Annual Report & Consolidated Accounts
Year ended 31 December 2022
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● Introduction
02 Objective and Investment Policy
● Strategic Report
04 Financial and Portfolio Review
06 Performance Summary
07 Chair’s Statement
12 Investment Manager’s Report
24 Property Investments
29 Environmental, Social and Governance
42 Taskforce for Climate-Related Financial Disclosures
46 Stakeholder Engagement
50 Strategic Overview
● Governance
60 Board of Directors
62 Directors’ Report
67 Corporate Governance Report
73 Sustainability Committee Report
74 Audit Committee Report
76 Directors’ Remuneration Report
79 Statement of Directors’ Responsibilities
● Financial Statements
80 Independent Auditor’s Report
90 Consolidated Statement of Comprehensive Income
91 Consolidated Balance Sheet
92 Consolidated Statement of Changes in Equity
93 Consolidated Cash Flow Statement
94 Notes to the Consolidated Financial Statements
● Additional Information
123 EPRA Performance Measures, ESG Performance
and Environmental Indicators
134 Glossary
136 Investor Information
141 Annual General Meeting
Contents
01
API Annual Report & Accounts Year End 31 December 2022
Images
1. Mount Farm, Milton Keynes
Objective and Investment Policy
Introduction
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.
An analysis of how the portfolio was invested on 31 December
2022 is contained within the Investment Manager’s Report.
03
Strategic Report Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022
2022 Financial Review
Dividends paid*
p
4.0p
Dividends paid of 4.0p in the year
2021: 3.7725p. Dividends paid in 2022
equated to a yield of 6.4% based on
the share price at 31 December 2022.
Share buybacks
£
£12.4m
Share buybacks totalling £12.4m
in 2022 at significant discounts to
NAV which are accretive to both
NAV performance and earnings
(NAV per share 0.2p higher).
Financial resources*
£
£57.8m
Financial resources of £57.8 million
as at 31 December 2022
2021: £50 million available for
investment to enhance earnings.
2022 NAV
total return*
NAV total return of –12.8% 2021: 28.6%
for the year, 7.0% over 3 years, 21.9%
over 5 years and 159.5% over 10 years.
–12.8%
Loan-to-Value
Low Loan-to-value of 22.6%
2021: 19.2% at the year end with
scope to increase gearing through
available revolving credit facilities.
22.6%
2022 Share price
total return*
Share price total return of –19.0%
2021: 43.4% for the year, -18.5%
over 3 years, -11.8% over 5 years and
90.4% over 10 years.
–19.0%
Dividend yield
FTSE All-Share
Index
4.6%
3.6%
Dividend
yield*
6.4%
Dividend yield
FTSE All-Share
REIT Index
* These Alternative Performance Measures “APMs” are defined in the glossary on pages 134 and 135.
Yields based on stats
at 31 December 2022
based on share price at
31 December 2022 of 62.4p.
Strategic Report
* These Alternative Performance Measures “APMs”
are defined in the glossary on pages 134 and 135.
Positive asset
management
£
£1 .98m
Positive asset
management
£
11%
A total of 6 lease renewals and
restructurings were undertaken,
securing £567,954 pa in rent,
and a total of 16 lettings
including agreements for
lease securing £1,980,737 pa.
6 rent reviews were settled
with uplifts in rent, securing
an additional £237,560
(an average increase
of 11% on previous rent).
2022 Portfolio
total return*
Portfolio total return of
–8.8% 2021: 22.6% is marginally
ahead of the MSCI benchmark
return of -8.9% and the
Company has outperformed its
benchmark over all time periods.
–8.8%
Portfolio well positioned
55.7%
Industrial
21.6%
Office
13.1%
Retail
9.6%
Other
†
2022 Financial Review
The portfolio sector exposure reflects
thematic trends. The Company has retained
a high weighting to industrial / logistics
assets with a focus on mid box units that are
affordable and meet tenant needs. We have
continued to reduce the exposure to offices
through disposals of assets, with a year end
weighting of 22.0%, and a weighting as at
31 March of 19.6%. The outlook for offices
remains uncertain with risks on the downside
as occupiers need less space, with demand
focused on “future fit” accommodation.
The exposure to retail has remained constant,
with a clear target of affordable retail
warehouse space let to budget style retailers.
