abrdn Property
Income Trust Limited
Annual Report and Financial Statements
For the year ended 31 December 2023
API Annual Report & Accounts Year End 31 December 2023
1
Contents
Introduction
02 Objective and Investment Policy
Strategic Report
03 Performance Summary
04 Chair’s Statement
06 Investment Manager’s Report
11 Property Investments
13 Environmental, Social and Governance
20 Taskforce for Climate-Related Financial Disclosures
27 Stakeholder Engagement
29 Strategic Overview
Governance
34 Board of Directors
35 Directors’ Report
38 Corporate Governance Report
43 Sustainability Committee Report
44 Audit Committee Report
47 Directors’ Remuneration Report
50 Statement of Directors’ Responsibilities
Financial Statements
51 Independent Auditor’s Report
58 Consolidated Statement of Comprehensive Income
59 Consolidated Balance Sheet
60 Consolidated Statement of Changes in Equity
61 Consolidated Cash Flow Statement
62 Notes to the Consolidated Financial Statements
Additional Information
89 Alternative Performance Measures
91 EPRA Performance Measures
94 ESG Performance and Environmental Indicators
101 Glossary
103 Investor Information
105 Directors and Company Information
106 Annual General Meeting
API Annual Report & Accounts Year End 31 December 2023
2
Objective and Investment Policy
Objective
To provide shareholders with an attractive level of income together with the
prospect of income and capital growth.
Investment Policy
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 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. As noted below, the API Board intend to
propose a change in this policy to that of a Managed Wind-Down at an upcoming
extraordinary general meeting (EGM) currently proposed to be held on 28 May 2024.
An analysis of how the portfolio was invested on 31 December 2023 is contained
within the Investment Manager’s Report.
Future of the Company
As discussed in more detail in Note 2.1 (on pages 62 to 63), on 19 January 2024, the
boards of abrdn Property Income Trust Limited (API) and Custodian Property Income
REIT plc (CREI) announced that they had reached agreement on the terms and
conditions of a recommended all-share merger pursuant to which CREI would
acquire the entire issued and to be issued share capital of API.
On 20 February 2024, Urban Logistics REIT plc announced that it was considering a
possible offer for API, which was subsequently withdrawn on the 20 March 2024.
On the 27 March 2024, both the API Court Meeting and API General Meeting were
convened with the proportions of API Shares voting in favour being below the
minimum threshold required. The Board had previously explained to shareholders
that if the proposed merger was rejected, it would take the necessary actions to put
the Company into a managed and orderly wind-down (subject to approval of API
Shareholders at an upcoming EGM), selling assets and returning funds to
shareholders as such funds become available.
A shareholder circular will be posted to shareholders on 14
May 2024 recommending
a change in investment policy to pursue a managed wind-down.
Given the material uncertainty over the Company’s future, the Directors have
decided not to provide an annual report in the same format as previous years to
reduce costs.
API Annual Report & Accounts Year End 31 December 2023
3
Performance Summary
Earnings, Dividends & Costs 31 December
2023
31 December
2022
IFRS Loss per share (p)
(2.17) (13.11)
EPRA earnings per share (p) (excl capital items & swap movements)
1
2.83 2.94
Dividends paid per ordinary share (p)
4.0 4.0
Dividend Cover (%)
2
71 73
Dividend Cover excluding non-recurring items (%)
82 97
Dividend Yield (%)
3
7.5 6.4
FTSE All-Share Real Estate Investment Trusts Index Yield (%)
4.5 4.6
FTSE All-Share Index Yield (%)
4.0 3.6
Ongoing Charges
2
As a % of average net assets including direct property costs
2.5 2.2
As a % of average net assets excluding direct property costs
1.2 1.1
Capital Values & Gearing 31 December
2023
31 December
2022
Change
%
Total assets (£million)
456.1 444.9 2.5
Net asset value per share (p) (note 22) 78.2 84.8 (7.8)
Ordinary Share Price (p)
53.0 62.4 (15.1)
(Discount)/Premium to NAV (%)
(32.2) (26.4)
Loan-to-value (%)
2
30.8 22.6
Total Return 1 year
% return
3 year
% return
5 year
% return
10 year
% return
NAV
4
(3.0) 8.8 8.0 101.2
Portfolio 0.7 12.6 15.9 99.4
AIC Property Direct – UK Commercial
(weighted average) NAV Total Return
(0.8) 10.9 18.2 73.6
Share Price
4
(8.2) 6.6 (11.7) 35.2
AIC Property Direct – UK Commercial
(weighted average) Share Price Total Return
(1.3) 6.8 5.1 22.0
FTSE All-Share Real Estate Investment Trusts
Index
11.6 (1.1) 8.3 35.5
FTSE All-Share Index 7.9 28.1 37.7 68.2
Property Returns & Statistics (%) 31 December
2023
31 December
2022
Portfolio income return
5.3 4.4
MSCI Benchmark income return 4.6 4.1
Portfolio total return
0.7 (8.8)
MSCI Benchmark total return
(1.5) (8.9)
Void rate
7.6 9.8
1 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. EPRA stands for
European Public Real Estate Association. See pages 91 to 93
2 As defined and calculated under API’s Alternative Performance Measures (see pages 89 to 90)
3 Based on dividend paid of 4.0p and the share price at 31 December 2023 of 53.0p.
4 Assumes re-investment of dividends excluding transaction costs.
Sources: abrdn, MSCI
API Annual Report & Accounts Year End 31 December 2023
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Chair’s Statement
Background
Despite grappling with global uncertainties, ranging from
geopolitical tensions to the persistent shadow of COVID-19, the
UK economy exhibited commendable resilience during 2023. A
notable feature of the economic landscape in 2023 was the
resurgence of inflationary pressures, fuelled by a combination
of factors including supply chain disruptions, rising energy
prices and wage pressures. The Bank of England responded
decisively to these challenges, implementing measured
adjustments to monetary policy in an effort to temper inflation
while supporting economic growth. As we sit here in April 2024,
it would appear that this fine balance has been well judged with
a meaningful recession avoided, and inflation on a downwards
trajectory.
Corporate Activity
During the second half of 2023 the Board undertook a strategic
review. This review was prompted by the Board’s concerns, as
well as those of some shareholders about the Company’s size,
the lack of liquidity in its shares, the discount to NAV and
uncovered dividend. The outcome of this review, following
interest from other listed REITs, was that the Board
recommended to shareholders that they vote in favour of a
proposed merger with Custodian REIT for the reasons outlined
in various announcements to shareholders during the first
quarter of 2024.
The Company’s Court Meeting and General Meeting were both
held on 27 March 2024, with the proportions of API Shares
voting in favour of the proposed merger being below the
minimum threshold required. Prior to this date, the Board
explained to shareholders that if the proposed merger was
rejected, it would take the necessary actions to put the
Company into a managed and orderly wind-down. As such,
following the vote, the Board announced that it intended to
take steps to implement a Managed Wind-Down subject to the
approval of the Company’s Shareholders at an upcoming
Extraordinary General Meeting (EGM) on 28 May 2024. The
outcome of this meeting is not guaranteed and will be known
only after publication of this report. Hence the Annual Report
has been prepared with a material uncertainty in relation to its
going concern despite the Boards belief that all present and
future commitments will be met in full. Further information on
the Board’s assessment can be found in Note 2.1 on pages 62 to
63 of the Financial Statements.
UK Real Estate Market
After the challenges of the second half of 2022 and the resultant
market re-pricing, 2023 saw some stabilisation with a marked
improvement in real estate total returns, albeit these remained
marginally negative. Throughout the year there was an
expectation of a peak in interest rates followed swiftly by the
beginnings of a period of rate cuts. However, this failed to
materialise due to inflation levels remaining stubbornly
elevated. The uncertainty around inflation, interest rates and
debt costs contributed to weakened investor sentiment which
resulted in significantly reduced investment activity. According
to CBRE, investment volumes in the UK were down 30.2% when
compared to 2022 with some sectors being more impacted than
others.
This was most notable within the office sector, which persists in
its underperformance with the main driver being a continuation
of outward yield movement negatively impacting capital values.
Whilst there was limited transactional evidence in the sector,
the transactions that did occur painted a weakening picture.
There was a stark divergence in value movement across regions
with, as an example, London’s West End significantly
outperforming the South East, albeit both still returning
negative total returns. Confidence in the sector has not
recovered to pre-COVID levels, from either an investor or
occupier perspective and this is depressing demand and
negatively impacting values.
From an occupational perspective, demand continues to focus
on prime or “best-in-class” assets, characterised by those with
high levels of amenity and a strong emphasis on environmental
and sustainable credentials. Following a review of the
Company’s office portfolio a number of years ago, the Board
and Investment Manager have progressed initiatives to
maximise amenity at all of the office assets within the confines
of the specific buildings. This has positioned the Company’s
assets favourably within their respective market and is
evidenced by the good letting activity over the year. It does,
however, remain a focus of the Investment Manager to
continue to reduce the Company’s exposure to this sector, and
this is evidenced by the sale of 15 Basinghall Street in London
which completed in March 2024.
In contrast to the performance of the office sector, the
industrial sector has recovered from the sharp pricing
correction in late 2022 and early 2023 to return to being the
top-performing sector according to the MSCI Quarterly Index.
With the outward pressure on yields abating, and positive rental
growth continuing, the sector posted a total return of 4.1% for
the year.
Whilst tenant demand remains robust and development levels
low, the overall vacancy rate within the sector is starting to rise.
The increase is muted, and the overall vacancy level remains
below historic averages, but this is perhaps the beginning of
affordability having an impact on demand for some occupiers.
Expectations are that there will continue to be positive rental
growth within the sector, albeit at more muted levels than we
API Annual Report & Accounts Year End 31 December 2023
5
have seen in recent years. Both the Board and the Investment
Manager continue to have conviction around the portfolio’s
significant exposure to the industrial sector being a source of
performance going forwards.
The retail sector outperformed on a total return basis, showing
commendable resilience largely led by a higher relative income
return. The sector does, however, continue to demonstrate a
wide divergence of returns between the sub-sectors bookended
by High Street at the lower end and Retail Warehousing at the
higher. The inflationary pressures on household incomes have
impacted discretionary spending, with the discount and value
retailers being the beneficiaries. This divergence reinforces the
Company’s strategy of focusing its retail portfolio
predominantly in retail warehousing let to discount retailers.
Environmental, Social and Governance (ESG) factors are now an
ever-present consideration for investors and occupiers alike.
The Board’s Sustainability Committee oversees the work that
the Company undertakes in this area, demonstrating the
importance that the Board places on this area. As an example,
the Company has taken great strides over recent years in the
installation of on-site renewable energy in the form of roof-
mounted photovoltaic panels. Recent elevated energy costs
have brought significant focus on the benefits of on-site
renewable energy for occupiers, so the Company’s work in this
area will be a significant benefit going forward.
Portfolio and Corporate Performance
The NAV total return for the year was -3.0%. The real estate
investment portfolio returned 0.7%, which outperformed the
MSCI Quarterly Property Index benchmark return of -1.5% over
the same period. The Company’s portfolio has outperformed
the Index over 1, 3, 5 and 10 years.
The share price total return for the year at -8.2% was a
disappointment. Similarly to 2022, the share price traded
persistently at a high discount to NAV throughout the year.
Whilst the Board had utilised buybacks in previous years,
repeating this would have required additional borrowings at
unattractive interest rates so was not deemed a suitable option.
The discount level was one of the main reasons behind the
Board undertaking a review of the Company’s future.
IFRS earnings improved from -13.11p per share to -2.17p for
2023 reflecting the stabilisation in property valuation moves
compared to last year. EPRA earnings per share decreased from
2.94p to 2.83p per share, a decrease of 3.7%.
Rent Collection
Following the disruption of COVID, collection rates have
returned to where we would expect with the fourth quarter
sitting at 99.4% and the year as a whole at 99.7%. This continued
recovery in collection rates led to a further reversal in bad debt
provisions which contributed £213,048 (or 0.06p per share) to
performance. The diversified nature of the tenant mix within
the portfolio should mitigate the risk of individual tenant failure.
Financial Resources
The Company continues to be in a strong financial position with
unutilised financial resources of £25m available in the form of
its revolving credit facilities (“RCF”) net of existing cash and
financial commitments.
As at the year end the Company had a Loan-to-Value (“LTV”)
ratio of 30.8%, which sits within the Board’s target range.
Dividends
The Board has maintained the annual dividend of 4p per share
for 2023. Dividend cover (excluding non-recurring costs) was
82% for 2023, reflecting a decrease from 97% in 2022 (also
excluding non-recurring items). Dividend cover for Q4 2023 was
83% demonstrating progress towards full cover.
Annual General Meeting (“AGM”)
The Annual General Meeting (“AGM”) will be held at 2.00pm on
Tuesday 13 August 2024 at 18 Bishops Square, London E1 6EG.
The AGM has been deferred from its typical June date to grant
shareholders the opportunity to assess the progress of the
proposed Managed Wind-Down if voted for at the upcoming
EGM. 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 by email to property.income@abrdn.com
Outlook
Looking ahead to 2024, there is cautious optimism around the
trajectory for UK real estate returns. At a macro level, the
downward trajectory of inflation will hopefully continue and
lead to some confidence returning to the market alongside
interest rate cuts. Increased investor demand should
strengthen the market for good quality real estate assets in the
right areas of the market with appropriate ESG credentials.
At a property market level, there is an expectation of continued
rental growth in the industrial sector as well as the retail
warehouse sector where vacancy rates have been falling. Both
these sectors are areas of the market in which the Company has
positioned itself with good levels of exposure, indicating
continued positive performance for the portfolio.
29 April 2024
James Clifton-Brown
Chair
API Annual Report & Accounts Year End 31 December 2023
6
Investment Manager’s Report
for the year ended 31 December 2023
Market Review
One of the defining aspects of the UK commercial real estate
market in 2023 was the low volume of investment transactions.
It is worth remembering that capital values fell by around 20%
in the second half of 2022 as inflation took hold and interest
rates started to rise. Interest rate expectations have defined
sentiment over the course of 2023 with capital valuation
declines more muted over the period, averaging nearly 1.5% per
quarter. As discussed below this fall was driven by the office
sector, whilst industrial and retail warehouse values appear to
have broadly stabilised.
For several years now sector allocation has played an important
part in the performance of a UK diversified property portfolio.
This has transitioned from retail underperforming to offices
underperforming, and for a short period in between when
industrials underperformed (the 4
th
quarter 2022 derating of
low yielding assets hitting industrials very hard). Sector
divergence is likely to remain elevated but much more nuanced
in the future, with Environmental, Social and Governance (ESG)
factors having a major influence on performance.
Returns in the direct UK real estate market in 2023 were
negative, driven by continued declines in capital values. The all
Property capital index decline in 2023 was 5.7% (compared to
2022’s decline of 12.8%). Total return was -1.0% in 2023
compared to -9.1% in 2022. The listed sector is often considered
to be more forward looking than the direct market, and the REIT
sector ended 2023 buoyantly, with the FTSE EPRA Nareit UK
Index providing a total return of 10.7% for 2023, significantly
outperforming the FTSE All-Share Index’s 7.9% over the same
period. The positivity in the REIT sector was most noticeable in
the 4
th
quarter of 2023, as sentiment towards the outlook for
inflation and interest rates became much more positive. Some
of those gains have however been given back over the first
quarter of 2024 as the timing of interest rate cuts seems to be
being pushed back.
Industrial
Following a sharp sector-wide repricing in the 12 months to
June 2023, the industrial market rebounded, posting a positive
annual total return of 4.1% by the end of the year according to
the MSCI Quarterly Index. Indeed, as yields stabilised, capital
value growth levelled out on an annual basis across all
Industrials at -0.4%. London and the Southeast posted total
returns of 3.2% and 4.0%, respectively, and all regions posted
positive returns on an annual basis. Rental growth has
decelerated from the near-parabolic levels seen in 2022 as
levels of supply and demand rebalance. In terms of demand,
national take-up over 2023 declined 40% year-on-year to 29.1m
sq ft according to Savills, though this represents a 12% increase
over pre-Covid levels. Manufacturing, food retailers, and third-
party logistics operators (‘3PL’) led take-up figures at 24%, 17%,
and 15%, respectively. Similarly, overall investment volumes
reached £9.4 billion according to Real Capital Analytics (RCA),
down from the £15.8bn seen over 2022, and nearer to the long-
term average.
Availability rose across the UK during 2023 as occupiers
recalibrated their immediate requirements for space, although
units over 200,000 sq ft are in notable short supply with the
greatest need in the South East for 3PLs. Rental values within
this sub-sector of the market will likely continue to be squeezed
higher as costs remain too high to justify Build-to-Suit space and
demand for e-commerce captures more of the post-Covid retail
sales market. Market rental growth is still expected to return
positive values in the near term across all industrial, albeit at a
slower pace than recent years due to incoming supply. With
consumer confidence rising and the prospect of rate cuts
feeding through in the second half of 2024, occupiers will likely
feel more confident in bringing forward expansion plans as the
economy improves.
Office
The office sector continues to underperform, delivering an
annual total return of -10.2% to December 2023 according to
the MSCI Quarterly Index. Weakening capital values led this
decline, accelerating in their deterioration over 2023 as the
Bank of England raised interest rates to 15-yr highs to quell
inflationary pressure. This helped increase the polarisation of
performance in the office market between regions. Indeed,
London West End offices substantially outperformed its peers
at -2.4% compared to -13.9% and -15.4% for the City of London
and wider Southeast offices, respectively. Market rental value
growth provides a similar story, with Midtown and West End
offices leading the pack at 4.8% and 4.4%, respectively,
compared to 2.4% for all offices.
As has been the trend post-Covid, concealed within these
figures is an occupational story of sustained flight to best-in-
class quality, particularly for assets with sustainability
credentials and amenities. Outdated and out of fashion stock is
experiencing both the highest levels of vacancy and greatest
outward yield shifts. A dwindling pipeline due to rising interest
rates and elevated construction costs will only reinforce this
trend over the medium term as occupiers embrace flexible
working strategies and undesirable offices struggle to reduce
vacancies.
Retail
The retail sector posted a total annual return of -0.1% to
December 2023 according to the MSCI Quarterly Index, beating
API Annual Report & Accounts Year End 31 December 2023
7
all property returns of -1.0%. This proved to be a year of two
halves as retail outperformed the all property index over the
first six months of 2023, seeing a relatively robust total return
of 2.2%. This trend reversed in the 2
nd
half of the year as cost of
living pressures cemented themselves, with West End standard
retail and South East retail warehouses posting -1.7% and -2.5%,
respectively. Despite a slowdown, retail has performed well in
the context of the significant rebasing seen over 2022. Much of
this recovery was influenced by strong performance within the
high-yielding shopping centres and resilient retail warehousing
sub-sectors, with the latter posting consistent month-on-month
rental growth over the year.
Much of the relative performance within the retail warehousing
sub-sector comes from the continued resilience of discount
retailers. Value supermarkets and discount homeware brands
have benefited significantly from consumers under sustained
cost of living pressures. This is evident within ONS retail sales
data through the widening divergence between retail sales
values and volumes as consumers increasingly spend more for
less. Furthermore, as value operators look to expand further, a
limited pipeline of suitable properties should support further
rental growth in this sub-sector.
Market Outlook 2024
We expect the UK real estate market to bottom out in 2024 and
start to improve in the latter part of the year and into 2025. A
catalyst for an improvement in the fortunes for UK real estate
will be the start of the interest rate cutting cycle, matched with
lower prices, and the prospect of a far more positive real estate
yield margin.
While the macro environment will continue to dominate in
2024, sector allocation will remain crucial. Polarisation in
performance from both a sector and asset-quality perspective
will remain a key differentiator for performance. Real estate
refinancing poses a risk to our outlook in 2024, but we believe
that the risk is more heavily skewed towards the office sector,
given the amount of outstanding debt and lack of appetite for
lending to this sector.
Sectors that benefit from longer-term growth drivers, such as
the industrial and logistics sector, will continue to garner the
most interest from investors. It is unlikely that there will be a
material change in investor sentiment towards the office sector,
but more attractively priced re-positioning opportunities will
emerge over the course of 2024, with debt re-capitalisation and
funds working through redemptions the most likely source of
value. However, underwriting assumptions, particularly around
capital expenditure, are crucial. Long income assets now look
more attractively priced, and we anticipate there will be some
good buying opportunities in this area of the market in 2024.
Purchases:
The Company made two purchases during the year, both
occurring early in the year. Knowsley, Villiers Road – was a site
purchase for a speculative logistics development that
completed in the first quarter although the contract was
exchanged the previous summer. The purchase was conditional
on a satisfactory planning consent. Further details of the
development are given below. Welwyn Garden City, Morrisons,
is a supermarket purchased for £18.29m reflecting a yield of
6.4%. The purchase was a sale and leaseback with Morrisons
giving a 25-year lease with CPI linked rent reviews (annual for
the first 5 years). The asset combines a long-term income with
a high yield.
Development:
The Company completed the development of its speculative
logistics unit in Knowsley in late December 2023. The unit is
built to a high specification, and we are confident that a letting
will be achieved reasonably quickly given the current level of
interest and multiple inspections.
Although not strictly a development the Company also
completed the substantial refurbishment of a logistics unit in
Washington. The unit had previously been occupied by a
manufacturer servicing Nissan; however, we agreed terms with
Hermes Parcelnet on expiry of the last lease for a new 15-year
lease subject to a scope of works by the landlord that changed
the unit to a fully specialist delivery hub. The refurbishment
included a substantial photo voltaic scheme, and the asset now
has an EPC A rating.
Sales:
Only one sale completed during the year; a logistics property of
two units in Livingston Scotland for £6.25m before costs sold
towards the end of 2023.
Given the various potential corporate transactions, sales were
not progressed in 2023, however a number of sales have been
undertaken after the reporting period as a strategy of prepaying
the RCF was implemented.
▸London, 15 Basinghall Street (Office) – sold for £9.85m
completed in the first quarter.
▸Warrington, Opus 9 (Industrial) – sold in the first quarter for
£6.75m.
▸Hebburn, Unit 4 Monkton Business Park (Industrial) – Sale
completed in April 2024 at £5.3m to the tenant.
▸Bristol, Kings Business Park (Industrial) – sold for £7.9m in
April 2024.
API Annual Report & Accounts Year End 31 December 2023
8
In addition, soft marketing commenced after the period end for
the sale of Far Ralia, the Company’s natural capital asset. Timing
of the exit is being influenced by changes to the grant funding
submission period and strong progress on planting in order to
maximise value for the Company. It is realised that at a time of
higher interest rates a non-income producing asset sits less
comfortably in an income focused fund. Indications suggest the
capital value uplift on a sale will make this investment one of
the Company’s better investments.
Asset Management:
Although not many investment transactions were completed
over the course of 2023, the experienced and dedicated asset
management team completed a significant number of deals to
enhance or protect the income to the Company.
Rent collection has returned to the levels expected following
the disruption of COVID.
Rent Collection Quarter % Received
2022 1 100%
2 100%
3 99%
4 100%
2022 FY 100%
2023 1 100%
2 100%
3 100%
4 99%
2023 FY 100%
The vacancy rate at the year-end was 7.6% (prior year 9.8%)
which is above our target level of 5%.
Fourteen lettings were completed during the year securing total
rent of £2.7m per annum.
Seven lease renewals or regears were completed over the year
securing £1.4m per annum, along with seven rent reviews,
resulting in an additional £0.5m per annum being secured.
Income Growth Potential
One of the attractions of the portfolio is the amount of
reversion that exists – i.e. potential to grow the rent. At year
end that figure was £7m with the Estimated Rental Value (ERV)
of the portfolio 26% above the passing rent. This reversion will
be received from several parts of the portfolio as the table
below demonstrates.
Rent reviews are a mixture of open market (negotiated), fixed
or indexed. The graphic below shows the Company mix.
Current Rent Estimated Rental Value Reversion Reversion (% of
portfolio income)
Let Properties £27,143,039 £30,753,882
£3,610,843 13.3%
Speculative Development Properties - £830,000 £830,000 3.1%
Void Properties - £2,605,160 £2,605,160 9.6%
Total £27,143,039 £34,189,042 £7,046,003 26.0%
Portfolio Rent Reviews
Basis % of Current Rent Roll Weighted Average Floor
(value if fixed)
Weighted Average Cap /
Range of Caps
Weighted Average
Unexpired Lease Term
(years)
RPI Inflation linked % 15.9% 1.0% 3.9 (ex-uncapped income) 7.6
CPI Inflation linked % 8.1% 0.7% 3.8% 19.6
Fixed / Stepped 9.6% 2.6% n/a 10.0
Open Market Value 66.4% n/a n/a 2.6
Total 100% n/a n/a 6.3 (FUND WAULT)
API Annual Report & Accounts Year End 31 December 2023
9
Debt
As reported in the last Annual Report and Accounts, the
Company’s previous debt facilities with RBSI expired in April
2023. The Company had secured new facilities with RBSI in the
4
th
quarter of 2022 that commenced concurrently to the
previous facilities expiring. These new facilities are:
▸A 3-year Term Loan of £85m which is fully drawn. The
Company entered into an interest rate cap for the full £85m at
3.96% which when coupled with the margin of 150 bps (one of
the lowest in the sector) results in an all-in cost capped at
5.46%.
▸Revolving Credit Facility (RCF) of £80m. As at the year-end,
the Company had drawn £56.9m of the RCF which is also at a
margin of 150 bps over SONIA. Following subsequent sales and
development costs, the drawn amount was £44.4m as at 31
March 2024.
The two facilities from RBSI are due to expire in April 2026 and
incur no early repayment fees. As at 31 December 2023, the
Loan to Value ratio (LTV) was 30.8%.
Performance
There are a number of different measures of performance used
by the Board, from individual assets to shareholder return.
These are detailed below:
Portfolio Return:
As the Company invests in direct real estate one of the best
measures of investment decisions and quality of the portfolio is
its performance compared to the general UK real estate market.
