Mar-17
Jun-17
Sep-17
Dec-18
Mar-18
Jun-18
Sep-18
Dec-19
Mar-19
Jun-19
Sep-19
Dec-20
Mar-20
Jun-20
Sep-20
Dec-21
Mar-21
Jun-21
Sep-21
180
The table adjacent shows the actual expenditure during
the year in relation to Directors’ remuneration and
shareholder distributions.
DIRECTORS’ SHAREHOLDINGS
The Directors’ interests in the Company’s ordinary
shares are shown in the Directors’ Report on page 46.
COMPANY PERFORMANCE
The Board is responsible for the Group’s investment
strategy and performance, although the management
of the Group’s investment portfolio is delegated
to the Investment Manager through the Investment
Management Agreement, as referred to in the
Corporate Governance Report on page 48. The graph
to the right compares the total return (assuming
all dividends re-invested) to ordinary shareholders
compared with the total return on the MSCI Quarterly
Index over the five years to 31 December 2021.
Ordinary resolutions for the approval of
the Directors’ Remuneration Report and Directors
Remuneration policy will be put to shareholders
at the forthcoming Annual General Meeting.
Approved by the Board on
27 April 2022
Jill May
Director
SLIPIT Direct portfolio total return
MCSI Benchmark
Share price total return
31/12/2021 31/12/2020
Aggregate Directors’ Remuneration 221,742 236,953
Aggregate Shareholder Distributions 15,018,379 15,493,435
57Year ended 31 December 2021
The Directors are responsible for preparing the
Annual Report and the Group Consolidated Financial
Statements for each year which give a true and fair
view, in accordance with the applicable Guernsey law
and those International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union.
In preparing those Consolidated Financial
Statements, the Directors are required to:
Select suitable accounting policies in accordance
with IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors and then
apply them consistently;
Make judgement and estimates that are
reasonable and prudent;
Present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
Provide additional disclosures when compliance
with the specific requirements in IFRSs as adopted
by the European Union is insufficient to enable users
to understand the impact of particular transactions,
other events and conditions on the Group’s
financial position and financial performance;
State that the Group has complied with IFRSs as
adopted by the European Union, subject to any
material departures disclosed and explained in
the Group Consolidated Financial Statements; and
Prepare the Group Consolidated Financial
Statements on a going concern basis unless it
is inappropriate to presume that the Group will
continue in business.
The Directors confirm that they have complied
with the above requirements in preparing the
Consolidated Financial Statements.
The Directors are responsible for keeping adequate
accounting records, that are sufficient to show
and explain the Group’s transactions and disclose
with reasonable accuracy at any time, the financial
position of the Group and to enable them to
ensure that the Financial Statements comply with
The Companies (Guernsey) Law, 2008. They are
also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for
the prevention and detection of fraud, error and
non compliance with law and regulations.
The maintenance and integrity of the Company’s
website is the responsibility of the Directors
through its Investment Manager; the work carried
out by the auditors does not involve considerations
of these matters and, accordingly, the auditors
accept no responsibility for any change that may
have occurred to the Consolidated Financial
Statements since they were initially presented
on the website. Legislation in Guernsey governing
the preparation and dissemination of the
consolidated financial statements may differ
from legislation in other jurisdictions.
Responsibility Statement of the Directors in
respect of the Consolidated Annual Report under
the Disclosure and Transparency Rules.
The Directors each confirm to the best of their
knowledge that:
The Consolidated Financial Statements, prepared in
accordance with IFRSs as adopted by the European
Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of
the Group; and
The management report, which is incorporated
into the Strategic Report, Directors’ Report and
Investment Manager’s Review, includes a fair
review of the development and performance
of the business and the position of the Group,
together with a description of the principal risks
and uncertainties that they face.
Statement under the UK Corporate
Governance Code.
The Directors each confirm to the best of their
knowledge and belief that the Annual Report
and Consolidated Financial Statements taken as
a whole are fair, balanced and understandable
and provide the information necessary to assess
the Group’s position and performance, business
model and strategy.
Approved by the Board on
27 April 2022
James Clifton-Brown
Chairman
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 58
Governance
Statement of Directors’ Responsibilities
Financial Statements
INDEPENDENT
AUDITOR’S
REPORT
59
1 OPINION
In our opinion the financial statements of Standard
Life Investments Property Income Trust Limited (the
‘parent company’) and its subsidiaries (the ‘Group’):
Give a true and fair view of the state of the Group’s
affairs as at 31 December 2021 and of its profit for
the year then ended;
Have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union; and
Have been prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements
which comprise:
The consolidated statement of comprehensive income;
The consolidated balance sheet;
The consolidated statement of changes in equity;
The consolidated cash flow statement; and
The related notes 1 to 26.
The financial reporting framework that has been
applied in their preparation is applicable law and
IFRSs as adopted by the European Union.
2 BASIS FOR OPINION
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the auditor’s
responsibilities for the audit of the financial statements
section of our report.
We are independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including
the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We confirm
that we have not provided any non-audit services
prohibited by the FRC’s Ethical Standard to the Group
or the parent company.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
3 SUMMARY OF OUR AUDIT APPROACH
Key audit matters The key audit matters that we identified
in the current year were:
Investment property valuation; and
Recoverability of rental income receivable.
Within this report, key audit matters
are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group financial statements in the current year
was £4.0m which was determined on the basis of 1% of Net Asset Value.
Scoping
All audit work for the Group was performed directly by the Group engagement team. All of the
Group’s subsidiaries with the exception of Hagley Road Limited are subject to full scope audits.
Significant changes in our approach
There were no significant changes in our approach in the current year.
REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 60
Financial Statements
Independent Auditor’s Report
4 CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue
to adopt the going concern basis of accounting included:
Challenged management’s assessment of going concern and the assumptions, including income,
expenditure and cash forecasts, used in their 12 month and 5 year forecast models;
Evaluated the maturity of group debt and the effect of repayment dates on the going concern
assumption and the longer term viability of the Group;
Performed fair value and income sensitivity analysis, which we compared to management
stress testing results;
Reviewed banking covenants to assess compliance as at the balance sheet date; and
Assessed the appropriateness of the going concern disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the group’s and parent company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements
about whether the Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report.
61Year ended 31 December 2021
5 KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of investment properties is the
key driver of the Group’s net asset value.
Valuations are inherently complex and require
significant judgement and estimation around
the key inputs and assumptions. We have
identified that the main judgements are around
equivalent yields and estimated market rent,
in particular in certain property sectors
continuing to be impacted by COVID-19, and
thus this was the focus of our key audit matter.
Given the level of judgement involved, we have
determined that there was a potential for fraud
through possible manipulation of this balance.
Management’s valuation is based on the
valuation provided by external chartered
surveyors. The valuation of the investment
property portfolio at 31 December 2021
amounted to £485m (2020: £428m).
Refer to notes 2.2 of Accounting policies on
pages 73 and note 7 on page 82 to 85 of the
Notes to the Financial Statements. Also refer to
the Audit Committee report pages 54 to 55.
We have performed the following:
Obtained an understanding of the relevant
controls in relation to the valuation process;
Evaluated the competence, capability
and objectivity of the external valuer in
order to obtain an understanding of the
work of that expert;
With the involvement of our real estate
specialists we challenged the valuation
process and assumptions, performance of
the portfolio, significant assumptions and
significant judgements, by benchmarking
the valuation assumptions, in particular the
equivalent yields and estimated market rates,
to relevant market evidence including specific
property transactions and other external data;
Assessed the integrity of information provided
to the external valuer by testing a sample back
to underlying lease agreements; and
Evaluated the financial statements disclosures
to assess whether the significant judgements
and estimations are appropriately disclosed.
We concluded that the fair value of the Group’s
investment property valuation as determined
by management is appropriate.
KEY AUDIT MATTER
DESCRIPTION
HOW THE SCOPE OF OUR
AUDIT RESPONDED TO THE
KEY AUDIT MATTER
KEY OBSERVATIONS
Investment Property Valuation
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 62
Financial Statements
Independent Auditor’s Report continued
Recoverability of rental income receivable
As a result of COVID-19, rent collection levels are below what has
historically been collected and this has resulted in an increase in
the bad debt provision.
There is a risk that the Group’s revenue has not been recognised
correctly due to inadequate impairment of the rental income
receivable. The impact of the COVID-19 pandemic and associated
lockdowns and social restrictions on certain tenants may
result in rental payments no longer being made due to cash
flow difficulties. We therefore identified a key audit matter in
relation to the recoverability of rental income and the impairment
assessment on rental income receivable for the Group as at the
reporting date. Given the high level of judgement and estimation
uncertainty involved, we have determined there is the potential for
management bias.
In-line with IFRS 9 accounting for expected credit losses
management perform a bottom up process of reviewing
every tenant that has rent outstanding to identify and quantify
the provision related to bad debts due from rental debtors.
The provision for bad debts included in the financial statements
at 31 December 2021 is £3.0m (2020: £2.6m).
Refer to notes 2.3 C and 2.3 I of Accounting policies on pages 74 and
76 and note 11 on pages 86 of the Notes to the Financial Statements.
Also refer to the Audit Committee report pages 54 to 55.
We performed the following:
Obtained an understanding of
management’s processes and relevant
controls relating to the recoverability of
rental income;
Tested the considerations used by
management to recalculate the rent
receivable amount and assessed the
provisions applied;
Assessed the ageing of rental income
accrued and tested the recoverability for
a sample of balances with regard to cash
received after the balance sheet date;
To address the ongoing risks around
recoverability, reviewed the Group’s
Expected Credit Loss workings, which
should correspond to the assessed
recoverability of accrued rental income
recognised at year end, and assessed
whether these align to IFRS 9; and
Evaluated the financial statements
disclsoures to assess whether the
critical judgement or sources of
estimation uncertainty were applied
and appropriately disclosed.
We concluded that the bad debt
provision as determined by
management is appropriate.
HOW THE SCOPE OF OUR
AUDIT RESPONDED TO THE
KEY AUDIT MATTER
KEY OBSERVATIONSKEY AUDIT MATTER
DESCRIPTION
63Year ended 31 December 2021
In addition to net assets, we consider EPRA Adjusted
Profit After Tax as a critical performance measure for
the Group and a measure which is widely used within
the Real Estate industry. We applied a lower level
materiality of £0.7m (2020: £0.8m), which equates
to 5% (2020: 5%) of that measure for testing all
balances impacting that measure.
Performance materiality
We set performance materiality at a level lower than
materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed
the materiality for the financial statements as a whole.
Group performance materiality was set at 60% of
Group materiality for the 2021 audit (2020: 60%).
In determining performance materiality, we considered
the following factors:
A. The impact of COVID-19 on the Group’s operations
in the year and on the wider real estate sector;
B. The fact that we have not identified any significant
changes in business structure; and
C. Our experience from previous audits has indicated
a low number of corrected and uncorrected
misstatements identified in prior periods.
Error reporting threshold
We agreed with the Audit Committee that we
would report to the Committee all audit differences
in excess of £0.2m (2020: £0.17m), as well as
differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall
presentation of the financial statements.
6 OUR APPLICATION OF MATERIALITY
Materiality
We define materiality as the magnitude of
misstatement in the financial statements that
makes it probable that the economic decisions of
a reasonably knowledgeable person would be
changed or influenced. We use materiality both
in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we
determined materiality for the financial statements
as a whole as follows:
Group Materiality £4.0m (2020: £3.3m)
Basis for determining
materiality
1% of the Net Asset Value, in line with prior year.
Rationale for the
benchmark applied
Net Assets is the key balance considered by the users of the
financial statements which is consistent with the market
approach for such entities. Net Assets was selected as investors
are seeking capital appreciation in addition to dividend streams
and the net asset value per share is an important indicator of
performance to investors.
Group materiality
£4.0m
Audit Committee
reporting threshold
£0.2m
NAV
£401m
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 64
Financial Statements
Independent Auditor’s Report continued
7 AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
Scoping
The Group consists of the Company, Standard Life
Investments Property Income Trust Limited and
its subsidiaries. Our Group audit was scoped by
obtaining an understanding of the Group and
its environment, including internal controls, and
assessing the risks of material misstatement at the
Group level. The Group is audited by one audit team,
led by the Senior Statutory Auditor. The audit is
performed centrally, as the books and records for each
entity within the Group are maintained at head office.
All of the Group’s subsidiaries with the exception of
Hagley Road Limited are subject to full scope audits.
We also tested the consolidation process and carried
out analytical procedures to confirm our conclusion
that there were no significant risks of material
misstatement of the aggregated financial information.
Our consideration of the control environment
As part of our risk assessment, we assessed the control
environment in place at the Investment Manager to
the extent relevant to our audit. As a result of this we
adopted a controls reliance approach with respect to
the processing and review of rental income.
Our consideration of climate-related risks
In planning our audit, we have considered the potential
impact of climate change on the Group’s business
and its financial statements. The Group continues to
develop its assessment of the potential impacts of
environmental, social and governance (“ESG”) related
risks, including climate change, as outlined on pages
22 to 33. As a part of our audit, we held discussions to
understand the process of identifying climate-related
risks, the determination of mitigating actions
and the impact on the Group’s financial statements.
We performed our own qualitative risk assessment of
the potential impact of climate change on the Group’s
account balances and classes of transactions and did not
identify any additional risks of material misstatement.
We also read the climate related disclosures on pages
22 to 33 to consider whether they are materially
consistent with the financial statements and the
knowledge obtained in the audit.
8 OTHER INFORMATION
The other information comprises the information
included in the annual report, other than the financial
statements and our auditor’s report thereon. The
Directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not
cover the other information and we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement
in the financial statements themselves. If, based on
the work we have performed, we conclude that there
is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
9 RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’
responsibilities statement, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they give
a true and fair view, and for such internal control as
the Directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the Group’s ability to
continue as a going concern, disclosing as applicable,
matters related to going concern and using the going
concern basis of accounting unless the Directors either
intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
10 AUDITOR’S RESPONSIBILITIES
FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
11 EXTENT TO WHICH THE AUDIT WAS
CONSIDERED CAPABLE OF DETECTING
IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities,
including fraud is detailed below.
Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations,
we considered the following:
The nature of the industry and sector, control
environment and business performance including
the design of the Group’s remuneration policies, key
drivers for Directors’ remuneration, bonus levels and
performance targets;
Results of our enquiries of management and the
Audit Committee about their own identification and
assessment of the risks of irregularities;
Any matters we identified having obtained and
reviewed the Group’s documentation of their policies
and procedures relating to:
Identifying, evaluating and complying with laws
and regulations and whether they were aware of
any instances of non-compliance;
Detecting and responding to the risks of fraud
and whether they have knowledge of any actual,
suspected or alleged fraud;
The internal controls established to mitigate risks of
fraud or non-compliance with laws and regulations;
The matters discussed among the audit engagement
team and relevant internal specialists, including tax
and valuation specialists, regarding how and where
fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within
the organisation for fraud and identified the greatest
potential for fraud in the following areas: Investment
property valuation and recoverability of rental income
receivable. In common with all audits under ISAs (UK),
we are also required to perform specific procedures
to respond to the risk of management override.
We also obtained an understanding of the legal and
regulatory frameworks that the Group operates in,
focusing on provisions of those laws and regulations
that had a direct effect on the determination of
material amounts and disclosures in the financial
statements. The key laws and regulations we
considered in this context included the Companies
(Guernsey) Law, 2008 and the Listing Rules.
65Year ended 31 December 2021
In addition, we considered provisions of other laws
and regulations that do not have a direct effect on the
financial statements but compliance with which may
be fundamental to the Group’s ability to operate or
to avoid a material penalty. This included compliance
with the REIT regime rules.
Audit response to risks identified
As a result of performing the above, we identified
investment property valuation and recoverability of
rental income receivable as key audit matters related
to the potential risk of fraud. The key audit matters
section of our report explains the matters in more
detail and also describes the specific procedures we
performed in response to those key audit matters.
In addition to the above, our procedures to respond
to risks identified included the following:
Reviewing the financial statement disclosures
and testing to supporting documentation to
assess compliance with provisions of relevant
laws and regulations described as having a direct
effect on the financial statements;
Enquiring of management, the Audit Committee
and external legal counsel concerning actual and
potential litigation and claims;
Performing analytical procedures to identify any
unusual or unexpected relationships that may indicate
risks of material misstatement due to fraud;
Reading minutes of meetings of those charged
with governance; and
In addressing the risk of fraud through management
override of controls, testing the appropriateness of
journal entries and other adjustments; assessing
whether the judgements made in making accounting
estimates are indicative of a potential bias; and
evaluating the business rationale of any significant
transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members including internal specialists, and
remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the
audit.
REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS
12 OPINION ON OTHER MATTER
PRESCRIBED BY OUR ENGAGEMENT
LETTER
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the provisions of the UK Companies
Act 2006 as if that Act had applied to the company.
13 CORPORATE GOVERNANCE
STATEMENT
The Listing Rules require us to review the Directors’
statement in relation to going concern, longer-term
viability and that part of the Corporate Governance
Statement relating to the Group’s compliance with
the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit,
we have concluded that each of the following
elements of the Corporate Governance Statement is
materially consistent with the financial statements
and our knowledge obtained during the audit:
The Directors’ statement with regards to the
appropriateness of adopting the going concern
basis of accounting and any material uncertainties
identified set out on page 46;
The Directors’ explanation as to its assessment of the
Group’s prospects, the period this assessment covers
and why the period is appropriate set out on page 43;
The Directors’ statement on fair, balanced and
understandable set out on page 58;
The Board’s confirmation that it has carried out
a robust assessment of the emerging and principal
risks set out on page 43;
The section of the annual report that describes the
review of effectiveness of risk management and internal
control systems set out on page 50 and 51; and
The section describing the work of the Audit
Committee set out on page 54 and 55.
14 MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
Adequacy of explanations received and
accounting records
Under the Companies (Guernsey) Law, 2008 we are
required to report to you if, in our opinion:
We have not received all the information and
explanations we require for our audit; or
Proper accounting records have not been kept by
the parent company; or
The financial statements are not in agreement with
the accounting records.
We have nothing to report in respect of these matters.
15 OTHER MATTERS
Auditor tenure
Following the recommendation of the Audit
Committee, we were appointed by the Board of
Directors on 13 June 2019 to audit the financial
statements for the year ending 31 December 2019
and subsequent financial periods. The period of
total uninterrupted engagement including previous
renewals and reappointments of the firm is three
years, covering the years ending 31 December 2019
to 31 December 2021.