After year end we increased our exposure
to the retail sector with the purchase of
a food store – a sub-sector we continue
to believe in at a time when retail generally
remains challenged. Other represents
a data centre, and two leisure investments
(the larger of which is underpinned by
residential conversion potential in North London).
PV schemes
The Company has 7 operational
PV schemes totalling 1.5 MWp
and is actively engaged in
24 additional schemes that
would add a further 16.0 MWp.
†
Excludes Far Ralia
90.2%98.9%
Rent collection for 2022 of
98.9% of rent due (2021: 96.0%).
Occupancy rate of 90.2%
2021: 90.3% compared to the
MSCI rate of 90.0% 2021: 90.0%.
Rent Collection
Occupancy Rate
05
Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Strategic Report
Earnings, Dividends & Costs
31 December
2022
31 December
2021
IFRS Earnings per share (p) (13.11) 21.54
EPRA earnings per share (p) (excl capital items & swap movements)
1
2.94 3.69
Dividends paid per ordinary share (p) 4.0 3.7725
Dividend Cover (%) 73 98
Dividend Cover excluding non-recurring items (%) 97 98
Dividend Yield (%)
2
6.4 4.6
FTSE All-Share Real Estate Investment Trusts Index Yield (%) 4.6 2.6
FTSE All-Share Index Yield (%) 3.6 3.1
Ongoing Charges
3
As a % of average net assets including direct property costs 2.2 2.2
As a % of average net assets excluding direct property costs 1.1 1.2
Capital Values & Gearing
31 December
2022
31 December
2021
Change
%
Total assets (£million) 444.9 526.6 (15.5)
Net asset value per share (p) (note 21) 84.8 101 (16.0)
Ordinary Share Price (p) 62.4 81.5 (23.4)
(Discount)/ Premium to NAV (%) (26.4) (19.3)
Loan-to-value (%)
4
22.6 19.2
Total Return
1 year
% return
3 year
% return
5 year
% return
10 year
% return
NAV
5
(12.8) 7.0 21.9 159.5
AIC Property Direct – UK Commercial (weighted average) NAV Total Return (0.4) 20.9 39.6 32.1
Share Price
5
(19.0) (18.5) (11.8) 90.4
AIC Property Direct – UK Commercial (weighted average) Share Price Total Return (15.8) (6.9) 12.5 17.8
FTSE All-Share Real Estate Investment Trusts Index (31.6) (25.8) (15.0) 45.1
FTSE All-Share Index 0.3 7.1 15.5 88.2
Property Returns & Statistics (%)
31 December
2022
31 December
2021
Portfolio income return 4.4 4.7
MSCI Benchmark income return 4.1 4.4
Portfolio total return (8.8) 22.6
MSCI Benchmark total return (8.9) 16.3
Void rate 9.8 9.7
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 (see page
123 for further details). EPRA stands for European Public Real Estate Association.
2. Based on dividend paid of 4.0p and the share price at 31 December 2022 of 62.4p.
3. Calculated as investment manager fees, auditor’s fees, directors’ fees and other
administrative expenses divided by the average NAV for the year.
4. Calculated as bank borrowings less all cash as a percentage of the open market
value of the property portfolio as at the end of each year.
5. Assumes re-investment of dividends excluding transaction costs.
Performance Summary
Sources: abrdn, MSCI.
Alternative Performance Measures (“APMs”) including
NAV total return, share price total return, dividend cover,
Loan-to-value dividend yield and portfolio total return are
defined in the glossary on pages 134 to 135.
Strategic Report
Background
With the threat and disruption from COVID-19 abating,
it would have been reasonable to hope that 2022 would
be a year of stability and recovery. However, it turned out
to be quite the contrary. The impact of Russia’s invasion of
Ukraine was the prevalent issue in the early part of the year.
This led, in part, to a sustained surge in inflation and
a corresponding reaction by the Bank of England, and
other Central Banks, to raise interest rates. Gilt yields rose
through the year until late September, but volatility in the
UK Government bond market reached unprecedented
levels in late September/early October when it reacted
negatively to Liz Truss’s “Growth Plan” which triggered
a slump in the UK commercial property market.