For that reason, we compare the portfolio to the MSCI quarterly
index – the largest regular index of the market. The chart below
shows that the Company’s portfolio has outperformed the MSCI
index over 1,3, 5, and 10 years. For the purpose of this year-end
report the chart also shows the portfolio and net asset value
(NAV) against both indices for clarity.
NAV Return:
NAV total return encompasses the costs of the fund, including
running the REIT and debt costs. As the MSCI index does not
include these, we instead use the AIC Property Direct UK Sector
weighted average as a comparator. In the short term, the
impact of higher debt costs has impacted the Company NAV
Total Return along with its high exposure to logistics which de-
rated heavily at the end of 2022. The chart below also shows a
comparison to the Open-Ended property sector as investors
often have to decide whether to invest in Investment
Companies or Open-Ended vehicles.
NAV Total Returns to 31 December 2023
Source AIC, abrdn,
Investment Association
1 year
%
3 years
%
5 years
%
10
years
%
abrdn Property Income
Trust Limited
(3.0) 8.8 8.0 101.2
AIC Property UK
Commercial (weighted
average)
(0.8) 10.9 18.2 73.6
Investment Association
Open Ended Commercial
Property Funds sector
2.6 2.8 6.0 43.2
API Annual Report & Accounts Year End 31 December 2023
10
Share Price:
The final measure is one that the Investment Manager has
limited influence on but is of most interest to Shareholders –
that is the Share Price Total Return. The table below compares
the API share price return to that of the FTSE all share REIT index
and AIC Property UK Commercial (weighted average) segment.
A major negative factor has been the persistently high discount
at which the shares have traded when compared to the
Company’s NAV.
Valuation
The portfolio is valued quarterly by Knight Frank LLP under the
provisions of the RICS Red Book. As at 31 December 2023 the
portfolio, including Far Ralia, was valued at £439.2m (£416.2m
at 31 December 2022) and the Company held cash of £6.7m
(£15.9m at 31 December 2022). The portfolio consisted of 46
assets at year-end (45 assets at 31 December 2022).
Investment Strategy
The Company has always had a focus on income with its
objective stated as “To provide shareholders 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”.
With the growing importance of Environmental, Social and
Governance (ESG) matters on investors and occupiers alike a
slight pivot in strategy over the last few years has been to
ensure that the income from the portfolio is sustainable. We do
that by ensuring the portfolio will continue to appeal to tenants
through the quality of accommodation offered at an affordable
price. The scale of new lettings and lease renewals suggests this
has been achieved, with further growth in income to be
expected from the portfolio.
Environmental Social and Governance (ESG)
ESG is central to API’s investment philosophy and is fully
incorporated into our decision making and actions. We believe
that ESG should form a central part of decision making, and that
in order to make the best decisions, we must build our own
expertise and knowledge through working with best-in-class
consultants to optimise the timing and impact of our
investments in ESG improvements. We do not aim to solve
every problem overnight, rather we seek to find the optimum
point of intervention for each asset to maximise return for
shareholders and avoid waste (and with-it embedded carbon).
To reflect the importance of ESG, the Annual Report now
includes a dedicated section and we were also early adopters of
the Taskforce for Climate-related Financial Disclosures.
Outlook and Future Strategy
Although the economic outlook and the Company’s future
remains uncertain the portfolio consists of good quality assets
that appeal to occupiers and investors. The Investment
Manager will continue to focus on growing income through
active asset management of the assets, and, subject to
shareholder approval (please see Note 2.1 on pages 62 to 63 of
the Financial Statements) will commence a Managed Wind-
Down of the Company through the sale of assets. The sales
process is expected to take approximately 24 months within a
range of 18-30 months from the date of implementation,
although this is very dependent on a reasonable market existing
for all the Company’s properties. There is a clear objective to
maximise returns to shareholders in a reasonable timescale.
Share Price Total Returns to 31 December 2023
Source AIC, abrdn 1 year
%
3 years
%
5 years
%
10 years
%
abrdn Property Income
Trust Limited
(8.2) 6.6 (11.7) 35.2
FTSE All-Share Index 7.9 28.1 37.7 68.1
FTSE All-Share REIT Index 11.6 (1.1) 8.3 35.5
AIC Property Direct – UK
Sector (weighted
Average)
(1.3) 6.8 5.1 22.0
API Annual Report & Accounts Year End 31 December 2023
11
Property Investments
for the year ended 31 December 2023
Top 10 Tenants Top 10 Properties
B&Q Plc
Halesowen, B&Q
Passing Rent: £1,560,000 £22m - £24m
5.7% Retail (5.4%)
Public Sector
Rotherham, Ickles Way
Passing Rent: £1,365,203 £20m - £22m
5.0% Industrial (4.8%)
WM Morrisons Supermarkets Ltd
Birmingham, 54 Hagley Road
Passing Rent: £1,252,162 £18m - £20m
4.6% Office (4.5%)
The Symphony Group Plc
Welwyn Garden City, Morrison’s
Passing Rent: £1,225,000 £18m - £20m
4.5% Retail (4.2%)
Schlumberger Oilfield UK plc
Swadlincote, Tetron 141
Passing Rent: £1,138,402 £16m - £18m
4.2% Industrial (3.6%)
Timbmet Limited
Shellingford, White Horse Business Park
Passing Rent: £904,768 £14m - £16m
3.3% Industrial (3.5%)
Atos IT Services UK Limited
London, Hollywood Green
Passing Rent: £872,466 £12m - £14m
3.2% Other (3.2%)
CEVA Logistics Limited
Washington, Rainhill Road
Passing Rent: £840,000 £12m - £14m
3.1% Industrial (3.1%)
ThyssenKrupp Materials (UK) Ltd
Corby, 3 Earlstrees Road
Passing Rent: £643,565 £12m - £14m
2.4% Industrial (3.1%)
Hermes Parcelnet Ltd
St Helens, Stadium Way
Passing Rent: £591,500 £12m - £14m
2.2% Industrial (2.9%)
Lease Expiry Profile
–
rent expiring
0-5
years
6-10
years
11-15
years
16-20
years
21-25
years
25 >
years
£10,386,518 £8,982,146 £4,899,334 £1,120,716 £1,897,359 £nil
38.1% 32.9% 18.0% 4.1% 7.0% 0.0%
1
1
2
3
4
5
6
7
8
9
10
2
3
4
5
6
7
8
9
10
API Annual Report & Accounts Year End 31 December 2023
12
# Name Location Sub-sector Market Value Tenure Area sq ft Occupancy %
1 B&Q Halesowen Retail £22m-£24m Freehold 92,400 100%
2 Ickles Way Rotherham Industrial £20m-£20m Leasehold 364,974 100%
3 54 Hagley Road Birmingham Office £18m-£20m Leasehold 136,515 89%
4 Morrisons Welwyn Garden City Retail £18m-£20m Leasehold 61,409 100%
5 Tetron 141 Swadlincote Industrial £16m-£18m Freehold 141,459 0%
6 White Horse Business Park Shellingford Industrial £14m-£16m Freehold 214,882 100%
7 Hollywood Green London Other £12m-£14m Freehold 63,634 100%
8 Rainhill Road Washington Industrial £12m-£14m Freehold 149,676 100%
9 3 Earlstrees Road Corby Industrial £12m-£14m Freehold 195,225 100%
10 Stadium Way St Helens Industrial £12m-£14m Freehold 101,087 100%
11 Building 3000 Birmingham Business Park Birmingham Other £12m-£14m Freehold 40,146 100%
12 Walton Summit Preston Industrial £12m-£14m Freehold 147,946 100%
13 Badentoy North Aberdeen Industrial £10m-£12m Freehold 67,843 100%
14 Bastion Point Dover Industrial £8m-£10m Freehold 84,376 100%
15 15 Basinghall Street London Office £8m-£10m Freehold 17,465 98%
16 Tetron 93 Swadlincote Industrial £8m-£10m Freehold 93,836 100%
17 Cosford Lane Rugby Industrial £8m-£10m Leasehold 100,564 100%
18 Villiers Road Knowsley Industrial £8m-£10m Freehold 107,000 0%
19 Tempsford Road Sandy Industrial £8m-£10m Freehold 125,774 100%
20 Ocean Trade Centre Aberdeen Industrial £8m-£10m Freehold 103,120 92%
21 The Pinnacle Reading Office £8m-£10m Freehold 39,379 69%
22 85 Fullarton Drive Cambuslang Industrial £8m-£10m Freehold 61,033 100%
23 Far Ralia Newtonmore Other £8m-£10m Freehold N/A* N/A
24 Alston Road Washington Industrial £8m-£10m Freehold 96,689 100%
25 Mount Farm Milton Keynes Industrial £8m-£10m Freehold 74,709 100%
26 Monck Street London Office £8m-£10m Leasehold 18,554 100%
27 Kings Business Park Bristol Industrial £8m-£10m Freehold 58,538 100%
28 Explorer Crawley Office £6m-£8m Freehold 42,135 95%
29 82-84 Eden Street Kingston-Upon-Thames Retail £6m-£8m Freehold 24,234 98%
30 Howard Town Retail Park Glossop Retail £6m-£8m Mixed 47,132 96%
31 Opus 9 Warrington Industrial £6m-£8m Freehold 53,279 100%
32 160 Causewayside Edinburgh Office £6m-£8m Freehold 39,522 100%
33 Garanor Way Bristol Industrial £6m-£8m Leasehold 38,330 100%
34 One Station Square Bracknell Office £6m-£8m Freehold 42,429 73%
35 3 Elliott Way Birmingham Industrial £6m-£8m Freehold 46,495 100%
36 The Point Retail Park Rochdale Retail £4m-£6m Freehold 42,224 100%
37 101 Princess Street Manchester Office £4m-£6m Freehold 41,096 42%
38 Unit 4 Easter Park Bolton Industrial £4m-£6m Leasehold 35,534 100%
39 21 Gavin Way Birmingham Industrial £4m-£6m Freehold 36,376 100%
40 Victoria Shopping Park Hednesford Retail £4m-£6m Leasehold 37,096 100%
41 2 Brunel Way Fareham Industrial £4m-£6m Freehold 38,217 100%
42 Unit 4 Monkton Business Park Hebburn Industrial £4m-£6m Freehold 33,021 100%
43 Olympian Way Leyland Retail £4m-£6m Leasehold 31,781 100%
44 Grand National Leisure Park Aintree Other £4m-£6m Leasehold 38,223 100%
45 Yarm Road Stockton-on-Tees Other £4m-£6m Freehold 44,266 100%
46 Unit 14 Interlink Park Bardon Industrial £2m-£4m Freehold 32,747 100%
Total property portfolio £439.2m
* The land at Ralia Estate, Newtonmore covers an area of 1,447 hectares.
Portfolio Allocation by Region
South East 23.0%
West Midlands 18.7%
North West 15.4%
East Midlands 13.5%
North East 12.0%
Scotland 10.1%
South West 3.3%
City of London 2.2%
London West End 1.8%
API Annual Report & Accounts Year End 31 December 2023
13
Environmental, Social and Governance (ESG)
for the year ended 31 December 2023
ESG
It is now commonplace for investment managers to say that ESG
is embedded in their processes. It is not always clear what that
really means. As a Company investing in real assets we can have
a direct impact on ESG outputs – and the reason we have fully
integrated ESG into our investment process and behaviour is
that we believe it is fundamental to achieving the Company’s
investment objective. We do not consider ESG in isolation or as
just a cost. We see it as an opportunity for driving performance.
It is for that reason it forms an integral part of our decision-
making processes. We seek to implement ESG initiatives in a
planned, sensible, and measured way so as to maximise the
return on investment.
ESG Policy
Please note that the text below relates to the approach and
activities undertaken in 2023. If the proposal to move to a
managed wind-down is approved by shareholders then the
focus will change to an optimum disposal strategy rather than
longer term performance initiatives, and this will impact the
approach to ESG.
ESG Strategy
The Board has a separate Sustainability Committee that sets Key
Performance Indicators (KPIs) in order to measure the ESG
performance of the real estate portfolio and Investment
Manager in delivering ESG improvements. The Committee
demonstrates the increased importance of ESG in managing risk
and return for the Company.
The Investment Manager has an advanced and comprehensive
framework of process, oversight, and knowledge to incorporate
and enhance ESG into the business and to ensure practical
implementation, which is evolving to keep pace with current
ESG trends and legislation.
Priorities
The Company, in addition to its focus on ESG transparency and
reporting, has identified two main areas of focus that have the
most relevance for the activities it undertakes – People and
Planet.
People involves our tenants, the users of our properties and the
local community. It is a wide-ranging theme, covering supplier
management, community engagement, social values, tenant
engagement and wellness.
Under Planet, the Company has a primary focus on (1) carbon
and energy; (2) climate resilience; and (3) biodiversity.
Extreme weather events are becoming more common place
bringing the need for climate action into focus. The Company
has a clear strategy for 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.
The Company’s commitments are as follows:
▸
2030: achieve Net Zero Carbon across all portfolio
landlord emissions (Scope 1 & 2)
▸
2050: achieve Net Zero Carbon across all portfolio
emissions (Scope 1, 2 & 3).
The following provides an overview of definitions of the
different emissions scopes:
▸
Scope 1 and 2: Cover emissions that directly result from
the landlord’s activities where there is operational control,
either through the purchase or consumption of energy or
refrigerant losses.
▸
Scope 3: Emissions are those that occur in our supply
chains and downstream leased assets (tenant spaces) over
which we have a degree of influence but limited control.
While there are no standard industry definitions of net-zero
carbon for real estate, the Company has been working to build-
out its own definitions, which are detailed in the table on page
15.
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. From that
baseline we can measure progress annually – although it won’t
be a straight line to net-zero. Since then, we have been
actioning our net-zero strategy to improve on the baseline
performance.
Transparency and Reporting
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 as explained above, is included
on pages 94 to 100 which also provides disclosures required
under Streamlined Energy and Carbon Reporting (SECR).
API Annual Report & Accounts Year End 31 December 2023
14
Our ESG Priorities
Planet - Climate Change
The Company considers the risks and opportunities of climate
change on the portfolio. This is one of the most material ESG
components to investment performance. The Taskforce for
Climate-related Financial Disclosures (TCFD) was established to
provide a standardised way to disclose and assess climate-
related risks and opportunities and defines two types of climate
risks:
▸
Transition risks: 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: 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 carbon standard.
Nonetheless, we have progressed already with work to model
the implications of decarbonising the portfolio in line with a
1.5°C scenario (using the ‘Carbon Risk Real Estate Monitor’
(CRREM) as a real-estate specific framework to measure
against) and undertaken analysis to understand potential future
physical climate risks.
The table on pages 20 to 26 provides a brief overview of our
Company approach to all 11 TCFD recommendations. Whilst the
company does not fall in scope of the 'Companies (Strategic
Report) ( Climate-related Financial Disclosure) Regulations
2022', the company still voluntarily follows this framework, as
best practice. The disclosure outlines how the Company
complies with all 11 recommendations. We expect that our
reporting against TCFD recommendations will continue to
evolve over time as industry methodologies improve and our
own work develops further. In addition to the qualitative
disclosure below, the next section provides further analysis into
the work the Company has been undertaking with regards to
transition risks and its net-zero carbon target.
Transition Risks: Targeting Net-Zero
Net-Zero Strategy
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 net-zero target was informed from the findings of a carbon
modelling exercise undertaken in 2021 to understand its
current carbon footprint, and what would be required to be net-
zero by 2050. The key finding was that landlord-controlled
energy (i.e. responsible for scope 1 and 2 carbon emissions)
accounts for roughly 11% of the Company’s carbon footprint
and we have limited control over 89% of the output determined
by tenants.
Our Net-Zero Principles
Although the goal of net-zero may seem clear, definitions and
standards and the policy mix to support it remains immature.
Accordingly, the Company has established several key principles
to ensure its strategy, 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 at Far Ralia is in 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 in turn reduces cost and embodied
carbon.
Realistic:
▸
Target – long-term objectives must be stretching but
deliverable and complemented 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.
Measurable:
▸
Clear key performance indicators at the asset and portfolio
level.
Collaborative:
▸
Occupiers – we cannot achieve net-zero for the portfolio in
isolation. We will work closely with occupiers, many of whom
have their own decarbonisation strategies covering their leased
space.
▸
Suppliers – we will work collaboratively with our suppliers
including property managers and consultants in order to
achieve net-zero.
API Annual Report & Accounts Year End 31 December 2023
15
Net-zero delivery strategy
Target
Timeframe Target
Context
Short term Achieve net-zero emissions across all portfolio
landlord emissions for Scope 1 and 2 by 2030.
Improve emissions intensity for all scopes with a
50% reduction by 2030 from 2019 baseline.
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 it is worth acknowledging that the Landlord only has direct
control over approximately 11% of carbon emissions, they will
continue to work with tenants and upgrade properties where
possible 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.
Long term Net-zero across all emission
scopes by 2050.
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
as much as possible with high quality nature-based offsets for any
residual carbon. We will keep our long-term target under review
and may bring it forward as policy measures and market drivers
become clearer in the coming years.
Delivery
Acquisitions
Action 2023 performance 2024 onwards
In line with the Investment Manager’s policies,
benchmark assets preacquisition, understand
costs and build decarbonisation into asset
management plan from the start of ownership.
During 2023 2 assets were acquired and an in-
depth ESG due diligence was applied. The
development asset since achieved EPC A rating,
and on the supermarket as part of the purchase
the tenant was required to undertake ESG
upgrades to the asset.
For any new acquisitions, the in depth ESG due
diligence approach focusing on decarbonisation
potential of the asset will be applied.
Standing Investments
Data coverage and occupier engagement
Action 2023 performance 2024 onwards
Improve ability to obtain tenant energy data via:
1. Improve tenant engagement
2. Increase smart metering coverage
3. Integrate ESG into lease agreements
46% data coverage by floor area (based on 2023
GRESB submission, data as at 31/12/2022)
10 assets by number with smart metering (as at
31/12/2023) 18 leases signed with non-
negotiable ESG clauses (as at 31/12/2023)
100% of assets to be targeted with automation
of energy data collection.
Every new lease will include non-negotiable ESG
clauses.
Energy efficiency
Action 2023 performance 2024 onwards
• 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.
-34% reduction in carbon intensity of scope 1
and 2 emissions and a 12% reduction in carbon
intensity for scope 3 emissions compared to
baseline (2019 versus 2022)
11 tenants procured renewable energy (based
on 2023 GRESB submission, data as at
31/12/2022)
100% of portfolio ran through energy and
carbon simulation model (as at 31/12/2023)
86% of portfolio with EPC A-C as at 31/12/2023
(73% as at 31/12/2022)
60% of assets of Scope 1 and 2 portfolio reliant
on gas (based on 2023 GRESB submission, data
as at 31/12/2022)
Assess optimum time of intervention and scope
for ESG improvements and incorporate in
discussions with tenants.
API Annual Report & Accounts Year End 31 December 2023
16
Standing Investments (continued)
Renewable energy
Action 2023 performance 2024 onwards
Continue to implement solar PV projects and
establish power purchase agreements with
occupiers.
3.4 MWp installed Solar PV capacity (2022: 1.5
MWp) to date with approximately 14 MWp of
opportunity.
Any further PV installations will be dependent
on the future strategic direction of the
Company.
Nature based carbon removal
Action 2023 performance 2024 onwards
Progress with nature-based carbon removal
strategy at our site Far Ralia in parallel with asset
decarbonisation.
During 2023 planting approval was received for
a scheme that encompassed natural rewilding,
peatland restoration, bio diversity gain and
planting of native species. Grant funding was
also secured enabling site preparation. In the
later part of 2023, and first half of 2024 planting
has been completed on most of the land.
Planting to be completed in 2024 and first grant
income following completion.
Peatland restoration works to start post
planting. This will generate claimable carbon
units linearly after the first five years, and every
ten years thereafter.
Development
Action 2023 performance 2024 onwards
Direct development and development funding
to be designed to whole life net zero principles.
One major refurbishment and one development
completed during the year. The refurbishment
has created an operationally carbon net neutral
building, whilst the development asset has
achieved a "NetZero ready status".
Whole life carbon assessments to be
undertaken for any new refurbishments and
developments and design to be aligned with
whole life net-zero principles.
Performance to Date
Baseline versus current performance:
In order to report progress against our net-zero carbon target,
please see table below which splits out the carbon performance
for scope 1 and 2 carbon emissions with regards to the 2030
target and Scope 3 carbon emissions for the 2050 target.
Our carbon performance for our 2019 baseline versus 2022 is
shown below. We used 2019 as a baseline as it was unaffected
by changes in occupancy due to COVID-19. The 2019 baseline
was updated from that reported in the previous annual report
due to improved data coverage and the inclusion of F-gases.
Between 2019 and 2022, absolute carbon emissions for the
portfolio have decreased by 32%.
This can in part be explained by sale of assets. The most useful
figure to observe is the carbon intensity figure which normalises
the carbon performance by floor area and shows relative
performance improvements between 2019 and 2022 removing
the influence of any portfolio churn. The carbon intensity for
Scope 1 and 2 assets where we have data for the whole building
has reduced by 34% between 2019 and 2022. For scope 3
emissions, the carbon intensity has reduced by 12%.
The reason 2023 data is not shown here, is due to later data
collection periods for scope 3 which required data requests
going out to all tenants during Q1 2024 to collect data for the
previous year to allow time for energy invoicing to be
completed.
Net Zero target KPI Metric Baseline 2022 % Change
2030
Scope 1 & 2
Absolute carbon (scope 1 & 2) tCO2e 2,102 1,426 -32%
% of portfolio (Scope 1 & 2) % 11% 10% -1%
Carbon intensity (Scope 1 & 2
whole building)
tCO2e/m2 50.57 33.30 -34%
Carbon performance against
current year CRREM target
(Scope 1 & 2 whole building)
% of portfolio by value
that meets CRREM
Current
72% 94% n/a
2050 Scope 1, 2 and 3
Absolute carbon
(Scope 1, 2 & 3 whole
building)
tCO2e 19,375 13,935 -32%
Absolute carbon (Scope 3) tCO2e 17,273 12,509 -28%
% of portfolio (Scope 3) % 89% 90% +1%
Carbon intensity (scope 3
whole building)
tCO2e/m2 42.32 37.21 -12%
API Annual Report & Accounts Year End 31 December 2023
17
Net-Zero Action on the Ground
The route to net-zero for the UK is going to evolve, and so are
regulations and solutions / technology that we can use. The
high-level progress is already reported in the net-zero delivery
strategy above. The purpose of the next section is to provide
real life examples of implementing net-zero on the ground:
Electric Vehicle Charging:
Although installing EV charge points does not reduce the
Company’s energy consumption, it does help with broader
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.
Energy efficiency:
Refurbishment decisions are focused around energy
performance improvements.
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. All assets
below C are being assessed to understand the route to get a C
by 2027, and 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 immediately, only to find a better solution
becomes available in the future. We did however ensure up to
date EPC assessments on our office assets with a rating of at
least a C to ensure compliance until 2027 in case of regulation
change.
One of the challenges of looking at a UK wide portfolio is that
Scotland has a different approach to calculating an EPC rating
(and does not have the legislation impacting use at certain
ratings). EPCs are a very visible measure of a building’s energy
performance, but should not be the driver of all decision
making, as there is not a clear alignment of EPCs to a pathway
to net-zero. The majority of the Company’s E and G rated
properties are located in Scotland .
Energy Performance Certificate
Rating (EPC)
% of fund’s rental value
A+ 3.1%
A 9.1%
B 39.0%
C 35.1%
D 6.6%
E 6.0%
F 0.0%
G 1.1%
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 has an even smaller footprint.
Following the positive groundwork completed in 2022 on a
number of photo voltaic (PV) installations, significant progress
has been made during 2023. Whilst at the end of 2021 we had
six operational PV schemes across the portfolio totalling
1.2MWp, as at the end of 2023 we now have twelve schemes
with a capacity of 3.4MWp.
Included in this is our largest installation to date, at Rainhill
Road, Washington where a 1.16MWp scheme has been
completed. Given the specifics of this property, we utilised an
innovative product which combined the PV panels and roof
covering, mitigating the need to refurbish or replace the roof.
When incorporated with a comprehensive refurbishment, the
property is now effectively operationally carbon net neutral.
A further installation has been completed since the end of 2023,
and we have another on site with another committed and due
to start shortly. Combined these provide a further 1.2MWp of
capacity. In terms of future pipeline, the portfolio has 16 other
potential opportunities which could add an additional
12.7MWp.
Depending on the strategic direction for the portfolio, we will
continue to progress further opportunities where it is viable and
aligns with asset plans.
Carbon offsetting:
Based on current emissions data, current policies and nationally
determined contributions (NDCs), it is highly likely that the
global economy will overshoot the 1.5°C carbon budget. Carbon
offsetting is an important part of achieving net-zero but only if
done in conjunction with real carbon reductions. The Company
believes that carbon offsetting should only be done alongside
carbon reductions.
The path to net-zero will, however, take time, and some
offsetting will be required. The Company’s offsetting strategy is
to focus on local, high integrity nature-based offsets where
possible alongside its carbon reduction targets.
API Annual Report & Accounts Year End 31 December 2023
18
As part of this broader strategy, during 2021 the Company
acquired 1,471 hectares of open moorland in the Scottish
Highlands called Far Ralia. The intention is to undertake a mix of
reforestation (planting approximately 1.2m natural broadleaf
trees), peatland restoration and other forms of biodiversity gain
to create a high integrity, local nature-based source of offsets.
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.
To date, the Company has completed approximately 80% of the
detailed planting plans which were prepared after consultation
with a number of regulatory and interested parties, leading to
an agreed Environmental Impact Plan.
During the early part of site ownership, seeds were collected on
site by the nursery we are using and saplings grew ready for
planting in 2023 and 2024. A number of contracts have been
agreed and we have required that all tendering parties are local
/ Highlands based using local labour where possible.
