STAD EURONPV We are also now seeing the beginning of investment market activity on the retail side. We expect to see a more positive sentiment on the retail investment market spread with increased data on post pandemic spending habits, followed by tenant activity then following through to the relevant investment markets. The British Retail Consortium reported retail sales were 6.4 per cent higher in July than in the same month one year ago. This is below the 3-month average growth of 14.7 per cent. UK retail warehouses are leading the way in the sector with Savills reporting the pandemic-related pause in transactional activity to be short-lived, with the investment market off to a good start to 2021 with GBP476 million of transactions in the first quarter. This is the largest volume of first quarter transactions since 2017 and is up 47 per cent on the same period in 2019. Yields have been moving rapidly and are tighter by as much as 75 basis points for prime assets since last year. The many different types of retail in Europe will move at differing paces and it will be interesting to see how momentum builds in this space.
Inflation has become a concern for markets with uncertainty about whether high short term readings will translate into longer term inflation. The markets are currently signalling that this is a short term effect with continued low long term bond yields. Evercore note the last time US short term inflation was this high, the ten year US treasury bond yielded 7.7 per cent whereas it is only 1.3 per cent today. If expectations changed on long term inflation then we would expect to see interest rate policy responses and in this case the Group's portfolio would benefit as 78 per cent of the portfolio is floating rate debt which would benefit from higher short term interest rates. While the income from floating rate loans would benefit from increases in rates, these loans all feature interest rate floors which protect income against very low interest rates. This results in an asymmetrically better upside to an increasing interest rate environment versus the downside of a decreasing interest rate environment from here. Capital markets generally have continued a positive trajectory. The FTSE 100, FTSE 250 and the iShares UK Property ETF are up 8.9 per cent, 9.2 per cent and 9.5 per cent respectively during the first half of 2021.
The trend in non-bank lending to the real estate market continues to be highlighted by data coming through from the Cass business school survey which is the most comprehensive survey of UK commercial real estate lending. The statistics provide a clear picture of the scale of the migration from domestic balance sheet lenders to other sources of capital in commercial real estate lending. In 2008 GBP170 billion of UK commercial real estate debt was held by UK banks and building societies. By the end of 2020 this had reduced to GBP77 billion. That corresponds to a reduction of market share from 66 per cent to 40 per cent. This trend is clearly being seen in the Group's pipeline which includes a diverse set of opportunities and is at the strongest level since the Group was established.
All of the above factors combined give us confidence of positive momentum in our markets and activity amongst our counterparties; we therefore expect our portfolio to continue to perform robustly and we expect to see further opportunities for loan origination.
PORTFOLIO STATISTICS
As at 30 June 2021, the portfolio was invested in line with the Group's investment policy. The key portfolio statistics are as summarised below.
30 June 30 June
2021 2020
Number of investments 18 18
Percentage of currently invested portfolio in floating rate loans 78.3% 79.5%
Invested Loan Portfolio unlevered annualised total return (1) 6.6% 6.7%
Portfolio levered annualised total return (1) 6.8% 7.0%
Weighted average portfolio LTV - to Group first GBP (1) 18.0% 18.4%
Weighted average portfolio LTV - to Group last GBP (1) 63.5% 62.9%
Average loan term (stated maturity at inception) 4.7 years 4.4 years
Average remaining loan term 2.2 years 2.8 years
Net Asset Value GBP423.7m GBP430.1m
Amount drawn under Revolving Credit Facilities (excluding accrued interest) (GBP11.0m) (GBP24.1m)
Loans advanced GBP420.8m GBP448.9m
Cash GBP1.4m GBP9.0m
Other net assets (including hedges) GBP12.5m GBP3.8m 1. Alternative performance measure - refer to Alternative performance Measures for definitions andcalculation methodology. The maturity profile of investments as at 30 June 2021 is shown below.
Remaining years to contractual maturity (1) Principal value of loans % of
GBPm invested portfolio
0 to 1 years 83.5 20%
1 to 2 years 163.3 39%
2 to 3 years 29.1 7%
3 to 5 years 142.6 34% 1. Excludes any permitted extensions. Note that borrowers may elect to repay loans before contractualmaturity. The Group continues to achieve good portfolio diversification as shown in the below:
Country % of invested assets UK 43.3% Spain 29.1% Republic of Ireland 20.5% Netherlands 3.4% Germany 2.7% Finland 1.0% Sector % of invested assets Hospitality 40.4% Office 22.2% Retail 12.7% Residential 11.2% Healthcare 6.0% Life Sciences 4.7% Light Industrial 1.3% Logistics 1.3% Other 0.2% Loan type % of invested assets Whole loans 62.3% Mezzanine 37.7% Currency % of invested assets* Sterling 43.3% Euro 56.7%
-- The currency split refers to the underlying loan currency, however the capital on all non-sterlingexposure is hedged back to sterling.
The Board considers that the Group is engaged in a single segment of business, being the provision of a diversified portfolio of real estate backed loans. The analysis presented in this report is presented to demonstrate the level of diversification achieved within that single segment. The Board does not believe that the Group's investments constitute separate operating segments.
SHARE PRICE PERFORMANCE
As at 30 June 2021 the NAV was 103.62 pence per Ordinary Share (31 December 2020: 104.18 pence) and the share price was 94 pence (31 December 2020: 90 pence).
Source: Morningstar
The Company's share price has been volatile since March 2020. This volatility has been driven by market conditions and trading cash flows rather than a change in the Company's NAV.
INVESTMENT DEPLOYMENT
As at 30 June 2021, the Group had 18 investments and commitments of GBP455.3 million as follows:
Sterling equivalent Sterling equivalent unfunded Sterling Total (Drawn and
balance (1) commitment (1) Unfunded)
Hospitals, UK GBP25.0m - GBP25.0m
Hotel & Residential, UK GBP49.9m - GBP49.9m
Office, Scotland GBP4.9m GBP0.1m GBP5.0m
Office, London GBP13.6m GBP7.0m GBP20.6m
Hotel, Oxford GBP16.7m GBP6.3m GBP23.0m
Hotel, Scotland GBP38.1m GBP4.5m GBP42.6m
Hotel, North Berwick GBP13.1m GBP1.9m GBP15.0m
Life Science, UK GBP19.5m GBP7.1m GBP26.6m
Logistics Portfolio, UK(2) GBP0.6m - GBP0.6m
Total Sterling Loans GBP181.4m GBP26.9m GBP208.3m
Three Shopping Centres, GBP31.2m - GBP31.2m
Spain
Shopping Centre, Spain GBP14.6m - GBP14.6m
Hotel, Dublin GBP51.6m - GBP51.6m
Hotel, Spain GBP46.6m - GBP46.6m
Office, Madrid, Spain GBP15.9m GBP0.9m GBP16.8m
Mixed Portfolio, Europe GBP24.8m - GBP24.8m
Mixed Use, Dublin GBP3.9m GBP8.7m GBP12.6m
Office Portfolio, Spain GBP13.2m GBP0.3m GBP13.5m
Office Portfolio, Ireland GBP30.2m - GBP30.2m
Logistics Portfolio, GBP5.1m - GBP5.1m
Germany(2)
Total Euro Loans GBP237.1m GBP9.9m GBP247.0m (MORE TO FOLLOW) Dow Jones Newswires
September 07, 2021 02:00 ET (06:00 GMT)