James Clifton-Brown
Whilst there have been many changes
in the property market over the year,
one constant has been the increasing
importance of Environmental, Social
and Governance (ESG) factors.
Both occupiers and investors have
an increasing focus on this aspect
of assets, meaning that it is having
a direct impact on value. Fortunately,
the Company’s early and continuing
work in this area has meant we are
well positioned, with the Board’s
Sustainability Committee overseeing
progress in this regard.
Chair’s Statement
07
Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Strategic Report
Chair’s Statement
Continued
UK Real Estate Market
2022 was very much a year of two halves, with the first six
months continuing the positive capital growth recorded
throughout 2021. The third quarter was the tipping point
at which the increase in inflation and interest rates,
along with unexpected government economic policy
announcements, led to a spike in gilt yields. With a rapid
repricing of the “risk-free” rate, real estate values reversed,
resulting in the largest monthly capital declines ever
recorded by MSCI in October and November.
Perhaps surprisingly, the industrial sector was largely
responsible for not only the positive capital growth in
the first half of the year, but also the rapid decline in
the second half. Historically low yields had been paid
in the expectation of high rental growth, by increasingly
debt-backed buyers. The increase in debt costs, coupled
with fears of recession reducing confidence in future
rental growth, led to a sharp upward yield adjustment
and a corresponding decline in values.
Despite this, the dynamics of the industrial market remain
reasonably robust with continued low vacancy levels, limited
new supply and good occupier demand. There is still likely to
be rental growth, albeit at more muted levels than previous
years, meaning the company’s exposure to this sector
should be positive going forward.
The structural change in the office market was accelerated
by the impact of COVID-19. Whilst we are hopeful that
the pandemic is firmly behind us, there are few signs of
confidence returning to the sector. The wide range of
approaches being taken by companies to get staff back
into offices and to manage hybrid working is fuelling this
uncertainty. The Board and Investment Manager remain
convinced that overall office demand will reduce, with well
specified offices which provide good staff amenities faring
best. Given this uncertainty, and the likelihood of further
capital declines, the Company disposed of three office
assets during the year.
We continue to expect the retail sector to experience
challenges and headwinds, particularly with the cost-of-
living crisis and the spectre of recession hanging over the
UK. In such circumstances, the “discretionary” areas of
the market, such as fashion and non-essential retailers,
will suffer most with shopping centres and the high street
bearing the brunt of this. The Company’s retail portfolio
is focused in the retail warehouse sector, predominantly
occupied by discount or budget retailers, for whom we see
a more positive outlook.
Whilst there have been many changes in the property
market over the year, one constant has been the increasing
importance of Environmental, Social and Governance (ESG)
factors. Both occupiers and investors have an increasing
focus on this aspect of assets, meaning that it is having
a direct impact on value. Fortunately, the Company’s
early and continuing work in this area has meant we are
well positioned, with the Board’s Sustainability Committee
overseeing progress in this regard.
Images
1. Timbmet, Shellingford
2. Walton Summit Industrial Estate, Preston
1
Strategic Report
Portfolio and Corporate Performance
The NAV total return for the year was a loss of -12.8%.
The real estate investment portfolio returned -8.8%,
which approximately matched the MSCI Quarterly Property
Index benchmark return of -8.9% over the same period.
The Company’s portfolio has strongly outperformed the
Index over 3, 5 and 10 years.
The share price total return for the year of -19.0% was
disappointing, with the Company’s shares consistently
trading on a discount which peaked with risk free rates
at the end of the third quarter. The Board pursued its share
buyback programme throughout most of the year buying
a total of 15.7m shares at an average discount of 26.8%.
This contributed 0.2p to NAV per share. The Board continues
to monitor the discount of the share price against NAV.
IFRS earnings have decreased from 21.54p per share to
-13.11p for 2022. This reflects the drop in valuations recorded
in the second half of the year. EPRA earnings per share
decreased from 3.69p to 2.94p per share as a result of the
one-off break costs associated with terminating the interest
rate swap entered into in October. Without the break costs
the EPRA earnings per share would have been 3.86p, an
increase of 4.6% reflecting improved rental collection.