In partnership with the Natural History Museum and EY we
undertook a Biodiversity baseline survey using their Biodiversity
Intactness Index. Given we bought open moorland in the
national park, with a historic use of grouse shooting and stalking
along with limited grazing, the result was quite surprising, with
a current score of only 52 out of 100. The survey has considered
the Company’s plans for the site, which concludes that the
regeneration program will, in a period of 75 years or so, return
biodiversity to the level of a resilient and functioning
ecosystem. This surpasses the safe planetary boundary reaching
a high of 94%, and within 30 years will deliver a significant
increase in biodiversity of nearly 21 percentage points.
On a social level, the project will (i) boost the local economy, by
employing local contractors and forestry experts, where
possible, (ii) provide improved amenity, by restoring bothies
and, improving access (iii) offer discovery and volunteering
opportunities to local schools. Healthy woodland will also
provide flood mitigation benefits, improved soil quality and
protection against erosion, as well as enhanced water quality
downstream.
Physical Risks: Climate Resilience.
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 acute 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. We are also
considering chronic risks. Chronic risks are those associated
with the impacts of rising temperatures on energy consumption
for the cooling and heating of buildings.
Rising temperatures will, at some point, require increased
cooling of workplaces, something that will require increased
energy consumption. With increased modelling out to 2080 we
are better able to forecast future changes and adapt our
strategies accordingly. 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. The
analysis shows that the portfolio has extremely low exposure to
acute risks.
Biodiversity:
Biodiversity is a relatively new focus for the Company but is
rising in importance due to risks associated with biodiversity
loss which includes upcoming regulation on reporting company
impacts on nature. Biodiversity measurement is a key indicator
for measuring a healthy ecosystem and adverse nature impacts
and the Company aims to achieve at least a 10% biodiversity net
gain on developments.
The approach to understanding the Company’s impact on
nature from its real estate investments, is based on two phases
in the property asset’s lifecycle:
1. The Construction Phase:
For construction/development sites, there are two
ways to consider the impact on nature. The first is to
focus directly on the existing site and optimise for
nature as much as possible around the building and
target biodiversity net gain. The second is to actively
engage with the supply chains of the materials used
to construct the buildings to reduce the impact on
nature upstream.
2. The Use Phase:
For buildings already standing, where we have
management control and can be directly involved on
site, the Company can optimise the site for nature as
much as possible (e.g. native species planting
alongside installation of bird and bat boxes). Where
our occupiers have control, we can engage and work
together to improve the building's environmental
surroundings.
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.
At our office investment in Edinburgh we are working with a
local charity to increase biodiversity in the landscaping regime,
and at our leisure park in Aintree the Company won a “Green
Apple” award for its landscaping improvements. The Company’s
API Annual Report & Accounts Year End 31 December 2023
19
land purchase of Far Ralia provides an opportunity to consider
biodiversity on a greater scale, as described on the previous
page.
Enhancing the ‘S’ in ESG
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. We therefore focus on the social aspects of
wellbeing, health and safety and promoting a fair living wage to
optimise those principles. It is also important to consider the
wider impact our buildings have on the local community and
contribute positively to that community.
Fair Living Wage
Our supplier agreements for on-site staff require a living wage
to be paid. Our property managing agent is JLL, who have a
strong commitment to being an ethical company.
API Annual Report & Accounts Year End 31 December 2023
20
Taskforce for Climate-Related Disclosures
for the year ended 31 December 2023
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 the business. 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 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 carbon standard.
Nonetheless, we have progressed already with work to model
the implications of decarbonising the portfolio in line with a
1.5°C scenario (using the ‘Carbon Risk Real Estate Monitor’
(CRREM) as a real-estate specific framework to measure
against) and undertaken analysis to understand potential future
physical climate risks.
The table below provides a brief overview of our Company
approach to all 11 TCFD recommendations. The below
disclosure outlines how the Company aligns with all 11
recommendations. Note that this disclosure against the TCFD
recommendations is entirely voluntary. We expect that our
reporting against TCFD recommendations will continue to
evolve over time as industry methodologies improve and our
own work develops further. In addition to the qualitative
disclosure below, pages 94 to 100 provide core TCFD metrics on
carbon emissions and value at risk from physical climate risks.
TCFD Recommendation Company Approach Further Information
Governance
Board oversight of
climate-related risks
and opportunities
The Board recognises its responsibility to assess the Company’s Principal risks and emerging
risks; of which some have been identified to relate to climate change.
The Board consider climate-related risks and opportunities alongside all other Company
risks which fall under the remit of the Audit Committee. The Board have also created a
separate Sustainability Committee to monitor and oversee the Investment Manager’s ESG
undertakings which includes consideration of climate-related risks and opportunities. In
addition, the Board, alongside the Investment Manager, consider climate related issues as
part of the Investment Process, such as during investment decisions involving acquisitions,
disposals and fund strategic planning.
The Company has identified its most material potential risks, one of which relates to its
investment and asset management activity, and how ill-judged property investment
decisions could expose the Company to risk, including those associated with climate
change.
The Board, alongside the Investment Manager, consider climate related risks and
opportunities relating to transitional and physical climate risk, as an integral part of the
Investment and Asset Management Process. This includes review of such climate related
risks and opportunities during acquisition ESG due diligence (at the pre-bid and exclusivity
phase), and during annual Company strategic planning, which is the process by which risks
and opportunities against various ESG indicators (including climate indicators) are
identified across the portfolio, and strategic goals are set.
Sustainability Committee
Report on page 43.
Management’s role in
assessing and managing
climate-related risks and
opportunities
The Investment Manager’s ESG approach groups material sustainability indicators into four
main categories: (i) Environment & Climate, (ii) Demographics; (iii) Governance &
Engagement; and (iv) Technology & Infrastructure. This approach allows the identification
and promotion (where relevant) of material ESG risks and opportunities relevant to a fund’s
investment strategy, sector and geography. These guide the prioritisation and integration
of ESG factors at the fund and asset level, whilst providing a structure for engagement with,
and reporting to stakeholders. Of these ESG factors, climate change represents one of the
most material ESG risks and opportunities that the Company’s real estate portfolio
considers as part of its investment process. The Investment Manager’s ‘Blueprint for
addressing climate change’, which details its approach to climate risk, is available on the
website:
http://www.abrdn.com/docs?editionId=42ec6ae7-d171-4a81-a0ac-1f06106c86b4
The Company’s approach
is set out in the
Environmental, Social and
Governance section on
pages 13 to 19.
API Annual Report & Accounts Year End 31 December 2023
21
TCFD Recommendation Company Approach Further Information
Governance (continued)
Management’s role in
assessing and managing
climate-related risks and
opportunities (continued)
At an operational level, the Investment Manager is responsible for integrating
consideration of climate risks and opportunities into the investment and asset
management process. The Company adopts the Investment Manager’s approach to
integrating ESG in the investment process, and climate related risks and opportunities are
considered the most material ESG topic relating to the Company. As such, climate risk and
opportunities are considered throughout the investment process, including during
acquisitions, asset/property management, refurbishment/development and fund strategic
planning.
A range of governance mechanisms exist which are used to ensure that (a) the Investment
Manager’s approach and house-view on climate risk approaches is cascaded down from
the senior leadership team to the real estate and Company level; and (b) to ensure the
climate related factors are considered during investment decisions. These governance
bodies include (but are not limited to):
▸ abrdn Investments-level Climate Change Strategy Group: this is led by abrdn’s Head of
Sustainability Insights and Climate Strategy, attended by the Real Estate Head of ESG. This
group meets quarterly and is the decision-making forum for climate related risks and
opportunities in the investments vector, and ensures compliance with TCFD reporting
obligations.
▸ Investment Strategy Committee (ISC): this committee is the decision-making and
approval body for the Company’s annual strategic plan, which includes several sections on
ESG risks/opportunities (including relating to climate risks), and strategic goals. This
committee is also the approval body for ESG/climate-related changes to the investment
process, developed in the ‘ESG Strategy Working Group’.
▸ Investment Committee (IC): this is the approval body for acquisitions, fundings and large
development proposals, during which a climate related risks and opportunities are
considered.
▸ ESG Strategy Working Group: this group is led by Georgie Nelson (Head of Real Estate
ESG), and is used to develop new processes and procedures with respect to ESG (including
climate related processes and procedures), to ensure that the Investment Manager stays
in line with best practice and emergent legislation.
The Investment Manager reports a number of KPIs to the Board on a quarterly and annual
basis, including climate related indicators including energy data coverage and portfolio
carbon emissions.
The Company’s approach
is set out in the
Environmental, Social and
Governance section on
pages 13 to 19.
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 and scenarios, also taking into account the
type and geographical location of our assets. A summary of our initial assessment over the
short, medium and long term is as follows. The time horizons used below are considered
to be appropriate umbrellas under which to identify climate risks and opportunities and
are informed by the timescales against which we expect the impacts of transitional/policy
related and physical climate risks to be felt, based on our understanding of local regulation,
and the outputs of climate scenario analysis completed on our portfolio to-date.
Short-term (0-5 years):
▸ Transition: Policy and Legal: in the short term we anticipate regulations affecting the
energy performance and emissions of buildings to continue to tighten to align more closely
with Government targets for economy-wide decarbonisation. Whilst this will provide clarity
of direction to the sector, the risk is likely to take the form of increased development and
refurbishment costs, which could start to affect valuations.
▸ Transition: Market and Reputational: the above trends will also create opportunities to
benefit from shifting occupier and investor demand for low-carbon, future-fit assets.
▸ Physical: Acute: we anticipate that the frequency and severity of acute/extreme weather
events will continue to increase, even in the short-term.
An overview of the
Company’s approach to
addressing physical
climate risks is on page 18.
API Annual Report & Accounts Year End 31 December 2023
22
TCFD Recommendation Company Approach Further Information
Strategy (continued)
Climate-related risks and
opportunities the
organisation has
identified over the short,
medium, and long term
(continued)
Medium-term (5-15 years):
▸ Transition: Policy and Legal: the aforementioned policy and legal related trends will
continue and we expect regulations and market sentiment to further drive energy
efficiency and decarbonisation towards alignment with science-based decarbonisation
pathways (such as CRREM), representing the same risks as outlined above (increased
costs).
▸ Transition: Market and Reputational: as with the short-term risks, we anticipate that
addressing policy and legal related risks will create market and reputational opportunities
arising from shifting investor demand.
▸ Transition: Technology: 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. In addition, grid decarbonisation will
continue to contribute to the required carbon emissions reductions from the built
environment sector.
Long-term (15+ years):
▸ Physical: Acute and Chronic: over the long term (15+ years), in terms of risk we are likely
to see climate-related extreme/acute weather events increase in frequency and severity
which may impact built environment assets depending on their location and
characteristics. In addition, we are also likely to see how the impact of chronic physical
climate risks, such as the influence that changing weather will have on heating and cooling
costs, along with energy consumption. This is an example where increased cooling costs
associated with heat stress could also have a negative impact on the asset’s alignment with
net-zero carbon benchmarks, due to the increased energy consumed. However, there will
remain opportunities to enhance the resilience of our assets through resilience
planning/interventions, creating market and reputational opportunities.
An overview of the
Company’s approach to
addressing physical
climate risks is on page 18.
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.
Transition Climate Risks:
In recognition of the importance of decarbonisation, and in order to support the Company’s
alignment with tightening policy around carbon reduction, the Company has set a net-zero
carbon target of 2030 for Scope 1 and 2 emissions, and 2050 for all emissions scopes.
The Company also established a baseline operational carbon footprint of 2019, against
which progress has been measured in 2021 and 2022 (progress in 2020 was excluded due
to Covid-19 influence). Operational energy consumption data is used to support the
calculation of the portfolio’s operational carbon footprint, with industry-accepted
benchmarks used to estimate the remainder.
On an absolute carbon emissions basis, the portfolio achieved a 32% reduction in total
Scope 1 and 2 emissions between 2019 and 2022, and a 28% reduction for all operational
emissions scopes during the same period.
On an emissions intensity basis: The carbon intensity for Scope 1 and 2 assets where we
have data for the whole building has reduced by 30% between 2019 and 2022. For scope 3
emissions, the carbon intensity has reduced by 16%.
Such analysis has supported the identification of opportunities to reduce the carbon
intensity of poor performing assets. The Company uses the Carbon Risk Real Estate Monitor
(CRREM) tool to analyse the net-zero performance of its assets. CRREM is a real estate
specific net-zero assessment framework, widely used across the real estate industry, and
recommended under the Institutional Investors Group on Climate Change (IIGCC) (under
which the Investment Manager is a member) net-zero investment framework
implementation guide.
The Company will use such analysis to support the prioritisation of assets to take forward
for more detailed net-zero carbon audits. While the Company is already including
decarbonisation-related capital expenditure (CAPEX) figures into its asset cash flow
calculations, detailed audits will support the refinement of these CAPEX figures and support
our asset managers in programming in net-zero interventions into wider asset
management plans.
The EPC profile of the
Company’s properties is
set out on page 100.
The Company’s approach
to net-zero is set out on
page 14.
API Annual Report & Accounts Year End 31 December 2023
23
TCFD Recommendation Company Approach Further Information
Strategy (continued)
The impact of climate-
related risks and
opportunities on the
organisation’s
businesses, strategy, and
financial planning where
material (continued)
Alongside our net zero carbon planning described above, a detailed exercise has been
completed by the Investment Manager to assess the portfolio’s compliance with
anticipated Minimum Energy Efficiency Standards legislation to ensure assets are capable
of compliance and that any necessary interventions can be appraised and included with the
individual asset plans. As at December 2023, 51% of the portfolio ERV in the EPC A+/A/B
bracket, and 86% was in the EPC A+ to C bracket. This represents the resilience of the
portfolio to current and future known energy regulation in the UK, which is currently
anticipated to be minimum EPC C by 2027, and EPC B by 2030 (for all leases). With regard
to the 14% of portfolio ERV that does not currently meet the anticipated 2027 and 2030
minimum standards, we use EPC recommendation reports to better understand the
interventions required to meet minimum energy standards. While exact costs to achieve
these standards has not yet been fully established, the Company manages this risk by
integrating the Investment Manager’s house-level net-zero carbon costs into asset forecast
cashflows, to ensure that the estimated cost of decarbonisation is reflected in investment
return calculations.
Physical Climate Risks:
The Company continues to participate in physical climate risk scenario analysis (using a
third-party data provider) to understand future risks and opportunities based on asset
type/nature and geographical location of its assets. The analysis uses climate data relating
to various hazards (e.g. cyclones, windstorm, wildfire, inland/coastal flood) along with
company exposure data (e.g. asset type, location, insurance costs, replacement value, floor
area and market value). This data is modelled out under varying time horizons (out to 2080)
under different climate scenarios. The outputs of the analysis support the understanding
of future cost and value impact relating to the portfolio.
It should be noted that data quality and methodologies in the physical climate risk space
are continually evolving, and the Company continues to work with an external third-party
data provider to analyse such risks, and their materiality. Importantly, no significant risks
to the Company’s assets have been identified at this stage. In the event significant risks are
identified by any subsequent physical climate risk analysis, the Company will take
appropriate action to limit its exposure to such risks, including integrating the cost of
resilience planning into asset cash flows.
The EPC profile of the
Company’s properties is
set out on page 100.
The Company’s approach
to net-zero is set out on
page 14.
The resilience of the
organisation’s strategy,
taking into consideration
different climate related
scenarios, including a 2C
or lower scenario
A full outline of how we have considered the climate related risks and opportunities under
chosen future scenarios has been outlined above. The Company has set out its long term
aim to be a net zero Company by 2050 with an interim target for operational emissions
within our direct control (Scope 1 and 2 emissions) by 2030. We are tracking progress
against our long-term aim at the Fund level and asset level, using key KPIs including EPC
ratings vs ERV, carbon data coverage, total energy/carbon emissions and energy/carbon
intensity metrics.
Against current and future known energy regulation in England and Wales, the portfolio is
well-positioned with 51% of the portfolio ERV in the EPC A+/A/B bracket, and 86% was in
the EPC A+ to C bracket. This represents the resilience of the portfolio to current and future
known energy regulation in the UK, which is currently anticipated to be minimum EPC C by
2027, and EPC B by 2030 (for all leases). The Company is working to put a plan in place to
achieve all minimum energy efficiency standards set by the UK Government.
With regard to resilience against science-based decarbonisation pathways, the Company’s
work to establish a net zero pathway is informed by industry benchmarks including the
Carbon Risk Real Estate Monitor (CRREM) 1.5°C Paris-aligned emissions trajectories. Going
forward, the Company will use such analysis to compare its assets against 1.5C science-
based decarbonisation pathways (CRREM), to support the prioritisation of assets to take
forward for more detailed net-zero carbon audits. While the Company is already including
decarbonisation-related capital expenditure (CAPEX) figures into its asset cash flow
calculations, such detailed audits will support the refinement of these CAPEX figures and
support our asset managers in programming in net-zero interventions into wider asset
management plans.
Our delivery strategy is set
out on page 14.
API Annual Report & Accounts Year End 31 December 2023
24
TCFD Recommendation Company Approach Further Information
Strategy (continued)
The resilience of the
organisation’s strategy,
taking into consideration
different climate related
scenarios, including a 2C
or lower scenario
(continued)
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. The Investment Manager 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 cooling loads. Our initial assessment
of these results is that in general under a worst-case climate scenario, physical climate risks
do not become material to the Company’s portfolio until after 2050, and that most
potential cost 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 however keep this under regular review as
methodologies for physical risk assessment improve.
Our delivery strategy is set
out on page 14.
Risk Management
The Company’s processes
for identifying and
assessing climate-related
risks
The Company’s processes for assessing the size and extent of transition and physical
climate risk are outlined in detail above under “The impact of climate-related risks and
opportunities on the organisation’s businesses, strategy, and financial planning where
material.”.
Climate-related risks are considered and assessed by the Company Audit Committee. The
Board have also created a separate Sustainability Committee to monitor and oversee the
Investment Manager’s ESG undertakings which includes consideration of climate-related
risks and opportunities
The Company employs the Investment Manager’s approach to addressing climate risks and
opportunities as part of the investment process. This includes assessment of transition and
physical climate risks during acquisition due diligence, asset management,
refurbishment/development and portfolio-level strategic planning.
The Company considers transition climate risks via net-zero carbon analysis, to determine
the extent to which the portfolio aligns with the defined net-zero targets, and to define
indicative high-level CAPEX figures to decarbonise the portfolio in line with a net-zero
pathway. The Company also uses a third-party data provider to assess value at risk
(amongst other indicators) associated with several climate hazards, over multiple time
horizons and climate scenarios.
The Company’s processes
for managing climate-
related risks
The Company follows the Investment Manager’s approach to managing climate related
risk. We have embedded our approach to such risks into our investment process for
acquisitions, refurbishments/developments and standing investments. This approach is
outlined below.
On acquisition:
Transition risks:
Our ESG due diligence process involves the assessment of transition risks at both the pre-
bid and post-bid stage, with the aim of reducing a Fund’s exposure to transitional climate
risks going forward. At the pre-bid stage, we use all available information about the asset,
its context and regulatory backdrop, alongside our in-house decarbonisation guidance and
ESG priorities of the Fund, to form a view of anticipated decarbonisation costs over the
next 10-year period. Where appropriate, such decarbonisation CAPEX is captured as part
of the pre-bid screen and meeting; which subsequently feeds into the IC paper for review.
When detailed due diligence is completed during exclusivity, the assumptions around
decarbonisation for compliance and net-zero alignment (using a 1.5C CRREM pathway) are
refined by an external consultant. This allows the Fund to better understand the costs that
it may be responsible for in the future for decarbonisation. Such findings are included in
our pre-signing checklist prior to deal completion.
An overview of the
findings of the latest net-
zero and physical climate
risk analysis is provide on
pages 22-23.
API Annual Report & Accounts Year End 31 December 2023
25
TCFD Recommendation Company Approach Further Information
Risk Management
(continued)
The Company’s processes
for managing climate-
related risks (continued)
Physical risks:
As part of any pre-bid ESG screen/meeting, we use a mapping tool made available to us by
a physical climate risk data provider to screen assets (based on their geographical location)
against up to 8 different physical climate risks across different time horizons (current, 2030,
2050, 2100) under different climate scenarios including Low (RCP2.6), Intermediate
(RCP4.5) and High (RCP8.5) scenarios. This tool is used alongside available online mapping
provided by environmental regulators/authorities in the given country (where/if available).
Such risks are considered at pre-bid stage in a “go/no-go” context. During exclusivity, as a
minimum, flood risk will be assessed in more detail by an external third-party, alongside
any other physical climate risks identified during the pre-bid screen.
On development/refurbishment:
The Investment Manager has established a set of ESG guidelines and standards (which
include a focus on climate related aspects) that apply to all new construction, major
renovations and forward funded developments carried out by the Group. These standards
ensure new developments are future fit and resilient to future transition and physical
climate risks. This sets out the standards that are used as a benchmark during the design
and appraisal of development schemes and outlines the process to be followed by our
internal and external teams when undertaking major development work. This covers, for
example, requirements for EPC ratings, CRREM alignment and physical climate resilience.
Approval for major development must be sought through the Investment Committee in the
same way as for asset acquisitions. The process can also be flexible to account for any
separate Investment Committee processes outlined by client requirements. For smaller
refurbishment activity an ESG checklist is available to teams to support the identification
of ESG opportunities (which include climate related risks and opportunities) that contribute
to fund goals that can be included in project specification. Approval for landlord
refurbishment works is through a Capital Expenditure Approval Form (CEAF) which requires
description of ESG measures incorporate in the works. Overall, the approach to
development seeks to deliver high quality assets that meet the needs of tenants and
ultimately support investment returns.
On development/refurbishment:
The Company completes an annual ESG risk and performance dashboard as part of their
strategic plan which flags priority assets for action against both transition risks (looking at
levels of energy data collection, carbon performance against net-zero pathways where data
available and energy performance ratings) and physical risks (looking at modelled acute
weather risks out to 2050 as a result of climate change). The Company’s strategic plan is
approved via the Investment Manager’s Investment Strategy Committee (ISC). All assets
have an ESG and climate related component integrated into their asset management plan.
These are set to enable the assets to contribute to the fund level strategic ESG
ambition/goals set in the annual strategic plan. An example of this would be installing solar
panels onto the roof of a property; enabling the fund to sell the generated electricity to the
tenant and in turn generating additional income from the asset
In addition to the annual ESG risk and performance dashboard, The Company completes
an annual carbon footprinting exercise to review progress against its 2019 baseline, and to
review asset level performance against CRREM 1.5C benchmarks, to help determines next
steps and priorities for the fund with regards to priority assets for focus and specific
initiatives to roll out with more detailed analysis.
The Company also undertakes analysis with an external consultant to assess the assets
within the fund against various hazards which are expected to impact real estate due to
climate change under multiple different scenarios, including a worst-case scenario
(RCP8.5).
An overview of the
findings of the latest net-
zero and physical climate
risk analysis is provide on
pages 22-23.
The Company’s processes
for identifying, assessing
and managing climate-
related risks into the
organisation’s overall risk
management.
The Company’s overall risk management process is underpinned by the Investment
Manager’s investment process described above. Climate related risks and opportunities are
assessed at all stages of the investment process, which are in turn supported by robust
governance bodies including the Investment Committee (IC) and Investment Strategy
Committee (ISC).
In addition, as described above, the Board have also created a separate Sustainability
Committee to monitor and oversee the Investment Manager’s ESG undertakings which
includes consideration of climate-related risks and opportunities
API Annual Report & Accounts Year End 31 December 2023
26
TCFD Recommendation Company Approach Further Information
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 greenhouse gas emissions (alongside other related ESG performance
metrics on energy and water consumption, waste generation and disposal routes) in line
with EPRA Sustainability Best Practices Recommendations. In addition, we also disclose the
following carbon and climate metrics in line with TCFD requirements:
▸ Scope 1, 2 and 3 emissions (tCO2e)
▸ Scope 1, 2 and 3 emissions data coverage (%)
▸ Year-on-year change in carbon emissions (%)
▸ Portfolio carbon intensity by floor area (tCO2e/m2)
▸ Weighted Average Carbon Intensity (WACI) (tCO2e/m2 weighted by value)
▸ Economic Emissions Intensity (tCO2e/Gross Asset Value)
▸ Climate Value at Risk (%), further details available on page 23 under physical climate risk
As part of our decarbonisation strategy we also track progress against our baseline carbon
footprint from 2019. Information on year-on-year performance is included in the net-zero
pathway section above (on pages 14 to 16) and in the EPRA disclosures on pages 94 to 100.
At present, the Company does not have sufficient reliable data to report a specific
percentage of total assets that have associated climate related “risks” vs “opportunities”.
However, based on the findings of net-zero carbon and climate scenario analysis completed
to-date, along with the current status of the portfolio against the UK Government’s
Minimum Energy Efficiency Standards (MEES), there are not considered to be any
significant climate risks in the portfolio. The Company accounts for the cost of
decarbonising its assets in line with regulation and recognised industry pathways (e.g.
CRREM), by factoring in such cost into our cash flows (and deploying capital where
necessary). The Company does not apply a specific carbon price (e.g. £ per tonne of
carbon), rather we assess our assets to understand what the interventions to decarbonise
our assets may cost, and where necessary use the Investment Manager’s house-level
decarbonisation cost guidance. In addition, it should be noted that ESG goals (which
include climate relate goals) are included in investment teams’ performance targets.
The metrics from the 2023 calendar year included in the EPRA disclosures will in part be
used to inform future progress updates relating to the Company’s net-zero pathway
(alongside any additional Scope 3 data collected for the 2023 calendar year throughout the
first half of 2024). This net-zero pathway analysis supports the analysis of assets against
CRREM 1.5C net-zero pathways, to better understand risk, and likely decarbonisation
related CAPEX to include in cash flow calculations. In addition, the metrics outlined above
also support with investment decision making at all touch-points of the investment process.