Consistency of the audit report with the
additional report to the Audit Committee
Our audit opinion is consistent with the additional
report to the Audit Committee we are required to
provide in accordance with ISAs (UK).
16 USE OF OUR REPORT
This report is made solely to the company’s
members, as a body, in accordance with Section 262
of the Companies (Guernsey) Law, 2008. Our audit
work has been undertaken so that we might state
to the company’s members those matters we are
required to state to them in an auditor’s report and/
or those matters we have expressly agreed to report
to them on in our engagement letter and for no other
purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other
than the company and the company’s members as
a body, for our audit work, for this report, or for the
opinions we have formed.
As required by the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rule (DTR)
4.1.14R, these financial statements form part of the
European Single Electronic Format (ESEF) prepared
Annual Financial Report filed on the National Storage
Mechanism of the UK FCA in accordance with the
ESEF Regulatory Technical Standard (‘ESEF RTS’). This
auditor’s report provides no assurance over whether
the annual financial report has been prepared using
the single electronic format specified in the ESEF RTS.
John Clacy (Senior statutory auditor)
For and on behalf of Deloitte LLP
Recognised Auditor
St Peter Port, Guernsey
27 APRIL 2022
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 66
Financial Statements
Independent Auditor’s Report continued
FINANCIAL
STATEMENTS
67
All items in the above Consolidated Statement of Comprehensive Income derive from continuing operations.
The notes on pages 72 to 92 are an integral part of these Consolidated Financial Statements.
Notes
12 Months to
31-Dec-21
£
12 Months to
31-Dec-20
£
Rental income 26 , 4 85 ,5 85 2 9, 4 39, 5 4 9
Service charge income 4,097,344 3,543,976
Surrender premium — 21,250
Valuation gain/(loss) from investment properties 7 72,188,550 (27,640,224 )
Valuation loss from land 8 (501,550 ) —
Loss on disposal of investment properties 7 (634,368 ) (4,806,137 )
Investment management fees 4 (3,301,074 ) (3,198,519 )
Valuer's fees 4 (77,457 ) (84,638 )
Auditor's fees 4 (111,540 ) (118,400 )
Directors' fees and subsistence 23 (221,742 ) (236,953 )
Service charge expenditure (4,097,344 ) (3,543,976 )
Impairment loss on trade receivables (406,475 ) (2,444,966 )
Other direct property expenses (3,430,243 ) (2,460,002 )
Other administration expenses (751,270 ) (512,849 )
Operating profit/(loss) 89,238,416 (12,041,889 )
Finance income 5 763 3,896
Finance costs 5 (3,506,359 ) (3,744,074 )
Profit/(loss) for the year before taxation 85,732,820 (15,782,067 )
Taxation
Tax charge 6 — —
Profit/(loss) for the year, net of tax 85,732,820 (15,782,067 )
Other Comprehensive Income
Valuation gain/(loss) on interest rate swap 15 3 , 16 7, 2 1 8 (1,5 14,638 )
Total other comprehensive gain/(loss) 3,167,218 (1,514,638 )
Total comprehensive gain/(loss) for the year, net of tax 88 ,90 0,038 (1 7 , 29 6 ,705 )
Earnings per share 2021 (p) 2020 (p)
Basic and diluted earnings per share 20 21.5 4 (3. 88 )
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 68
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
ASSETS Notes
31-Dec-21
£
31-Dec-20
£
Non-current assets
Investment properties 7 484,5 1 4,08 5 428,412,375
Lease incentives 7 8,802,294 5, 8 85,270
Land 8 7,500,000 —
Rental deposits held on behalf of tenants 904,189 855 , 8 6 6
Current assets
Investment properties held for sale 9 — 4,3 00,000
Trade and other receivables 11 11 , 02 4 , 10 0 1 0,802 ,1 97
Cash and Cash equivalents 12 13,818 ,0 08 9 ,383,371
Total Assets 526,562,676 459,639,079
LIABILITIES
Current liabilities
Trade and other payables 13 13, 618 , 457 13,09 6,05 4
Interest rate swap 15 546,526 1,472,387
Non-current liabilities
Bank borrowings 14 10 9, 7 2 3 , 3 9 9 1 09,542,823
Interest rate swap 15 21,510 2, 262, 8 67
Obligations under finance leases 16 901,129 9 0 2 , 6 45
Rent deposits due to tenants 904,189 855 , 8 6 6
Total liabilities 125,715,210 12 8 , 132 ,6 4 2
Net assets 400,847 ,466 331,506,437
EQUITY
Capital and reserves attributable to Company’s equity holders
Share capital 18 228, 383, 85 7 228 ,3 83,857
Treasury share reserve 18 (5,991,417 ) (1,450,787 )
Retained earnings 19 8,521,081 7,339,209
Capital reserves 19 72 , 0 95 , 57 3 (604,21 4 )
Other distributable reserves 19 97,838,372 97, 8 3 8 , 3 7 2
Total equity 400,847,466 331,506,437
Approved and authorised for issue by the Board of Directors on 27 April 2022 and signed on their behalf by James Clifton-Brown.
The accompanying notes on pages 72 to 92 are an integral part of these Consolidated Financial Statements. Company Number: 41352 (Guernsey)
69Year ended 31 December 2021
Financial Statements
Consolidated Balance Sheet
as at 31 December 2021
Notes Share
Capital £
Treasury
shares £
Retained
Earnings £
Capital
Reserves £
Other
Distributable
Reserves £
Total
equity £
Opening balance 1 January 2021
Profit for the year — — 85,732,820 — — 85,732,820
Other comprehensive income — — — 3,167,218 — 3,167,218
Total comprehensive income for the period — — 85,732,820 3,167,218 — 88,900,038
Ordinary shares placed into treasury net of issue costs 18 — (4,540,630 ) — — — (4,540,630 )
Dividends paid 21 — — (15,018,379 ) — — (15,018,379 )
Other transfer between reserves — — 1,520,063 (1,520,063 ) — —
Valuation gain from investment properties 7 — — (72,188,550 ) 72,188,550 — —
Valuation loss from land 8 — — 501,550 (501,550 ) — —
Loss on disposal of investment properties 7 — — 634,368 (634,368 ) — —
Balance at 31 December 2021 228,383,857 (5,991,417 ) 8,521,081 72,095,573 97,838,372 400,847,466
Notes Share
Capital £
Treasury
shares £
Retained
Earnings £
Capital
Reserves £
Other
Distributable
Reserves £
Total
equity £
Opening balance 1 January 2020
Loss for the year — — (15,782,067 ) — — (15,782,067 )
Other comprehensive income — — — (1 , 51 4 , 6 3 8 ) — (1 , 514 , 6 3 8 )
Total comprehensive loss for the period — — (15,782,067 ) (1 , 514 , 6 3 8 ) —
(17,296,705 )
Ordinary shares issued net of issue costs 18 95 2,800 — — — — 95 2,800
Ordinary shares placed into treasury
net of issue costs
18 — (1,450,787 ) — — — (1,450,787 )
Dividends paid 21 — — (15 , 4 9 3 , 435 ) — — (15 , 49 3 , 435 )
Valuation loss from investment properties 7 — — 2 7, 6 4 0 , 2 2 4 (27 ,640,224 ) — —
Loss on disposal of investment properties 7 — — 4,806, 13 7 (4,806, 1 37 ) — —
Balance at 31 December 2020 228,383,857 (1,450,787 ) 7, 33 9 , 2 0 9 (604,21 4 )
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
The notes on pages 72 to 92 are an integral part of these Consolidated Financial Statements.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 70
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Cash flows from operating activities Notes
12 months to
31-Dec-21
£
12 months to
31-Dec-20
£
Profit /(loss) for the year before taxation 85,732,82 0 (15,782,067 )
Movement in lease incentives (2,966,033 ) (1,694,642 )
Movement in trade and other receivables (270,226 ) (6,446,180 )
Movement in trade and other payables 536,404 3,421,484
Finance costs 5 3,506,359 3,744,074
Finance income 5 (763 ) (3,896 )
Other transfer between reserves 1,520,063 —
Valuation (gain)/loss from investment properties 7 (72,188,550 ) 27,640,224
Valuation loss from land 8 501,550 —
Loss on disposal of investment properties 7 634,368 4,806,137
Net cash inflow from operating activities 17, 0 0 5 , 9 9 2 15,685,134
Cash flows from investing activities
Interest received 5 76 3 3,896
Purchase of investment properties 7 (11,741,501 ) (21,297,754 )
Purchase of land 8 (8,001,550 ) —
Capital expenditure on investment properties 7 (1,819,229 ) (4,947,828 )
Net proceeds from disposal of investment properties 7 31,840,632 50,973,863
Net cash inflow from investing activities 10,279,115 24,732,177
Cash flows from financing activities
Proceeds on issue of ordinary shares 18 — 95 2,800
Shares bought back during the year 18 (4,540,630 ) (1,450,787 )
Bank borrowing 14 — 27,000,000
Repayment of RCF 14 — (45,000,000 )
Interest paid on bank borrowing (1,872,545 ) (2,479,388 )
Payments on interest rate swaps (1,418,916 ) (1,038,749 )
Dividends paid to the Company's shareholders 21 (15,018,379 ) (15,493,435 )
Net cash outflow from financing activities (22,850,470 ) (37,509,559 )
Net increase in cash and cash equivalents 4,434, 637 2 , 9 0 7,7 52
Cash and cash equivalents at beginning of year 12 9,383,371 6 , 4 75 , 619
Cash and cash equivalents at end of year 12 13 , 8 18 , 0 0 8 9 ,383,371
The notes on pages 72 to 92 are an integral part of these Consolidated Financial Statements.
71Year ended 31 December 2021
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 December 2021
1 GENERAL INFORMATION
a limited liability company incorporated in
listing on the London Stock Exchange.
The address of the registered office is
These audited Consolidated Financial Statements
were approved for issue by the Board of Directors
on 27th April 2022.
2 ACCOUNTING POLICIES
2.1 Basis of preparation
The audited Consolidated Financial Statements
of the Group have been prepared in accordance
with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union
and as issued by the International Accounting
Standards Board, and all applicable requirements
of The Companies (Guernsey) Law, 2008.
The audited Consolidated Financial Statements
of the Group have been prepared under the
historical cost convention as modified by the
measurement of investment property, land and
derivative financial instruments at fair value. The
Consolidated Financial Statements are presented
in pounds sterling and all values are not rounded
except when otherwise indicated.
The Directors have considered the basis of
preparation of the accounts given the COVID-19
pandemic and believe that it is still appropriate
for the accounts to be prepared on the going
concern basis.
Changes in accounting policy and disclosure
The Group has applied the following amendments
for the first time for their annual reporting period
commencing 1 January 2021:
Amendments to IFRS 9 Financial Instruments,
IAS 39 Financial Instruments: Recognition and
Measurement, IFRS 7 Financial Instruments:
Disclosures, IFRS 4 Insurance Contracts and
IFRS 16 Leases – Interest Rate Benchmark
Reform (Phase 2).
In the prior year, the Group adopted the Phase 1
amendments Interest Rate Benchmark Reform –
Amendments to IFRS 9, IAS 39 and IFRS 7. These
amendments modify specific hedge accounting
requirements to allow hedge accounting to
continue for affected hedges during the period
of uncertainty before the hedged item or hedging
instruments are amended as a result of the
interest rate benchmark reform.
In the current year, the Group adopted the Phase
2 amendments Interest Rate Benchmark Reform
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS
4 and IFRS 16. Adopting these amendments
enables the Group to reflect the effects of
transitioning from interbank offered rates (IBOR)
to alternative benchmark interest rates (also
referred to as ‘risk free rates’ or RFRs) without
giving rise to accounting impacts that would not
provide useful information to users of financial
statements. The Group has not restated the prior
period. Instead, the amendments have been
applied retrospectively with any adjustments
recognised in the appropriate components of
equity as at 1 January 2021.
Both the Phase 1 and Phase 2 amendments
are relevant to the Group because it applies
hedge accounting to its interest rate
benchmark exposures. The application of the
amendments impacts the Group’s accounting
in the following ways.
The amendments permit continuation of
hedge accounting even if in the future the
hedged benchmark interest rate, LIBOR, may
no longer be separately identifiable and there
is uncertainty about the replacement of the
floating interest rates included in the interest
rate swaps. However, this relief does not
extend to the requirement that the designated
interest rate risk component must continue to
be reliably measurable. If the risk component
is no longer reliably measurable, the hedging
relationship will be discontinued.
The Group will continue to apply the Phase 1
amendments to IFRS 9/IAS 39 until the
uncertainty arising from the interest rate
benchmark reform with respect to the timing
and the amount of the underlying cash flows to
which the Group is exposed ends. The Group
expects this uncertainty will continue until the
Group’s contracts that reference IBORs are
amended to specify the date on which the
interest rate benchmark will be replaced and
the basis for the cash flow of the alternative
benchmark rate are determined including any
fixed spread.
When the contractual terms of the Group’s
bank borrowings are amended as a direct
consequence of the interest rate benchmark
reform and the new basis for determining the
contractual cash flows is economically equivalent
to the basis immediately preceding the change,
the Group changes the basis for determining the
contractual cash flows prospectively by revising
the effective interest rate.
Annual improvements to IFRS
The Group has made no adjustments to its
financial statements in relation to IFRS Standards
detailed in the annual Improvements to IFRS
2018–2020 Cycle (effective for annual reporting
periods beginning on or after 1 January 2022).
The Group will consider these amendments in
due course to see if they will have any impact on
the Group.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 72
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021
2.2 Significant accounting judgements,
estimates and assumptions
The preparation of the Group’s Financial Statements
requires management to make judgements, estimates
and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the
disclosure of contingent liabilities, at the reporting
date. However, uncertainties about these assumptions
and estimates could result in outcomes that could
require a material adjustment to the carrying amount of
the asset or liability affected in the future periods. The
most significant estimates and judgements are set out
below. There were no critical accounting judgements.
Fair value of investment properties
Investment properties are stated at fair value as
at the Balance Sheet date. Gains or losses arising
from changes in fair values are included in the
Consolidated Statement of Comprehensive Income
in the year in which they arise. The fair value of
investment properties is determined by external real
estate valuation experts using recognised valuation
techniques. The fair values are determined having
regard to any recent real estate transactions where
available, with similar characteristics and locations to
those of the Group’s assets.
In most cases however, the determination of the fair
value of investment properties requires the use of
valuation models which use a number of judgements
and assumptions. The only model used was the income
capitalisation method. Under the income capitalisation
method, a property’s fair value is judged based on the
normalised net operating income generated by the
property, which is divided by the capitalisation rate
(discounted by the investor’s rate of return). Under the
income capitalisation method, over (above market rent)
and under-rent situations are separately capitalised
(discounted).
The sensitivity analysis on page 85 (note 7) details the
decrease in the valuation of investment properties if
equivalent yield increases by 50 basis points or rental
rates (ERV) decreases by 5% which the Board believes
are reasonable sensitivities to apply given historical
movements in valuations.
Lease incentive accounting
As set out under Accounting Policy C(ii), rental
income from those operating leases which include
rent free provisions and stepped rent increases is
recognised on a straight line basis over the lease term.
During 2021, it was identified that there were historic
leases dating back to 2016 where the required rent
smoothing adjustments had not been applied. The
total of these adjustments up to the end of the prior
year (31 December 2020) amounted to £1,520,063.
Having considered the key financial measures of the
Group, and the accumulated profile of this balance,
the Directors are satisfied that the appropriate
correction is a transfer of the identified adjustment
from Capital Reserves to Retained Earnings in the
current year.
This adjustment has no effect on the previously
reported NAVs of the Group.
Fair value of financial instruments
When the fair value of financial assets and financial
liabilities recorded in the Consolidated Balance
Sheet cannot be derived from active markets,
they are determined using a variety of valuation
techniques that include the use of mathematical
models. The input to these models are taken from
observable markets where possible, but where this
is not feasible, a degree of judgement is required
in establishing fair value. The judgements include
considerations of liquidity and model inputs such as
credit risk (both own and counterparty’s), correlation
and volatility.
Changes in assumptions about these factors could
affect the reported fair value of financial instruments.
The models are calibrated regularly and tested for
validity using prices from any observable current
market transactions in the same instrument (without
modification or repackaging) or based on any
available observable market data.
The valuation of interest rate swaps used in the
Balance Sheet is provided by The Royal Bank of
Scotland. These values are validated by comparison
to internally generated valuations prepared using the
fair value principles outlined above.
The sensitivity analysis on page 78 (note 3) details
the increase and decrease in the valuation of interest
rate swaps if market rate interest rates had been
100 basis points higher and 100 basis points lower.
Provision for impairment of receivables
Provision for impairment of receivables are also
a key estimation uncertainty. These are measured
with reference to amounts included as income at
the year end but not yet collected. In assessing
whether the credit risk of an asset has significantly
increased the Group takes into account qualitative
and quantitative reasonable and supportable
forward-looking information.
Due to the impact of COVID-19 and geopolitical risk
on collection rates, there remains an elevated
assessed credit risk. Each individual rental income
debtor is reviewed to assess whether it is believed
there is a probability of default and expected credit
loss given the knowledge of and intelligence about the
individual tenant and an appropriate provision made.
2.3 Summary of significant accounting policies
A Basis of consolidation
The audited Consolidated Financial Statements
comprise the financial statements of Standard Life
Investments Property Income Trust Limited and its
material wholly owned subsidiary undertakings.
Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement
with subsidiaries and has the ability to affect those
returns through its power over the subsidiary.
Specifically, the Group controls a subsidiary if, and
only if, it has:
Power over the subsidiary (i.e. existing rights that
give it the current ability to direct the relevant
activities of the subsidiary)
Exposure, or rights, to variable returns from its
involvement with the subsidiary
The ability to use its power over the subsidiary to
affect its returns
The Group assesses whether or not it controls
a subsidiary if facts and circumstances indicate
that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary
begins when the Group obtains control over the
subsidiary and ceases when the Group loses control
of the subsidiary.
Assets, liabilities, income and expenses of
a subsidiary acquired or disposed of during the
year are included in the consolidated statement
of other comprehensive income from the date the
Group gains control until the date when the Group
ceases to control the subsidiary.
The financial statements of the subsidiaries are
prepared for the same reporting period as the parent
company, using consistent accounting policies.
All intra-group balances, transactions and unrealised
gains and losses resulting from intra-group
transactions are eliminated in full.
73Year ended 31 December 2021
B Functional and presentation currency
Items included in the financial statements of each of
the Group’s entities are measured using the currency
of the primary economic environment in which the
entity operates (“the functional currency”). The
Consolidated Financial Statements are presented
in pound sterling, which is also the Company’s
functional currency.
C Revenue Recognition
Revenue is recognised as follows:
i) Bank interest
Bank interest income is recognised on an
accruals basis.
ii) Rental income
Rental income from operating leases is net of sales
taxes and value added tax (“VAT”) recognised on a
straight line basis over the lease term including lease
agreements with stepped rent increases. The initial
direct costs incurred in negotiating and arranging
an operating lease are recognised as an expense over
the lease term on the same basis as the lease income.
The cost of any lease incentives provided are
recognised over the lease term, on a straight line
basis as a reduction of rental income. The resulting
asset is reflected as a receivable in the Consolidated
Balance Sheet.
Contingent rents, being those payments that are
not fixed at the inception of the lease, for example
increases arising on rent reviews, are recorded
as income in periods when they are earned. Rent
reviews which remain outstanding at the year end are
recognised as income, based on estimates, when it is
reasonable to assume that they will be received.
iii) Other income
The Group is classified as the principal in its contract
with the managing agent. Service charges billed
to tenants by the managing agent are therefore
recognised gross.
iv) Property disposals
Where revenue is obtained by the sale of properties,
it is recognised once the sale transaction has been
completed, regardless of when contracts have
been exchanged.
D Expenditure
All expenses are accounted for on an accruals basis.
The investment management and administration fees,
finance and all other revenue expenses are charged
through the Consolidated Statement of Comprehensive
Income as and when incurred. The Group also incurs
capital expenditure which can result in movements in
the capital value of the investment properties.
E Taxation
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or
paid to taxation authorities. The tax rates and tax
laws used to compute the amount are those that are
enacted or substantively enacted by the reporting
date. Current income tax relating to items recognised
directly in other comprehensive income or in equity
is recognised in other comprehensive income and in
equity respectively, and not in the income statement.
Positions taken in tax returns with respect to situations
in which applicable tax regulations are subject to
interpretation, if any, are reviewed periodically and
provisions are established where appropriate.
The Group recognises liabilities for current taxes
based on estimates of whether additional taxes will be
due. When the final tax outcome of these matters is
different from the amounts that were initially recorded,
such differences will impact the income and deferred
tax provisions in the period in which the determination
is made.
Deferred income tax is provided using the liability
method on all temporary differences at the reporting
date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting
purposes. Deferred income tax assets are recognised
only to the extent that it is probable that taxable profit
will be available against which deductible temporary
differences, carried forward tax credits or tax losses
can be utilised. The amount of deferred tax provided
is based on the expected manner of realisation or
settlement of the carrying amount of assets and
liabilities. In determining the expected manner of
realisation of an asset the Directors consider that the
Group will recover the value of investment property
through sale. Deferred income tax relating to items
recognised directly in equity is recognised in equity
and not in profit or loss.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 74
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
F Investment property
Investment properties comprise completed property
and property under construction or re-development
that is held to earn rentals or for capital appreciation
or both. Property held under a lease is classified
as investment property when the definition of an
investment property is met.
Investment properties are measured initially at cost
including transaction costs. Transaction costs include
transfer taxes, professional fees for legal services
and initial leasing commissions to bring the property
to the condition necessary for it to be capable of
operating. The carrying amount also includes the
cost of replacing part of an existing investment
property at the time that cost is incurred if the
recognition criteria are met.
Subsequent to initial recognition, investment
properties are stated at fair value. Fair value is
based upon the market valuation of the properties
as provided by the external valuers as described
in note 2.2. Gains or losses arising from changes
in the fair values are included in the Consolidated
Statement of Comprehensive Income in the year in
which they arise. For the purposes of these financial
statements, in order to avoid double counting,
the assessed fair value is:
i) Reduced by the carrying amount of any accrued
income resulting from the spreading of lease
incentives and/or minimum lease payments.
ii) Increased by the carrying amount of any liability to
the superior leaseholder or freeholder (for properties
held by the Group under operating leases) that has
been recognised in the Balance Sheet as a finance
lease obligation.
Acquisitions of investment properties are considered
to have taken place on exchange of contracts unless
there are significant conditions attached. For conditional
exchanges acquisitions are recognised when these
conditions are satisfied. Investment properties are
derecognised when they have been disposed of
and no future economic benefit is expected from
their disposal. Any gains or losses on the disposal
of investment properties are recognised in the
Consolidated Statement of Comprehensive Income
in the year of retirement or disposal.
Gains or losses on the disposal of investment
properties are determined as the difference between
net disposal proceeds and the carrying value of the
asset in the previous full period financial statements.
G Investment properties held for sale
Non-current assets (and disposal groups) classified
as held for sale are measured at the lower of carrying
amount and fair value (except for investment
property measured using fair value model).
Non-current assets and disposal groups are
classified as held for sale if their carrying amount
will be recovered through a sale transaction rather
than through continuing use. This condition is
regarded as met only when the sale is highly
probable and the asset (or disposal group) is
available for immediate sale in its present condition.
Management must be committed to the sale
which should be expected to qualify for recognition
as a completed sale within one year from the date
of classification.
H Land
The Group’s land is capable of woodland creation
and peatland restoration projects which would
materially assist the Group’s transition to Net Zero.
Land is initially measured at cost including
transaction costs. Transaction costs include
transfer taxes and professional fees for legal
services. Subsequent expenditure is capitalised
only if it is probable that the future economic
benefits associated with the expenditure will flow
to the Group. Land is not depreciated but instead,
subsequent to initial recognition, recognised at fair
value based upon periodic valuations provided by
the external valuers. Gains or losses arising from
changes in the fair values are included in
the Consolidated Statement of Comprehensive
Income in the year in which they arise.
75Year ended 31 December 2021
I Trade and other receivables
Trade receivables are recognised and carried
at the lower of their original invoiced value and
recoverable amount. Where the time value of
money is material, receivables are carried at
amortised cost. A provision for impairment of trade
receivables is established when there is objective
evidence that the Group will not be able to collect
all amounts due according to the original terms of
the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default
or delinquency in payments (more than 30 days
overdue) are considered indicators that the trade
receivable is impaired. The amount of the provision
is the difference between the asset’s carrying
amount and the present value of estimated future
cash flows, discounted at the original effective
interest rate. The carrying amount of the asset is
reduced through use of an allowance account,
and the amount of the expected credit loss is
recognised in the Consolidated Statement of
Comprehensive Income. When a trade receivable is
uncollectible, it is written off against the allowance
account for trade receivables. Subsequent
recoveries of amounts previously written off
are credited in the Consolidated Statement of
Comprehensive Income.
The Group applies the IFRS 9 simplified approach
to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade
receivables and contract assets.
A provision for impairment of trade receivables
is established where the Property Manager has
indicated concerns over the recoverability of
arrears based upon their individual assessment
of all outstanding balances which incorporates
forward looking information. Given this detailed
approach, a collective assessment methodology
applying a provision matrix to determine expected
credit losses is not used.
The amount of the provision is recognised in the
Consolidated Balance Sheet and any changes
in provision recognised in the Statement of
Comprehensive Income.
J Cash and cash equivalents
Cash and cash equivalents are defined as cash
in hand, demand deposits, and other short-term
highly liquid investments readily convertible
within three months or less to known amounts
of cash and subject to insignificant risk of
changes in value.
K Borrowings and interest expense
All loans and borrowings are initially recognised
at the fair value of the consideration received,
less issue costs where applicable. After initial
recognition, all interest-bearing loans and
borrowings are subsequently measured at
amortised cost. Amortised cost is calculated by
taking into account any discount or premium on
settlement. Borrowing costs are recognised within
finance costs in the Consolidated Statement of
Comprehensive Income as incurred.
L Accounting for derivative financial instruments
and hedging activities
Interest rate swaps are initially recognised at fair
value on the date a derivative contract is entered
into and are subsequently remeasured at their fair
value. The method of recognising the resulting
gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group
documents at the inception of the transaction
the relationship between hedging instruments
and hedged items, as well as its risk management
objective and strategy for undertaking various
hedging transactions. The Group also documents
its assessment both at hedge inception and on an
ongoing basis of whether the derivatives that are
used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows
of hedged items. The effective portion of changes
in the fair value of derivatives that are designated
and qualify as cash flow hedges are recognised in
other comprehensive income in the Consolidated
Statement of Comprehensive Income. The gains
or losses relating to the ineffective portion are
recognised in operating profit in the Consolidated
Statement of Comprehensive Income.
Amounts taken to equity are transferred to profit or
loss when the hedged transaction affects profit or
loss, such as when the hedged financial income or
financial expenses are recognised.
When a derivative is held as an economic hedge
for a period beyond 12 months after the end of
the reporting period, the derivative is classified as
non-current consistent with the classification of
the underlying item. A derivative instrument that is
a designated and effective hedging instrument is
classified consistent with the classification of the
underlying hedged item.
M Service charge
IFRS15 requires the Group to determine whether
it is a principal or an agent when goods or
services are transferred to a customer. An entity
is a principal if the entity controls the promised
good or service before the entity transfers the
goods or services to a customer. An entity is an
agent if the entity’s performance obligation is to
arrange for the provision of goods and services
by another party.
Any leases entered into between the Group and
a tenant require the Group to provide ancillary
services to the tenant such as maintenance works
etc, therefore these service charge obligations
belong to the Group. However, to meet this
obligation the Group appoints a managing agent,
Jones Lang Lasalle Inc “JLL” and directs it to fulfil
the obligation on its behalf. The contract between
the Group and the managing agent creates both
a right to services and the ability to direct those
services. This is a clear indication that the Group
operates as a principal and the managing agent
operates as an agent. Therefore it is necessary
to recognise the gross service charge revenue
and expenditure billed to tenants as opposed to
recognising the net amount.
N Other financial liabilities
Trade and other payables are recognised and
carried at invoiced value as they are considered
to have payment terms of 30 days or less and
are not interest bearing. The balance of trade
and other payables are considered to meet the
definition of an accrual and have been expensed
through the Income Statement or Balance Sheet
depending on classification. VAT payable at
the Balance Sheet date will be settled within
31 days of the Balance Sheet date with Her
Majesty’s Revenue and Customs (“HMRC”) and
deferred rental income is rent that has been
billed to tenants but relates to the period after
the Balance Sheet date. Rent deposits recognised
in note 13 as current are those that are due within
one year as a result of upcoming tenant expiries.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 76
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
3 FINANCIAL RISK MANAGEMENT
The Group’s principal financial liabilities are loans
and borrowings. The main purpose of the Group’s
loans and borrowings is to finance the acquisition
and development of the Group’s property portfolio.
The Group has rent and other receivables, trade and
other payables and cash and short-term deposits
that arise directly from its operations.
The Group is exposed to market risk (including
interest rate risk and real estate risk), credit risk,
liquidity risk and capital risk. The Group is not
exposed to currency risk or price risk. The Group
is engaged in a single segment of business, being
property investment in one geographical area, the
United Kingdom. Therefore the Group only engages
in one form of currency being pound sterling.
The Board of Directors reviews and agrees policies
for managing each of these risks which are
summarised below.
Market risk
Market risk is the risk that the fair values of financial
instruments will fluctuate because of changes in
market prices. The financial instruments held by the
Group that are affected by market risk are principally
the interest rate swap.
i) Interest Rate risk
As described on page 78 the Group invests cash
balances with RBS, Citibank and Barclays. These
balances expose the Group to cash flow interest rate
risk as the Group’s income and operating cash flows
will be affected by movements in the market rate
of interest. There is considered to be no fair value
interest rate risk in regard to these balances.
The bank borrowings as described in note 14 also
expose the Group to cash flow interest rate risk.
The Group’s policy is to manage its cash flow interest
rate risk using interest rate swaps, in which the Group
has agreed to exchange the difference between fixed
and floating interest amounts based on a notional
principal amount (see note 15). The Group has
floating rate borrowings of £110,000,000. The full
£110,000,000 of these borrowings has been fixed
via an interest rate swap.
The fair value of the interest rate swap is exposed to
changes in the market interest rate as their fair value is
calculated as the present value of the estimated future
cash flows under the agreements. The accounting
policy for recognising the fair value movements in
the interest rate swaps is described in note 2.3 L.
At 31 December 2021
Fixed Rate
£
Variable Rate
£
Interest Rate
£
Cash and cash equivalents — 13,818,008 0.020%
Bank borrowings 110,000,000 — 2.725%
At 31 December 2020
Fixed Rate
£
Variable Rate
£
Interest Rate
£
Cash and cash equivalents — 9,383,371 0.020%
Bank borrowings 110,000,000 — 2.725%
At 31 December 2021, if market rate interest rates
had been 100 basis points higher, which is deemed
appropriate given historical movements in interest
rates, with all other variables held constant, the
profit for the year would have been £138,180 higher
(2020: £93,834 higher) as a result of the higher
interest income on cash and cash equivalents.
Other Comprehensive Income and the Capital
Reserve would have been £1,657,653 higher
(2020: £2,507,886 higher) as a result of an increase
in the fair value of the derivative designated as
a cash flow hedge of floating rate borrowings.
At 31 December 2021, if market rate interest
rates had been 100 basis points lower with all
other variables held constant, the profit for the
year would have been £138,180 lower (2020:
£93,834 lower) as a result of the lower interest
income on cash and cash equivalents. Other
Comprehensive Income and the Capital Reserve
would have been £1,657,731 lower (2020:
£2,519,221 lower) as a result of a decrease in
the fair value of the derivative designated as a cash
flow hedge of floating rate borrowings.
ii) Real estate risk
The Group has identified the following risk associated
with the real estate portfolio. The risks following, in
particular b and c and also credit risk have remained
high given the ongoing COVID-19 pandemic and the
resultant effect on tenants’ ability to pay rent:
a) The cost of any development schemes may increase
if there are delays in the planning process given the
inflationary environment. The Group uses advisers who
are experts in the specific planning requirements in
the scheme’s location in order to reduce the risks that
may arise in the planning process.
b) major tenants may become insolvent causing
a significant loss of rental income and a reduction
in the value of the associated property (see also
credit risk on page 78). To reduce this risk, the Group
reviews the financial status of all prospective tenants
and decides on the appropriate level of security
required via rental deposits or guarantees.
c) The exposure of the fair values of the portfolio to
market and occupier fundamentals. The Group aims
to manage such risks by taking an active approach
to asset management (working with tenants to
extend leases and minimise voids), capturing profit
(selling when the property has delivered a return
to the Group that the Group believes has been
maximised and the proceeds can be reinvested into
more attractive opportunities) and identifying new
investments (generally at yields that are accretive to
the revenue account and where the Group believes
there will be greater investment demand in the
medium term).
Trade and other receivables and trade and other
payables are interest free and have settlement dates
within one year and therefore are not considered to
present a fair value interest rate risk.
The tables below set out the carrying amount
of the Group’s financial instruments excluding
the amortisation of borrowing costs as outlined
in note 14 Bank borrowings have been fixed
due to an interest rate swap and is detailed further
in note 15:
77Year ended 31 December 2021
Credit risk
Credit risk is the risk that a counterparty will be
unable to meet a commitment that it has entered
into with the Group. In the event of default by an
occupational tenant, the Group will suffer a rental
income shortfall and incur additional related costs.
The Investment Manager regularly reviews reports
produced by Dun and Bradstreet and other sources,
including the MSCI IRIS report, to be able to assess
the credit worthiness of the Group’s tenants and
aims to ensure that there are no excessive
concentrations of credit risk and that the impact of
default by a tenant is minimised. In addition to this,
the terms of the Group’s bank borrowings require
that the largest tenant accounts for less than 20% of
the Group’s total rental income, that the five largest
tenants account for less than 50% of the Group’s
total rental income and that the ten largest tenants
account for less than 75% of the Group’s total
rental income. The maximum credit risk from the
tenant arrears of the Group at the financial year
end was £5,418,733 (2020: £6,019,917) as
detailed in note 11 on page 86. The Investment
Manager also has a detailed process to identify the
expected credit loss from tenants who are behind
with rental payments.
This involves a review of every tenant who owes
money with the Investment Manager using their own
knowledge and communications with the tenant to
assess whether a provision should be made. This
resulted in the provision for bad debts increasing to
£2,990,034 at the year end (2020: £2,583,559).
With respect to credit risk arising from other financial
assets of the Group, which comprise cash and cash
equivalents, the Group’s exposure to credit risk
arises from default of the counterparty bank with
a maximum exposure equal to the carrying value
of these instruments. As at 31 December 2021
£1,392,240 (2020: £921,920) was placed on
deposit with The Royal Bank of Scotland plc (“RBS”),
£1,145,830 (2020: £7,749,473) was held with
Citibank and £11,279,938 (2020: £711,978) was
held with Barclays. The credit risk associated with the
cash deposits placed with RBS is mitigated by virtue
of the Group having a right to off-set the balance
deposited against the amount borrowed from RBS
should RBS be unable to return the deposits for any
reason. Citibank is rated A-2 Stable by Standard
& Poor’s and P-2 Stable by Moody’s. RBS is rated
A-1 Stable by Standard & Poor’s and P-1 Stable by
Moody’s. Barclays is rated A-1 Positive by Standard
& Poor’s and P-1 Stable by Moody’s.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulties in realising assets or otherwise raising
funds to meet financial commitments. The investment
properties in which the Group invests are not traded
in an organised public market and may be illiquid.
As a result, the Group may not be able to liquidate
its investments in these properties quickly at an
amount close to their fair value in order to meet its
liquidity requirements.
The following table summarises the maturity
profile of the Group’s financial liabilities based on
contractual undiscounted payments.
The disclosed amounts for interest-bearing loans
and interest rate swaps in the below table are the
estimated net undiscounted cash flows.
The Group’s liquidity position is regularly monitored
by management and is reviewed quarterly by the
Board of Directors.
Financial Liabilities
Year ended 31 December 2021
On demand
£
12 months
£
1 to 5 years
£
> 5 years
£
Total
£
Interest-bearing loans — 1,744,875 110,436,219 — 112,181,094
Interest rate swaps — 1,252,625 313,156 — 1,565,781
Trade and other payables 8,187,362 26,068 104,271 2,606,785 10,924,486
Rental deposits due to tenants — 65,720 550,084 354,105 969,909
8,187,362 3,089,288 111,403,730 2,960,890 125,641,270
Year ended 31 December 2020
On demand
£
12 months
£
1 to 5 years
£
> 5 years
£
Total
£
Interest-bearing loans — 1,565,575 112,168,436 — 113,734,011
Interest rate swaps — 1,431,925 1,789,906 — 3,221,831
Trade and other payables 4,986,275 26,068 104,271 2,632,853 7,749,467
Rental deposits due to tenants — 736,793 521,194 334,673 1,592,660
4,986,275 3,760,361 114,583,807 2,967,526 126,297,969
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 78
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
Capital risk
The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as
a going concern in order to provide returns for
shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue
new shares, increase or decrease borrowings or sell
assets to reduce debt.