As part of the Investment Manager’s ESG policy and approach, ESG goals (including those
related to climate aspects) are embedded in investment teams’ performance targets.
Metrics related to ESG performance contribute to overall evaluations.
The EPRA disclosures
included on pages 94 to
100 include the relevant
climate related
performance data,
including GHG emissions.
Further information on
our net-zero pathway are
included above in pages
14 to 16.
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 94 to 100).
This covers Scope 1 and 2 emissions associated with landlord-procured energy as well as
Scope 3 emissions from energy sub-metered to occupiers. Scope 3 emissions are
considered material to the Company, especially given that they contributed to around 96%
of the Company’s total operational carbon footprint in 2022. Our revised 2019 baseline
emissions including tenant consumption (actual and estimated) is presented on page 16.
We have used 2019 data as a baseline for our measurements as this is prior to any
disruption to measurement caused by the COVID-19 pandemic.
Data on emissions is set
out on pages 94 to 100.
The targets used by
the organisation to
manage climate-related
risks and opportunities
and performance against
targets
An outline of the Company’s climate related targets are outlined above in section “The
impact of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning where material”. We have set out our long-term aim to be
a net zero Company by 2050 with an interim target for operational emissions within our
direct control by 2030. While the Company has not yet established specific targets around
other climate related elements (for example percentage of EPC ratings by ERV), the
Company continually looks to improve the portfolio’s performance through
implementation of the Investment Manager’s investment process and will look to set
specific targets in the future where appropriate.
Our delivery strategy is set
out on page 14.
API Annual Report & Accounts Year End 31 December 2023
27
Stakeholder Engagement
for the year ended 31 December 2023
This section 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 2023. The
Directors take 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.
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 maintained the dividend at a level of 1.0p per share per
quarter throughout the year. The level of dividend is monitored
by the Board throughout the year.
▸During the second half of 2023 the Board undertook a
strategic review. This review was prompted by the Board’s
concerns, as well as those of some shareholders about the
Company’s size, the lack of liquidity in its shares, the discount to
NAV and an uncovered dividend. The outcome of this review,
following interest from other listed REITs, was that the Board
recommended to shareholders that they vote in favour of a
proposed merger with Custodian REIT for the reasons outlined
in various announcements to shareholders during the first
quarter of 2024. Further information can be found in Note 2.1
on pages 62 to 63 of the Financial Statements.
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.
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. As indicated in the recent
shareholder vote, however, a number of shareholders wish the
Company to be wound down with capital returned to
shareholders. The shareholder vote on 28 May 2024 will
determine the future strategy of the Company.
The Board, 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.
API Annual Report & Accounts Year End 31 December 2023
28
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 Tuesday 13 August 2024 at
2.00pm at 18 Bishops Square, London, E1 6EG.
The Board hopes that as many shareholders as possible will be
able to attend the meeting. As set out in the Chair’s Statement,
shareholders are encouraged to submit questions in advance of
the AGM by email to:
property.income@abrdn.com.
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.
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.
Investment Manager
The Chair’s Statement on pages 4 to 5 and Investment
Manager’s Report on pages 6 to 10 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 40.
Other Service Providers
The Board via the Management Engagement Committee also
ensures that the views of its service providers are heard and
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.
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 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 will 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 13, our Taskforce for Climate-
related Financial Disclosures on pages 20 to 26, page 30 of our
Strategic Overview and the EPRA Financial and Sustainability
Reporting from page 94, for more information on the
Company’s approach to ESG.
API Annual Report & Accounts Year End 31 December 2023
29
Strategic Overview
for the year ended 31 December 2023
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 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.
Strategy
Each year the Board undertakes a strategic review, with the help
of its Investment Manager and other advisers.
Ultimately the Board has sought to maximise returns to
shareholders, and this was achieved by distributing an attractive
income return.
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 meet its environmental targets.
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.
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 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.
During the year the shares of the Company consistently traded
at a significant discount to net assets, and the dividend
remained uncovered by earnings.
The Board
As at 31 December 2023, the Board consisted of a Non-
Executive Chair and four Non-Executive Directors. The names
and biographies of those Directors who held office at 31
December 2023 and at the date of this report appear on page
34 and indicate their range of property, investment, commercial
and financial experience.
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”).
API Annual Report & Accounts Year End 31 December 2023
30
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. These KPIs are: Performance of the portfolio
and the total return of the Company.
Property income and total return is measured against the MSCI
UK Quarterly Property 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 the
Company as a leader in ESG. It 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
by 2030, 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 Company’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, and
reviews details of the current arrears.
Net Asset Value Total Return.
The net asset value (“NAV”) total return reflects both the net
asset value growth of the Company 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 Company over various time periods
(quarter, annual, three years, five years and ten years) and
compares the Company’s returns to those of its peer group of
listed, closed-ended property investment companies, as set out
on page 9.
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 Company’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 Company 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 Report, Chair’s Statement and Investment Manager’s
Review.
Principal Risks and Uncertainties
The Board ensures that proper consideration of risk is
undertaken in all aspects of the Company’s business on a
regular basis. During the year, the Board carried out an
assessment of the risk profile of the Company, including
consideration of risk appetite, risk tolerance and risk strategy.
The Board regularly reviews the principal and emerging risks of
the Company, seeking assurance that these risks are
appropriately rated and ensuring that appropriate risk
mitigation is in place.
The group and its objectives become unattractive to
investors, leading to widening of the discount.
This risk has been a major concern of the Board and has been
highlighted in conversations with shareholders. The discount
has traded consistently at a larger discount than most of the
peer group. This was one of the factors that led to a review of
the Company’s future.
Net revenue falls such that the Company cannot sustain
its level of dividend, for example due to tenant failure,
voids or increased costs.
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 review through
regular contact and various reports both from the managing
agents and the Investment Manager’s own reporting process.
API Annual Report & Accounts Year End 31 December 2023
31
Contingency plans are put in place at units that have tenants
that are believed to be in financial trouble. The Company
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.
The increase in financing costs has meant the dividend has been
uncovered during the year despite the strongly reversionary
nature of the portfolio and forecasts of the dividend being
covered in 2025 – it was felt that this was a factor contributing
to the high level of the discount.
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,
and by having a diversified property portfolio (diversified by
sector and geography).
Macroeconomic conditions form part of the decision-making
process for purchases and sales of properties and for sector
allocation decisions.
The impact of geopolitical uncertainty and the cost-of-living
crisis have resulted in inflationary pressures which have
impacted both property values and the ability of tenants to pay
rent.
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:
▸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.
▸Cyber – the risk of large-scale network disruption through
various forms such as hacking, malware, phishing, DDOS, data
breach or loss. In addition, Artificial Intelligence and it's
potential use in cyber attacks
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 38 to 42.
Emerging Risks
Emerging risks have been identified by the Board through a
process of evaluating relatively new risks that have emerged
and increased materially in the year, and subsequently, or
through market intelligence are expected to grow significantly
and impact the Company. Any such emerging risks are likely to
cause disruption to the business model. If ignored, they could
impact the Company’s financial performance and prospects.
Alternatively, if recognised, they could provide opportunities for
transformation and improved performance.
▸Future of the Company
Following the Company’s Court Meeting and General Meeting
held on the 27 March 2024, the Board announced that it
intended to take steps to implement a Managed Wind-Down
subject to approval of API shareholders at an upcoming EGM on
28 May 2024. Further information on the timeline and proposal
API Annual Report & Accounts Year End 31 December 2023
32
can be found in Note 2.1 on pages 62 to 63 of the Financial
Statements.
If shareholders vote in favour of a managed wind-down, there
are several risks associated with the size, speed and method of
capital distributions back to shareholders, and the maintenance
of REIT status for tax purposes. Several options are being
considered and will be detailed in an upcoming circular to
shareholders.
Finally, there is a risk that as the Managed Wind-Down
progresses, some assets prove difficult to sell and become
stranded.
▸Economic and Geopolitical
2024 is a year in which more than half the global population will
experience local elections and there will be greater focus on the
democratic process in some 70 countries. The outcome of some
elections, particularly the United States, may have far reaching
implications on the geo-political world order. If former
President, Donald Trump, wins the US election, there is the risk
that America may pursue a more isolationist and protectionist
policy which may result in less military support (e.g. Ukraine),
less diplomatic intervention in other conflicts such as the Middle
East and more trade tariffs. Greater escalation of events could
result and financial markets are likely to be volatile.
Conflict between countries is rising. Following Hamas’ attack on
Israel and Israel’s military response in Gaza, it is uncertain yet if
other countries will be drawn into the violence. The war waging
between Ukraine and Russia since February 2022 has reached a
stalemate, but with no settlement in sight.
Rapid inflationary pressures caused by supply side shortages
generated initially by the Russian invasion of Ukraine have now
subsided but inflation may continue to remain above acceptable
levels and so there is an expectation that interest rates will stay
“higher for longer” than originally anticipated. The impact on
consumers and businesses remains to be seen, even if
recessions are avoided, and increasing default rates on loans
could put strain on the banking system.
Tensions are also increasing in the relationship between the
United States and China which could lead to greater
protectionism and a decline in global trade. In particular, the
future of Taiwan is disputed and as one of the largest producers
and exporters of microchips in the world could cause
considerable disruption if its independence was threatened.
Many Western companies are continuing to build supply chains
closer to home and reduce their dependency on Asia,
particularly China.
The current economic and geopolitical environment is
unpredictable, and changing rapidly, and this may affect real
estate valuations in the Company’s portfolio.
▸Climate
Climate change is happening now and its rate of change and
impact on the environment will depend on the planet’s success
in controlling global emissions. The average surface
temperature in the UK has risen by 1.2
o
C since pre-industrial
times, and further warming is predicted. More extreme weather
events are also expected in future which could cause serious
damage to infrastructure and property. The extent of climate
change and the necessary regulation to control it are uncertain
and will continue to be monitored. A "greenlash" against
climate policies is beginning to emerge and may become more
evident if the Republicans win the US elections in 2024. This
could derail progress against global climate targets.
▸Changing Behavioural Patterns
The pandemic introduced or accelerated some structural
changes to the ways that we live, work and consume and
reformed our expectations of our environment and society. In
particular, the trend towards flexible and home working is
affecting the use of offices, with sustainability, health, wellbeing
and the social impact of office use increasing in importance.
The continuing attraction of online shopping and decline in
physical retailing have created challenging conditions for
traditional retailers and their landlords. It is still uncertain how
the role of offices and retail will develop, and they both
continue to be assessed in order to protect the portfolio but also
to identify new investment opportunities.
▸Technology & Artificial Intelligence
Technology is rapidly changing the habits of businesses and
consumers which in turn is impacting occupiers’ future
requirements for property and leading to greater disparity in
the performance of different property sectors and also within
each sector itself. Advances in technology have enabled many
of the behavioural changes in the use of real estate: for
example, the increased use of video conferencing by businesses
has facilitated a more permanent shift to home working and
could also redefine the need for office space in the future.
Robotics and automation are also altering the specifications for
industrial buildings and greater use of data and advanced
analytics is driving the need the data storage and data centres.
Technology is also increasingly contributing to improvements in
the sustainability of properties. If landlords fail to embrace
technology, they may face the risk of “stranded” assets in the
future.
Artificial intelligence is being adopted rapidly by businesses and
jobs may change significantly as AI replaces the need for
particular human activities. This will impact business models
and may reduce workforce numbers, but also could generate
new roles. This potentially transforming aspect of AI, in turn, will
affect business' requirements for space.
API Annual Report & Accounts Year End 31 December 2023
33
Cyber-attacks are increasing in occurrence and target
businesses’ data, IT systems and even their physical
infrastructure as buildings have become more reliant on smart
technology for their daily operation. In addition, the rapid
evolution of AI is potentially introducing risks that have not yet
been identified or quantified.
Viability Statement
The Board has assessed the Group’s viability over three years
and assessed financial projections over that timeframe on the
assumption that shareholders do not vote in favour of the
Managed Wind-Down as further explained in Note 2.1 on pages
62 to 63 of the Financial Statements.
The Board has also carried out a robust assessment of the
principal and emerging risks faced by the Group, as detailed on
pages 30 to 33. 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.
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 three-
year period under both normal and stressed conditions;
▸The Group’s ability to pay its operational expenses, bank
interest, tax and dividends over a three-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 2026;
▸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.
The assessment for stressed conditions used a foreseeable
severe but plausible scenario which was modelled using the
following assumptions:
▸25 per cent capital fall in the next 3 years
▸Tenant defaults of 15 per cent for the next 3 years
▸Sterling Overnight Index Average (SONIA) tracks 1.0 per
cent above the anticipated forward curve
Even under those scenarios the Group remains viable.
Despite the uncertainty in the UK regarding the impact of
international conflict, the Board has a reasonable expectation,
based on the information at the time of writing, that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the next three years.
The Board have also assessed the Group’s ability to meet its
liabilities as they fall due under a Managed Wind-Down
scenario. In that case, the Group may no longer be considered
to be viable as it will be liquidated once the net proceeds of the
wind-down have been returned to shareholders. However, the
Board is satisfied that the Group will be able to meet its
liabilities as they fall due over the wind-down period.
Approval of Strategic Report
The Strategic Report comprises the Financial and Portfolio
Review, Performance Summary, Chair’s Statement, Investment
Manager’s Review, Environmental, Social and Governance
(ESG), 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:
29 April 2024
James Clifton-Brown
Chair
API Annual Report & Accounts Year End 31 December 2023
34
Board of Directors
James Clifton-Brown Sarah Slater
Chair Board member
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 August 2024 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 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 August 2024 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.
Jill May Mike Balfour
Board member Board member
Jill May is a UK resident. She is an External Member of the Prudential
Regulation Committee of the Bank of England, a Council member of the
Duchy of Lancaster and is also a Non-Executive Director of JPMorgan
Claverhouse Investment Trust plc and Alpha Financial Markets Consulting
plc. Jill was a Non-Executive Director of the CMA from its inception in 2013
until 2016. Prior to this she spent 25 years in investment banking
comprising 13 years in mergers and acquisitions with SG Warburg & Co.
Ltd and 12 years at UBS AG. She was appointed Senior Independent
Director of the Company on 15 June 2022 following the retirement of Huw
Evans.
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 August 2024 and has concluded that she continues
to discharge her responsibilities appropriately both as Senior Independent
Director as well as in chairing the Remuneration Committee, Nomination
Committee and Management Engagement Committee. Jill also continues
to provide excellent strategic, risk and investment management insight to
the Board discussions.
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 38 years of investment
management experience and was appointed to the Board on 10 March
2016. He is also Chair of Fidelity China Special Situations PLC, audit chair
of Schroder BSC Social Impact Trust plc and is on the board 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 August 2024 and has concluded that his
chairmanship of the Audit Committee is strong and continues to provide
the Board with expert knowledge of investment companies, financing and
capital markets.
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 Chair of HICL plc and a non-
executive director of Apax Global Alpha Limited. In addition, he is Chair 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 re-
election at the AGM in August 2024 and has concluded that his
chairmanship of the Sustainability Committee is strong and continues to
provide the Board with the benefit of his industry experience and
knowledge of the real estate sector and regulatory and operating
environment in Guernsey, where the Company is registered.
API Annual Report & Accounts Year End 31 December 2023
35
Directors’ Report
for the year ended 31 December 2023
The Directors of abrdn Property Income Trust Limited ("the
Company") present their annual report and audited financial
statements for the year to 31 December 2023.
Principal Activity and Status
The Company was incorporated in Guernsey on 18 November
2003 under registration number 41352. The Company is a
closed ended investment company 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 1 January 2015 the
Company migrated its tax residence to the UK and became a UK
REIT. The Company’s ordinary shares are admitted to trading
on the premium segment of the London Stock Exchange. The
Company has complied with the relevant provisions of, and the
requirements set out in, the United Kingdom’s Financial
Conduct Authority’s Listing Rules throughout the year under
review.
At 31 December 2023, the Group consisted of the Company and
four subsidiaries: abrdn Property Holdings Limited, a company
with limited liability incorporated in Guernsey; abrdn (APIT)
Limited Partnership, a limited partnership established in
England & Wales; abrdn APIT (General Partner) Limited, a
company with limited liability incorporated in England & Wales;
abrdn (APIT Nominee) Limited, a company with limited liability
incorporated in England & Wales.
Results and Dividends
The Group generated an IFRS loss of £8.3 million (2022: Loss of
£51.1 million) in the year equating to earnings per share of -
2.17p (2022: -13.11p). In addition, the Group had cash outflows
of £9.2 million (2022: generated cash of £2.1 million) in the year
and had cash at the year-end of £6.7 million (2022: £15.9
million). The Group paid out dividends totalling £15.2 million
(2022: £15.6 million) in the year.
Share Capital and Voting Rights
At 31 December 2023 there were 406,865,419 ordinary shares
of 1p each in issue, comprising 381,218,977 (2022: 381,218,977)
ordinary shares with voting rights and an additional 25,646,442
(2022: 25,646,442) ordinary shares held in treasury. During the
year, the Company bought back no (2022: 15,703,409) ordinary
shares into treasury. There have been no changes to the
ordinary shares in issue, or held in 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.
As required by the FCA’s 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.
Directors
The Directors of the Company during the year and at the date
of this Report are set out below, including details of the number
of ordinary shares in the Company (audited):
2023 2022
James Clifton-Brown 21,500 21,500
Jill May 128,592 128,592
Mike Balfour 125,000 125,000
Sarah Slater 20,000 20,000
Mike Bane - -
Substantial Shareholdings
As at 31 December 2023 and 31 March 2024, the following
entities had notified the Company of a holding of 3% or more of
the Company’s issued share capital.
Holdings (%)
31.12.2023 31.03.2024
Hargreaves Lansdown 13.4 12.3
Interactive Investor 10.4 9.8
AJ Bell 7.3 6.8
Mattioli Woods 6.4 5.7
BlackRock 5.0 5.0
RBC Brewin Dolphin 4.7 4.2
Brooks Macdonald 3.4 3.1
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 (delegated
to abrdn Fund Managers Limited, see below)
▸Company secretarial and administration services (delegated
to Northern Trust International Fund Administration Services
(Guernsey) Limited)
▸Shareholder registration services (Computershare Investor
Services (Guernsey) Limited)
These contracts 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. Key
API Annual Report & Accounts Year End 31 December 2023
36
members of staff from the Investment Manager and Company
Secretary attend Board meetings to brief the Directors on issues
pertinent to the services provided.
Investment Management Agreement
The Company appointed abrdn Fund Managers Limited
(formerly Aberdeen Standard Fund Managers Limited) (the
“Investment Manager”) as its alternative investment fund
manager with effect from 10 December 2018.
Under the terms of the Investment Management Agreement
between the Investment Manager and the Company (“the
Management Agreement”), the Investment Manager was
entitled to an annual fee equal to 0.70% of gross asset value up
to £500 million and 0.60% of gross asset value over £500 million.
With effect from 1 January 2023, the annual fee changed to
0.60% of gross asset value up to £500 million and 0.50% of gross
asset value over £500 million.
The Management Agreement is terminable by either party on
not less than one year’s notice. On 12 October 2023, the Board
served notice on the Investment Management Agreement. In
the event that the Managed Wind-Down is approved by
Shareholders, it is proposed that a new agreement (and fee
structure) will be signed with the Investment Manager.
Directors’ Insurance and Indemnities
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 law, 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.
Statement of Directors' Responsibilities
The Directors are responsible for preparing financial statements
for each year which give a true and fair view, in accordance with
applicable Guernsey law and International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union.
The Directors are required to prepare financial statements for
each financial year which give a true and fair view of the state
of affairs of the Company and of the financial performance and
cash flows of the Company for that period. In preparing those
Financial Statements, the Directors should:
▸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;
▸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
Company’s financial position and financial performance;
▸state that the Company has complied with IFRSs as adopted
by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
▸prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time,
the financial position of the Company 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 Company and hence for taking
reasonable steps for the prevention and detection of fraud,
error and non-compliance with law and regulations.
Corporate Governance
The Directors’ report on Corporate Governance is detailed on
pages 38 to 42 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.
Financial Instruments
The financial risk management objectives and policies arising
from financial instruments and the exposure of the Company to
risk are disclosed in note 3 to the financial statements.
Disclosure of Information to Auditors
In the case of each of the persons that are directors at the time
when the Annual Report is approved, the following applies:
▸so far as the director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
▸he/she has taken all the steps that he/she ought to have
taken as a director in order to make himself/herself aware of
any relevant audit information and to establish that the
Company’s auditors are aware of that information.
API Annual Report & Accounts Year End 31 December 2023
37
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. 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.
As set out in more detail in the Chair’s Statement on page 4 and
in Note 2.1 on pages 62 to 63 of the Financial Statements,
following the results of the Company’s Court Meeting and
General Meeting held on the 27
th
March 2024, the Board
announced that they are taking steps to implement a Managed
Wind-Down subject to the approval of shareholders at an
upcoming EGM on 28 May 2024. The outcome of this vote
represents a material uncertainty which may cast significant
doubt on the Group’s ability to continue as a going concern.
Notwithstanding this material uncertainty, the Board has
concluded that it remains appropriate to continue to prepare
the financial statements on a going concern basis. In reaching
this conclusion, the Board has come to the view that, as the
proposed change in Investment Policy is contingent on
shareholder approval and the Company is considered solvent in
all other regards, there is no irrevocable path to liquidation and
thus going concern remains the most appropriate basis for
preparation. Note 2.1 on pages 62 to 63 of the Financial
Statements includes further details on the Board’s assessment
of going concern and the proposed EGM.
Independent Auditors
A resolution to re-appoint Deloitte LLP as the Group's auditor
will be proposed to the shareholders at the Annual General
Meeting on 13 August 2024.
Annual General Meeting
The notice of the Annual General Meeting, which will be held
this year at 2.00pm on Tuesday 13 August 2024 at 18 Bishops
Square, London E1 6EG, may be found on pages 106 to 108.
The Board hopes that as many shareholders as possible will be
able to attend the Annual General Meeting, where there will be
the opportunity to put questions to both the Board and
Investment Manager.
The Board welcomes correspondence from shareholders in
writing to the Company’s registered office (see page 105) by
email to:
property.income@abrdn.com
Approved by the Board on 29 April 2024.
James Clifton-Brown
Chair
API Annual Report & Accounts Year End 31 December 2023
38
Corporate Governance Report
for the year ended 31 December 2023
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 (the “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 alternative Provisions on issues that are of specific
relevance to the Company. The UK Code is available on the
Financial Reporting Council’s (the “FRC”) website: frc.org.uk.
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 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 provisions of the AIC Code
on Corporate Governance, except those relating to the
requirement for an internal audit function.
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 internal operations. The Company
has therefore not reported further in respect of these
provisions.
The Board
The Board is comprised of Non-Executive Directors with James-
Clifton Brown as Chair and Jill May as Senior Independent
Director. Biographical details of each Director may be found on
page 34.
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.
Matters Reserved for the Board.
The Board sets the Company’s objectives and ensures that its
obligations to its shareholders are met. It has formally adopted
a schedule of matters which are required to be brought to it for
decision, thus ensuring that it maintains full and effective
control over appropriate strategic, financial, operational and
compliance issues.
These matters include:
▸the maintenance of clear investment objectives and risk
management policies;
▸the monitoring of the business activities of the Company
ranging from analysis of investment performance through to
review of quarterly management accounts;
▸monitoring requirements such as approval of the Half-
Yearly Report and Annual Report and financial statements and
approval and recommendation of any dividends;
▸setting the range of gearing in which the Manager may
operate;
▸major changes relating to the Company’s structure
including share buy-backs and share issuance;
▸Board appointments and removals and the related terms;
▸authorisation of Directors’ conflicts or possible conflicts of
interest;
▸terms of reference and membership of Board Committees;
▸appointment and removal of the Manager and the terms
and conditions of the Management Agreement relating
thereto; and
▸London Stock Exchange/Financial Conduct Authority –
responsibility for approval of all circulars, listing particulars
and other releases concerning matters decided by the Board.
Full and timely information is provided to the Board to enable it
to function effectively and to allow the Directors to discharge
their responsibilities.
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 Chair, ensuring good information
flows to the Board and its Committees, as well as facilitating
inductions and assisting with professional developments; and
▸Liaising, through the Chair, on all corporate governance
matters.
API Annual Report & Accounts Year End 31 December 2023
39
Management of Conflicts of Interest, Anti-Bribery
Policy and Tax Evasion Policy.
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 their 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.
The Board takes a zero-tolerance approach to bribery and has
adopted appropriate procedures designed to prevent bribery.
abrdn also takes a zero-tolerance approach and has its own
detailed policy and procedures in place to prevent bribery and
corruption. It is the Company’s policy to conduct all of its
business in an honest and ethical manner. The Company takes
a zero-tolerance approach to facilitation of tax evasion, whether
under UK law or under the law of any foreign country and its full
policy on tax evasion may be found on its website.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge
represented on the Board in order to allow it to fulfil its
obligations. The Board also recognises the benefits and is
supportive of, and will give due regard to, the principle of
diversity in its recruitment of new Board members. The Board
will not display any bias for age, gender, race, sexual
orientation, socio-economic background, religion, ethnic or
national origins or disability in considering the appointment of
Directors. The Board will continue to ensure that all
appointments are made on the basis of merit against the
specification prepared for each appointment. The Board will
take account of the targets set out in the FCA’s Listing Rules,
which are set out below.
The Board has resolved that the Company’s year-end date is the
most appropriate date for disclosure purposes. The information
in the tables below has been provided by each Director through
the completion of questionnaires.
Chair and Senior Independent Director
The Chair is responsible for providing effective leadership to the
Board, demonstrating objective judgement and promoting a
culture of openness and debate. The Chair facilitates the
effective contribution, and encourages active engagement, by
each Director. In conjunction with the Company Secretary, the
Chair ensures that Directors receive accurate, timely and clear
information to assist them with effective decision-making. The
Chair 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
Chair also engages with major shareholders and ensures that all
Directors understand shareholder views.
Table for reporting on sex as at 31 December 2023
Number of board
members
Percentage of the
board
Number of senior
positions
on the board
(CEO, CFO, Chair
and SID)
Number in
executive
management
Percentage of
executive
management
Men 3 60%
N/A
3
N/A
3
N/A
3
Women 2 40%
1
Not specified/prefer not to say - -
Table for reporting on ethnic background as at 31 December 2023
Number of board
members
Percentage of the
board
Number of senior
positions
on the board
(CEO, CFO, Chair
and SID)
Number in
executive
management
Percentage of
executive
management
White British or other White
(including minority-white groups)
5 100%
N/A
3
N/A
3
N/A
3
Other ethnic group - -
2
Not specified/prefer not to say - -
1. Meets target that at least 40% of Directors are women as set out in LR 9.8.6R (9)(a)(i)
2. Does not meet target that at least one Director is from a minority ethnic background as set out in LR 9.8.6R (9)(a)(iii). [In relation to the ethnic diversity of the Board, the Directors recognise that this does
not meet the target and will take this into account when making future Board appointments.]
3. These columns are not applicable as the Company is externally managed and does not have any executive staff, specifically it does not have either a CEO or CFO. The Company considers that the roles of
Chair of the Board, Senior Independent Director and Chair of the Audit Committee are senior board positions and accordingly that the Company meets in spirit the requirement that at least one of the senior
board positions is held by a woman.
API Annual Report & Accounts Year End 31 December 2023
40
The Senior Independent Director acts as a sounding board for
the Chair 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 Chair and leads the annual
appraisal of the Chair’s performance. The Senior Independent
Director is also available to shareholders to discuss any
concerns they may have.
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 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.abrdnpit.co.uk
Property Valuation Committee.
The Property Valuation Committee, chaired by Sarah Slater
throughout the year, comprises the full Board and meets at
least three 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 throughout the
year, comprises the full Board, apart from the Board Chair, and
meets at least three times a year. James Clifton-Brown, the
Chair of the Board, attends the Audit Committee by invitation
of the Chair. The Audit Committee‘s report is included on pages
44 to 46.
Management Engagement Committee.
The Management Engagement Committee, which comprises
the full Board, is chaired by Jill May. The Committee meets at
least once a year to review the performance of the Investment
Manager and other service providers, including with the terms
and conditions of their contracts with the Group.
The 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
Management Agreement.
Nomination Committee.
The Nomination Committee, chaired by Jill May throughout the
year, comprises the full Board and meets at least once a year.
The Committee believes that, given the size of Board, it is
appropriate for all Directors to serve as members of the
Committee. Appointments of new Directors are considered by
the Committee taking account of the need to maintain a
balanced Board.
New Directors appointed to the Board receive a formal
induction and appropriate training is arranged for new and
current Directors, as required. The Group’s policy on diversity is
noted on page 39. The Board and Committee are cognisant of
the recommendations of the Parker 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 Committee met twice, covering succession
planning and committee composition. The 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 throughout
the year, comprises the full Board and meets at least once a
year. The Committee believes that, given the size of Board, it is
appropriate for all Directors to serve as members of the
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, chaired by Mike Bane from 1
January 2023, comprises the whole Board, and meets 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.
Performance of the Board
The Nomination Committee undertook an annual evaluation of
the Chair of the Board, individual Directors and the performance
of Committees and the Board as a whole with respect to the
year ended 31 December 2023. This involved the completion of
questionnaires by each Director and follow-on discussions
between the Chair and each Director. The appraisal of the Chair
API Annual Report & Accounts Year End 31 December 2023
41
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
Chair. Details of the individual contribution made by each
Director may be found on page 34.
In relation to the 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. It had been intended to
carry out an external assessment of the board’s performance
for the year ended 31 December 2023. Following the corporate
activity described in the Chair’s Statement, an external
assessment was postponed and may be carried out over the
next 12 months.
Meeting Attendance
The table below sets out the Directors’ attendance at each
scheduled quarterly Board and Committee meetings in addition
to meetings dedicated to the Strategic Review conducted during
2023. The number of meetings which the Directors were eligible
to attend are also disclosed. In addition to the meetings detailed
below, two of the Directors attended a further meeting with the
Board of Custodian REIT during 2023.
Tenure Policy and Re-Election of Directors at the
Annual General Meeting.
The Board’s policy on tenure is that continuity and experience
are considered to add significantly to the strength of 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 Chair, to serve on the Board longer than
the AGM following their ninth anniversary of appointment as a
Director, except in exceptional circumstances. Depending on
the outcome of the shareholder vote on 28 May 2024 it may be
appropriate for certain directors to serve beyond the ninth
anniversary of appointment.
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: 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
eligible, will seek re-election.
All Directors will retire and, being eligible, stand for re-election
at the forthcoming Annual General Meeting. The Board has
reviewed the skills and experience of each Director, as
described in their individual biographies on page 34 and
believes that each contributes to the long-term sustainable
success of the Company. The Board has no hesitation in
recommending their individual re-election to shareholders.
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’).
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.
Board Audit
Committee
Property
Valuation
Committee
Management
Engagement
Committee
Nomination
Committee
Remuneration
Committee
Sustainability
Committee
Strategic
Review
Mike Balfour 4/4 3/3 4/4 2/2 2/2 2/2 3/3 8/8
James Clifton-Brown
A
4/4 -/- 4/4 2/2 2/2 2/2 3/3 8/8
Jill May
B
4/4 3/3 4/4 2/2 2/2 2/2 3/3 8/8
Sarah Slater
B
4/4 3/3 4/4 2/2 2/2 2/2 3/3 8/8
Mike Bane 4/4 3/3 4/4 2/2 2/2 2/2 3/3 8/8
A The Chair of the Board is not a member of the Audit Committee but may attend meetings at the invitation of the Audit Committee Chair.
B. Attended a further meeting with Custodian REIT
API Annual Report & Accounts Year End 31 December 2023
42
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 the anti-bribery
policies of its 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.
The Group entered into arrangements to comply with AIFMD in
2014. 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 (subsequently renamed abrdn Fund Managers Limited on
1 August 2022), and Citibank UK Limited as its Depositary. 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:
18 Bishops Square,
London,
E1 6EG
on Tuesday 13 August 2024 at 2.00pm.
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.abrdnpit.co.uk
The Chair 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 50 and the
Statement of Going Concern is included in the Directors’ Report
on page 37 and the Viability Statement can be found on page
33. The Independent Auditor’s Report is on pages 51 to 57.
Approved by the Board on
29 April 2024
James Clifton-Brown
Chair
API Annual Report & Accounts Year End 31 December 2023
43
Sustainability Committee Report
for the year ended 31 December 2023
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 Bane,
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:
▸Oversee the activities of the Investment Manager to ensure
that the sustainability objectives of the Company (as set by
the board), are met and observed.
▸Monitor the progress of the Investment Manager in relation
to KPIs and measures set by the Board.
▸Setting the Company’s ESG strategy and net-zero carbon
pathway.
▸Along with the Investment Manager, understand the
reporting requirements and reporting on ESG and TCFD.
▸Monitor the Company’s EPC rating exposure (against
regulatory requirements) (or other such measure as may from
time to time be considered relevant in place of an EPC).
Review of Activities
In the prior year, the Company established its sustainability KPIs
and ensured that these cover the Company’s key targets for
2030 as detailed in the dedicated section on ESG and the
Taskforce for Climate-related Financial Disclosures (pages 13 to
26).
Approved by the Board on
29 April 2024
Mike Bane
Sustainability Committee Chair
API Annual Report & Accounts Year End 31 December 2023
44
Audit Committee Report
for the year ended 31 December 2023
Composition of Audit Committee
The Audit Committee comprises the full Board, except the Chair
of the Board, all of whom are independent at the year end and
have recent and relevant financial experience. Two members of
the Audit Committee are Chartered Accountants, one of whom,
Mike Balfour, chairs the Audit Committee.
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 annual Going Concern assessment and
Viability Statement.
▸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;
▸To consider annually whether there is a need for the
Company to have its own internal audit function;
▸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.
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 Climate Change
and Geopolitical Risk, and the impact these could have on the
Group and its underlying investment 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).
Full details of the valuation methodology are contained in note
7 to the Consolidated Financial Statements.
Given the material uncertainty in relation to going concern
following the results of the Company’s Court Meeting and
General Meeting, as set out in more detail in the Chair’s
Statement on page 4 and Directors’ Report on page 37, the
Audit Committee gave particular consideration to the
appropriateness of the going concern basis of preparation of the
financial statements.
The Board’s statement on going concern is provided in full in
Note 2.1 on pages 62 to 63 of the Financial Statements.
API Annual Report & Accounts Year End 31 December 2023
45
Audit Committee Evaluation
The activities of the Audit Committee were considered as part
of the Board appraisal process completed in accordance with
standard governance arrangements as noted as pages 40 to 41.
A full evaluation was undertaken on the effectiveness, roles and
responsibilities of the Audit Committee in accordance with the
Financial Reporting Council’s current guidance. The evaluation
found that the Audit Committee functioned well with the right
balance of membership and skills.
Review of Activities
The Audit Committee met three times during the year under
review, in March, August and November 2023. Following the
year end, the Audit Committee met in March and April 2024.
At each March/April and August meeting, the Audit Committee
reviews the Group’s compliance with the AIC Code on Corporate
Governance and carries out a detailed assessment of the
Group’s internal controls, including 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;
▸the Investment Manager’s risk management and internal
controls;
▸the anti-bribery policy of the Group, and its service
providers;
▸the Investment Manager’s arrangements for staff to
escalate concerns, in confidence, of possible improprieties;
and Reviewing the performance of the auditor.
At each March/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 March/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.
Internal Auditor
The Board has considered the need for an internal audit
function but, because the Company is externally-managed, the
Board has decided to place reliance on the Manager’s risk
management/internal controls systems and internal audit
procedures.
External Audit Process
There are no contractual obligations which restrict the Audit
Committee’s choice of external auditor. The Group’s external
auditor is Deloitte, who were appointed as Auditor for the year
ended 31 December 2019, following a tender process carried
out during 2018.
Shareholders approved the re-appointment of Deloitte as the
Group’s auditor at the AGM in June 2023.
The Audit Committee meets twice a year with the external
auditor. The auditor provides a planning report in advance of
the annual audit and a report on the annual audit, which are
considered at the November and March/April meetings,
respectively. The Audit Committee has the opportunity to
question and challenge the auditor in respect of these reports.
In accordance with regulatory requirements Deloitte rotates the
audit partner responsible for the audit every five years. The
audit partner for the Company is Siobhan Durcan who is in her
second year of involvement in the audit.
The Audit Committee 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.
During the year ended 31 December 2023, Deloitte received
fees of £nil in relation to non-audit services (2022: £nil). The
Committee is cognisant of audit fee levels and will keep these
under review to ensure Deloitte continues to offer value for
money for shareholders.
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. 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.
Overall the Committee believes the external audit process is
effective.
API Annual Report & Accounts Year End 31 December 2023
46
Auditor
On the recommendation of the Audit Committee, it is the
Board’s intention to propose, at the Annual General Meeting on
13 August 2024, that shareholders approve the reappointment
of Deloitte as the Group’s auditors and approve the Board to
authorise the Auditors’ remuneration as resolutions 4 and 5,
respectively.
Approved by the Board on
29 April 2024
Mike Balfour
Audit Committee Chair
API Annual Report & Accounts Year End 31 December 2023
47
Directors’ Remuneration Report
For the year ended 31 December 2023
Remuneration Committee
The Remuneration Committee, comprising the full Board and
chaired by Jill May, has prepared this Directors’ Remuneration
Report which consists of two parts:
a) a Remuneration Policy, which is subject to a
shareholder vote every three years – most recently
voted on at the AGM on 15 June 2022 where the proxy
votes on the relevant resolution were: For –
172,625,986 votes (98.86%); Discretionary – 45,149
votes (0.03%); Against – 1,129,769 votes (0.65%); and
Withheld votes – 813,055 (0.47%). The Remuneration
Policy will next be put to a shareholder vote at the
AGM in 2025; and
b) an annual Implementation Report, which is subject to
an advisory vote by shareholders.
The law requires the Company’s auditor to audit certain of the
disclosures provided in this report. Where disclosures have
been audited, they are indicated as such. The independent
auditor’s opinion is included on pages 51 to 57.
The fact that the Remuneration Policy is subject to a
shareholder vote at least every three years does not imply any
change on the part of the Company. The principles remain the
same as for previous years. There have been no changes to the
Directors’ Remuneration Policy during the period of this Report.
Remuneration Policy
This part of the Remuneration Report provides details of the
Company’s Remuneration Policy for its Directors, which takes
into consideration corporate governance principles. No
shareholder views were sought in setting the Remuneration
Policy although any comments received from shareholders are
considered on an ongoing basis.
The Directors are non-executive and it is the Board’s policy that
the remuneration of Directors be reviewed annually, although
such review may not necessarily result in any change. The
annual review should ensure remuneration reflects Directors’
duties and responsibilities, expected and actual time
commitment, the level of skills and experience required and the
need for Directors to maintain on an ongoing basis an
appropriate level of knowledge of regulatory and compliance
requirements in an industry environment of increasing
complexity.
Remuneration should be fair and comparable to that of similar
real estate investment companies. The level of fees should also
be sufficient to attract and retain the high calibre of Directors
needed to oversee the Company properly and to reflect its
specific circumstances.
Appointment.
▸The Company only intends to appoint non-executive
Directors.
▸All the Directors are non-executive and are appointed under
the terms of letters of appointment.
▸Directors must retire and be subject to re-election at the
first AGM after their appointment; the Company has also
determined that every Director will stand for re-election at
each AGM.
▸New appointments to the Board will be placed on the fee
applicable to all Directors at the time of appointment.
▸No incentive or introductory fees will be paid to encourage
a directorship.
▸Directors are not eligible for bonuses, pension benefits,
share options, long term incentive schemes or other benefits.
▸The Company indemnifies its Directors for all costs, charges,
and losses together with certain expenses and liabilities which
may be incurred in the discharge of duties, as a Director of the
Company.
Performance, Service Contracts, Compensation and
Loss of Offices.
▸The Directors’ remuneration is not subject to any
performance-related fee.
▸No Director has a service contract.
▸No Director was interested in contracts with the Company
during the period or subsequently.
▸The terms of appointment provide that a Director may be
removed without notice, there are no set notice periods and
no compensation will be due upon leaving office.
▸No Director is entitled to any other monetary payment or to
any assets of the Company.
▸No Director will stand for re-election as a Director of the
Company later than the Annual General Meeting following the
ninth anniversary of their appointment to the Board unless in
relation to exceptional circumstances.
Directors’ & Officers’ liability insurance cover is maintained by
the Company on behalf of the Directors.
Articles Limit on Directors’ Fees.
The Company’s Articles of Association limit to £350,000 the
aggregate annual fees payable to Directors. The limit can be
amended by shareholder resolution from time to time and was
last increased at the Annual General Meeting in 2020.
API Annual Report & Accounts Year End 31 December 2023
48
Implementation Report
Directors’ Fees.
The level of fees for the next year, the year under review and
the preceding year are set out in the table below. There are no
further fees to disclose as the Company has no employees, Chief
Executive or Executive Directors.
2024 £ 2023 £ 2022 £
Chair 55,000 50,000 50,000
Chair of Audit Committee 46,000 41,500 41,500
Senior Independent Director 42,500 37,000 37,000
Director 40,000 37,000 37,000
The Remuneration Committee carried out a review of Directors’
annual fees during the year including taking account of
increases in inflation and the time commitment required of
Directors of the Company to adequately discharge their
responsibilities. These factors supported an increase in the
Directors’ fees as disclosed above. A similar exercise conducted
in the prior year similarly suggested an increase, however, at the
time the Committee decided on that occasion to leave the
annual fees unchanged.
Given the significantly increased time spent on the Company’s
affairs over the last 12 months, because of the Strategic Review,
following the year-end it was agreed that each Director should
receive a one-off fee of £20,000 with the Chair receiving
£30,000 to partially reflect the additional work performed.
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 38.
Directors’ Fees
The Directors who served during the year received
remuneration as shown in the table.
2023 2022 %
change
£ £
Huw Evans
A
- 17,124 -100%
Mike Balfour 41,500 41,500 -
Mike Bane
B
37,000 34,059 8.6%
James Clifton-Brown
50,000 50,000 -
Jill May
37,000 37,000 -
Sarah Slater
37,000 37,000 -
Employers’ national
insurance contribution
23,735 22,885
226,235 239,568
Directors’ expenses 13,201 8,035
239,436 247,603
A Retired as a Director on 15 June 2022
B Appointed as a Director on 31 January 2022
API Annual Report & Accounts Year End 31 December 2023
49
The table indicates the expenditure during the year in relation
to Directors’ remuneration and shareholder distributions.
2023 2022
£ £
Aggregate Directors’ Remuneration 239,436 247,603
Aggregate shareholder distributions 15,248,759 15,610,827
Statement of Proxy Voting at Annual General Meeting
At the Company’s latest Annual General Meeting, held on 14
June 2023, shareholders approved the Directors’ Remuneration
Report (other than the Directors’ Remuneration Policy) in
respect of the year ended 31 December 2023 and the proxy
votes received on the relevant resolution were: For –
120,304,202 (99.45%); Discretionary – 65,359 (0.05%); Against
– 479,890 votes (0.4%); and Withheld votes – 120,546 (0.1%).
Directors’ Shareholdings
The Directors’ interests in the Company’s ordinary shares are
shown in the Directors’ Report on page 35.
An ordinary resolution for the approval of the Directors’
Remuneration Report will be put to shareholders at the Annual
General Meeting on 13 August 2024.
Approved by the Board on
29 April 2024
Jill May
Remuneration Committee Chair
API Annual Report & Accounts Year End 31 December 2023
50
Statement of Directors’ Responsibilities
for the year ended 31 December 2023
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 judgements 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 Group 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
29 April 2024
James Clifton-Brown
Chair
API Annual Report & Accounts Year End 31 December 2023
51
Independent auditor’s report to the members of abrdn Property Income Trust
Limited
Report on the audit of the financial statements
1 Opinion
In our opinion the financial statements of abrdn 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 2023 and of its loss for the year then
ended;
▸ have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union and as issued by the
International Accounting Standards Board (IASB); 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 and as issued by the IASB.
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 Material uncertainty related to going concern
We draw attention to note 2.1 in the financial statements,
which indicates that following the shareholders decision not to
vote in favour of the proposed all-share merger, the
shareholders are now due to vote to consider the board’s
recommendation of a managed wind down of the Group. This
vote is due to take place in May 2024 after the signing of the
annual report. If the shareholders vote in favour of a managed
wind down the Group has an intention to enter liquidation.
However, there can be no certainty of outcome of the
shareholders’ vote.
As stated in note 2.1, these events or conditions, along with the
other matters as set forth in note 2.1, indicate that a material
uncertainty exists that may cast significant doubt on the
Group’s ability to continue as a going concern. Our opinion is
not modified in respect of this matter.
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
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 forecast models;
▸ Evaluated the maturity of Group debt and the effect of
repayment dates on the going concern assumption of the
Group;
▸ Performed fair value of investment property and income
sensitivity analysis, which we compared to management
stress testing results;
▸ Inspected banking covenants to assess compliance as at the
balance sheet date; and
▸ Challenged the appropriateness of the Group’s disclosures
within note 2.1 of the financial statements over the going
concern basis and the material uncertainty arising with
reference to, our knowledge and understanding of the
assumptions taken by the Directors and presented to the
shareholders.
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; and
API Annual Report & Accounts Year End 31 December 2023
52
▸ the directors’ identification in the financial statements of
the material uncertainty related to the Group’s ability to
continue as a going concern over a period of at least twelve
months from the date of approval of the financial statements.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
4 Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
▸Going Concern (see section above “Material uncertainty related to going concern”); and
▸
Investment property valuation
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 was £2.98m which was determined on the
basis of 1% of the net asset value.
Scoping
All audit work for the Group was performed directly by the Group engagement team. All of the Group’s
subsidiaries are subject to full scope audits.
Significant changes in
our approach
There were no significant changes in our approach in the current year, except for the material uncertainty in
relation to going concern as reported in section 3 of our audit report.
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. In addition to the matter described in the material uncertainty related to going
concern section, we have determined the matter described below to be the key audit matter to be communicated in our report.
5.1 Investment property valuation
Key audit matter
description
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
determined that the main judgements are around equivalent yields and estimated market rent 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 2023 amounted to £388m (2022: £401m).
Refer to notes 2.2 of accounting policies on pages 63 to 64 and note 7 on page 74-77 of the notes to the
financial statements. Also refer to the Audit Committee report pages 44-46.
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API Annual Report & Accounts Year End 31 December 2023
53
How the scope of our
audit responded to
the key audit matter
We performed the following procedures:
▸ Obtained an understanding of and tested 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;
▸ In conjunction with our real estate advisory specialists, we challenged the external valuer on their valuation
process and assumptions, performance of the portfolio, significant assumptions and critical judgement areas
including climate related risk, 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, including 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.
Key observations
Based on the work performed, we concluded that the key judgments used in the valuation of the
investment properties are appropriate.
6 Our application of materiality
6.1 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
£2.98m (2022: £3.23m)
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
were 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.
In addition to net assets, we consider EPRA earnings 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 £0.54m (2022: £0.57m), which equates to
5% (2022: 5%) of that measure for testing all balances impacting
that measure, including trade receivables and trade payables.
6.2 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 70% of Group materiality for the 2023 audit (2022:
70%). In determining performance materiality, we considered
the following factors:
a. the impact of macroeconomic uncertainty on the Group’s
operations and across the wider real estate sector as a whole;
b. the fact that we have not identified any significant changes
in business structure; and
c. our experience from previous audits which has indicated a
low number of corrected and uncorrected misstatements
identified in prior periods.
API Annual Report & Accounts Year End 31 December 2023
54
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to
the Committee all audit differences in excess of £0.15m (2022:
£0.16m), 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.
7 An overview of the scope of our audit
7.1 Scoping
The Group consists of the Company, abrdn 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 are subject to full scope audits. We
also tested the consolidation process.
7.2 Our consideration of the control environment
The Board of Directors delegates management functions to
abrdn Fund Managers Limited as Investment Manager. As part
of our risk assessment, we assessed the control environment in
place at the Investment Manager, and obtained an
understanding of the relevant controls, such as those related to
the financial reporting cycle. We also tested relevant controls in
relation to the valuation of investment property and were able
to adopt a control reliance approach on the key business
processes surrounding investment property valuations.
As part of our audit procedures, we obtained an understanding
of the relevant controls in operation at the service organisation
of the Investment Manager, including an assurance report on
controls at service organisations. We further obtained a
bridging letter from the Investment Manager detailing that
there have not been any material changes to the internal
control environment between the date of the assurance report
and the balance sheet date. There were no other balances
where we planned to rely on controls, other than the balances
noted above.
7.3 Our consideration of climate-related risks
As part of our risk assessment, we have considered the potential
impact of climate change on the Group’s business and its
financial statements. We obtained an understanding of the
process for identifying climate-related risks, the processes and
controls in place, as well as the determination of any mitigating
actions.
The Group continues to develop its assessment of the potential
impact of environmental, social and governance (“ESG”) related
risks, including climate change. As outlined in the ESG
disclosures on page 13 and strategic overview on page 29 the
Group considers climate change to be a principal risk within the
business, with particular impact on their investment properties.
As part of our assessment of our key audit matter, we
considered whether there was a heightened element of climate
risk in relation to the key judgements in the valuation of
investment properties. Whilst this did not have a material
impact on the judgements, climate related risks were included
as part of our overall challenge on investment properties.
The directors have assessed that there is currently no material
impact arising from climate change on the valuation of
investment property. This is disclosed in Note 7 to the financial
statements.
We have assessed whether the risks identified by the Group are
consistent with our understanding of the Group’s business and
evaluated whether appropriate disclosures have been made in
the financial statements in this regard. The directors have
adopted the Task Force for Climate Related Disclosures
(“TCFD”). In conjunction with our ESG specialists we assessed
disclosures in the strategic overview, ESG and TCFD section to
consider whether they are materially consistent with the
guidelines.
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, except to the extent otherwise explicitly
stated in our report, 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.
API Annual Report & Accounts Year End 31 December 2023
55
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.
11.1 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, the directors and
the Audit Committee about their own identification and
assessment of the risks of irregularities, including those that
are specific to the Group’s sector;
▸ 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, financial
instrument and real estate advisory 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 investment property valuation. 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.
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.
11.2 Audit response to risks identified
As a result of performing the above, we identified investment
property valuation as a key audit matter related to the potential
risk of fraud. The key audit matters section of our report
explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit
matter.
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
API Annual Report & Accounts Year End 31 December 2023
56
provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
▸ enquiring of management, the directors and 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 Opinions on other matters 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 37;
▸ 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 33;
▸ the directors' statement on fair, balanced and
understandable set out on page 50;
▸ the board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
pages 31 to 33;
▸ the section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on pages 41 to 42; and
▸ the section describing the work of the Audit Committee set
out on pages 44 to 46.
14 Matters on which we are required to report by
exception
14.1 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 which we are required to address
15.1 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 five years, covering the years
ending 31 December 2019 to 31 December 2023.
15.2 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).