The Group monitors capital on the basis of the
gearing ratio. This ratio is calculated as total
borrowings divided by gross assets and has a limit
of 65% set by the Articles of Association of the
Company. Gross assets are calculated as non-current
and current assets, as shown in the Consolidated
Balance Sheet.
The gearing ratios at 31 December 2021 and at
31 December 2020 were as follows:
Fair values
Set out below is a comparison by class of the
carrying amounts and fair value of the Group’s
financial instruments that are carried in the
financial statements at amortised cost.
The fair value of trade
receivables and payables
are materially equivalent
to their amortised cost.
Financial Assets
2021
£
2020
£
2021
£
2020
£
Cash and cash equivalents 13,818,008 9,383,371 13,818,008 9,383,371
Trade and other receivables 11,024,100 10,802,197 11,024,100 10,802,197
Financial Liabilities
Bank borrowings 109,723,399 109,542,823 110,119,830 113,000,998
Interest rate swaps 568,036 3,735,254 568,036 3,735,254
Trade and other payables 8,359,405 5,797,386 8,359,405 5,797,386
Carrying Amount Fair Value
The Group also monitors
the Loan-to-value ratio
which is calculated as
gross borrowings less
cash divided by portfolio
valuation. As at
31 December 2021 this
was 19.2% (2020: 23.0%).
2021
£
2020
£
Total borrowings (excluding unamortised arrangement fees) 110,000,000 110,000,000
Gross assets 526,562,676 459,639,079
Gearing ratio (must not exceed 65%) 20.89% 23.93%
79Year ended 31 December 2021
Year ended 31 December 2021 Level 1 Level 2 Level 3 Total fair value
Financial assets
Trade and other receivables — 11,024,100 — 11,024,100
Cash and cash equivalents 13,818,008 — — 13,818,008
Rental deposits held on behalf of tenants 904,189 — — 904,189
Right of use asset — 901,129 — 901,129
14,722,197 11,925,229 — 26,647,426
Financial liabilities
Trade and other payables — 6,554,087 — 6,554,087
Interest rate swap — 568,036 — 568,036
Bank borrowings — 110,119,830 — 110,119,830
Obligations under finance leases — 901,129 — 901,129
Rental deposits held on behalf of tenants 904,189 — — 904,189
904,189 118,143,082 — 119,047,271
Year ended 31 December 2020 Level 1 Level 2 Level 3 Total fair value
Financial assets
Trade and other receivables — 10,802,197 — 10,802,197
Cash and cash equivalents 9,383,371 — — 9,383,371
Rental deposits held on behalf of tenants 855,866 — — 855,866
Right of use asset — 902,645 — 902,645
10,239,237 11,704,842 — 21,944,079
Financial liabilities
Trade and other payables — 4,038,874 — 4,038,874
Interest rate swap — 3,735,254 — 3,735,254
Bank borrowings — 113,000,998 — 113,000,998
Obligations under finance leases — 902,645 — 902,645
Rental deposits held on behalf of tenants 855,866 — — 855,866
855,866 121,677,771 — 122,533,637
The fair value of the financial assets and liabilities
are included at an estimate of the price that
would be received to sell a financial asset or paid
to transfer a financial liability in an orderly
transaction between market participants at the
measurement date. The following methods and
assumptions were used to estimate the fair value:
Cash and cash equivalents, trade and other
receivables and trade and other payables are
the same as fair value due to the short-term
maturities of these instruments.
The fair value of bank borrowings is estimated
by discounting future cash flows using rates
currently available for debt on similar terms and
remaining maturities. The fair value approximates
their carrying values gross of unamortised
transaction costs. This is considered as being
valued at level 2 of the fair value hierarchy and has
not changed level since 31 December 2020.
The fair value of the interest rate swap contract
is estimated by discounting expected future cash
flows using current market interest rates and yield
curve over the remaining term of the instrument.
This is considered as being valued at level 2 of
the fair value hierarchy and has not changed
level since 31 December 2020. The definition
of the valuation techniques are explained in the
significant accounting judgements, estimates and
assumptions on page 73.
The adjacent table shows an analysis of the
fair values of financial assets and liabilities
recognised in the Balance Sheet by the level of
the fair value hierarchy:
Level 1 Quoted (unadjusted) market prices in active
markets for identical assets or liabilities.
Level 2 Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable.
Level 3 Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable.
Please see note 7 for details on the valuation
of Investment properties.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 80
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
2021
£
2020
£
Interest income on cash and cash equivalents 763 3,896
Finance income 763 3,896
Interest expense on bank borrowings 1,613,050 2,202,152
Non-utilisation charges on facilities 329,186 277,236
Payments on interest rate swap 1,383,547 1,038,749
Amortisation of arrangement costs (see note 14) 180,576 225,937
Finance costs 3,506,359 3,744,074
6 TAXATION
UK REIT Status
The Group migrated tax residence to the UK and
elected to be treated as a UK REIT with effect from
1 January 2015. As a UK REIT, 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
require 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.
Accordingly, deferred tax is not recognised on
temporary differences relating to the property
rental business.
The Company and its Guernsey subsidiary have
obtained exempt company status in Guernsey
so that they are exempt from Guernsey taxation
on income arising outside Guernsey and bank
interest receivable in Guernsey.
A reconciliation between the tax charge and
the product of accounting profit multiplied by
the applicable tax rate for the year ended
31 December 2021 and 2020 is as follows:
2021
£
2020
£
Profit/(loss) before tax 85,732,820 (15,782,067)
Tax calculated at UK statutory corporation tax rate of 19%
(2020: 19%)
16,289,236 (2,998,593)
UK REIT exemption on net income (2,789,236) (3,166,216)
Valuation (gain)/loss in respect of investment properties
and land not subject to tax
(13,500,000) 6,164,809
Current income tax charge — —
5 FINANCE INCOME AND COSTS
Of the finance costs above, £409,487 of the interest expense on bank borrowings and £247,093 of payments
on interest rate swaps were accruals at 31 December 2021 and included in Trade and other payables.
4 FEES
Investment management fees
On 19 December 2003 Standard Life Investments
(Corporate Funds) Limited (“the Investment Manager”)
was appointed as Investment Manager to manage
the property assets of the Group. A new Investment
Management Agreement (“IMA”) was entered into on
7 July 2014, appointing the Investment Manager as
the AIFM (“Alternative Investment Fund Manager”).
On 10 December 2018, the Investment Manager’s
contract was novated on the same commercial terms
to Aberdeen Standard Fund Managers Limited.
From 1 July 2019, under the terms of the IMA
the Investment Manager is entitled to investment
management fees 0.70% of total assets up to
£500 million; and 0.60% of total assets in excess
of £500 million. The total fees charged for the year
amounted to £3,301,074 (2020: £3,198,519).
The amount due and payable at the year end amounted
to £893,048 excluding VAT (2020: £779,737 excluding
VAT). In addition the Company paid the Investment
Manager a sum of £160,250 excluding VAT (2020:
£131,000 excluding VAT) to participate in the Manager’s
marketing programme and Investment Trust share plan.
Administration, secretarial fees
On 19 December 2003 Northern Trust International
Fund Administration Services (Guernsey) Limited
(“Northern Trust”) was appointed administrator
and secretary to the Group. Northern Trust is
entitled to an annual fee, payable quarterly in
arrears, of £65,000. Northern Trust is also entitled
to reimbursement of reasonable out of pocket
expenses. Total fees and expenses charged for
the year amounted to £65,000 (2020: £65,000).
The amount due and payable at the year end
amounted to £16,250 (2020: £16,250).
Valuer’s fee
Knight Frank LLP (“the Valuers”), external
international real estate consultants, was appointed
as valuers in respect of the assets comprising the
property portfolio. The total valuation fees charged
for the year amounted to £77,457 (2020: £84,638).
The total valuation fee comprises a base fee for the
ongoing quarterly valuation, and a one off fee on
acquisition of an asset. The amount due and payable
at the year end amounted to £21,246 excluding VAT
(2020: £18,602 excluding VAT).
The annual fee is equal to 0.017 percent of the
aggregate value of property portfolio paid quarterly.
Auditor’s fee
At the year end date Deloitte LLP continued as
independent auditor of the Group. The audit fees for
the year amounted to £111,540 (2020: £118,400)
and relate to audit services provided for the 2021
financial year. Deloitte LLP did not provide any non-
audit services in the year (2020: nil).
81Year ended 31 December 2021
7 INVESTMENT PROPERTIES
UK Industrial
2021
£
UK Office
2021
£
UK Retail
2021
£
UK Other
2021
£
Total
2021
£
Market value at 1 January 211,200,000 142,695,000 51,150,000 32,650,000 437,695,000
Purchase of investment properties 11,690,631 — 50,870 — 11,741,501
Capital expenditure on investment properties 125,634 1,712,322 (35,227) 16,500 1,819,229
Opening market value of disposed investment properties (9,400,000) (20,425,000) (2,650,000) — (32,475,000)
Valuation gain from investment properties 58,043,007 1,580,786 7,762,099 3,282,595 70,668,487
Movement in lease incentives receivable 1,905,978 711,892 247,258 100,905 2,966,033
Market value at 31 December 273,565,250 126,275,000 56,525,000 36,050,000 492,415,250
Investment property recognised as held for sale — — — — —
Market value net of held for sale at 31 December 273,565,250 126,275,000 56,525,000 36,050,000 492,415,250
Right of use asset recognised on leasehold properties — 901,129 — — 901,129
Adjustment for lease incentives (4,405,288) (2,921,649) (808,188) (667,169) (8,802,294)
Carrying value at 31 December 269,159,962 124,254,480 55,716,812 35,382,831 484,514,085
UK Industrial
2020
£
UK Office
2020
£
UK Retail
2020
£
UK Other
2020
£
Total
2020
£
Market value at 1 January 252,800,000 163,305,000 42,270,000 34,800,000 493,175,000
Purchase of investment properties 5,099 623,074 20,669,581 — 21,297,754
Capital expenditure on investment properties 727,680 4,051,295 168,853 — 4,947,828
Opening market value of disposed investment properties (41,100,000) (10,700,000) (3,980,000) — (55,780,000)
Valuation loss from investment properties (2,093,045) (15,149,700) (8,286,927) (2,110,552) (27,640,224)
Movement in lease incentives receivable 860,266 565,331 308,493 (39,448) 1,694,642
Market value at 31 December 211,200,000 142,695,000 51,150,000 32,650,000 437,695,000
Investment property recognised as held for sale — (4,300,000) — — (4,300,000)
Market value net of held for sale at 31 December 211,200,000 138,395,000 51,150,000 32,650,000 433,395,000
Right of use asset recognised on leasehold properties — 902,645 — — 902,645
Adjustment for lease incentives (2,499,310) (2,209,756) (609,940) (566,264) (5,885,270)
Carrying value at 31 December 208,700,690 137,087,889 50,540,060 32,083,736 428,412,375
The valuation gain on investment properties in the Statement of Comprehensive Income & Statement of Changes in Equity is adjusted by the lease incentive
adjustment disclosed under Accounting Policies 2.2. in arriving at the £70,668,487 presented in the table within this note.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 82
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
Valuation methodology
The fair values of completed investment properties are
determined using the income capitalisation method.
The income capitalisation method is based on
capitalising the net income stream at an appropriate
yield. In establishing the net income stream the
valuers have reflected the current rent (the gross
rent) payable to lease expiry, at which point the
valuer has assumed that each unit will be re-let
at their opinion of ERV. The valuers have made
allowances for voids where appropriate, as well as
deducting non recoverable costs where applicable.
The appropriate yield is selected on the basis of the
location of the building, its quality, tenant credit
quality and lease terms amongst other factors.
No properties have changed valuation technique
during the year. At the Balance Sheet date the
income capitalisation method is appropriate for
valuing all investment properties.
The Investment Manager meets with the valuers
on a quarterly basis to ensure the valuers are aware
of all relevant information for the valuation and
any change in the investment over the quarter.
The Investment Manager then reviews and discusses
the draft valuations with the valuers to ensure correct
factual assumptions are made.
The management group that determines the
Company’s valuation policies and procedures for
property valuations is the Property Valuation
Committee as detailed on page 49. The Committee
reviews the quarterly property valuation reports
produced by the valuers before they are submitted
to the Board, focusing in particular on:
Significant adjustments from the previous
property valuation report;
Reviewing the individual valuations of each
property;
Compliance with applicable standards and
guidelines including those issued by RICS and
the UKLA Listing Rules;
Reviewing the findings and any recommendations
or statements made by the valuer;
Considering any further matters relating to the
valuation of the properties.
The Chair of the Committee makes a brief report of
the findings and recommendations of the Committee
to the Board after each Committee meeting. The
minutes of the Committee meetings are circulated
to the Board. The Chair submits an annual report to
the Board summarising the Committee’s activities
during the year and the related significant results
and findings.
The table on page 84 outlines the valuation
techniques and inputs used to derive Level 3 fair
values for each class of investment properties.
The table includes:
The fair value measurements at the end of the
reporting period.
The level of the fair value hierarchy (e.g. Level 3)
within which the fair value measurements are
categorised in their entirety.
A description of the valuation techniques applied.
Fair value measurements, quantitative information
about the significant unobservable inputs used in
the fair value measurement.
The inputs used in the fair value measurement,
including the ranges of rent charged to different
units within the same building.
The valuations of investment properties were
performed by Knight Frank LLP, accredited external
valuers with recognised and relevant professional
qualifications and recent experience of the location
and category of the investment properties being
valued. The valuation models used by Knight Frank
are in accordance with Royal Institute of Chartered
Surveyors (‘RICS’) requirements on disclosure for
Regulated Purpose Valuations (RICS Valuation –
Professional Standards January 2014 published by
the Royal Institution of Chartered Surveyors) and are
consistent with the principles in IFRS 13. The market
value provided by Knight Frank at the year end was
£492,415,250 (2020: £437,695,000) however
an adjustment has been made for lease incentives
of £8,802,294 (2020: £5,885,270) that are already
accounted for as an asset. In addition, as required
under IFRS 16, a right of use asset of £901,129
(2020: £902,645) has been recognised in respect
of the present value of future ground rents and an
amount of £901,129 (2020: £902,645) has also
been recognised as an obligation under finance
leases in the balance sheet, as explained in note 16.
In the Consolidated Cash Flow Statement, proceeds
from disposal of investment properties comprise:
2021
£
2020
£
Opening market value of disposed investment properties 32,475,000 55,780,000
Loss on disposal of investment properties (634,368) (4,806,137)
Net proceeds from disposal of investment properties 31,840,632 50,973,863
83Year ended 31 December 2021
Sector 2021 Fair Value 2021 £ Key Unobservable Input 2021 Range 2021 (Weighted average)
Industrial 273,565,250 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
0.00% to 7.49%
0.00% to 7.72%
0.00% to 7.00%
£4.00 to £9.50
(4.48%)
(5.11%)
(5.07%)
(£6.19)
Office 126,275,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
2.71% to 6.28%
5.25% to 9.23%
5.16% to 8.17%
£17.00 to £46.09
(4.77%)
(7.28%)
(6.84%)
(£26.19)
Retail 56,525,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
4.56% to 8.43%
5.25% to 7.48%
5.52% to 8.12%
£8.74 to £29.32
(6.18%)
(5.83%)
(6.40%)
(£15.31)
Other 36,050,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
4.57% to 8.10%
4.39% to 7.90%
4.62% to 7.90%
£9.24 to £18.68
(5.40%)
(5.22%)
(5.35%)
(£15.09)
492,415,250
Sector 2020 Fair Value 2020 £ Key Unobservable Input 2020 Range 2020 (Weighted average)
Industrial 211,200,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
0.00% to 8.08%
4.29% to 10.29%
4.26% to 8.55%
£2.75 to £8.50
(5.54%)
(6.26%)
(6.21%)
(£5.70)
Office 142,695,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
0.00% to 13.36%
5.32% to 10.01%
5.23% to 8.55%
£10.25 to £111.00
(5.24%)
(7.66%)
(7.11%)
(£25.54)
Retail 51,150,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
4.79% to 8.49%
5.12% to 7.84%
5.63% to 8.05%
£8.35 to £90.00
(7.99%)
(6.83%)
(7.43%)
(£15.53)
Other 32,650,000 Initial Yield
Reversionary Yield
Equivalent Yield
Estimated rental value per sq ft
4.91% to 6.89%
5.03% to 6.90%
5.01% to 6.91%
£7.50 to £30.00
(5.90%)
(5.80%)
(5.87%)
(£19.75)
437,695,000
Descriptions and definitions
The table above includes the following descriptions
and definitions relating to valuation techniques
and key observable inputs made in determining
the fair values.
Estimated rental value (ERV)
The rent at which space could be let in the market
conditions prevailing at the date of valuation.
Equivalent yield
The equivalent yield is defined as the internal rate of
return of the cash flow from the property, assuming
a rise or fall to ERV at the next review or lease
termination, but with no further rental change.
Initial yield
Initial yield is the annualised rents of a property
expressed as a percentage of the property value.
Reversionary yield
Reversionary yield is the anticipated yield to which
the initial yield will rise (or fall) once the rent
reaches the ERV.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 84
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
Below is a list of how the interrelationships in
the sensitivity analysis above can be explained.
In both cases outlined in the sensitivity table the
estimated fair value would increase (decrease) if:
The ERV is higher (lower)
Void periods were shorter (longer)
The occupancy rate was higher (lower)
Rent free periods were shorter (longer)
The capitalisation rates were lower (higher)
8 LAND
During the year, the Group acquired 1,471 hectares
of the Ralia Estate. The land is capable of woodland
creation and peatland restoration, projects which
would materially assist the Group’s transition to Net
Zero. The acquisition of this site is unlike the existing
portfolio in that it is not being held to create income
or primarily for capital return.
Valuation methodology
The Land is held at fair value.
The Group appoints suitable valuers (such
appointment is reviewed on a periodic basis) to
undertake a valuation of the land on a quarterly
basis. The valuation is undertaken in accordance
with the current RICS guidelines by Knight Frank LLP
whose credentials are set out in note 7.
2021 2020
ERV p.a. £31,542,350 £32,180,024
Area sq ft 3,517,993 3,825,017
Average ERV per sq ft £8.97 £8.41
Initial Yield 4.8% 5.8%
Reversionary Yield 4.8% 6.9%
The table below shows the overall ERV per annum, area
per square foot, average ERV per square foot, initial yield
and reversionary yield as at the Balance Sheet date.
2021
£
2020
£
Increase in equivalent yield of 50 bps (41,659,430) (34,483,590)
Decrease of 5% in ERV (19,561,811) (17,437,618)
Reconciliation of carrying amount 2021 2020
Cost
Balance at the beginning of the year — —
Additions 8,001,550 —
Balance at the end of the year 8,001,550 —
Unrealised fair value gains/(losses)
Balance at the beginning of the year — —
Valuation loss from land (501,550) —
Balance at the end of the year (501,550) —
Carrying amount as at 31 December 7,500,000 —
The table below presents the sensitivity of the valuation to changes
in the most significant assumptions underlying the valuation of
completed investment property. The Board believes these are
reasonable sensitivities given historic movements in valuations.
85Year ended 31 December 2021
9 INVESTMENT PROPERTIES
HELD FOR SALE
As at 31 December 2021, the Group was not actively
seeking a buyer for any of the Investment Properties.
As at 31 December 2020, the Group was
actively seeking a buyer for Interfleet House,
Derby. The Group both exchanged contracts and
completed this sale on 8 January 2021 for a price
of £4,346,000.
10 INVESTMENTS IN SUBSIDIARY
UNDERTAKINGS
The Company owns 100 per cent of the issued
ordinary share capital of Standard Life Investments
Property Holdings Limited, a company with limited
liability incorporated and domiciled in Guernsey,
Channel Islands, whose principal business is property
investment.
The Group undertakings consist of the following
100% owned subsidiaries at the Balance Sheet date:
Standard Life Investments Property Holdings
Limited, a company with limited liability
incorporated in Guernsey, Channel Islands.
Standard Life Investments (SLIPIT) Limited
Partnership, a limited partnership established in
England.
Standard Life Investments SLIPIT (General
Partner) Limited, a company with limited liability
incorporated in England.
Standard Life Investments SLIPIT (Nominee)
Limited, a company with limited liability
incorporated and domiciled in England.
Hagley Road Limited, a company with limited
liability incorporated in Jersey, Channel Islands.
The estimated fair values of receivables are the
discounted amount of the estimated future cash
flows expected to be received and approximate their
carrying amounts.
The trade receivables above relate to rental
income receivable from tenants of the investment
properties. When a new lease is agreed with a
tenant the Investment Manager performs various
money laundering checks and makes a financial
assessment to determine the tenant’s ability to
fulfil its obligations under the lease agreement for
the foreseeable future. The majority of tenants are
invoiced for rental income quarterly in advance and
are issued with invoices at least 21 days before the
relevant quarter starts. Invoices become due on
the first day of the quarter and are considered past
due if payment is not received by this date. Other
receivables are considered past due when the given
terms of credit expire.
Amounts are considered impaired when it becomes
unlikely that the full value of a receivable will be
recovered. Movement in the balance considered
to be impaired has been included in other direct
property costs in the Consolidated Statement
of Comprehensive Income. As at 31 December
2021, trade receivables of £2,990,034 (2020:
£2,583,559) were considered impaired and
provided for.
If the provision for impairment of trade receivables
increased by £1 million then the Company’s earnings
and net asset value would decrease by £1 million.
If it decreased by £1 million then the Company’s
earnings and net asset value would increase by £1
million.
11 TRADE AND OTHER RECEIVABLES
Reconciliation for changes in the provision
for impairment of trade receivables:
2021
£
2020
£
Trade receivables 8,408,767 8,603,476
Less: provision for impairment of trade receivables (2,990,034) (2,583,559)
Trade receivables (net) 5,418,733 6,019,917
Rental deposits held on behalf of tenants 65,720 736,793
Other receivables 5,539,647 4,045,487
Total trade and other receivables 11,024,100 10,802,197
2021
£
2020
£
Opening balance (2,583,559) (138,593)
Charge for the year (406,475) (2,444,966)
Closing balance (2,990,034) (2,583,559)
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 86
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
2021
£
2020
£
0 to 3 months (162,132) (252,550)
3 to 6 months (451,417) (705,740)
Over 6 months (2,376,485) (1,625,269)
Closing balance (2,990,034) (2,583,559)
The ageing of these receivables is as follows:
2021
£
2020
£
Cash held at bank 12,425,768 8,461,451
Cash held on deposit with RBS 1,392,240 921,920
13,818,008 9,383,371
12 CASH AND CASH EQUIVALENTS
Cash held at banks earns interest at floating rates
based on daily bank deposit rates. Deposits are
made for varying periods of between one day and
three months, depending on the immediate cash
requirements of the Group, and earn interest at the
applicable short-term deposit rates.
13 TRADE AND OTHER PAYABLES
2021
£
2020
£
Trade and other payables 6,488,367 3,302,081
VAT payable 1,698,995 1,684,195
Deferred rental income 5,365,375 7,372,985
Rental deposits due to tenants 65,720 736,793
13,618,457 13,096,054
Trade payables are non-interest bearing and are
normally settled on 30-day terms.
As of 31 December 2021, trade receivables of
£5,418,733 (2020: £6,019,917) were less than
3 months past due but considered not impaired.
87Year ended 31 December 2021
On 28 April 2016 the Group entered into an agreement
to extend £145 million of its existing £155 million
debt facility with Royal Bank of Scotland (“RBS”), now
Royal Bank of Scotland International (“RBSI”). The
debt facility consisted of a £110 million seven year
term loan facility and a £35 million five year Revolving
Credit Facility (“RCF”) which was extended by two
years in May 2018 with the margin on the RCF reset to
LIBOR plus 1.45%. Interest was payable on the Term
Loan at 3 month LIBOR plus 1.375% which equates
to a fixed rate of 2.725% on the Term Loan.
In June 2019, the Group also entered into a new
arrangement with RBSI to extend its RCF by
£20 million. This facility had a margin of 1.60%
above LIBOR. As at 31 December 2021 none of the
RCF was drawn (2020: £nil).
The London Interbank Offer Rate (LIBOR) was one of the
main interest rate benchmarks used in financial markets
to determine interest rates for financial contracts
globally. The low volume of underlying transactions
since the global financial crisis in 2008/2009 made
LIBOR unsustainable and as a result, and in line with
announcements from the Financial Conduct Authority
(FCA), 24 of the 35 LIBOR settings ceased from
1 January 2022. Various risk free rates are available
as an alternative to LIBOR including the Sterling
Overnight Index Average (SONIA) benchmark.
The Group has taken steps, before the date of
transition, to ensure that any exposure to LIBOR
was identified with actions taken to rebase and
redocument any financial contracts where LIBOR was
previously used. This led to minor amendments to
operational processes to cater for this change
but there is not expected to be a material impact on
the assets and liabilities of the Group as a result of
the phase out of LIBOR. The switch to SONIA took
effect from the first interest payment date following
cessation of LIBOR (20th January 2022).
Under the terms of the loan facility there are certain
events which would entitle RBSI to terminate the
loan facility and demand repayment of all sums due.
Included in these events of default is the financial
undertaking relating to the LTV percentage. The
loan agreement notes that the LTV percentage is
calculated as the loan amount less the amount of any
sterling cash deposited within the security of RBSI
divided by the gross secured property value, and
that this percentage should not exceed 60% for the
period to and including 27 April 2021 and should
not exceed 55% after 27 April 2021 to maturity.
14 BANK BORROWINGS
2021
£
2020
£
Loan facility and drawn down outstanding balance 110,000,000 110,000,000
Opening carrying value 109,542,823 127,316,886
Borrowings during the year — 27,000,000
Repayment of RCF — (45,000,000)
Amortisation of arrangement costs 180,576 225,937
Closing carrying value 109,723,399 109,542,823
Other loan covenants that the Group is obliged to
meet include the following:
that the net rental income is not less than 150%
of the finance costs for any three month period;
that the largest single asset accounts for less than
15% of the Gross Secured Asset Value;
that the largest ten assets accounts for less than
75% of the Gross Secured Asset Value;
that sector weightings are restricted to 55%,
45% and 55% for the Office, Retail and Industrial
sectors respectively;
that the largest tenant accounts for less than
20% of the Group’s annual net rental income;
that the five largest tenants account for less than
50% of the Group’s annual net rental income;
that the ten largest tenants account for less than
75% of the Group’s annual net rental income.
During the year, the Group complied with its obligations
and loan covenants under its loan agreement.
The loan facility is secured by fixed and floating
charges over the assets of the Company and its
wholly owned subsidiaries, Standard Life Investments
Property Holdings Limited and Standard Life
Investments (SLIPIT) Limited Partnership.
2021
£
2020
£
Loan amount 110,000,000 110,000,000
Cash (13,818,008) (9,383,371)
96,181,992 100,616,629
Portfolio valuation 499,915,250 437,695,000
LTV percentage 19.2% 23.0%
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 88
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
2021
£
2020
£
Opening fair value of interest rate swap at 1 January (3,735,254) (2,220,616)
Valuation gain/(loss) on interest rate swap 3,167,218 (1,514,638)
Closing fair value of interest rate swap at 31 December (568,036) (3,735,254)
The split of swap liability is listed below:
16 OBLIGATIONS UNDER
FINANCE LEASES
Minimum lease
payments
2021
£
Interest
2021
£
Present value of
minimum lease
payments
2021
£
Less than one year 26,068 (24,511) 1,557
Between two and five years 104,271 (97,607) 6,664
More than five years 2,606,785 (1,713,877) 892,908
Total 2,737,124 (1,835,995) 901,129
Minimum lease
payments
2020
£
Interest
2020
£
Present value of
minimum lease
payments
2020
£
Less than one year 26,068 (24,552) 1,516
Between two and five years 104,271 (97,78 4) 6,487
More than five years 2,632,853 (1,738,211) 894,642
Total 2,763,192 (1,860,547) 902,645
2021
£
2020
£
Current liabilities (546,526) (1,472,387)
Non-current liabilities (21,510) (2,262,867)
Total fair value (568,036) (3,735,254)
15 INTEREST RATE SWAP
As part of the refinancing of loans (see note 14), on
28 April 2016 the Group completed an interest rate
swap of a notional amount of £110,000,000 with
RBS, now RBSI. The interest rate swap effective date
is 28 April 2016 and it has a maturity date of 27 April
2023. Under the swap the Company has agreed to
receive a floating interest rate linked to 3 month LIBOR
and pay a fixed interest rate of 1.35%.
The interest rate swap is the Group’s only hedging
instrument and the “interest rate benchmark reform”
amendments have been applied to it. The switch to
SONIA took effect from the first interest payment date
following cessation of LIBOR (20th January 2022).
The above table shows the present value of future lease payments in relation to the ground lease payable at
Hagley Road, Birmingham as required under IFRS 16. A corresponding asset has been recognised and is part
of Investment properties as shown in note 7.
89Year ended 31 December 2021
17 LEASE ANALYSIS
The Group has granted leases on its property
portfolio. This property portfolio as at 31 December
2021 had an average lease expiry of six years and
one month. Leases include clauses to enable periodic
upward revision of the rental charge according to
prevailing market conditions. Some leases contain
options to break before the end of the lease term.
Future minimum rentals receivable under
non-cancellable operating leases as at
31 December are as follows:
2021
£
2020
£
Within one year 24,857,300 26,667,702
Between one and two years 22,613,540 24,233,138
Between two and three years 19,869,754 21,755,932
Between three and four years 14,371,388 17,825,125
Between four and five years 10,352,802 12,404,878
More than five years 44,233,215 60,572,038
Total 136,297,999 163,458,813
The largest single tenant at the year end accounts for 6.1% (2020: 5.6%) of the current annual passing rent.
2021
£
2020
£
Opening balance 228,383,857 227,431,057
Shares issued — 960,000
Issue costs associated with new ordinary shares — (7,200)
Closing balance 228,383,857 228,383,857
18 SHARE CAPITAL
Under the Company’s Articles of Incorporation,
the Company may issue an unlimited number of
ordinary shares of 1 pence each, subject to issuance
limits set at the AGM each year. As at 31 December
2021 there were 396,922,386 ordinary shares of
1p each in issue (2020: 404,316,422). All ordinary
shares rank equally for dividends and distributions
and carry one vote each. There are no restrictions
concerning the transfer of ordinary shares in the
Company, no special rights with regard to control
attached to the ordinary shares, no agreements
between holders of ordinary shares regarding their
transfer known to the Company and no agreement
which the Company is party to that affects its control
following a takeover bid.
2021
£
2020
£
Opening balance 1,450,787 —
Bought back during the year 4,540,630 1,450,787
Closing balance 5,991,417 1,450,787
Allotted, called up and fully paid:
Treasury Shares
From November 2020,, the Company undertook a share buyback programme at various levels of discount
to the prevailing NAV. In the period to 31 December 2021 7,394,036 shares had been bought back
(2020: 2,548,997) for £4,540,630 after costs (2020: £1,450,787) and are included in
the Treasury share reserve.
The number of shares in issue as at 31 December 2021/2020 are as follows:
2021
Number
of shares
2020
Number
of shares
Opening balance 404,316,422 405,865,419
Issued during the year — 1,000,000
Bought back during the year and put into Treasury (7,394,036) (2,548,997)
Closing balance 396,922,386 404,316,422
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 90
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
19 RESERVES
The detailed movement of the below reserves for
the years to 31 December 2021 and 31 December
2020 can be found in the Consolidated Statement
of Changes in Equity on page 70.
Retained earnings
This is a distributable reserve and represents the
cumulative revenue earnings of the Group less
dividends paid to the Company’s shareholders.
Capital reserves
This reserve represents realised gains and losses
on disposed investment properties and unrealised
valuation gains and losses on investment properties
and cash flow hedges since the Company’s launch.
Other distributable reserves
This reserve represents the share premium raised
on launch of the Company which was subsequently
converted to a distributable reserve by special
resolution dated 4 December 2003.
20 EARNINGS PER SHARE
Basic earnings per share amounts are calculated
by dividing profit for the year net of tax attributable
to ordinary equity holders by the weighted
average number of ordinary shares outstanding
during the year. As there are no dilutive instruments
outstanding, basic and diluted earnings per share
are identical.
The earnings per share for the year is set out
in the table below. In addition one of the key
metrics the Board considers is dividend cover.
This is calculated by dividing the net revenue
earnings in the year (profit for the year net of
tax excluding all capital items and the swaps
breakage costs) divided by the dividends payable
in relation to the financial year. For 2021 this
equated to a figure of 98% (2020: 108%).
The following reflects the income and share data
used in the basic earnings per share computations:
2021 2020
Dividends PID
pence
Non-PID
pence
Total
pence
PID
£
Non-PID
£
PID
pence
Non-PID
pence
Total
pence
PID
£
Non-PID
£
Quarter to 31 December of prior year
(paid in February)
0.7140 — 0.7140 2,878,508 — 0.6290 0.5610 1.1900 2,557,687 2,284,011
Top-up for 2020 (paid in May) 0.3810 — 0.3810 1,512,274 — — — — — —
Quarter to 31 March (paid in May) 0.8925 — 0.8925 3,542,532 — 0.9520 0.2380 1.1900 3,873,359 968,340
Quarter to 30 June (paid in August) 0.8925 — 0.8925 3,542,532 — 0.7140 — 0.7140 2,905,019 —
Quarter to 30 September
(paid in November)
0.2519 0.6406 0.8925 999,848 2,542,685 0.7140 — 0.7140 2,905,019 —
Total dividends paid 3.1319 0.6406 3.7725 12,475,694 2,542,685 3.0090 0.7990 3.8080 12,241,084 3,252,351
Quarter to 31 December of current
year (paid after year end)
0.7910 0.2090 1.0000 3,138,371 — 0.7140 — 0.7140 2,878,508 —
Prior year dividends (per above) (0.7140) — (0.7140) (2,878,508) — (0.6290) (0.5610) (1.1900) (2,557,687) (2,284,011)
Total dividend for year 3.2089 0.8496 4.0585 12,735,557 2,542,685 3.0940 0.2380 3.3320 12,561,905 968,340
21. DIVIDENDS AND PROPERTY INCOME
DISTRIBUTIONS GROSS OF INCOME TAX
2021
£
2020
£
Profit for the year net of tax 85,732,820 (15,782,067)
2021
£
2020
£
Weighted average number of ordinary shares
outstanding during the year
398,041,380 406,650,268
Earnings per ordinary share (p) 21.54 (3.88)
Profit for the year excluding capital items 14,680,188 16,664,294
EPRA earnings per share (p) 3.69 4.10
On 25 February 2022 a dividend in respect of the quarter to 31 December 2021 of 1.0 pence per share was paid split as 0.791p Property Income Distribution,
and 0.209p Non Property Income Distribution.
91Year ended 31 December 2021
23 RELATED PARTY DISCLOSURES
Directors’ remuneration
The Directors of the Company are deemed as
key management personnel and received fees
for their services. Further details are provided in
the Directors’ Remuneration Report (unaudited)
on pages 56 and 57. Total fees for the year were
£221,742 (2020: £236,953) none of which
remained payable at the year end (2020: nil).
Aberdeen Standard Fund Managers Limited, as
the Manager of the Group from 10 December 2018,
(previously Standard Life Investments (Corporate
Funds) Limited), received fees for their services as
Investment Managers. Further details are provided
in note 4.
2021 2020
Robert Peto* — 30,077
Huw Evans 36,000 36,000
Mike Balfour 40,000 40,000
James Clifton-Brown** 47,000 39,638
Jill May 36,000 36,000
Sarah Slater 36,000 36,000
Employers national insurance contributions 17,338 18,737
212,338 236,452
Directors expenses 9,404 501
221,742 236,953
24 SEGMENTAL INFORMATION
The Board has considered the requirements of
IFRS 8 ‘operating segments’. The Board is of the
view that the Group is engaged in a single segment
of business, being property investment and in one
geographical area, the United Kingdom.
25 CAPITAL COMMITMENTS
The Group had contracted capital commitments
as at 31 December 2021 of £11.9 million
(31 December 2020: £nil). The commitment is
to forward fund a new industrial development in
St Helens.
26 EVENTS AFTER THE BALANCE
SHEET DATE
On 25 February 2022 a dividend in respect of
the quarter to 31 December 2021 of 1.0 pence
per share was paid split as 0.791p Property
Income Distribution, and 0.209p Non Property
Income Distribution.
On 14 April 2022, the Company completed the
purchase of the Motorpoint car showroom in
Stockton-on-Tees for £5m.