API Annual Report & Accounts Year End 31 December 2023
57
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) 4.1.15R – DTR 4.1.18R,
these financial statements form part of the Electronic Format
Annual Financial Report filed on the National Storage
Mechanism of the FCA in accordance with DTR 4.1.15R – DTR
4.1.18R. This auditor’s report provides no assurance over
whether the Electronic Format Annual Financial Report has
been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
Siobhan Durcan
For and on behalf of Deloitte LLP
Recognised Auditor
St Peter Port, Guernsey
29 April 2024
API Annual Report & Accounts Year End 31 December 2023
58
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
12 Months to | 12 Months to | ||
31 Dec 2023 | 31 Dec 2022 | ||
Notes | £ | £ | |
| Rental income | |||
Service charge income | |||
| Service charge expenditure | ( | ( | |
| Net Rental Income | |||
| Administrative and other expenses | |||
| Investment management fee | 4 | ( | ( |
| Other direct property operating expenses | 4 | ( | ( |
| Net Impairment gain on trade receivables | 4 | ||
| Fees associated with strategic review and aborted merger | 4 | ( | |
| Other administration expenses | 4 | ( | ( |
| Total administrative and other expenses | ( | ( | |
Operating profit before changes in fair value of investment properties | |||
Valuation loss from investment properties | 7 | ( | ( |
| Valuation loss from land | 8 | ( | ( |
| Loss on disposal of investment properties | 7 | ( | ( |
| Operating loss | ( | ( | |
Finance income | 5 | ||
| Finance costs | 5 | ( | ( |
| Loss on termination of interest rate swaps | 15b | ( | |
| Loss for the year before taxation | ( | ( | |
| Taxation | |||
| Tax charge | 6 | ||
| Loss for the year, net of tax | ( | ( | |
| Other comprehensive (loss) / income | |||
| Movement in fair value on swap | 15a | ( | |
| Movement in fair value on interest rate cap | 15c | ( | |
| Total other comprehensive (loss)/gain | ( | ||
Total comprehensive loss for the year, net of tax | ( | ( | |
| Loss per share | 2023 (p) | 2022 (p) | |
| Basic and diluted loss per share | 20 | ( | ( |
All items in the above Statement of Comprehensive Income derive from continuing operations.
The notes on pages 62 to 88 are an integral part of these Consolidated Financial Statements.
API Annual Report & Accounts Year End 31 December 2023
59
Consolidated Statement of Financial Position
as at 31 December 2023
31 Dec 23 | 31 Dec 22 | ||
| Assets | Notes | £ | £ |
| Non-current assets | |||
Investment properties | 7 | ||
| Lease incentives | 7 | ||
| Land | 8 | ||
| Interest rate cap | 15c | ||
| Rental deposits held on behalf of tenants | |||
| Current Assets | |||
| Investment property held for sale | 9 | ||
| Trade and other receivables | 11 | ||
| Cash and cash equivalents | 12 | ||
| Interest rate swap | 15a | ||
| Interest rate cap | 15c | ||
Total assets | |||
| Liabilities | |||
| Current liabilities | |||
Trade and other payables | 13 | ||
| Non-current liabilities | |||
| Bank borrowings | 14 | ||
| Obligations under finance leases | 16 | ||
| Rental deposits due to tenants | |||
Total liabilities | |||
Net assets | |||
| Equity | |||
| Capital and reserves attributable to Company’s equity holders | |||
Share capital | 18 | ||
| Treasury share reserve | 18 | ( | ( |
| Retained Earnings | 19 | ||
| Capital reserves | 19 | ( | |
| Other distributable reserves | 19 | ||
| Total equity | |||
2023 (p) | 2022 (p) | ||
| NAV per share | 22 |
The notes on pages 62 to 88 are an integral part of these Consolidated Financial Statements.
API Annual Report & Accounts Year End 31 December 2023
60
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Notes | Share capital | Treasury | Retained | Capital | Other | Total equity | |
| Shares | earnings | reserves | distributable | ||||
| reserves | |||||||
£ | £ | £ | £ | £ | £ | ||
| Opening balance 1 January | ( | ||||||
| 2023 | |||||||
Loss for the year | ( | ( | |||||
| Other comprehensive loss | ( | ( | |||||
Total comprehensive loss for the year | ( | ( | ( | ||||
Dividends paid | 21 | ( | ( | ||||
| Valuation loss from investment | 7 | ( | |||||
| properties | |||||||
| Valuation loss from land | 8 | ( | |||||
Reclassified from Other distributable reserves | ( | ||||||
| Loss on disposal of investment | 7 | ( | |||||
| properties | |||||||
| Balance at 31 December 2023 | ( | ( |
for the year ended 31 December 2022
Notes | Share capital | Treasury | Retained | Capital | Other | Total equity | |
| Shares | earnings | reserves | distributable | ||||
| reserves | |||||||
£ | £ | £ | £ | £ | £ | ||
| Opening balance 1 January | ( | ||||||
| 2022 | |||||||
Loss for the year | ( | ( | |||||
| Other comprehensive income | |||||||
Total comprehensive loss for the year | ( | ( | |||||
Ordinary shares placed into treasury net of issue costs | ( | ( | |||||
| Dividends paid | 21 | ( | ( | ||||
| Valuation loss from investment | 7 | ( | |||||
| properties | |||||||
| Valuation loss from land | 8 | ( | |||||
| Loss on disposal of investment | 7 | ( | |||||
| properties | |||||||
| Balance at 31 December 2022 | ( |
The notes on pages 62 to 88 are an integral part of these Consolidated Financial Statements.
API Annual Report & Accounts Year End 31 December 2023
61
Consolidated Statement of Cash Flow
for the year ended 31 December 2023
12 months to | 12 months to | ||
31 Dec 2023 | 2022 | ||
| Cash flows from operating activities | Notes | £ | £ |
| Loss for the year before taxation | ( | ( | |
Movement in lease incentives | ( | ( | |
| Movement in trade and other receivables | |||
| Movement in trade and other payables | ( | ||
| Loss on termination of interest rate swaps | 15b | ||
| Finance costs | 5 | ||
| Finance income | 5 | ( | ( |
| Valuation loss from investment properties | 7 | ||
| Valuation loss from land | 8 | ||
| Loss on disposal of investment properties | 7 | ||
| Net cash inflow from operating activities | |||
| Cash flows from investing activities | |||
| Finance income | 5 | ||
Purchase of investment properties | 7 | ( | ( |
| Purchase of land | 8 | ( | ( |
| Capital expenditure on investment properties | 7 | ( | ( |
| Net proceeds from disposal of investment properties | 7 | ||
| Net cash (outflow)/inflow from investing activities | ( | ||
| Cash flows from financing activities | |||
| Shares bought back during the year | 18 | ( | |
Borrowing on RCF | 14 | ||
| Repayment of RCF | 14 | ( | ( |
| Repayment of expired facility | 14 | ( | |
| New term facility | 14 | ||
| Bank borrowing arrangement costs | 14 | ( | |
| Interest paid on bank borrowing | 5 | ( | ( |
| Receipts on Interest rate SWAP | ( | ||
| Receipts on Interest rate Cap | 15c | ||
| Swap breakage costs | 15b | ( | |
| Cap arrangement fees | 15c | ( | |
| Finance lease interest | 5 | ( | ( |
| Dividends paid to the Company’s shareholders | 21 | ( | ( |
| Net cash inflow/(outflow) from financing activities | ( | ||
Net (decrease)/increase in cash and cash equivalents in the year | ( | ||
| Cash and cash equivalents at beginning of year | 12 | ||
| Cash and cash equivalents at end of year | 12 |
The notes on pages 62 to 88 are an integral part of these Financial Consolidated Statements.
API Annual Report & Accounts Year End 31 December 2023
62
Notes to the Financial Statements
for the year ended 31 December 2023
1. General information
liability company incorporated in Guernsey
The address of the registered office is PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey.
These audited Consolidated Financial Statements were approved for issue by the Board of Directors on 29 April 2024.
2. Accounting policies
API Annual Report & Accounts Year End 31 December 2023
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64
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69
| As at 31 December 2023 | Fixed rate | Variable rate | Interest rate |
£ | £ | £ | |
| Cash and cash equivalents | - | 6,653,838 | 0.000% |
Bank borrowings | 85,000,000 | 56,874,379 | 5.459% |
| As at 31 December 2022 | Fixed rate | Variable rate | Interest rate |
£ | £ | £ | |
| Cash and cash equivalents | - | 15,871,053 | 0.000% |
Bank borrowings | 110,000,000 | - | 2.725% |
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70
Year ended 31 December 2023 | On demand | 12 months | 1 to 5 years | >5 years | Total |
£ | £ | £ | £ | £ | |
Interest-bearing loans | - | 8,442,998 | 152,428,127 | - | 160,871,125 |
Trade and other payables | 7,514,629 | 52,450 | 209,800 | 5,140,100 | 12,916,979 |
Rental deposits due to tenants | - | 299,124 | 713,058 | 181,945 | 1,194,127 |
7,514,629 | 8,794,572 | 153,350,985 | 5,322,045 | 174,982,231 |
Year ended 31 December 2022 | On demand | 12 months | 1 to 5 years | >5 years | Total |
£ | £ | £ | £ | £ | |
Interest-bearing loans | - | 29,462,608 | 94,425,183 | - | 123,887,791 |
Trade and other payables | 5,284,559 | 26,068 | 104,271 | 2,580,717 | 7,995,615 |
Rental deposits due to tenants | - | 257,899 | 508,736 | 243,046 | 1,009,681 |
5,284,559 | 29,746,575 | 95,038,190 | 2,823,763 | 132,893,087 |
2023 | 2022 | |
£ | £ | |
| Total borrowings (excluding unamortised arrangement fees) | 141,874,379 | 110,000,000 |
Gross assets | 456,053,931 | 444,943,156 |
| Gearing ratio (must not exceed 65%) | 31.11% | 24.72% |
API Annual Report & Accounts Year End 31 December 2023
71
Carrying amount | Fair Value | |||
2023 | 2022 | 2023 | 2022 | |
| Financial Assets | £ | £ | £ | £ |
| Cash and cash equivalents | 6,653,838 | 15,871,053 | 6,653,838 | 15,871,053 |
Trade and other receivables | 6,101,152 | 7,457,083 | 6,101,152 | 7,457,083 |
| Financial liabilities | ||||
Bank borrowings | 141,251,910 | 109,123,937 | 144,957,576 | 109,580,566 |
Trade and other payables | 8,217,588 | 6,564,852 | 8,217,588 | 6,564,852 |
Year ended 31 December 2023 | Level 1 | Level 2 | Level 3 | Total fair value |
| Financial assets | ||||
Trade and other receivables | - | 6,101,152 | - | 6,101,152 |
Cash and cash equivalents | 6,653,838 | - | - | 6,653,838 |
Interest rate cap | - | 1,408,781 | - | 1,408,781 |
Rental deposits held on behalf of tenants | 895,003 | - | - | 895,003 |
Right of use asset | - | 1,810,120 | - | 1,810,120 |
7,548,841 | 9,320,053 | - | 16,868,894 | |
| Financial liabilities | ||||
Trade and other payables | - | 8,217,588 | - | 8,217,588 |
Bank borrowings | - | 144,957,576 | - | 144,957,576 |
Obligation under finance leases | - | 1,810,120 | - | 1,810,120 |
Rental deposits held on behalf of tenants | 895,003 | - | - | 895,003 |
895,003 | 154,985,284 | - | 155,880,287 |
API Annual Report & Accounts Year End 31 December 2023
72
Year ended 31 December 2022 | Level 1 | Level 2 | Level 3 | Total fair value |
| Financial assets | ||||
Trade and other receivables | - | 7,457,083 | - | 7,457,083 |
Cash and cash equivalents | 15,871,053 | - | - | 15,871,053 |
Interest rate swap | - | 1,238,197 | - | 1,238,197 |
Interest rate cap | - | 2,550,469 | - | 2,550,469 |
Rental deposits held on behalf of tenants | 751,782 | - | - | 751,782 |
Right of use asset | - | 899,572 | - | 899,572 |
16,622,835 | 12,145,321 | - | 28,768,156 | |
| Financial liabilities | ||||
Trade and other payables | - | 6,564,852 | - | 6,564,852 |
Bank borrowings | - | 109,580,566 | - | 109,580,566 |
Obligation under finance leases | - | 899,572 | - | 899,572 |
Rental deposits held on behalf of tenants | 751,782 | - | - | 751,782 |
751,782 | 117,044,990 | - | 117,796,772 |
2023 | 2022 | ||
Notes | £ | £ | |
| Investment management fees | 2,632,225 | 3,480,963 | |
| Other direct property expenses | |||
| Vacant Costs (excluding void service charge) * | 1,217,722 | 600,561 | |
Repairs and maintenance | 418,360 | 1,740,937 | |
| Letting fees | 405,684 | 431,534 | |
| Other costs | 366,695 | 237,813 | |
| Total Other direct property expenses | 2,408,461 | 3,010,845 | |
Net Impairment gain on trade receivables ** | (213,048) | (772,947) | |
Fees associated with strategic review and aborted merger | 1,729,925 | - | |
| Other administration expenses | |||
| Directors’ fees and subsistence | 23 | 239,436 | 247,603 |
Valuer’s fees | 75,524 | 94,256 | |
| Auditor’s fees | 192,700 | 131,280 | |
| Marketing | 222,893 | 226,782 | |
| Other administration costs | 406,189 | 434,998 | |
| Total Other administration expenses | 1,136,742 | 1,134,919 | |
Total Administrative and other expenses | 7,694,305 | 6,853,780 |
2023 | 2022 | |
£ | £ | |
| Total service charge billed to tenants | 4,731,793 | 4,492,780 |
Service charge due from/(to) tenants | 152,564 | (80,959) |
| Service charge income | 4,884,357 | 4,411,821 |
Total service charge expenditure incurred | 4,884,357 | 4,411,821 |
Service charge incurred in respect of void units | 1,470,241 | 1,164,991 |
| Service charge expenditure | 6,354,598 | 5,576,812 |
API Annual Report & Accounts Year End 31 December 2023
73
2023 | 2022 | |
£ | £ | |
| Interest income on cash and cash equivalents | 92,178 | 27,543 |
| Finance income | 92,178 | 27,543 |
Interest expense on bank borrowings | 8,119,398 | 3,251,500 |
| Non-utilisation charges on facilites | 198,314 | 308,582 |
| Receipt on interest rate swap | (911,184) | (116,700) |
| Receipt on interest rate caps | (578,933) | - |
| Amortisation of premium paid for interest rate cap | 565,030 | - |
| Amortisation of arrangement costs (see note 14) | 253,594 | 204,835 |
| Finance lease interest | 49,289 | 24,468 |
| Finance costs | 7,695,508 | 3,672,685 |
API Annual Report & Accounts Year End 31 December 2023
74
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 are also required 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 2023 and 2022 is as follows:
2023 | 2022 | |
£ | £ | |
| Loss before tax | (8,267,901) | (51,053,487) |
Tax calculated at blended UK statutory corporation tax rate of 23.5% (2022: 19%) | (1,942,957) | (9,700,163) |
UK REIT exemption on net income | (2,534,334) | (2,179,636) |
| Valuation loss in respect of Investment properties not subject to tax | 4,477,291 | 11,879,799 |
| Current income tax charge | - | - |
* Calculated as a blended average of 23.5% being 3 months at the prevailing 19%, and 9 months at 25%.
7. Investment Properties
UK | UK | UK | UK | ||
Industrial | Office | Retail | Other | Total | |
2023 | 2023 | 2023 | 2023 | 2023 | |
£ | £ | £ | £ | £ | |
Market value at 1 January | 227,525,000 | 88,450,000 | 53,550,000 | 39,150,000 | 408,675,000 |
Purchase of investment properties | 4,367,140 | - | 19,619,261 | - | 23,986,401 |
Capital expenditure on investment properties | 17,394,611 | 3,658,739 | 624,029 | 1,342 | 21,678,721 |
| Opening market value of disposed investment | (6,400,000) | - | - | - | (6,400,000) |
| properties | |||||
Valuation loss from investment properties | 6,062,225 | (19,490,769) | (1,360,741) | (3,200,246) | (17,989,531) |
Movement in lease incentives | 1,121,061 | (42,970) | (42,549) | (51,096) | 984,446 |
Market value at 31 December | 250,070,037 | 72,575,000 | 72,390,000 | 35,900,000 | 430,935,037 |
Investment property recognised as held for sale | (19,750,000) | (15,350,000) | - | - | (35,100,000) |
Market value net of held for sale at 31 December | 230,320,037 | 57,225,000 | 72,390,000 | 35,900,000 | 395,835,037 |
| Right of use asset recognised on leasehold | - | 1,810,120 | - | - | 1,810,120 |
| properties | |||||
Adjustment for lease incentives | (5,957,199) | (1,943,609) | (846,233) | (559,362) | (9,306,403) |
Carrying value at 31 December | 224,362,838 | 57,091,511 | 71,543,767 | 35,340,638 | 388,338,754 |
The valuations were performed by Knight Frank LLP, acting in the capacity of a valuation adviser to the AIFM, 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 model in accordance with Royal Institute of Chartered Surveyors (‘RICS’) requirements on disclosure for
Regulated Purpose Valuations has been applied (RICS Valuation - Global Standards, which incorporate the International Valuation
Standards). These valuation models are consistent with the principles in IFRS 13. The market value provided by Knight Frank at the year-
end was £430,935,037 (2022: £408,675,000) however an adjustment has been made for lease incentives of £9,248,902 (2022: £8,357,036)
that are already accounted for as an asset. In addition, as required under IFRS 16, a right of use asset of £1,810,120 has been recognised
in respect of the present value of future ground rents. As required under IFRS 16 an amount of £1,810,120 has also been recognised as
API Annual Report & Accounts Year End 31 December 2023
75
an obligation under finance leases in the balance sheet. Valuation gains and losses from investment properties are recognised in the
Consolidated Statement of Comprehensive Income for the period and are attributable to changes in unrealised gains or losses relating to
investment properties held at the end of the reporting period.
UK | UK | UK | UK | ||
Industrial | Office | Retail | Other | Total | |
2022 | 2022 | 2022 | 2022 | 2022 | |
£ | £ | £ | £ | £ | |
Market value at 1 January | 273,565,250 | 126,275,000 | 56,525,000 | 36,050,000 | 492,415,250 |
Purchase of investment properties | 91,859 | - | - | 5,409,462 | 5,501,321 |
Capital expenditure on investment properties | 9,375,227 | 4,117,846 | 31,740 | - | 13,524,813 |
| Opening market value of disposed investment | (20,450,000) | (20,900,000) | - | - | (41,350,000) |
| properties | |||||
Valuation gain from investment properties | (35,924,164) | (20,993,533) | (3,087,334) | (2,252,751) | (62,257,782) |
Movement in lease incentives | 866,828 | (49,313) | 80,594 | (56,711) | 841,398 |
Market value at 31 December | 227,525,000 | 88,450,000 | 53,550,000 | 39,150,000 | 408,675,000 |
| Right of use asset recognised on leasehold | - | 899,572 | - | - | 899,572 |
| properties | |||||
Adjustment for lease incentives | (4,871,218) | (1,986,578) | (888,782) | (610,458) | (8,357,036) |
Carrying value at 31 December | 222,653,782 | 87,362,994 | 52,661,218 | 38,539,542 | 401,217,536 |
In the Cash Flow Statement, proceeds from disposal of investment properties comprise:
2023 | 2022 | |
£ | £ | |
| Opening market value of disposed investment properties | 6,400,000 | 41,350,000 |
Loss on disposal of investment properties | (279,090) | (207,153) |
| Net proceeds from disposal of investment properties | 6,120,910 | 41,142,847 |
Valuation Methodology
The fair value 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 assets.
The Company appoints suitable valuers (such appointment is reviewed on a periodic basis) to undertake a valuation of all the direct real
estate investments on a quarterly basis. The valuation is undertaken in accordance with the then current RICS guidelines and requirements
as mentioned earlier.
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. The Committee reviews the quarterly property valuation reports produced by the valuers (or such other person as
may from time to time provide such property valuation services to the Company) before its submission 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 FCA 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.