Events in Russia/Ukraine
Post the Balance Sheet date, on 24th February 2022,
Russia launched a military offensive against Ukraine
resulting in widespread sanctions on Russia and
heightened security and cyber threats.
As at the date of the report the Company did not hold
any assets in Ukraine or Russia. The Company’s key
suppliers also do not have operations pertaining to
the Company in Ukraine or Russia.
The situation in the region is rapidly evolving and
the Board and Investment Manager continue to
monitor the situation carefully and will take whatever
steps are necessary and in the best interests of
the Company’s Stakeholders. This includes but is
not limited to ensuring that the requirements of all
international sanctions are adhered to, managing the
assets of the Company proactively to best mitigate
risk and ensuring that the Investment Manager
and other key suppliers continue to operate all
protections, protocols and monitoring of heightened
cyber threats.
22 RECONCILIATION OF
CONSOLIDATED NAV TO
PUBLISHED NAV
The NAV attributable to ordinary shares is published
quarterly and is based on the most recent valuation
of the investment properties.
2021 2020
Number of ordinary shares at the reporting date 396,922,386 404,316,422
2021
£
2020
£
Total equity per audited consolidated financial statements 40 0,8 47,466 331,506,437
NAV per share (p) 101.0 82.0
* Retired from the Board on 25 August 2020.
** Appointed as Chairman from 25 August 2020.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 92
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021 continued
Additional Information
UNAUDITED EPRA PERFORMANCE
AND SUSTAINABILITY MEASURES
& ADDITIONAL INFORMATION
93
31 December
2021
£
31 December
2020
£
EPRA earnings 14,680,188 16,664,294
EPRA earnings per share (pence per share) 3.69 4.10
EPRA Net Tangible Assets (“NTA”) 401,415,502 335,241,691
EPRA NTA per share 100.8 82.4
EPRA Net Reinstatement Value (“NRV”) 434,899,739 365,004,951
EPRA NRV per share 109.3 89.8
EPRA Net Disposal Value (“NDV”) 400,866,278 328,048,262
EPRA NDV per share 101.0 81.1
EPRA Net Initial Yield 4.2% 5.5%
EPRA topped-up Net Initial Yield 4.7% 5.8%
EPRA Vacancy Rate 9.7% 8.3%
EPRA Cost Ratios – including direct vacancy costs 30.6% 30.8%
EPRA Cost Ratios – excluding direct vacancy costs 23.9% 25.7%
A. EPRA EARNINGS
31 December
2021
£
31 December
2020
£
Earnings per IFRS income statement 85,732,820 (15,782,067)
Adjustments to calculate EPRA Earnings, exclude:
Net changes in value of investment properties (72,188,550) 27,64 0,224
Loss on disposal of investment properties 634,368 4,806,137
Net change in value of land 501,550 —
EPRA Earnings 14,680,188 16,664,294
Weighted average number of shares 398,041,380 406,650,268
EPRA Earnings per share (pence per share) 3.69 4.10
In October 2019, EPRA issued new best practice
recommendations (BPR) for financial guidelines
on its definitions of NAV measures: EPRA net
tangible assets (NTA), EPRA net reinvestment
value (NRV) and EPRA net disposal value (NDV).
The rationale behind each of these measures
is set out below the table. abrdn consider EPRA
Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Group and report this as our
primary non-IFRS NAV measure.
RATIONALE:
EPRA NET TANGIBLE ASSETS
The underlying assumption behind the EPRA Net
Tangible Assets calculation assumes entities buy
and sell assets, thereby crystallising certain levels
of deferred tax liability.
EPRA NET REINSTATEMENT VALUE
The objective of the EPRA Net Reinstatement Value
measure is to highlight the value of net assets
on a long-term basis. Assets and liabilities that
are not expected to crystallise in normal
circumstances such as the fair value movements
on financial derivatives and deferred taxes on
property valuation surpluses are therefore excluded.
Since the aim of the metric is to also reflect what
would be needed to recreate the company through
the investment markets based on its current capital
and financing structure, related costs such as real
estate transfer taxes should be included.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 94
Additional Information
EPRA Performance Measures
C. EPRA Net Reinstatement Value
31 December
2021
£
31 December
2020
£
EPRA NTA 401,415,502 335,241,691
Real Estate Transfer Tax and other acquisition costs 33,484,237 29,763,260
EPRA NRV 434,899,739 365,004,951
EPRA NRV per share 109.6 89.8
B. EPRA Net Tangible Assets
31 December
2021
£
31 December
2020
£
IFRS NAV 40 0,8 47,46 6 331,506,437
Fair value of financial instruments 568,036 3,735,254
EPRA NTA 401,415,502 335,241,691
Basic number of shares 396,922,386 404,316,422
EPRA NTA per share 101.1 82.4
D. EPRA Net Disposal Value
31 December
2021
£
31 December
2020
£
IFRS NAV 40 0,8 47,46 6 331,506,437
Fair value of debt 18,812 (3,458,175)
400,866,278 328,048,262
EPRA NRV per share 101.0 81.1
Fair value of debt per financial statements 109,704,587 113,000,998
Carrying value 109,723,399 109,542,823
Fair value of debt adjustment (18,812) 3,458,175
EPRA NET DISPOSAL VALUE
Shareholders are interested in understanding
the full extent of liabilities and resulting
shareholder value if company assets are sold
and/or if liabilities are not held until maturity.
For this purpose, the EPRA Net Disposal Value
provides the reader with a scenario where
deferred tax, financial instruments, and certain
other adjustments are calculated as to the full
extent of their liability, including tax exposure
not reflected in the Balance Sheet, net.
The adjacent table sets out the 2021 EPRA
numbers under the new guidelines for both
2021 and 2020.
95Year ended 31 December 2021
E. EPRA Net Initial Yield and ‘topped up’ NIY disclosure
Completed property portfolio
31 December
2021
£
31 December
2020
£
Investment property – wholly owned 492,415,250 437,695,000
Allowance for estimated purchasers’ costs 33,484,237 29,763,260
Gross up completed property portfolio valuation 525,899,487 4 67,458,260
Annualised cash passing rental income 25,690,060 27,969,637
Property outgoings (3,430,243) (2,460,002)
Annualised net rents 22,259,817 25,509,635
Add: notional rent expiration of rent free
periods or other lease incentives
2,243,687 1,639,780
Topped-up net annualised rent 24,503,504 27,149,415
EPRA NIY 4.2% 5.5%
EPRA “topped-up” NIY 4.7% 5.8%
F. EPRA COST RATIOS
31 December
2021
£
31 December
2020
£
Administrative / property operating expense
line per IFRS income statement
8,299,803 9,056,327
EPRA Costs (including direct vacancy costs) 8,299,803 9,056,327
Direct vacancy costs (1,828,982) (1,493,304)
EPRA Costs (excluding direct vacancy costs) 6,470,821 7,563,023
Gross Rental income less ground rent costs 27,0 85,214 29,439,549
EPRA Cost Ratio (including direct vacancy costs) 30.6% 30.8%
EPRA Cost Ratio (excluding direct vacancy costs) 23.9% 25.7%
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 96
Additional Information
EPRA Performance Measures continued
97Year ended 31 December 2021
H. Property-related CapEx
2021
£
2020
£
Acquisitions 11,741,501 21,297,754
Development
Investment properties:
Incremental lettable space — —
No incremental lettable space 1,819,229 4,947,828
Tenant incentives 803,327 71,203
Other material non-allocated types of expenditure — —
Total capital expenditure incurred 14,364,057 26,316,785
For the Period Ending 31 December 2021
Rental
growth
Portfolio value
by sector
Rental
growth
Portfolio value
by sector
G. Like-for-like rental growth reporting
2021
£
2021
£
2020
£
2020
£
Sector:
Industrial 919,777 262,690,000 (13,787) 211,200,000
Offices 98,049 126,275,000 338,136 142,695,000
Retail (54,400) 56,525,000 (126,653) 31,150,000
Other (10,000) 36,050,000 (22,500) 32,650,000
Total portfolio value 953,426 481,540,000 175,196 417,695,000
* Basis and assumptions to be disclosed here
All properties held within the portfolio are UK based.
ESG PERFORMANCE
This section details the Company’s sustainability
performance using the EPRA Sustainability Best
Practice Recommendations Guidelines (sBPR). It
also meets the requirements for Streamlined Energy
and Carbon Reporting (SECR) under the Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
EXPLANATORY NOTES
ON METHODOLOGY
Reporting period
Sustainability data in this report covers the calendar
years of 2020 and 2021.
Organisational boundary and data coverage
For the purposes of sustainability reporting, we have
included single-let assets within the organisational
boundary even though operational control is limited
and we have limited coverage of consumption
data from tenant-managed utility supplies. It was
judged that these should be included to enable the
reporting of landlord consumption associated with
any void units at these assets. The coverage numbers
in the tables below therefore appear low due to the
inclusion of all of the Company’s assets in the totals.
Where there is no data coverage for a sector
(for example, water consumption for unit shops
where there was no landlord consumption during
the period), the sector is excluded from the table but
the number of assets in the sector is included in the
total possible coverage number.
The like-for-like portfolio is determined on the basis
of assets that were held for two full reporting years
and were not subject to major refurbishment or
development during that time.
Note that the Company does not employ any staff
and does not have its own premises; these corporate
aspects fall within the scope of the Investment Manager.
Emissions calculation
Emissions are calculated in line with the GHG
Protocol using UK Government location-based
conversion factors. Scope 1 emissions include
emissions from gas consumption and refrigerant
losses where applicable. Scope 2 emissions are
those from landlord consumption of purchased
electricity. Scope 3 emissions are those from
electricity sub-metered to tenants and from the
transmission and distribution of electricity. We collect
data from tenants where they purchase their own
energy but this exercise is undertaken later in the
year to align with GRESB reporting. As such, tenant-
procured energy is not included in this section.
Normalisation
Net lettable area (NLA) is used as the denominator for
all intensities reported in this section. This is the most
appropriate choice for the Company’s portfolio as it is
the most widely available metric. It enables year-on-
year comparisons within the portfolio to be made.
Renewable energy
There are landlord-owned solar PV installations
at fourteen assets in the portfolio. The largest scheme
to date was completed in late 2020; a 918kWp
installation at Flamingo Flowers in Sandy. This will
meet 25% of the tenant’s electricity demand, save
200 tonnes of CO2 each year and provide
the Company with a new income stream. There are
around 20 further opportunities for PV at various
stages of feasibility and design. Most of these
schemes are at single-let industrial assets where we
have pro-actively engaged with occupiers to install
PV and supply them with zero-carbon electricity.
In the reporting period, all landlord-procured electricity
was from 100% renewable sources. Natural gas
consumed was not from renewable sources.
Auditing and assurance
Our utilities data which feeds into our sustainability
reporting is validated by our Utilities Bureau Consultant
and checked by our Sustainability Consultant. We have
not sought third party assurance for the sustainability
data included in this report although this is something
we are considering for future years.
Materiality
We have undertaken a review of materiality against
each of the EPRA sBPR indicators. The table below
indicates the outcome of the review.
GLOBAL REAL ESTATE
SUSTAINABILITY BENCHMARK
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 98
Additional Information
ESG Performance
Code Performance measure Review outcome
Environmental
Elec-Abs Total electricity consumption Material
Elec-LfL Like-for-like total electricity consumption Material
DH&C-Abs Total district heating & cooling consumption
Not material – none of
the Company’s assets
are connected to district
energy supplies
DH&C-LfL Like-for-like total district heating & cooling consumption
Fuels-Abs Total fuel consumption Material
Fuels-LfL Like-for-like total fuel consumption Material
Energy-Int Building energy intensity Material
GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions Material
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions Material
GHG-Int Greenhouse gas (GHG) emissions intensity from building energy consumption Material
Water-Abs Total water consumption Material
Water-LfL Like-for-like total water consumption Material
Water-Int Building water intensity Material
Waste-Abs Total weight of waste by disposal route Material
Waste-LfL Like-for-like total weight of waste by disposal route Material
Cert-Tot Type and number of sustainably certified assets Material
Social
Diversity-Emp Employee gender diversity
Not material – SLIPIT does
not have any employees
Diversity-Pay Gender pay ratio
Emp-Training Employee training and development
Emp-Dev Employee performance appraisals
Emp-Turnover New hires and turnover
H&S-Emp Employee health and safety
H&S-Asset Asset health and safety assessments Material
H&S-Comp Asset health and safety compliance Material
Comty-Eng Community engagement, impact assessments and development programs
Material – see main body
of report (pages 29–31).
Governance
Gov-Board Composition of the highest governance body
Material – see main
body of report
(pages 48 to 51 for content
related to Governance)
Gov-Selec Process for nominating and selecting the highest governance body
Gov-CoI Process for managing conflicts of interest
99Year ended 31 December 2021
Landlord electricity consumption across like-for-like
assets increased by 6% year-on-year. This overall
increase was driven by increases in landlord
consumption at office and retail unit shops, alongside
increased vacancy (and therefore void consumption)
at retail warehouses (notably at Howard Town Retail
Park). These increases were offset by significant
reductions in landlord electricity consumption at
Industrial Distribution Warehouses, due to reduced
vacancy at these locations.
Landlord gas consumption at office assets increased
by 10%, as did sub-metred electricity consumption
(by 57%). These increases are primarily attributable
to increased use of these office assets in 2021 in
comparison with 2020, due to the relaxation of
COVID-19 restrictions. We have implemented a number
of energy saving initiatives across the portfolio and
identified more for future roll-out as part of asset
management plans and linked to Energy Performance
Certification improvements. These include lighting
upgrades, BMS optimisation and plant replacement.
LIKE-FOR-LIKE
ENERGY CONSUMPTION
Landlord Electricity
(kWh)
Occupier Electricity
i.e. sub-metered to occupiers (kWh)
Total Landlord obtained
Electricity (kWh)
Landlord-obtained Gas
(kWh)
Energy Intensity
(kWh/m
2
)
Indicator references Elec-LfL Elec-LfL Elec-LfL Fuels-LfL Energy-Int
Sector Coverage
(assets)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
Industrial,
Business
Parks
2 of 8 4,380 4,325 –1%
No sub–metered
consumption
N/A 4,380 4,325 –1%
No Landlord
consumption
N/A 0.2 0.2 –1%
Industrial,
Distribution
Warehouse
1 of 17 28,293 6,699 –76%
No sub–metered
consumption
N/A 28,293 6,699 –76%
No Landlord
consumption
N/A 3.6 0.9 –76%
Offices 11 of 11 2,638,633.0 2 , 8 07,397 6% 2,203,378 3,469,431 57% 4,842,011 4,950,752 2% 3,144,741 3,469,431 10% 191.5 201.9 5%
Retail,
Unit Shops
1 of 2 41,231 49,135 19%
No sub–metered
consumption
N/A 41,231 49,135 19%
No Landlord
consumption
N/A 6.9 8.3 19%
Retail,
Warehouses
3 of 6 39,760 49,267 24%
No sub–metered
consumption
N/A 39,760 49,267 24%
No Landlord
consumption
N/A 3.5 4.3 24%
Totals 18 of 44 2,752,297 2,916,823 6% 2,203,378 3,469,431 57% 4,955,675 5,060,178 2% 3,144,741 3,469,431 10% 94.3 99.3 5%
LIKE-FOR-LIKE AND
ABSOLUTE WASTE GENERATION
AND TREATMENT
We are responsible for waste management at
11 multi-let assets across the Company. Our waste
management consultant undertakes regular waste
audits and works closely with our Property Manager
to implement interventions to improve segregation
of materials and ultimately increase recycling rates.
In total across the four like-for-like assets at which
we manage waste, 731 tonnes of non-hazardous
waste was generated in 2021 with approximately
41% recycled and 59% recovered via energy from
waste. A very small volume of non-recyclable waste
(125kg) was sent to landfill (approximately 0.03% of
the total waste generated). Note that like-for-like
and absolute waste generation figures are exactly
the same for 2021, hence why both are summarised
in the below table.
Total Waste
(tonnes)
Waste to Landfill
(tonnes)
Waste Recovered
(tonnes)
Waste Recycled
(tonnes)
Indicator reference Waste-Abs, Waste-LfL
Sector
Coverage 2021
(assets)
2020 2021 2021 2021 2021
Offices 9 of 15 511 418 0% 0.1 61% 257 39% 161
Retail,
Unit Shops
2 of 3 216 313 0% 0 70% 174 30% 139
Totals 11 of 54 727 731 0% 0.1 59% 431 41% 300
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 100
Additional Information
Environmental Indicators continued
Like-for-like Scope 1 emissions increased by
5% year on year, primarily driven by increased
gas consumption at office assets in 2021.
The like-for-like electricity consumption figures
above translate into a 3% reduction in Scope 2
emissions; driven by further improvements in the
carbon-intensity of the grid. Note that emissions
associated with refrigerants are included in the Scope
1 emissions figure alongside natural gas. Scope 3
emissions increased by 36% mainly as a result of
increased sub-metered occupier electricity use.
LIKE-FOR-LIKE
GREENHOUSE GAS EMISSIONS
Scope 1 Emissions
(tCO
2
)
Scope 2 Emissions
(tCO
2
)
Scope 3 Emissions
(tCO
2
)
Emissions Intensity
Scopes 1, 2 & 3 (kgCO
2
/m
2
)
Indicator references No relevant EPRA indicator
Sector Coverage
(assets)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
Industrial,
Business Parks
2 of 8
No Landlord
consumption
N/A 1.0 0.9 –10% 0.1 0.1 –7% 0.1 0.1 –10%
Industrial,
Distribution Warehouse
1 of 17
No Landlord
consumption
N/A 6.6 1.4 –78% 0.6 0.1 –78% 0.914 0.20 –78%
Offices
11 of 11 684 716 5% 615 596 –3% 611 830 36% 46 51 12%
Retail, Unit Shops
1 of 2
No Landlord
consumption
N/A 9.6 10.4 9% 0.8 0.9 12% 1.8 1.9 9%
Retail, Warehouses
3 of 5
No Landlord
consumption
N/A 9.3 10.5 13% 0.8 0.9 16% 0.9 1.0 13%
Totals
18 of 44 684 716 5% 642 619 –3% 613 832 36% 23 25 12%
SUSTAINABILITY CERTIFICATIONS
One asset in the portfolio has a BREEAM Very Good
ratings; 54 Hagley Road in Birmingham. This asset
accounts for 5.1% of the Company’s assets by gross
asset value.
Energy Performance Certificate (EPC) ratings for
assets in England owned by the Company are shown
below. This includes several draft F/G ratings for
which a plan is place to make improvements.
SOCIAL INDICATORS
Health & Safety
Every asset in the portfolio (i.e. 100% coverage)
was subject to a health and safety inspection
during the reporting year, with no incidents of
non-compliance with regulations identified.
Community Engagement
Our community engagement activities are focused
around development or construction projects that
the Company implements. Our Property Manager
regularly undertakes community and charity
engagement activities, particularly at multi-let offices.
GOVERNANCE INDICATORS
The Board is made up entirely from Non-Executive
Directors. The average tenure of the Board is
4.4 years, with the longest serving Director being
Huw Evans at almost 9 years and the shortest being
Mike Bane who was appointed on 1st February
2022. They have a clear succession plan in place
so that no Director serves for more than 9 years.
The six Non-Executive Directors provide a variety of
experience, from real estate, corporate banking, and
finance and all have a keen focus on ESG matters and
responsibilities of the Company, with all Directors
being members of the newly created Sustainability
Committee. In addition, the Audit Committee reviews
the environmental risk of the Company’s operations
and the Valuation Committee also assesses the
impact upon the portfolio.
Two of the six Directors are female, and all are
independent of the Investment Manager.
EPC Rating
% Estimated
Rental value
A 2%
B 21%
C 33%
D 35%
E 8%
F 0%
G 1%
101Year ended 31 December 2021
Absolute landlord electricity and gas consumption
increased in 2021. As noted above, the scale of this
reduction is primarily driven by increased energy
consumption at office assets, with more modest
increases at Retail Unit Shops and Retail Warehouse
assets. These increases are offset slightly by overall
reductions in electricity and gas consumption at
Industrial Business Parks and Industrial Distribution
Warehouses; mainly as a result of overall reduced
void consumption associated with reduced vacancy
at these assets. The variation from like-for-like
consumption is due to the effect of acquisitions and
disposals during 2020 and 2021. In the reporting
period, all landlord-procured electricity was from
100% renewable sources. Natural gas consumed
was not from renewable sources.
ABSOLUTE ENERGY
CONSUMPTION
Water consumption increased by 5% across both
like-for-like assets and across the whole portfolio.
Note that data coverage is lower for water than
for energy as it is uncommon to have landlord
meters at assets with no internal common parts
or shared services. It should also be noted that
water consumption data includes estimates
associated with account billing, and will be updated
once actual consumption data becomes available.
Note: There is a data centre asset that is excluded from the table as there is no landlord consumption but are included in the total possible coverage number.
LIKE-FOR-LIKE AND ABSOLUTE
WATER CONSUMPTION
Absolute Water Consumption
(m
3
)
LfL Water Consumption
(m
3
)
Indicator references Water-Abs; Water-Int Water-LfL; Water-Int
Sector Coverage
2020
(assets)
Coverage
2021
(assets)
2020
(m
3
)
2020
(litres/m
2
)
2021
(m
3
)
2021
(litres/m
2
)
Change
(%)
Coverage
(assets)
2020
(m
3
)
2020
(litres/m
2
)
2021
(m
3
)
2021
(litres/m
2
)
Change
(%)
Industrial, Business Parks 2 of 12 0 of 8 53 9 0 0 –100% 0 of 8 0 0 0 0 N/A
Offices 9 of 15 9 of 15 18,501 489 19,456 515 5% 9 of 11 18,501 489 19,456 515 5%
Retail, Unit Shops 1 of 3 1 of 3 64 11 53 9 –17% 1 of 2 64 11 53 9 –17%
Totals 12 of 56 10 of 54 18,565 424 19,509 446 5% 10 of 44 18,565 424 19,509 446 5%
Landlord Electricity
(kWh)
Occupier Electricity
i.e. sub-metered to occupiers (kWh)
Total landlord-obtained
Electricity (kWh)
Landlord-obtained Gas
(kWh)
Energy Intensity
(kWh/m
2
)
Indicator references Elec-Abs Elec-Abs Elec-Abs Fuels-Abs Energy-Int
Sector Coverage
2020
(assets)
Coverage
2021
(assets)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
Industrial,
Business
Parks
5 of 12 2 of 8 13,112 4,325 –67%
No sub–metered
consumption
N/A
13,112 4,325
–67%
126
No Landlord
consumption
N/A 0.3 0.2 –21%
Industrial,
Distribution
Warehouse
1 of 18 1 of 18 28,293 6,699 –76%
No sub–metered
consumption
N/A
28,293 6,699
–76%
305,855
No Landlord
consumption
N/A 43 0.9 –98%
Offices
11 of 15 11 of 15 2,638,633 2,807,397 6% 2,203,378 2,143,355 –3% 4,842,011 4,950,752 2% 3,144,741 3,469,431 10% 192 202 5%
Retail,
Unit Shops
1 of 3 1 of 3 41,231 49,134 19%
No sub–metered
consumption
N/A
41,231 49,134
19%
No Landlord consumption
N/A 6.9 8.3 19%
Retail,
Warehouses
3 of 7 3 of 6 39,760 49,267 24%
No sub–metered
consumption
N/A
39,760 49,267
24%
No Landlord consumption
N/A 3.5 4.3 24%
Totals
21 of 56 18 of 54 2,761,029 2,916,822 6% 2,203,378 2,143,355 –3% 4,964,407 5,060,177 2% 3,450,722 3,469,431 0.5% 74.4 99.3 33%
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 102
Additional Information
Environmental Indicators continued
Absolute Scope 1 emissions decreased by 3%
in 2021. Note that emissions associated with
refrigerants are included in this figure alongside
natural gas. Total Scope 2 and 3 emissions reduced
by 4% and 10% respectively.
For the purposes of Streamlined Energy and Carbon
Reporting (SECR), total Scope 1 and 2 emissions are
also summarised in the following table. Total Landlord
Energy Consumption (kWh) used to calculate Scope 1
and 2 emissions is also outlined in the table below,
and a breakdown of energy type is included in the
Absolute Energy Consumption table above. Note that
the Total Scope 1 and 2 Emissions reported below
include emissions associated with refrigerant losses
as well as energy consumption.
Please note that data has been included back to
2019, which has been chosen as the baseline year for
reporting (primarily given that it was not influenced by
energy/carbon reductions associated with COVID-19
restrictions). Percentage change has been provided
on a 2021 vs 2020 basis, and 2021 vs 2019 basis.
Emissions intensity has increased over time due to
the inclusion of landlord consumption associated with
vacant units. It is important to include this data given it
forms part of the Company’s Scope 1 and 2 emissions
but when included in intensity calculations it has the
effect of skewing the outcome at the portfolio level.
2019 2020 2021 % Change
2021 vs 2020
% Change
2021 vs 2019
Total Scope 1/2 Emissions
(tCO
2
e)
1,496 1,384 1,336 –3% –11%
Emissions intensity
(kgCO
2
e/m
2
Net Lettable Area)
16.0 12.2 15.6 27% –3%
Total Landlord Energy Consumption
(kWh)
6,401,310 6,211,751 6,386,253 3% –0.2%
ABSOLUTE GREENHOUSE
GAS EMISSIONS
Scope 1 Emissions
(tCO
2
)
Scope 2 Emissions
(tCO
2
)
Scope 3 Emissions
(tCO
2
)
Emissions Intensity
Scopes 1, 2 & 3 (kgCO
2
/m
2
)
Indicator references GHG–Dir–Abs GHG–Indir–Abs GHG–Indir–Abs GHG–Int
Sector Coverage
2020
(assets)
Coverage
2021
(assets)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
2020 2021 Change
(%)
Industrial,
Business Parks
5 of 12 2 of 8 0.02 0.0 N/A 3.1 0.9 –70% 0.3 0.1 –69% 0.1 0.1 –27%
Industrial,
Distribution
Warehouse
1 of 18 1 of 18 56 0 N/A 6.6 1.4 –78% 0.6 1.4 151% 8.1 0.4 –96%
Offices
11 of 15 11 of 15 684 716 5% 615 596 –3% 611 548 –10% 45.8 44.6 –3%
Retail,
Unit Shops
1 of 3 1 of 3
No Landlord
consumption
N/A 9.6 10.4 9% 0.8 0.9 12% 1.8 1.9 9%
Retail,
Warehouses
3 of 7 3 of 6
No Landlord
consumption
N/A 9.3 10.5 13% 0.8 0.9 16% 0.9 1.0 13%
Totals
21 of 56 18 of 54 740 716 –3% 644 619 –4% 613 551 –10% 17.7 22.0 24%
103Year ended 31 December 2021
AIC
Association of Investment Companies. The trade body representing closed-ended investment companies.
Annual rental income
Cash rents passing at the Balance Sheet date.
Average debt maturity
The weighted average amount of time until the maturity of the Group’s debt facilities.
Break option
A break option (alternatively called a ‘break clause’ or ‘option to determine’) is a clause in a lease which provides the
landlord or tenant with a right to terminate the lease before its contractual expiry date, if certain criteria are met.
Contracted rent
The contracted gross rent receivable which becomes payable after all the occupied incentives
in the letting have expired.
Covenant strength
This refers to the quality of a tenant’s financial status and its ability to perform the covenants in a Lease.
Dividend
A sum of money paid regularly by the Company to its shareholders. The Company currently pays dividends
to shareholders quarterly.
Dividend cover
The ratio of the company’s net surplus
after tax (excluding capital items) to the
dividends paid.
2021 2020
Total comprehensive income/(loss) for the year 88,900,038 (17,296,705)
Add back:
Unrealised (gains)/losses on investment properties (72,188,550) 27,640,224
Realised losses on investment properties 634,368 4,806,137
Unrealised loss on land 501,550 —
(Gains)/losses on cash flow hedge (3,167,218) 1,514,638
Profit for dividend cover 14,680,188 16,664,294
Dividends paid in the year 15,018,379 15,493,435
Dividend cover 98% 108%
Dividend yield
Annual dividend expressed as a percentage of share price on any given day.
Earnings per share (EPS)
Surplus for the period attributable to shareholders divided by the weighted average number of shares in issue during the period.
EPRA European Public
Real Estate Association
The industry body representing listed companies in the real estate sector.
ERV
The estimated rental value of a property, provided by the property valuers.
Fair value
Fair value is defined by IFRS 13 as ‘the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date’.
Fair value movement
Fair value movement is the accounting adjustment to change the book value of an asset or liability to its market value,
and subsequent changes in market value.
Financial resources
Uncommitted cash balances plus undrawn element of revolving credit facility.
Gearing ratio
Calculated as gross borrowings (excluding swap valuation) divided by total assets. The Articles of Association of the Company
have a 65% gearing ratio limit (see page 88 for calculation).
Group
Standard Life Investments Property Income Trust Limited and its subsidiaries.
IFRS
International Financial Reporting Standards.
Index linked
The practice of linking the review of a tenant’s payments under a lease to a published index, most commonly the
Retail Price Index (RPI) but also the Consumer Price Index (CPI).
Loan-to-value
Calculated as net borrowings (gross borrowings less cash excluding swap valuation) divided by portfolio value.
Swap valuations at fair value are not considered relevant in gearing calculations (see note 14 for calculation).
MSCI
An independent organisation supplying an expansive range of regional and global indexes, research, performance modelling,
data metrics and risk analytics across direct property, listed and unlisted vehicles, joint ventures, separate accounts and debt.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 104
Information for Investors
and Additional Performance Measures
Glossary
MSCI Benchmark
Quarterly version of MSCI Monthly Index Funds.
NAV
Net Asset Value is the equity attributable to shareholders calculated under IFRS.
NAV total return
The return to shareholders, expressed
as a percentage of opening NAV,
calculated on a per share basis by
adding dividends paid in the period
to the increase or decrease in NAV.
Dividends are assumed to have been
reinvested in the quarter they are paid,
excluding transaction costs.
2021 2020
Opening NAV 82.0 89.9
Closing NAV 101.0 82.0
Movement in NAV 19.0 (7.9)
% Movement in NAV 23.2% (8.8%)
Impact of reinvested dividends 5.4% 4.2%
NAV total return 28.6% (4.6%)
Net initial yield (NIY)
The net initial yield of a property is the initial net income at the date of purchase, expressed as a percentage of the gross
purchase price including the costs of purchase.
Over-rented
Space where the passing rent is above the ERV.
Passing rent
The rent payable at a particular point in time.
Portfolio fair value
The market value of the Group’s property portfolio, which is based on the external valuation provided by Knight Frank LLP.
Portfolio total return (including
Portfolio capital return and
Portfolio income return)
Combining the Portfolio Capital Return (the change in property value after taking account of property sales, purchases
and capital expenditure in the period) and Portfolio Income Return (net property income after deducting direct property
expenditure), assuming portfolio income is re-invested.
Portfolio yield
Passing rent as a percentage of gross property value.
Premium/Discount to NAV
The difference between the share price and NAV per share, expressed as a percentage of NAV. Premium representing a higher
share price compared to NAV per share, discount the opposite.
Rack-rented
Space where the passing rent is the same as the ERV.
REIT
A Real Estate Investment Trust (REIT) is a single company REIT or a group REIT that owns and manages property on behalf of
shareholders. In the UK, a company or group of companies can apply for ‘UK-REIT’ status, which exempts the company from
corporation tax on profits and gains from their UK qualifying property rental businesses.
Rent Collection
The percentage of rents paid compared to the rents invoiced over a specified period.
Rent free
A period within a lease (usually from the lease start date on new leases) where the tenant does not pay any rent.
Reversionary yield
Estimated rental value as a percentage of the gross property value.
RICS
The Royal Institution of Chartered Surveyors, the global professional body promoting and enforcing the highest international
standards in the valuation, management and development of land, real estate, construction and infrastructure.
Share price
The value of each of the company’s shares at a point in time as quoted on the Main Market of the London Stock Exchange.
Share price total return
The return to shareholders, expressed
as a percentage of opening share price,
calculated on a per share basis by
adding dividends paid in the period to
the increase or decrease in share price.
Dividends are assumed to have been
reinvested in the quarter they are paid,
excluding transaction costs.
2021 2020
Opening share price 60.0 91.0
Closing share price 81.5 60.0
Movement in share price 21.5 (31.0)
% Movement in share price 35.8% (34.1%)
Impact of reinvested dividends 7.6% 4.3%
Share price total return 43.4% (29.8%)
Void rate
The quantum of ERV relating to properties which are unlet and generating no rental income.
Stated as a percentage of total portfolio ERV.
105Year ended 31 December 2021
AIFMD/PRE-INVESTMENT
DISCLOSURE DOCUMENT (“PIDD”)
The Company has appointed Aberdeen Standard Fund
Managers Limited as its alternative investment fund
manager and Citibank UK Limited as its depositary
under the AIFMD. AIFMD requires Aberdeen Standard
Fund Managers Limited, as the alternative investment
fund manager (“AIFM”) of Standard Life Investments
Property Income Trust Limited, to make available to
investors certain information prior to such investors’
investment in the Company. Details of the leverage
and risk policies which the Company is required
to have in place under AIFMD are published in the
Company’s PIDD, which can be found on its website.
The periodic disclosures required to be made by the
AIFM under AIFMD are set out on page 109.
INVESTOR WARNING:
BE ALERT TO SHARE FRAUD
AND BOILER ROOM SCAMS
abrdn has been contacted by investors informing them
that they have received telephone calls and emails
from people who have offered to buy their investment
trust shares, purporting to work for abrdn.
abrdn has also been notified of emails claiming
that certain investment companies under their
management have issued claims in the courts against
individuals. These may be scams which attempt to
gain your personal information with which to commit
identity fraud or could be “boiler room” scams
where a payment from you is required to release
the supposed payment for your shares. These calls/
senders do not work for abrdn and any third party
making such offers/claims has no link with abrdn.
abrdn does not “cold-call” investors in this way. If
you have any doubt over whether a caller is genuine,
do not offer any personal information, end the call
and contact the Customer Services Department (see
below for their contact details).
The Financial Conduct Authority provides advice
with respect to share fraud and boiler room scams:
www.fca.org.uk/consumers/scams
SHARE REGISTER ENQUIRIES
Shareholders who hold their shares in certificated
form can check their shareholding with the Registrar.
Notifications of changes of address and all enquiries
regarding certificates or dividend cheques should
be sent in writing to the Registrar whose details are
shown on page 110.
KEEPING YOU INFORMED
The Company’s shares are listed on the London
Stock Exchange and the share price is quoted daily
in the Financial Times.
Details of the Company may also be found on
the Company’s own dedicated website at:
www.slipit.co.uk
This provides information on the Company’s share
price performance, capital structure, stock exchange
announcement and an Investment Manager’s
monthly factsheet. Alternatively you can call
0808 500 0040 (free when dialling from a UK
landline) for trust information.
If you have any questions about your Company, the
Investment Manager or performance, please telephone
the Customer Services Department (direct private
investors) on 0808 500 0040. Alternatively, please
send an email to inv.trusts@abrdn.com or write to
abrdn, PO Box 11020, Chelmsford, Essex CM99 2DB.
In the event of queries regarding holdings of shares,
lost certificates, dividend payments, registered details,
shareholders holding their shares in the Company
directly should contact the Registrar, Computershare
Investor Services (Guernsey) Limited on
+44 (0) 370 707 4040 or by writing to the address
on page 110. Calls may be recorded and monitored
randomly for security and training purposes. Changes
of address must be notified to the Registrar in writing.
HOW TO INVEST IN THE COMPANY
Individual investors can buy and sell shares in the
Company directly through a stockbroker or indirectly
through a lawyer, accountant or other professional
adviser. Alternatively, for retail clients, shares can
be bought directly through the abrdn Investment
Plan for Children, Investment Trust Share Plan or
Investment Trust ISA.
abrdn Investment Plan for Children
abrdn runs an Investment Plan for Children (the
“Children’s Plan”) which covers a number of
investment companies under its management
including the Company. Anyone can invest in the
Children’s Plan, including parents, grandparents
and family friends (subject to the eligibility
criteria as stated within the terms and conditions).
All investments are free of dealing charges on the
initial purchase of shares, although investors will
suffer the bid-offer spread, which can, on some
occasions, be a significant amount. Lump sum
investments start at £150 per trust, while regular
savers may invest from £30 per month. Selling costs
are £10 + VAT. There is no restriction on how long
an investor need invest in the Children’s Plan, and
regular savers can stop or suspend participation by
instructing abrdn in writing at any time. In common
with other schemes of this type, all investments are
held in nominee accounts. Investors have full voting
and other rights of share ownership.
abrdn Share Plan
abrdn runs a Share Plan (the “Plan”) through which
shares in the Company can be purchased. There are
no dealing charges on the initial purchase of shares,
although investors will suffer the bid-offer spread,
which can, on some occasions, be a significant
amount. Lump sum investments start at £250, while
regular savers may invest from £100 per month.