API Annual Report & Accounts Year End 31 December 2023
76
| Country & | UK Industrial | UK Office | UK Retail | UK Other |
| Class 2023 | Level 3 | Level 3 | Level 3 | Level 3 |
| Fair Value | 250,070,037 | 72,575,000 | 72,390,000 | 35,900,000 |
| 2023 £ | ||||
| Key | Initial Yield | Initial Yield | Initial Yield | Initial Yield |
| Unobservable | Reversionary yield | Reversionary yield | Reversionary yield | Reversionary yield |
| Input 2023 | Equivalent Yield | Equivalent Yield | Equivalent Yield | Equivalent Yield |
| Estimated rental value per | Estimated rental value per | Estimated rental value per | Estimated rental value per | |
| sq ft | sq ft | sq ft | sq ft | |
| Range | 0.00% to 8.97% (4.80%) | 4.56% to 10.51% (7.57%) | 6.03% to 9.12% (6.91%) | 5.40% to 9.30% (6.53%) |
| (weighted | 4.74% to 8.79% (6.55%) | 7.34% to 12.20% (10.33%) | 5.52% to 7.99% (6.22%) | 5.81% to 9.40% (6.52%) |
| average) | 5.28% to 8.30% (6.46%) | 7.04% to 9.98% (8.89%) | 5.76% to 9.91% (7.02%) | 5.58% to 9.21% (6.67%) |
| 2023 | £4.75 to £10.25 (£7.04) | £15.79 to £45.94 (£27.08) | £0.00 to £30.61 (£11.35) | £6.50 to £20.00 (£14.49) |
| Country & | UK Industrial | UK Office | UK Retail | UK Other |
| Class 2022 | Level 3 | Level 3 | Level 3 | Level 3 |
| Fair Value | 227,525,000 | 88,450,000 | 53,550,000 | 39,150,000 |
| 2022 £ | ||||
| Key | Initial Yield | Initial Yield | Initial Yield | Initial Yield |
| Unobservable | Reversionary yield | Reversionary yield | Reversionary yield | Reversionary yield |
| Input 2022 | Equivalent Yield | Equivalent Yield | Equivalent Yield | Equivalent Yield |
| Estimated rental value per | Estimated rental value per | Estimated rental value per | Estimated rental value per | |
| sq ft | sq ft | sq ft | sq ft | |
| Range | 0.00% to 8.78% (5.20%) | 5.10% to 7.90% (6.11%) | 4.39% to 8.33% (6.75%) | 5.01% to 9.13% (5.98%) |
| (weighted | 5.00% to 8.68% (6.35%) | 6.25% to 10.45% (8.76%) | 5.49% to 7.99% (6.16%) | 4.79% to 9.40% (5.85%) |
| average) | 5.00% to 8.23% (6.26%) | 6.15% to 9.25% (8.02%) | 5.76% to 9.67% (6.79%) | 5.01% to 9.07% (5.87%) |
| 2022 | £4.50 to £9.00 (£6.38) | £17.01 to £45.47 (£26.78) | £8.74 to £30.61 (£15.37) | £6.00 to £20.00 (£14.71) |
API Annual Report & Accounts Year End 31 December 2023
77
2023 | 2022 | |
| ERV p.a. | £34,189,042 | £31,048,945 |
Area sq.ft. | 3,503,840 | 3,416,291 |
| Average ERV per sq.ft. | £9.76 | £9.09 |
| Initial yield | 5.8% | 5.7% |
| Reversionary yield | 7.1% | 7.1% |
2023 | 2022 | |
£ | £ | |
| Increase in equivalent yield of 50 bps | (31,373,168) | (31,086,535) |
Decrease in rental rates of 5% (ERV) | (15,910,176) | (15,879,151) |
2023 | 2022 | |
£ | £ | |
| Cost | ||
| Balance at the beginning of the year | 8,061,872 | 8,001,550 |
| Additions | 2,154,160 | 60,322 |
| Government Grant Income receivable | (620,477) | - |
| Balance at the end of the year | 9,595,555 | 8,061,872 |
| Accumulated depreciation and amortisation | ||
| Balance at the beginning of the year | (561,872) | (501,550) |
| Valuation loss from land | (783,683) | (60,322) |
| Balance at the end of the year | (1,345,555) | (561,872) |
| Carrying amount as at 31 December | 8,250,000 | 7,500,000 |
API Annual Report & Accounts Year End 31 December 2023
78
2023 | 2022 | |
£ | £ | |
| Trade receivables | 4,574,012 | 6,851,117 |
Less: provision for impairment of trade receivables | (832,240) | (2,137,972) |
| Trade receivables (net) | 3,741,772 | 4,713,145 |
| Rental deposits held on behalf of tenants | 299,124 | 257,899 |
| Accrued Grant Income (see Note 8) | 620,477 | - |
| Other receivables | 1,439,779 | 2,486,039 |
| Total trade and other receivables | 6,101,152 | 7,457,083 |
2023 | 2022 | |
£ | £ | |
| Opening balance | (2,137,972) | (2,990,034) |
Credit for the year | 213,048 | 772,947 |
| Reversal for amounts written-off | 1,092,684 | 79,115 |
| Closing balance | (832,240) | (2,137,972) |
API Annual Report & Accounts Year End 31 December 2023
79
2023 | 2022 | |
£ | £ | |
| 0 to 3 months | (37,274) | (8,203) |
3 to 6 months | (81,350) | (251,682) |
| Over 6 months | (713,616) | (1,878,087) |
(832,240) | (2,137,972) |
2023 | 2022 | |
£ | £ | |
| Cash held at bank | 6,337,101 | 9,389,992 |
Cash held on deposit with RBS | 316,737 | 6,481,061 |
6,653,838 | 15,871,053 |
2023 | 2022 | |
£ | £ | |
| Trade and other payables | 7,023,461 | 4,655,599 |
VAT payable | 656,894 | 628,960 |
| Deferred rental income | 6,038,976 | 5,337,852 |
| Rental deposits due to tenants | 299,124 | 257,899 |
14,018,455 | 10,880,310 |
API Annual Report & Accounts Year End 31 December 2023
80
| 2023 | 2022 | |
| £ | £ | |
| Loan facility (including Rolling Credit Facility) | 165,000,000 | 165,000,000 |
Drawn down outstanding balance | 141,874,379 | 110,000,000 |
| 2023 | 2022 | |
| £ | £ | |
| Opening carrying value of expired facility as at 1 January | 109,928,234 | 109,723,399 |
Borrowings during the period on expired RCF | 25,000,000 | 17,000,000 |
Repayment of expired RCF | (25,000,000 | (17,000,000) |
| Repayment of expired facility | (110,000,000) | - |
| Amortisation arrangement costs | 71,766 | 204,835 |
| Closing carrying value of expired facility | - | 109,928,234 |
| Opening carrying value of new facility as at 1 January | (804,297) | - |
| Borrowings during the period on new RCF | 63,000,000 | - |
Repayment of new RCF | (6,125,621) | - |
| New term loan facility | 85,000,000 | - |
| Arrangement costs of new facility | - | (804,297) |
| Amortisation arrangement costs | 181,828 | - |
| Closing carrying value | 141,251,910 | (804,297) |
| Opening carrying value of facilities combined as at 1 January | 109,123,937 | 109,723,399 |
Closing carrying value of facilities combined | 141,251,910 | 109,123,937 |
2023 | 2022 | ||
£ | £ | ||
| Amortisation of arrangement costs (expired facility) | 71,766 | 204,835 | |
Amortisation of arrangement costs (new facility) | 181,828 | - | |
| See Note 5 | 253,594 | 204,835 |
API Annual Report & Accounts Year End 31 December 2023
81
| Analysis of | Cash and cash | Interest- | 2023 | Cash and cash | Interest- | 2022 |
| movement in net | equivalents | bearing loans | Net debt | equivalents | bearing loans | Net debt |
| debt | £ | £ | £ | £ | £ | £ |
| Opening balance | 15,871,053 | (109,123,937) | (93,252,884) | 13,818,008 | (109,723,399) | (95,905,391) |
Cash movement | (9,217,215) | (31,874,379) | (41,091,594) | 2,053,045 | 804,297 | 2,857,342 |
Amortisation of arrangement costs | - | (253,594) | (253,594) | - | (204,835) | (204,835) |
| Closing balance | 6,653,838 | (141,251,910) | (134,598,072) | 15,871,053 | (109,123,937) | (93,252,884) |
2023 | 2022 | |
£ | £ | |
| Loan amount | 141,874,379 | 110,000,000 |
Cash | (6,653,838) | (15,871,053) |
135,220,541 | 94,128,947 | |
Investment property valuation | 439,185,037 | 416,175,000 |
| LTV percentage | 30.8% | 22.6% |
2023 | 2022 | |
£ | £ | |
| Opening fair value of interest rate swaps at 1 January | 1,238,197 | (568,036) |
Reclassification of interest accrual | (335,663) | (247,093) |
Valuation (loss)/gain on interest rate swap | (902,534) | 1,470,570 |
| Reclassified to Profit & Loss | - | 582,756 |
Closing fair value of interest rate swap at 31 December | - | 1,238,197 |
API Annual Report & Accounts Year End 31 December 2023
82
2023 | 2022 | |
£ | £ | |
| Current assets/(liabilities) | - | 1,238,197 |
Non-current assets/(liabilities) | - | - |
| Interest rate swap with a start date of 28 April 2016 maturing on 27 April 2023 | - | 1,238,197 |
2023 | 2022 | |
£ | £ | |
| Opening fair value of interest rate cap at 1 January | 2,550,469 | - |
Cost of interest rate cap | - | 2,507,177 |
Net Change in fair value | (1,141,688) | 43,292 |
| Closing fair value of interest rate cap at 31 December | 1,408,781 | 2,550,469 |
| 2023 | |||
Cost of hedging | Cash flow hedge | Total | |
£ | £ | £ | |
Opening fair value | 1,779,151 | 771,318 | 2,550,469 |
Valuation (loss)/gain | (1,153,875) | 377,860 | (776,015) |
Interest received | - | (365,673) | (365,673) |
Net Change in fair value | (1,153,875) | 12,187 | (1,141,688) |
Closing fair value of interest rate cap at 31 December | 625,276 | 783,505 | 1,408,781 |
Less Closing Interest Accrual * | - | (213,260) | (213,260) |
Adjusted fair value of interest rate cap at 31 December | 625,276 | 570,245 | 1,195,521 |
Opening Adjusted fair value of interest rate cap at 1 January | 1,779,151 | 771,318 | 2,550,469 |
Valuation (loss)/gain recognised on Adjusted Valuation | (1,153,875) | (201,073) | (1,354,948) |
Net Change in fair value (as above) | (1,153,875) | 12,187 | (1,141,688) |
Less Closing Interest Accrual (as above) * | - | (213,260) | (213,260) |
Valuation (loss)/gain recognised on Adjusted Valuation | (1,153,875) | (201,073) | (1,354,948) |
API Annual Report & Accounts Year End 31 December 2023
83
| 2023 | |||
Interest Rate Cap Reserves Reconciliation | Cost of hedging | Cash flow | Total |
| reserve | hedge reserve | ||
£ | £ | £ | |
Opening Reserve | (728,026) | 771,318 | 43,292 |
Valuation (loss)/gain recognised on Adjusted Valuation | (1,153,875) | (201,073) | (1,354,948) |
Amortisation of Premium (See Note 5) | 565,030 | - | 565,030 |
Valuation loss as recognised in Other Comprehensive Income | (588,945) | (201,073) | (789,918) |
Closing Reserve | (1,316,871) | 570,245 | (746,626) |
| 2022 | |||
Cost of hedging | Cash flow hedge | Total | |
£ | £ | £ | |
Opening Value | - | - | - |
Cost of Interest rate cap | 2,507,177 | - | 2,507,177 |
Valuation (loss)/gain | (728,026) | 771,318 | 43,292 |
Net Change in fair value | (728,026) | 771,318 | 43,292 |
Closing fair value of interest rate cap at 31 December | 1,779,151 | 771,318 | 2,550,469 |
Less Closing Interest Accrual * | - | - | - |
Adjusted fair value of interest rate cap at 31 December | 1,779,151 | 771,318 | 2,550,469 |
Opening Adjusted fair value of interest rate cap at 1 January | - | - | - |
Valuation (loss)/gain recognised on Adjusted Valuation | (728,026) | 771,318 | 43,292 |
| 2022 | |||
Interest Rate Cap Reserves Reconciliation | Cost of hedging | Cash flow | Total |
| reserve | hedge reserve | ||
£ | £ | £ | |
Opening Reserve | - | - | - |
Valuation (loss)/gain recognised on Adjusted Valuation | (728,026) | 771,318 | 43,292 |
Amortisation of Premium (See Note 5) | - | - | - |
Valuation gain as recognised in Other Comprehensive Income | (728,026) | 771,318 | 43,292 |
Closing Reserve | (728,026) | 771,318 | 43,292 |
2023 | 2022 | |
£ | £ | |
| Interest received | 365,673 | - |
Closing Interest Accrual | 213,260 | - |
| Receipt on interest rate caps (see Note 5) | 578,933 | - |
2023 | 2022 | |
£ | £ | |
| Current assets/(liabilities) | 849,110 | 339,462 |
Non-current assets/(liabilities) | 559,671 | 2,211,007 |
| Interest rate cap with a start date of 27 April 2023 maturing on 26 April 2026 | 1,408,781 | 2,550,459 |
API Annual Report & Accounts Year End 31 December 2023
84
| Minimum lease | Interest | Present value of | |
| payments | minimum lease | ||
| payments | |||
2023 | 2023 | 2023 | |
£ | £ | £ | |
Less than one year | 52,450 | (49,202) | 3,248 |
Between two and five years | 209,800 | (195,892) | 13,908 |
More than five years | 5,140,100 | (3,347,135) | 1,792,965 |
Total | 5,402,350 | (3,592,229) | 1,810,121 |
| Minimum lease | Interest | Present value of | |
| payments | minimum lease | ||
| payments | |||
2022 | 2022 | 2022 | |
£ | £ | £ | |
Less than one year | 26,068 | (24,468) | 1,600 |
Between two and five years | 104,271 | (97,426) | 6,845 |
More than five years | 2,580,717 | (1,689,590) | 891,127 |
Total | 2,711,056 | (1,811,484) | 899,572 |
2023 | 2022 | |
£ | £ | |
| Within one year | 27,137,392 | 24,457,032 |
Between one and two years | 22,839,051 | 21,677,762 |
| Between two and three years | 19,036,836 | 16,236,484 |
| Between three and four years | 14,949,198 | 12,375,936 |
| Between four and five years | 12,718,074 | 8,695,218 |
| More than 5 years | 78,172,826 | 45,075,463 |
| Total | 174,853,377 | 128,517,895 |
| Allotted, called up and fully paid: | 2023 | 2022 |
£ | £ | |
| Opening balance | 228,383,857 | 228,383,857 |
Shares issued | - | - |
| Closing balance | 228,383,857 | 228,383857 |
API Annual Report & Accounts Year End 31 December 2023
85
2023 | 2022 | |
£ | £ | |
| Opening balance | 18,400,876 | 5,991,417 |
Bought back during the year | - | 12,409,459 |
| Closing balance | 18,400,876 | 18,400,876 |
2023 | 2022 | |
| Number of | Number of | |
| shares | shares | |
| Opening balance | 381,218,977 | 396,922,386 |
Bought back during the year and put into Treasury | - | (15,703,409) |
| Closing balance | 381,218,977 | 381,218,977 |
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 (surplus 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 2023 this equated to a figure of 81% (2022: 97%).
See the Alternative Performance Measures on pages 89 to 90.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2023 | 2022 | |
£ | £ | |
| Loss for the year net of tax | (8,267,901) | (51,053,487) |
2023 | 2022 | |
| Weighted average number of ordinary shares outstanding during the year | 381,218,977 | 389,565,276 |
| Loss per ordinary share (pence) | (2.17) | (13.11) |
Profit for the year excluding capital items (£) | 10,824,203 | 11,471,770 |
EPRA earnings per share (pence) | 2.83 | 2.94 |
API Annual Report & Accounts Year End 31 December 2023
86
Dividends 2023 | PID | Non-PID | Total | PID | Non-PID |
| pence | pence | Pence | £ | £ | |
| Quarter to 31 December of prior year | - | 1.0000 | 1.0000 | - | 3,812,190 |
| (paid in February) | |||||
Quarter to 31 March (paid in May) | 1.0000 | - | 1.0000 | 3,812,190 | - |
Quarter to 30 June (paid in August) | 1.0000 | - | 1.0000 | 3,812,190 | - |
Quarter to 30 September (paid in November) | - | 1.0000 | 1.0000 | - | 3,812,190 |
Total dividends paid | 2.0000 | 2.0000 | 4.0000 | 7,624,380 | 7,624,380 |
| Quarter to 31 December of current year | 0.3980 | 0.6020 | 1.0000 | 1,517,252 | 2,294,938 |
| (paid after year end) | |||||
Prior year dividends (per above) | - | (1.0000) | (1.0000) | - | (3,812,190) |
Total dividends paid for the year | 2.3980 | 1.6020 | 4.0000 | 9,141,632 | 6,107,128 |
Dividends 2022 | PID | Non-PID | Total | PID | Non-PID |
| pence | pence | Pence | £ | £ | |
| Quarter to 31 December of prior year | 0.7910 | 0.2090 | 1.0000 | 3,139,656 | 829,568 |
| (paid in February) | |||||
Quarter to 31 March (paid in May) | 1.0000 | - | 1.0000 | 3,969,224 | - |
Quarter to 30 June (paid in August) | 1.0000 | - | 1.0000 | 3,860,190 | - |
Quarter to 30 September (paid in November) | 0.1806 | 0.8194 | 1.0000 | 688,481 | 3,123,708 |
Total dividends paid | 2.9716 | 1.0284 | 4.0000 | 11,657,551 | 3,953,276 |
| Quarter to 31 December of current year | - | 1.0000 | 1.0000 | - | 3,812,190 |
| (paid after year end) | |||||
Prior year dividends (per above) | (0.7910) | (0.2090) | (1.0000) | (3,139,656) | (829,568) |
Total dividends paid for the year | 2.1806 | 1.8194 | 4.0000 | 8,517,895 | 6,935,898 |
22. Reconciliation of Audited Consolidated NAV to Unaudited Published NAV
The NAV attributable to ordinary shares is published quarterly and is based on the most recent valuation of the investment properties.
2023 | 2022 | |
| Number of ordinary shares at the reporting date | 381,218,977 | 381,218,977 |
2023 | 2023 | |
£ | £ | |
| Total equity per audited consolidated financial statements | 298,078,443 | 323,287,555 |
| NAV per share (p) | 78.2 | 84.8 |
Published NAV per share (p) | 78.4 | 84.8 |
The variance between the unaudited published NAV and audited consolidated NAV of 0.2p per share represents the recognition of fees
associated with the strategic review and proposed merger, the identification of a backdated rent review post publication but agreed prior
to year-end, and the recognition of accrued grant income not yet received.
API Annual Report & Accounts Year End 31 December 2023
87
2023 | 2022 | |
£ | £ | |
| Huw Evans | - | 17,124 |
Mike Balfour | 41,500 | 41,500 |
| Mike Bane | 37,000 | 34,059 |
| James Clifton-Brown | 50,000 | 50,000 |
| Jill May | 37,000 | 37,000 |
| Sarah Slater | 37,000 | 37,000 |
| Employers’ national insurance contributions | 23,735 | 22,885 |
226,235 | 239,568 | |
Directors’ expenses | 13,201 | 8,035 |
239,436 | 247,603 |
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.
26. Events after the balance sheet date
Merger with Custodian
On 19 January 2024, the boards of abrdn Property Income Trust Limited (API) and Custodian Property Income REIT plc (Custodian)
announced that they had reached agreement on the terms and conditions of a recommended all-share merger pursuant to which CREI
would acquire the entire issued and to be issued share capital of API. It was intended that the Merger will be implemented by means of
a Court sanctioned scheme of arrangement under Part VIII of the Companies Law. Shareholder votes were scheduled for the 27
th
(CREI)
and 28
th
(API) February 2024.
On 20
February 2024, Urban Logistics REIT plc (Urban) announced that they were considering a possible offer for API and were ultimately
given a deadline of 5pm on 20 March 2024 to clarify their intentions. As a result, API’s Shareholder Meetings were adjourned to the 27
March 2024.
On 27 March 2024 approximately 60% of shareholders who cast a vote voted in favour of the proposed merger. However, the threshold
for approval of the merger was 75% so the merger did not proceed. The Board explained to shareholders that if the proposed merger was
rejected, it would take the necessary actions to put the Company into a managed and orderly wind-down, selling assets and returning
funds to shareholders as such funds become available. The Board is now, therefore, taking steps to initiate this process and a circular to
shareholders will be issued convening another meeting during May at which shareholders will be asked to vote in favour of a resolution
to change the Company’s investment policy as further explained in note 2.1.
API Annual Report & Accounts Year End 31 December 2023
88
As discussed further in note 4, fees associated with the initial Rule 2.7 announcement (including advisor, due diligence and valuation fees)
were £2,014,248 of which £1,729,925 was accrued as at 31 December 2023 based on levels of WIP. Fees associated with the approach
from Urban (including due diligence) were £298,300, while fees associated with proposed wind-down are £87,500.
Dividends
On 23 February 2024 a dividend in respect of the quarter to 31 December 2023 of 1.0 pence per share was paid split as 0.398p Property
Income Distribution, and 0.602p Non-Property Income Distribution.
Sales
On 7 March 2024, the Company completed on the sale of its industrial asset Opus 9, Warrington for a headline price of £6.75m. Further
to this, the Company completed on the sale of its office asset 15 Basinghall Street in London for a headline price of £9.8m on 22 March
2024, and its Industrial assets Unit 5 Monkton Business Park in Hebburn (8 April 2024) and Kings Business Park in Bristol (15 April 2024)
for headline prices of £5.3m and £7.9m respectively.
API Annual Report & Accounts Year End 31 December 2023
89
Alternative Performance Measures (unaudited)
The Company uses the following Alternative Performance Measures (APMs). APM do not have a standard meaning prescribed by GAAP
and therefore may not be comparable to similar measures presented by other entities.
Further details can be found in the Glossary on pages 101 to 102.
Dividend Cover
31 December 2023 31 December 2022
£ £
Earnings per IFRS Income Statement
(9,960,353) (49,539,625)
Add back:
Unrealised losses on investment properties 17,989,531 62,257,782
Realised losses on investment properties
279,090 207,153
Unrealised loss on land
783,683 60,322
Gains on cash flow hedge
1,692,452 (1,513,862)
Profit for dividend cover
10,784,403 11,471,770
Dividends paid in the year 15,248,759 15,610,827
Dividend cover
71% 73%
Add back non-recurring items:
Fees associated with strategic review and aborted merger 1,729,925 -
Loss on termination of interest rate swaps
- 3,562,248
Adjusted Profit for dividend cover
12,514,328 15,034,018
Dividend cover 82% 97%
NAV Total Return
31 December 2023 31 December 2022
£ £
Opening NAV
84.8 101.0
Closing NAV 78.2 84.8
Movement in NAV
(6.6) (16.2)
% Movement in NAV (7.8%) (16.0%)
Impact of reinvested dividends 4.8% 3.2%
NAV total return
(3.0%) (12.8%)
Share Price Total Return
31 December 2023 31 December 2022
£ £
Opening share price
62.4 81.5
Closing share price 53.0 62.4
Movement in share price
(9.4) (19.1)
% Movement in share price (15.1%) (23.4%)
Impact of reinvested dividends 6.9% 4.4%
Share price total return
(8.2%) (19.0%)
Gearing
31 December 2023 31 December 2022
£ £
Loan amount
141,874,379 110,000,000
Total Assets 456,053,931 444,943,156
Less Derivative Swap - (1,238,197)
Less Derivative Cap
(1,408,781) (2,550,469)
454,645,150 441,154,490
Gearing Ratio 31.2% 24.9%
API Annual Report & Accounts Year End 31 December 2023
90
Loan to Value
31 December 2023 31 December 2022
£ £
Loan amount
141,874,379 110,000,000
Cash (6,653,838) (15,871,053)
135,220,541 94,128,947
Portfolio valuation (including Land) 439,185,037 416,175,000
LTV percentage
30.8% 22.6%
Ongoing Charges
31 December 2023 31 December 2022
£ £
Average NAV
313,684,524 396,947,575
Investment management fees 2,632,225 3,480,963
Other administration expenses
2,866,667 1,134,919
Other direct property expenses
2,408,461 3,010,845
Less: Fees associated with strategic review and aborted merger
(1,729,925) -
Service charge billed to the Group in respect of void units
1,470,241 1,164,991
Finance lease interest
49,289 24,468
Total ongoing charges
7,696,958 8,816,186
As a % of average NAV 2.5% 2.2%
Total ongoing charges (as above)
7,696,958 8,816,186
Less: Other direct property expenses
(2,408,461) (3,010,845)
Less: Finance lease interest (75,524) (94,256)
Less: Valuation Fees
(49,289) (24,468)
Less: Service charge billed to the Group in respect of void units
(1,470,241) (1,164,991)
Total ongoing charges less direct property expenses
3,693,443 4,521,626
As a % of average NAV 1.2% 1.1%
API Annual Report & Accounts Year End 31 December 2023
91
EPRA Performance Measures (unaudited)
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.
31 December 2023 31 December 2022
£ £
EPRA earnings
10,784,403 11,471,770
EPRA earnings per share (pence per share) 2.83 2.94
EPRA Net Tangible Assets ("NTA")
296,669,662 319,498,889
EPRA NTA per share
77.8 83.8
EPRA Net Reinstatement Value ("NRV")
325,973,245 347,288,789
EPRA NRV per share
85.5 91.1
EPRA Net Disposable Value ("NDV")
294,372,777 322,830,926
EPRA NDV per share
77.2 84.7
EPRA Net Initial Yield
5.2% 5.0%
EPRA topped-up Net Initial Yield
5.7% 5.3%
EPRA Vacancy Rate
9.8% 9.8%
EPRA Cost Ratios - including direct vacancy costs
33.4% 30.1%
EPRA Cost Ratios - excluding direct vacancy costs
23.7% 23.5%
A. EPRA Earnings
31 December 2023 31 December 2022
£ £
Earnings per IFRS Income statement
(8,267,901) (51,053,487)
Adjustments to calculate EPRA Earnings, exclude:
Net changes in value of investment properties
17,989,531 62,257,782
Loss on disposal of Investment properties
279,090 207,153
Net change in value of land
783,683 60,322
EPRA Earnings
10,784,403 11,471,770
Weighted average number of shares 381,218,977 389,565,276
EPRA Earnings per share (pence per share)
2.83 2.94
Rationale: EPRA Net Tangible Assets
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.
B. EPRA Net Tangible Assets
31 December 2023 31 December 2022
£ £
IFRS NAV
298,078,443 323,287,555
Fair value of financial instrument (assets)/liabilities (1,408,781) (3,788,666)
EPRA NTA
296,669,662 319,498,889
Basic number of shares 381,218,977 381,218,977
EPRA NTA per share
77.8 83.8
API Annual Report & Accounts Year End 31 December 2023
92
C. EPRA Net Reinstatement Value 31 December 2023 31 December 2022
£ £
EPRA NTA
296,669,662 319,498,889
Real Estate Transfer Tax and other acquisition costs 29,303,583 27,789,900
EPRA NRV
325,973,245 347,288,789
EPRA NRV per share 85.5 91.1
Rationale: 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.
D. EPRA Net Disposal Value
31 December 2023 31 December 2022
£ £
IFRS NAV
298,078,443 323,287,555
Fair value of debt (3,705,666) (456,629)
294,372,777 322,830,926
EPRA NDV per share 77.2 84.7
Fair value of debt per financial statements 144,957,576 109,580,566
Carrying value 141,251,910 109,123,937
Fair value of debt adjustment
3,705,666 456,629
E. EPRA Net Initial Yield and "topped up" NIY disclosure
31 December 2023 31 December 2022
Completed property portfolio
£ £
Investment property - wholly owned
430,935,037 408,675,000
Allowance for estimated purchasers' costs 29,303,583 27,789,900
Gross up completed property valuation
460,238,620 436,464,900
Annualised cash passing rental income 27,341,419 25,501,414
Property outgoings (3,522,307) (3,768,770)
Annualised net rents
23,819,111 21,732,644
Add: notional rent expiration of rent-free periods or other lease incentives 2,607,320 1,550,927
Topped-up net annualised rent 26,426,431 23,283,571
EPRA NIY 5.2% 5.0%
EPRA "topped-up" NIY 5.7% 5.3%
F. EPRA COST RATIOS
31 December 2023 31 December 2022
£ £
Administrative / property operating expense line per IFRS income
statement
9,213,835 8,043,241
EPRA Costs (including direct vacancy costs) 9,213,835 8,043,241
Direct vacancy costs (2,687,963) (1,765,552)
EPRA Costs (excluding direct vacancy costs)
6,525,872 6,277,689
Gross Rental income less ground rent costs 27,552,279 26,697,931
EPRA Cost Ratio (including direct vacancy costs) 33.4% 30.1%
EPRA Cost Ratio (excluding direct vacancy costs)
23.7% 23.5%
API Annual Report & Accounts Year End 31 December 2023
93
G. Like-for-like rental growth reporting Rental growth
(£)
Portfolio value
by sector (£)
Rental growth (£) Portfolio value
by sector (£)
2023 2023 2022 2022
Sector:
Industrial 1,460,220 240,770,037 1,127,510 227,525,000
Offices
33,564 72,575,000 128,893 88,450,000
Retail
- 54,100,000 22,300 53,550,000
Other
53,313 35,900,000 83,400 34,600,000
Total portfolio value
1,547,097 403,345,037 1,362,103 404,125,000
H. Property-related CapEx
31 December 2023 31 December 2022
£ £
Acquisitions
23,986,401 5,501,321
Development 10,339,684 8,501,944
Investment properties:
Incremental lettable space
- -
No incremental lettable space
11,339,037 5,022,869
Tenant incentives
444,348 (162,619)
Other material non-allocated types of expenditure
- -
Total capital expenditure incurred
46,109,470 18,863,515
I. LTV
31 December 2023 31 December 2022
£ £
Borrowings from Financial Institutions
141,251,910 109,123,937
Exclude
Cash and Cash equivalents
6,653,838 15,871,053
Net Debt (a)
134,598,072 93,252,884
Investment properties at fair value 423,438,754 391,115,008
Financial assets (Land) 8,250,000 7,500,000
Exclude IFRS16 adjustment
(1,810,120) (899,572)
Properties under development
- 10,050,000
Net Receivables
2,797,881 8,722,475
Net Assets (b)
432,676,515 416,540,440
LTV (a/b) 31.1% 22.4%
API Annual Report & Accounts Year End 31 December 2023
94
ESG Performance
Sustainability 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. In addition,
carbon metrics in line with the Taskforce for Climate-Related
Financial Disclosures (TCFD) are included in this section.
Explanatory notes on methodology
Reporting Period
Sustainability data in this report covers the calendar years of
2022 and 2023.
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 Industrial
distribution warehouses 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.
The data in the below sBPR disclosures has not been estimated,
due to the excellent coverage of data from landlord procured
utilities. All data disclosed in the tables below is ‘actual’ data
(primarily from utility invoices).
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 f-gas
(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
Several industrial assets in the portfolio have solar PV installed
which is demised to the tenant. Further details on this can be
found in the main body of the report on page 16. There is
currently no landlord self-generated renewable electricity
across the portfolio although we are at the feasibility with
several large landlord-led schemes.
In the reporting period, all landlord-procured electricity was
from 100% renewable sources. 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. The ESG data
(including energy, GHGs, water and waste data) in this
disclosure has also been subject to limited assurance by an
external third-party consultant, in accordance with the
International Standard on Assurance Engagements (UK) 3000
(ISEA3000). There was no landlord District Heating/ Cooling
consumption over the reporting period .
A copy of the assurance statement can be found on
www.abrdnpit.co.uk/en~gb/literature
API Annual Report & Accounts Year End 31 December 2023
95
Materiality
We have undertaken a review of materiality against each of the EPRA sBPR indicators. The table below indicates the outcome of the
review.
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 Trust’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 – the Trust 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
Governance
Gov-Board Composition of the highest governance body Material – see main body of report (page
38-42 for content related to Governance)
Gov-Selec Process for nominating and selecting the highest governance body
Gov-CoI Process for managing conflicts of interest
API Annual Report & Accounts Year End 31 December 2023
96
Environmental Indicators
In the tables below, the following shorthand notation has been used:
Sector Sector Shorthand
Industrial, Business Parks IBP
Industrial, Distribution Warehouse IDW
Offices O
Leisure L
Retail, High Street RHS
Retail, Warehouses RW
Life-for-like energy consumption
Landlord electricity consumption across like-for-like assets decreased by 2% year-on-year. This overall decrease was primarily driven by
decreases in landlord consumption at Office and Leisure assets; albeit offset partially by increases in consumption at Retail Warehouse
assets. Landlord gas consumption across like-for-like assets increased by 20%, due to the increased consumption at Offices. Sub-metered
electricity consumption (i.e. tenant electricity consumption at assets where landlord-procured electricity is sub-metered to tenants)
increased by 89% overall. This is due to increased tenant consumption at 101 Princess Street and 160 Causewayside.
Landlord Electricity (kWh) Occupier Electricity (i.e. sub-metered to
occupiers) (kWh)
Total landlord-obtained Electricity (kWh)
Indicator References Elec-LfL Elec-LfL Elec-LfL
Sector
Coverage
(assets)
2022 2023
%
Change
2022 2023
%
Change
2022 2023
%
Change
IBP 2 of 5 10,875 6,411 -41% No sub-metered consumption N/A 10,875 6,411 -41%
IDW 1 of 20
No landlord
consumption
113,731 N/A No sub-metered consumption N/A
No landlord-
obtained
consumption
113,731 N/A
O 6 of 11 3,882,409 3,711,953 -4% 1,784,770 3,378,391 89% 5,667,179 7,090,344 25%
L 2 of 2 53,231 39,896 -25% No sub-metered consumption N/A 53,231 39,896 -25%
RW 2 of 6 19,402 21,312 10% No sub-metered consumption N/A 19,402 21,312 10%
Totals 13 of 47 3,965,917 3,893,303 -2% 1,784,770 3,378,391 89% 5,750,687 7,271,695 26%
Landlord-obtained Gas (kWh) Energy Intensity (kWh/ m2)
Indicator References Fuels-LfL Energy-Int
Sector
Coverage
(assets)
2022 2023
%
Change
2022 2023
%
Change
IBP 2 of 5 No Landlord consumption N/A 1 0 -41%
IDW 1 of 20 777 23 N/A 0.1 8.1 N/A
O 6 of 11 2,677,516 3,210,908 20% 250 308 23%
L 2 of 2 No Landlord consumption N/A 6 4 -25%
RW 2 of 6 No Landlord consumption N/A 2 3 10%
Totals 13 of 47 3,965,917 3,893,303 20% 106 132 24%
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the tables above, but are included in the total possible
coverage number. All figures in these tables have been subject to limited assurance by a third-party consultant against ISAE3000.
Life-for-like greenhouse gas emissions
Overall emissions intensity increased by 32% year of year. Like-for-like Scope 1 emissions increased by 24% year on year, driven by
increased gas consumption at office assets in 2023. Since there were no reported losses of F-gases from refrigerant plant in 2022 or
2023, this has not affected the emissions year on year. The like-for-like electricity consumption figures above translate into a 5%
increase in Scope 2 emissions and an 86% increase in Scope 3 emissions; primarily driven by increased energy consumed in the office
assets mentioned above.
Scope 1 Emissions (tCO2) Scope 2 Emissions (tCO2)
Indicator reference No relevant EPRA indicator
Sector Coverage (assets) 2022 2023 % Change 2022 2023 % Change
IBP 2 of 5 No landlord consumption N/A 2.1 1.3 -37%
IDW 1 of 20 0.14 0.004 -97% No landlord
consumption
23.6 N/A
O 6 of 11 475 587 24% 751 769 2%
L 2 of 2 No landlord consumption N/A 10 8.3 -20%
RW 2 of 6 No landlord consumption N/A 3.8 4.4 18%
Totals 13 of 47 475 587 24% 767 806 5%
API Annual Report & Accounts Year End 31 December 2023
97
Scope 3 Emissions (tCO2) Emissions Intensity - Scopes 1, 2 & 3 (kgCO2/m2)
Indicator reference No relevant EPRA indicator
Sector Coverage (assets) 2022 2023 % Change 2022 2023 % Change
IBP 2 of 5 0.19 0.11 -40% 0.2 0.1 -37%
IDW 1 of 20 No electricity T&D
emissions due to no
landlord consumption
2.0 N/A 0.01 1.8
17944%
O 6 of 11 445 827 86% 50 65 31%
L 2 of 2 0.94 0.71 -24% 1.2 0.9 -20%
RW 2 of 6 0.34 0.4 11% 0.5 0.6 17%
Totals 13 of 47 447 830 86% 21 28 32%
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the tables above, but are included in the total possible
coverage number. All figures in this table have been subject to limited assurance by a third-party consultant against ISAE3000.
Absolute Energy Consumption
Absolute landlord electricity and gas consumption decreased by 3% and 22% in 2022, respectively. As noted above, the scale of this
reduction is primarily driven by decreased energy consumption at Retail Warehouse and Office assets. The variation from like-for-like
consumption is due to the effect of acquisitions, disposals and development/refurbishment activity during 2022 and 2023. In the
reporting period, all landlord-procured electricity was from 100% renewable sources. Natural gas consumed was not from renewable
sources.
Landlord Electricity (kWh) Occupier Electricity (i.e. sub-metered to
occupiers) (kWh)
Total landlord-obtained Electricity (kWh)
Indicator references Elec-Abs Elec-Abs Elec-Abs
Sector
Coverage
2022
(assets)
Coverage
2023
(assets)
2022 2023 % Change 2022 2023 % Change 2022 2023 % Change
IBP 2 of 3 2 of 5 10,875 6,411 -41%
No sub-metered
consumption
N/A 10,875 6,411 -41%
IDW 1 of 23 2 of 20
No landlord
consumption
117,708 N/A
No sub-metered
consumption
N/A
No landlord-
obtained
consumption
117,708 N/A
O 11 of 11 7 of 8 4,433,930 3,711,953 -16% 2,105,012 3,378,391 60% 6,538,941 7,090,344 8%
L 2 of 2 2 of 2 53,231 39,896 -25%
No sub-metered
consumption
N/A 53,231 39,896
-25%
RHS N/A 1 of 1
No landlord
consumption
265 N/A
No sub-metered
consumption
N/A
No landlord-
obtained
consumption
265 N/A
RW 2 of 6 2 of 6 19,402 21,312 10%
No sub-metered
consumption
N/A 19,402 21,312
10%
Totals 18 of 56 16 of 47 4,517,437 3,897,545 -14% 2,105,012 3,378,391 60% 6,622,449 7,275,937 10%
Landlord-obtained Gas (kWh) Energy Intensity (kWh/ m2)
Indicator references Fuels-Abs Energy-Int
Sector Coverage
2022
(assets)
Coverage
2023
(assets)
2022 2023 % Change 2022 2023 % Change
IBP 2 of 3 2 of 5 No landlord consumption N/A 0.72 0.43 -41%
IDW 1 of 23 2 of 20 777 23 -97% 0.06 4.3 N/A
O 11 of 11 7 of 8 2,677,516 3,210,908 20% 225 263 17%
L 2 of 2 2 of 2 No landlord consumption N/A 6 4 -25%
RHS N/A 1 of 1 No landlord consumption N/A N/A 0.12 N/A
RW 2 of 6 2 of 6 No landlord consumption N/A 2 3 10%
Totals 18 of 56 16 of 47 2,678,293 3,210,931 20% 107 104 -3%
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the tables above, but are included in the total possible
coverage number. All figures in this table have been subject to limited assurance by a third-party consultant against ISAE3000.
API Annual Report & Accounts Year End 31 December 2023
98
Absolute greenhouse gas emissions
Absolute Scope 1 emissions increased by 20% in 2023. Note there were no emissions associated with refrigerant losses (F-gas) in 2022 or
2023. Total Scope 2 emissions reduced by 8% and Scope 3 emissions increased by 58% year-on-year.
Scope 1 Emissions (tCO2) Scope 2 Emissions (tCO2)
Indicator reference GHG-Dir-Abs GHG-Indir-Abs
Sector Coverage 2022
(assets)
Coverage 2023
(assets)
2022 2023 % Change 2022 2023 % Change
IBP 2 of 3 2 of 5 No Landlord consumption N/A 2.1 1.3 -37%
IDW 1 of 23 2 of 20 0.14 0.004 -97% No Landlord
consumption
24 N/A
O 11 of 11 7 of 8 489 587 20% 857 769 -10%
L 2 of 2 2 of 2 No Landlord consumption N/A 10 8.3 -20%
RHS N/A 1 of 1 No Landlord consumption N/A No Landlord
consumption
0.05 N/A
RW 2 of 6 2 of 6 No Landlord consumption N/A 3.8 4.4 18%
Totals 18 of 56 16 of 47 489 587 20% 874 807 -8%
Scope 3 Emissions (tCO2) Emissions Intensity - Scopes 1, 2 & 3 (kgCO2/m2)
Indicator reference GHG-Indir-Abs GHG-Int
Sector Coverage 2022
(assets)
Coverage 2023
(assets)
2022 2023 % Change 2022 2023 % Change
IBP 2 of 3 2 of 5 0.19 0.11 -40% 0.2 0.1 -37%
IDW 1 of 23 2 of 20
No electricity
T&D emissions
due to no
landlord
consumption
2.1 N/A 0.01 1.0
9519%
O 11 of 11 7 of 8 523 827 58% 46 56 22%
L 2 of 2 2 of 2 0.9 0.71 -24% 1.2 0.95 -20%
RHS N/A 1 of 1
No electricity
T&D emissions
due to no
landlord
consumption
0.005 N/A N/A 0.03 N/A
RW 2 of 6 2 of 6 0.34 0.38 11% 0.5 0.61 17%
Totals 18 of 56 16 of 47 524 830 58% 22 22 2%
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the table above, but are included in the total possible
coverage number. All figures in this table have been subject to limited assurance by a third-party consultant against ISAE3000.
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, for the years where there were
reported refrigerant losses (no losses during 2022 and 2023). 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 2023 vs 2022 basis, and 2023 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.
SECR table - GHGs
Data Type (all figures absolute) 2019 (EPRA) 2020 (EPRA 2021 (EPRA) 2022 (EPRA) 2023 (EPRA)
% Change
2023 vs 2021
% Change
2023 vs 2019
Total Scope 1/2 GHG Emissions (tCO2e) 1,496 1,384 1,264 1,013 1,394 38% -7%
Emissions Intensity (kgCO2e/m2 NLA) - Scopes 1&2 16.0 12.2 15.6 11.1 13.8 24% -14%
Total Landlord Energy Consumption (kWh) 6,401,310 6,211,751 6,055,022 5,201,407 7,108,476 37% 11%
API Annual Report & Accounts Year End 31 December 2023
99
Taskforce for Climate Related Financial Disclosures (TCFD)
In support of our clients’ own TCFD obligations, core TCFD metrics for the Fund for the 2023 period are disclosed in the below table.
2023
Total Scope 1 Emissions 587
Total Scope 2 Emissions 807
Total Scope 1 + 2 Emissions 1,394
Total floor area (m
2
) - with associated Scope 1 & 2 emissions 100,909
Total GAV (£million) - with associated Scope 1 & 2 emissions 141
Scope 1 and 2 GHG Intensity (tCO2e/m2) 0.014
Scope 1 and 2 GHG Intensity (tCO2e/£M) 9.9
Life-for-Like and Absolute Water Consumption
Water consumption increased by 100% across like-for-like assets and across the whole portfolio, respectively. The increase was driven by
a large increase in water consumption in The Pinnacle (office asset). 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.
Absolute Water Consumption (m3)
Indicator
reference
Water-Abs; Water-Int
Sector Coverage 2022
(assets)
Coverage 2023
(assets)
2022 (m
3
) 2022 (litres/m
2
) 2023 (m
3
) 2023 (litres/m
2
) % Change
IBP M/A N/A No landlord water consumption 24 3 N/A
IDW N/A N/A No landlord water consumption No landlord water consumption N/A
O 9 of 15 7 of 11 13,756 371 25,704 769 87%
L 1 of 2 1 of 2 46 8 77 13 67%
RHS N/A N/A No landlord water consumption No landlord water consumption N/A
RW N/A N/A No landlord water consumption 38 9 N/A
Totals 10 of 56 8 of 47 13,801 321 25,843 485 87%
LfL Water Consumption (m3)
Indicator
reference
Water-LfL; Water-Int
Sector Coverage (assets) 2022 (m
3
) 2022 (litres/m
2
) 2023 (m
3
) 2023 (litres/m
2
) % Change
IBP N/A No landlord water consumption No landlord water consumption N/A
IDW N/A No landlord water consumption No landlord water consumption N/A
O 7 of 11 12,872 385 25,704 769 100%
L 1 of 2 46 8 77 13 67%
RHS N/A No landlord water consumption No landlord water consumption N/A
RW N/A No landlord water consumption No landlord water consumption N/A
Totals 8 of 41 12,918 329 25,781 656 100%
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the table above, but are included in the
total possible coverage number. All figures in this table have been subject to limited assurance by a third-party consultant against
ISAE3000.
Life-for-Like and Absolute waste generation and treatment
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 eight like-for-like assets at which we manage waste, 554 tonnes of non-hazardous waste was generated in 2023 with
approximately 44% recycled and 56% recovered via energy from waste. A very small volume of non-recyclable waste (200kg) was sent to
landfill (less than 0.1% of the total waste generated). Note that like-for-like and absolute waste generation figures are both presented in
the table below.
Waste-Abs
Indicator Reference Total Waste (tonnes) Waste to Landfill (Tonnes) Waste Recovered (Tonnes) Waste Recycled (Tonnes)
Sector Coverage
(assets)
2022 2023 203 2023 2023
O 6 of 11 149 145 0.1% 0.2 65% 94 36% 52
RHS 1 of 1 28 29 0.0% 0 77% 22 23% 7
L 1 of 2 299 381 0.0% 0 51% 195 49% 185
Total 8 of 47 476 554 0.0% 0.2 56% 311 44% 244
API Annual Report & Accounts Year End 31 December 2023
100
Waste-LfL
Indicator Reference Total Waste (tonnes) Waste to Landfill (Tonnes) Waste Recovered (Tonnes) Waste Recycled (Tonnes)
Sector Coverage
(assets)
2022 2023 203 2023 2023
O 6 of 11 124 145 0.1% 0.2 64% 93 35% 51
RHS 1 of 1 28 29 0% 0 77% 22 23% 7
L 1 of 2 299 381 0% 0 51% 195 49% 185
Total 8 of 47 451 554 0% 0.2 56% 310 44% 243
Note: Asset-types for which there is no landlord procurement of energy have been excluded from the table above, but are included in the
total possible coverage number. All figures in this table have been subject to limited assurance by a third-party consultant against
ISAE3000.
Sustainability certifications
Three assets in the portfolio have BREEAM ratings; 54 Hagley Road in Birmingham (BREEAM Rating: Very Good),The Pinnacle in Reading
(BREEAM Rating: Excellent) and Glass Futures in St Helens (BREEAM Rating: Very Good). Additionally, the contractual agreement for the
industrial development in Knowsley contains an obligation on the developer to achieve a minimum “Excellent” BREEAM rating. The
assessment for Knowsley will be carried out later this year. These assets account for 11.5% 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 in place to make improvements.
% Estimated Rental Value (ERV)
EPC Rating Dec-23 Dec-22 Dec-21
A+ 3% 0% 0%
A 9% 4% 2%
B 37% 26% 21%
C 36% 42% 33%
D 7% 20% 35%
E 7% 7% 8%
F 0% 0% 0%
G 1% 1% 1%
Social Indicators
Health & Safety
Excluding the open moorland at Far Ralia, every asset in the portfolio 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 community and charity engagement activities arranged by our property
manager particularly at multi-let offices.
API Annual Report & Accounts Year End 31 December 2023
101
Glossary
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 cover
The ratio of the company’s net surplus after tax (excluding capital items) to the dividends
paid. Detailed calculation provided on page 89.
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 derivative valuation) divided by total assets (less
derivative valuations). The Articles of Association of the Company have a 65% gearing ratio
limit (see page 89 for calculation).
Group abrdn 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 page 90 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.
MSCI Benchmark
Benchmark which includes data relevant to all properties held by funds included in the MSCI
UK Quarterly Property Index.
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. Detailed calculation provided on page 89.
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.
Ongoing Charges
A measure, expressed as a percentage of the average NAV for a period, of the regular,
recurring costs of running an investment company, calculated in line with AIC ongoing charge
methodology. Such recurring costs include the investment managers fees, auditor’s fees,
director’s fees and other such costs. Detailed calculation provided on page 90.
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.
API Annual Report & Accounts Year End 31 December 2023
102
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.
Property Income Distribution
UK REITs are required to distribute a minimum of 90% of the income from their qualifying
property rental business. This distribution is known as a Property Income Distribution (“PID”).
PIDs are taxable as UK property income in the hands of tax-paying shareholders.
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.
Revolving Credit Facility (“RCF”)
A bank loan facility from which funds can be withdrawn, repaid and redrawn again any
number of times until the facility expires. As at the date of this report, the Company had a
RCF facility of £80 million.
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. Detailed calculation provided on page 89.
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.
API Annual Report & Accounts Year End 31 December 2023
103
Investor Information
Alternative Investment Fund Managers Directive
(“AIFMD”) and Pre-Investment Disclosure
Document (“PIDD”)
The Company has appointed abrdn Fund Managers Limited as
its alternative investment fund manager and Citibank UK
Limited as its depositary under the AIFMD.
The AIFMD requires abrdn Fund Managers Limited, as the
Company’s AIFM, 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 the AIFMD are published in the
Company’s PIDD which can be found on its website:
www.abrdnpit.co.uk. The periodic disclosures required to be
made by the AIFM under the AIFMD are set out on page 104.
Investor Warning: Be alert to share fraud and
boiler room scams
abrdn has been contacted by investors informing us that they
have received telephone calls and emails from people who have
offered to buy their investment company shares, purporting to
work for abrdn or for third party firms. abrdn has also been
notified of emails claiming that certain investment companies
under our 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 callers/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 the veracity of a caller, do not offer any personal
information and end the call.
The Financial Conduct Authority provides advice with respect to
share fraud and boiler room scams at:
fca.org.uk/consumers/scams
Shareholder Enquiries
For queries regarding shareholdings, lost certificates, dividend
payments, registered details and related matters, shareholders
holding their shares directly in the Company are advised to
contact the Registrar (see details on page 105).
Changes of address must be notified to the Registrar in writing.
Any general queries about the Company should be directed to
the Company Secretary in writing (see Contact Addresses) or by
email to: property.income@abrdn.com
Closure of the abrdn Investment Trust Savings
Plans (the “Plans”)
In June 2023, abrdn notified investors in the abrdn Investment
Trust ISA, Share Plan and Investment Plan for Children that
these plans would be closing in December 2023. All investors
with a holding or cash balance at that time transferred to
interactive investor (“ii”). ii communicated with investors in
November to set up account security to ensure that investors
could continue to access their holdings via ii following the
closure of the Plans.
Please contact ii for any ongoing support with your account on
0345 646 1366, or +44 113 346 2309 if you are calling from
outside the UK. Lines are open 8.00am to 5.00pm Monday to
Friday. Alternatively, you can access the ii website at:
www.ii.co.uk/abrdn-welcome
How to Invest in the Company
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
private investors, there are a number of online dealing
platforms 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.
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
Personal Investment Management and Financial Advice
Association at: pimfa.co.uk
Financial Advisers
To find an adviser who recommends on investment trusts,
visit: unbiased.co.uk
Regulation of Stockbrokers
Before approaching a stockbroker, always check that they are
regulated by the Financial Conduct Authority at:
fca.org.uk/firms/financial-services-register
How to Attend and Vote at Company Meetings
Investors who hold their shares through a platform or share
plan provider (for example Hargreaves Lansdown, Interactive
Investor or AJ Bell) and would like to attend and vote at
Company meetings (including AGMs) should contact their
platform or share plan provider directly to make arrangements.
Investors who hold their shares through platforms and have
their shares held through platform nominees, may not
necessarily receive notification of general meetings and are
advised to keep themselves informed of Company business by
referring to the Company’s website. Where voting is required,
and the Board encourages shareholders to vote at all general
meetings of the Company, shareholders with their holdings in
nominees will need to instruct the nominee to vote on their
behalf and should do so in good time before the meetings.
API Annual Report & Accounts Year End 31 December 2023
104
Keeping You Informed
Information about the Company can be found on its website:
www.abrdnpit.co.uk, including share price and performance
data as well as London Stock Exchange announcements, current
and historic Annual and Half-Yearly Reports, and the latest
monthly factsheet on the Company issued by the Manager.
Investors can receive updates via email by registering on the
home page of the Company’s website.
The Company’s Ordinary share price appears under the heading
‘Investment Companies’ in the Financial Times. Details are also
available at: invtrusts.co.uk
X (formerly Twitter):
@abrdnTrusts
LinkedIn:
abrdn Investment Trusts
Key Information Document (“KID”)
The KID relating to the Company and published by the Manager
can be found on the Company’s website.
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 REITs are excluded from these
restrictions therefore, the FCA’s restrictions on retail
distribution do not apply.
Note
Please remember that past performance is not a guide to the
future. Stock market and currency 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 investment
trust shares purchased will immediately be reduced by the
difference between the buying and selling prices of the shares,
known as 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.
AIFMD Disclosures (unaudited)
The Company has appointed abrdn Fund Managers Limited as
its alternative investment fund manager with Citibank UK
Limited, as its depositary under 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.abrdnpit.co.uk. There have
been no material changes to the disclosures contained within
the PIDD since its last publication in June 2022.
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 abrdn Fund Managers
Limited on request (see contact details on page 105) and the
remuneration disclosures in respect of the AIFM’s reporting
period for the period ended 31 December 2023 are available on
the Company’s website.
Leverage
The table below sets out the current maximum permitted limit
and actual level of leverage for
the Company:
Gross Method Committed Method
Maximum level of
leverage
400% 250%
Actual level at 31
December 2023
179% 150.6%
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 103 to 104 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 abrdn
Fund Managers Limited which is authorised and regulated by
the Financial Conduct Authority
API Annual Report & Accounts Year End 31 December 2023
105
Directors and Company Information
Directors
James Clifton-Brown
Mike Balfour
Jill May
Sarah Slater
Mike Bane
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
abrdn Fund Managers Limited
280 Bishopsgate
London
EC2M 4AG
Independent Auditors
Deloitte LLP
Regency Court
Glategny Esplanade
Guernsey GY1 3HW
Depositary
Citibank UK Limited
Canada Square, Canary Warf
London E14 5LB
Property Valuers
Knight Frank LLP
55 Baker Street
London W1U 8AN
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Addleshaw Goddard
Milton Gate
60 Chiswell Street
London EC1Y 4AG
Walkers (Guernsey) LLP
Helvetia Court
St Peter Port
Guernsey GY1 1AR
Broker
Winterflood Securities Limited
The Atrium Building
Cannon Building
25 Dowgate Hill
London EC4R 2GA
Principal Bankers
The Royal Bank of Scotland plc
135 Bishopsgate
London EC2M 3UR
API Annual Report & Accounts Year End 31 December 2023
106
Annual General Meeting
Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of abrdn Property Income Trust Limited (‘the Company’)
will be held at the offices of abrdn, 18 Bishops Square, London E1 6EG on 13 August 2024, at 2.00pm, for the
following purposes:
To consider and, if thought fit, pass the following resolutions as
ordinary resolutions:
To receive and approve the Annual Report and
Consolidated Financial Statements of the Company for
the year ended 31 December 2023.
To receive and approve the Directors’ Remuneration
Report (excluding the Directors’ Remuneration Policy) for
the year ended 31 December 2023.
To approve the Company’s dividend policy to continue to
pay a minimum of four quarterly interim dividends per
year.
To re-appoint Deloitte LLP as Auditor of the Company
until the conclusion of the next Annual General Meeting.
To authorise the Board of Directors to determine the
Auditor’s Remuneration.
To re-elect Mike Bane as a Director of the Company.
To re-elect Mike Balfour as a Director of the Company.
To re-elect James Clifton-Brown as a Director of the
Company.
To re-elect Jill May as a Director of the Company.
To re-elect Sarah Slater as a Director of the Company.
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.
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API Annual Report & Accounts Year End 31 December 2023
107
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
£381,219 being approximately 10 percent of the
nominal value of the issued share capital of the
Company, as at 25 April 2024.
By Order of the Board
For and on behalf of Northern Trust International Fund
Administration Services (Guernsey) Limited
Secretary
29 April 2024
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API Annual Report & Accounts Year End 31 December 2023
108
Annual General Meeting
Notes to the notice of 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 Chair 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 2.00pm
on 9 August 2024.
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 6.00pm
on 9 August 2024.
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 6.00pm on 9 August 2024.
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
As at 25 April 2024, the latest practicable date prior to
publication of this document, the Company’s issued
share capital comprised 381,218,977 Ordinary shares of
1p excluding shares were held in treasury. Accordingly,
the total number of voting rights in the Company at 25
April 2024 was 381,218,977 shares.
Any person holding 3% of the total voting rights in the
Company who appoints a person other than the Chair 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.
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