Selling costs are £10 + VAT. There is no restriction
on how long an investor need invest in a Plan, and
regular savers can stop or suspend participation by
instructing abrdn in writing at any time. In common
with other schemes of this type, all investments are
held in nominee accounts. Investors have full voting
and other rights of share ownership.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 106
Information for Investors
Information for Investors
abrdn ISA
abrdn operates an Investment Trust ISA (“ISA”)
through which an investment may be made of up to
£20,000 in the tax year 2022/2023.
There are no brokerage or initial charges for the ISA,
although investors will suffer the bid-offer spread,
which can, on some occasions, be a significant
amount. Selling costs are £15 + VAT. The annual
ISA administration charge is £24 + VAT, calculated
annually and applied on 31 March (or the last
business day in March) and collected soon thereafter
either by direct debit or, if there is no valid direct
debit mandate in place, from the available cash in
the Plan prior to the distribution or reinvestment of
any income, or, where there is insufficient cash in the
Plan, from the sale of investments held in the Plan.
Investors have full voting and other rights of share
ownership. Under current legislation, investments
in ISAs can grow free of capital gains tax.
abrdn ISA transfer
You can choose to transfer previous tax year
investments to the abrdn Investment Trust ISA which
can be invested in the Company while retaining your
ISA wrapper. The minimum lump sum for an ISA
transfer is £1,000 and is subject to a minimum per
trust of £250.
LITERATURE REQUEST SERVICE
For literature and information on the abrdn
Investment Plan for Children, Share Plan, ISA or
ISA Transfer including application forms for the
Company and the Manager’s investment trust
products, please contact:
abrdn Investments Trust Administration
PO Box 11020
Chelmsford
Essex CM99 2DB
Tel: 0808 500 00 40
(free when dialling from a UK landline)
Terms and conditions for the abrdn managed savings
products can also be found under the literature
section of www.invtrusts.co.uk
ONLINE DEALING DETAILS
Investor information
There are a number of other ways in which
you can buy and hold shares in this investment
company outwith abrdn savings products.
Online dealing
There are a number of online dealing platforms for
private investors that offer share dealing, ISAs and
other means to invest in the company. Real-time
execution-only stockbroking services allow you to
trade online, manage your portfolio and buy UK
listed shares. These sites do not give advice. Some
comparison websites also look at dealing rates and
terms. Some well-known online providers, which can
be found through internet search engines, include:
AJ Bell Youinvest; Barclays Stockbrokers/Smart
Investor; Charles Stanley Direct; Equiniti/Shareview;
Halifax Share Dealing; Hargreave Hale; Hargreaves
Lansdown; iDealing; Interactive Investor/TD Direct;
Selftrade; The Share Centre; Stocktrade.
Discretionary private client stockbrokers
If you have a large sum to invest, you may wish to
contact a discretionary private client stockbroker.
They can manage your entire portfolio of shares and
will advise you on your investments. To find a private
client stockbroker visit the Wealth Management
Association at www.pimfa.co.uk
Independent Financial Advisers
To find an adviser who recommends on investment
trusts, visit www.unbiased.co.uk
Regulation of Stockbrokers
Before approaching a stockbroker, always check that
they are regulated by the Financial Conduct Authority:
Tel: 0800 111 6768 or at www.register.fca.org.uk
Email: register@fca.org.uk
107Year ended 31 December 2021
Suitable for Retail/NMPI Status
The Company’s shares are intended for investors,
primarily in the UK, including retail investors,
professionally-advised private clients and institutional
investors who are seeking exposure to UK commercial
property, and who understand and are willing to
accept the risks of exposure to this asset class.
Investors should consider consulting a financial
adviser who specialises in advising on the acquisition
of shares and other securities before acquiring shares.
Investors should be capable of evaluating the risks
and merits of such an investment and should have
sufficient resources to bear any loss that may result.
The Company currently conducts its affairs, and
intends to continue to do so for the foreseeable
future, in order that the shares issued by Standard
Life Investments Property Income Trust Limited can be
recommended by a financial adviser to ordinary retail
investors in accordance with the FCA’s rules in relation
to non-mainstream pooled investments (NMPIs).
EFFECT OF REIT STATUS ON
PAYMENT OF DIVIDENDS
REITs do not pay UK corporation tax in respect
of rental profits and chargeable gains relating to
property rental business. However, REITs are required
to distribute at least 90% of their qualifying income
(broadly calculated using the UK tax rules) as
a Property Income Distribution (“PID”).
Certain categories of shareholder may be able
to receive the PID element of their dividends
gross, without deduction of withholding tax.
Categories which may claim this exemption
include: UK companies, charities, local authorities,
UK pension schemes and managers of PEPs, ISAs
and Child Trust Funds.
Further information and the forms for completion
to apply for PIDs to be paid gross are available from
the Registrar.
Where the Group pays an ordinary dividend,
in addition to the PID, this will be treated in the
same way as dividends from non-REIT companies.
RETAIL DISTRIBUTION
On 1 January 2014, the FCA introduced rules
relating to the restrictions on the retail distribution
of unregulated collective investment schemes and
close substitutes (non-mainstream investment
products). UK investment trusts are excluded from
these restrictions.
NOTE
Please remember that past performance is not
a guide to the future. Stock market movements
may cause the value of shares and the income from
them to fall as well as rise and investors may not get
back the amount they originally invested.
As with all equity investments, the value of
real estate investment trusts purchased will
immediately be reduced by the difference between
the buying and selling prices of the shares, the
market maker’s spread.
Investors should further bear in mind that the
value of any tax relief will depend on the individual
circumstances of the investor and that tax rates and
reliefs, as well as the tax treatment of ISAs may be
changed by future legislation.
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 108
Information for Investors
Information for Investors
continued
Gross method Commitment method
Maximum level of leverage 500% 300%
Actual level at 31 December 2021 155% 128%
The periodic disclosures as required under the
AIFMD to investors are made below:
Information on the investment strategy, geographic
and sector investment focus and principal
exposures are included in the Strategic Report.
None of the Company’s assets are subject to special
arrangements arising from their illiquid nature.
The Strategic Report, note 3 to the Financial
Statements and the PIDD together set out the
risk profile and risk management systems in
place. There have been no changes to the risk
management systems in place in the period
under review and no breaches of any of the risk
limits set, with no breach expected.
There are no new arrangements for managing
the liquidity of the Company or any material
changes to the liquidity management systems
and procedures employed by ASFML.
All authorised Alternative Investment Fund
Managers are required to comply with the AIFMD
Remuneration Code. In accordance with the
Remuneration Code, the AIFM’s remuneration
policy is available from Aberdeen Standard Fund
Managers Limited on request (see contact details
on page 110) and the remuneration disclosures in
respect of the AIFM’s reporting period for the period
ended 31 December 2021 are available on the
Company’s website.
Leverage
The table above sets out the current maximum
permitted limit and actual level of leverage for
the Company.
There have been no breaches of the maximum
level during the period and no changes to the maximum
level of leverage employed by the Company. There is no
right of re-use of collateral or any guarantees granted
under the leveraging arrangement. Changes to the
information contained either within this Annual Report
or the PIDD in relation to any special arrangements
in place, the maximum level of leverage which ASFML
may employ on behalf of the Company; the right of
use of collateral or any guarantee granted under any
leveraging arrangement; or any change to the position
in relation to any discharge of liability by the Depositary
will be notified via a regulatory news service without
undue delay in accordance with the AIFMD.
The information on pages 106 to 109 has been
approved for the purposes of Section 21 of the
Financial Services and Markets Act 2000 (as amended
by the Financial Services Act 2012) by Aberdeen
Standard Fund Managers Limited which is authorised
and regulated by the Financial Conduct Authority.
OTHER INFORMATION
The Company is a member of the Association of
Investment Companies. The Association publishes
a Monthly Information Service which contains a wide
range of detailed information including statistical
and performance data on all its members. A sample
copy can be obtained free of charge from the AIC,
9th Floor, 24 Chiswell Street, London EC1Y 4YY
(telephone: 020 7282 5555) along with full
details of other publications available from the AIC.
Alternatively, visit their website on www.theaic.co.uk
AIFMD Disclosures (unaudited)
The Company has appointed Aberdeen Standard
Fund Managers Limited as its alternative investment
fund manager and Citibank UK Limited as its
depositary under the AIFMD. The AIFM and the
Company are required to make certain disclosures
available to investors in accordance with the
Alternative Investment Fund Managers Directive
(“AIFMD”). Those disclosures that are required
to be made pre-investment are included within
a pre-investment disclosure document (“PIDD”)
which can be found on the Company’s website
www.slipit.co.uk. There have been no material
changes to the disclosures contained within the
PIDD since its last publication in June 2021.
109Year ended 31 December 2021
DIRECTORS
Mike Balfour
{1}
Mike Bane
James Clifton-Brown
{2}
Huw Evans
{3}
Jill May
{4}
Sarah Slater
{5}
REGISTERED OFFICE
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
REGISTERED NUMBER
41352
ADMINISTRATOR
& SECRETARY
Northern Trust International
Fund Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
REGISTRAR
Computershare Investor
Services (Guernsey) Limited
Le Truchot
St Peter Port
Guernsey GY1 1WD
INVESTMENT MANAGER
Aberdeen Standard Fund Managers Limited
Bow Bells House
1 Bread Street
London EC4M 9HH
INDEPENDENT AUDITORS
Deloitte LLP
Regency Court
Glategny Esplanade
Guernsey
United Kingdom
GY1 3HW
SOLICITORS
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Walkers (Guernsey) LLP
New Street
Guernsey GY1 2PF
BROKER
Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
PRINCIPAL BANKERS
The Royal Bank of Scotland plc
135 Bishopsgate
London EC2M 3UR
PROPERTY VALUERS
Knight Frank LLP
55 Baker Street
London W1U 8AN
DEPOSITARY
Citibank UK Limited
Canada Square
London E14 5LB
1. Chair of the Audit Committee and Chair of the Sustainability Committee
2. Chair of the Board
3. Chair of the Management Engagement Committee and Senior Independent Director
4. Chair of the Nomination Committee and Remuneration Committee
5. Chair of the Property Valuation Committee
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 110
Information for Investors
Directors and Company Information
Notice is hereby given that the Annual General Meeting of Standard Life
Investments Property Income Trust Limited (‘the Company’) will be held at
Bow Bells House, 1 Bread Street, London EC4M 9HH on Wednesday 15 June 2022,
at 10.30am, for the following purposes:
To consider and, if thought fit, pass the following
resolutions as ordinary resolutions
That the Company’s investment policy, with
effect from the conclusion of the Annual
General Meeting, be amended as set out under
“Proposed Change to Investment Policy” on page 38 of
the Annual Report for the year ended 31 December 2021.
To consider and, if thought fit, pass the following
resolutions as special resolutions
To authorise the Company, in accordance
with The Companies (Guernsey) Law, 2008,
as amended to make market acquisitions of
its own shares of 1 pence each (either for retention
as treasury shares for future resale or transfer or
cancellation) provided that;
a. the maximum number of ordinary shares hereby
authorised to be purchased shall be 14.99 percent
of the issued ordinary shares on the date on which
this resolution is passed;
b. the minimum price which may be paid for an
ordinary share shall be 1 pence;
c. the maximum price (exclusive of expenses)
which may be paid for an ordinary share shall be
the higher of (i) 105 percent of the average of
the middle market quotations (as derived from
the Daily Official List) for the ordinary shares for
the five business days immediately preceding
the date of acquisition and (ii) the higher of the
last independent trade and the highest current
independent bid on the trading venue on which
the purchase is carried out; and
d. unless previously varied, revoked or renewed,
the authority hereby conferred shall expire at the
conclusion of the next Annual General Meeting of
the Company after the passing of this resolution
or on the expiry of 15 months from the passing of
this resolution, whichever is the earlier, save that
the Company may, prior to such expiry, enter into
a contract to acquire ordinary shares under such
authority and may make an acquisition of ordinary
shares pursuant to any such contract.
That the Directors of the Company be and
they are hereby generally empowered,
to allot ordinary shares in the Company or
grant rights to subscribe for, or to convert securities
into, ordinary shares in the Company (“equity
securities”) for cash, including by way of a sale of
ordinary shares held by the Company as treasury
shares, as if any pre-emption rights in relation to
the issue of shares as set out in the listing rules made
by the Financial Conduct Authority under Part VI
of the Financial Services and Markets Act 2000,
as amended, did not apply to any such allotment
of equity securities, provided that this power:
a. expires at the conclusion of the next Annual
General Meeting of the Company after the passing
of this resolution or on the expiry of 15 months
from the passing of this resolution, whichever is
the earlier, save that the Company may, before such
expiry, make an offer or agreement which would
or might require equity securities to be allotted
after such expiry and the Directors may allot equity
securities in pursuance of any such offer or agreement
as if the power conferred hereby had not expired; and
b. shall be limited to the allotment of equity
securities up to an aggregate nominal value of
£396,922 being approximately 10 percent of the
nominal value of the issued share capital of the
Company, as at 27 April 2022.
That the change of name of the Company
to “abrdn Property Income Trust Limited”
be approved.
By Order of the Board
For and on behalf of
Northern Trust International Fund Administration
Services (Guernsey) Limited
Secretary
27 April 2022
12
13
14
1
To receive and approve the Annual Report
and Consolidated Financial Statements of the
Company for the year ended 31 December 2021.
2
To receive and approve the Directors’
Remuneration Report (excluding the Directors’
Remuneration Policy) for the year ended
31 December 2021.
3
To receive and approve the Directors’
Remuneration Policy.
4
To approve the Company’s dividend policy to
continue to pay a minimum of four quarterly
interim dividends per year.
5
To re-appoint Deloitte LLP as Auditor of
the Company until the conclusion of the
next Annual General Meeting.
6
To authorise the Board of Directors to
determine the Auditor’s Remuneration.
7
To elect Mike Bane as a Director of the
Company.
8
To re-elect Mike Balfour as a Director
of the Company.
9
To re-elect James Clifton-Brown as
a Director of the Company.
10
To re-elect Jill May as a Director of
the Company.
11
To re-elect Sarah Slater as a Director
of the Company.
15
111Year ended 31 December 2021
Annual General Meeting
Notice of the Annual General Meeting
A form of proxy is enclosed with this notice.
A Shareholder entitled to attend, speak and
vote is entitled to appoint one or more proxies
to exercise all or any of their rights to attend, speak and
vote at the Meeting. A proxy need not be a Shareholder
of the Company. If you wish to appoint a person other
than the Chairman of the Meeting, please insert the
name of your chosen proxy holder in the space provided
on the enclosed form of proxy.
In the case of joint holders such persons shall
not have the right to vote individually in respect
of an ordinary share but shall elect one person
to represent them and vote in person or by proxy in
their name. In default of such an election, the vote of
the person first named in the register of members of
the Company tendering a vote will be accepted to the
exclusion of the votes of the other joint holders.
You may appoint more than one proxy
provided each proxy is appointed to exercise
rights attached to different ordinary shares.
You may not appoint more than one proxy to exercise
rights attached to any one ordinary share. To appoint
more than one proxy you may photocopy the enclosed
form of proxy. Please indicate the proxy holder’s name
and the number of ordinary shares in relation to which
they are authorised to act as your proxy (which, in
aggregate, should not exceed the number of ordinary
shares held by you). Please also indicate if the proxy
instruction is one of multiple instructions given by
you. All hard copy forms of proxy must be signed and
should be returned together in the same envelope.
The form of proxy should be completed and
sent, together with the power of attorney or
authority (if any) under which it is signed, or
a notarially certified copy of such power or authority, so
as to reach Computershare Investor Services (Guernsey)
Limited, The Pavilions, Bridgwater Road, Bristol BS99
6ZY no later than 10.30 a.m. on 13 June 2022.
Completing and returning a form of proxy will
not prevent a member from attending the
Meeting in person. If you have appointed a proxy
and attend the Meeting in person your proxy appointment
will remain valid and you may not vote at the Meeting
unless you have provided a hard copy notice to revoke
the proxy to Computershare Investor Services (Guernsey)
Limited, The Pavilions, Bridgwater Road, Bristol BS99 6ZY
not later than 6.00 p.m. on 13 June 2022.
To have the right to attend, speak and vote
at the Meeting (and also for the purposes of
calculating how many votes a member may
cast on a poll) a member must first have his or her
name entered on the register of members not later
than 6.00 p.m. on 13 June 2022. Changes to entries
in the register after that time shall be disregarded
in determining the rights of any member to attend,
speak and vote at such Meeting.
The Directors’ letters of appointment will be
available for inspection for fifteen minutes prior
to the Meeting and during the Meeting itself.
By attending the Meeting a holder of ordinary
shares expressly agrees they are requesting
and willing to receive any communications
made at the Meeting.
If you submit more than one valid form of
proxy, the form of proxy received last before
the latest time for the receipt of proxies will
take precedence. If the Company is unable to determine
which form of proxy was last validly received, none of
them shall be treated as valid in respect of the same.
A quorum consisting of one or more
Shareholders present in person, or by proxy,
and holding five percent or more of the voting
rights is required for the Meeting. If, within half an hour
after the time appointed for the Meeting, a quorum is
not present the Meeting shall be adjourned for seven
days at the same time and place or to such other day
and at such other time and place as the Board may
determine and no notice of adjournment need be given
at any such adjourned meeting. Those Shareholders
present in person or by proxy shall constitute the
quorum at any such adjourned meeting.
The resolutions to be proposed at the Meeting
will be proposed as ordinary and special
resolutions which, to be passed, must receive
the support of a majority (in the case of the ordinary
resolutions) and not less than seventy five percent
(in the case of the special resolutions) of the total
number of votes cast for, or against, the ordinary and
special resolutions respectively.
As at 27 April 2022, the latest practicable
date prior to publication of this document, the
Company had 396,922,386 ordinary shares
in issue with a total of 396,922,386 voting rights.
Any person holding 3% of the total voting
rights in the Company who appoints a person
other than the Chairman as his proxy will need to
ensure that both he and such third party complies
with their respective disclosure obligations under the
Disclosure Guidance and Transparency Rules.
1
3
5
2
4
6
7
10
12
8
11
13
9
Standard Life Investments Property Income Trust Limited Annual Report & Consolidated Accounts 112
Annual General Meeting
Notes to the notice of Annual General Meeting