Rent Collection
Collection rates largely returned to more normal levels in
2022, with the fourth quarter sitting at 99% and the year
as a whole at 98.9%. This improvement led to a reversal
in bad debt provisions which made a contribution to
performance. Going forward, we believe that the portfolio
is well diversified in tenant risk. In addition, the positive
tenant engagement undertaken over the last couple
of years should be beneficial particularly if economic
conditions deteriorate further.
Financial Resources &
Renewal of the Debt Facility
The Company continues to be in a strong financial position
with significant unutilised financial resources of £55m available
for investment in the form of its revolving credit facilities
(“RCF”) net of existing cash and financial commitments.
The low Loan-to-value (“LTV”) ratio of 22.6% at the year end
means the Company is well placed to deploy capital into
accretive assets which fit the portfolio strategy.
The existing debt facility (which includes the RCF) of
£165 million will come to an end in April 2023. This was
renewed at the end of the summer with our existing lender
at a three year tenor comprising an £85 million term loan
and an £80 million RCF. A swap contract to fix rates on the
£85 million term loan was also negotiated. At that time
the politically induced gilt market volatility was at its height.
We took the view that it was in the Company’s best interests
to secure the re-financing for April 2023 as some lenders
were beginning to withdraw from the market. Furthermore,
even if facilities had still been available, it was possible that
the Company could have been forced to renew at even
higher rates if markets had continued to deteriorate.
UK fixed interest markets began to improve shortly after new
terms had been agreed and, therefore with hindsight, our
loan renewal timing proved to be poor. Recognising this, and
the income-orientated nature of the Company the Board
and Managers pro-actively reconsidered matters with the
help of external advice. As a result, the new swap contract
was terminated in December and replaced with an interest
rate cap arrangement. This limits the interest cost on the
term loan to 5.46%, but if SONIA declines the Company’s
interest cost will decline too.
2
09
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
These new arrangements have resulted in a one-off
charge of £3.56 million to terminate the swap, along with
the payment of a premium of £2.5 million for the cap
arrangement. This premium will be amortised over the
three years from April 2023. Although complex and costly,
the Board believes these actions have placed the Company
on a better footing for the future.
Benchmark Change
Following a review undertaken by the Investment
Manager’s Investment Strategy Team, the Board has
decided to amend the benchmark against which the
property portfolio is measured. Going forward the MSCI
UK Quarterly Property Index will be referenced, as it has
grown to become the largest and most relevant benchmark
covering the UK market. The Company previously used
the MSCI UK Monthly Index Funds Quarterly Property Index
which has, in recent times, not only reduced in size but is
also now less reflective of the investment universe in which
the Company could acquire assets.
Dividends
The Board remains conscious that many of the Company’s
shareholders have invested in the Company because of
the attractive level of income it generates. The Board aims
to invest in good quality assets that have the potential to
provide an above market level of total return as well as an
attractive level of income that has scope to grow.
The Board has maintained the annual dividend of 4p per
share, which was reached at the end of 2021, for 2022.
Dividend cover has decreased to 73%, down from 98% in
2021. Excluding one-off swap break costs, dividend cover
was 97%.
The Board reaffirms its stated intention to maintain the
current dividend level, of 4p per share despite the increased
financing costs for the next two years.
Management Fee
A thorough review of costs was undertaken late in the year,
which resulted in a renegotiation of and 10bps reduction
in the management fee. From 1st January 2023 abrdn will
be paid 0.6% of Gross Asset Value (GAV) below £500m,
and 0.5% above £500m.
Annual General Meeting (“AGM”)
The Annual General Meeting (“AGM”) will be held at
2.30pm on Wednesday 14 June 2023 at Wallacespace,
15 Artillery Lane, London E1 7HA. 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
The Board has decided to hold an interactive Online
Shareholder Presentation at 2.30pm on Tuesday
13 June 2023. As part of the presentation, shareholders
will receive updates from the Chair and Manager as
well as the opportunity to participate in an interactive
question and answer session. Further information
on how to register for the event can be found on
www.workcast.com/register?cpak=9811658259471291
Outlook
2022 was a particularly challenging year for many
companies including this one. The high industrial weighting
had a negative impact during the past year but we believe
the sector allocation and assets held will be beneficial in the
near future. The new debt facility provides the Company
with certainty, albeit at a higher interest rate than before.
This increased cost will impact short-term dividend cover,
but the Board and Investment Manager are confident
that the portfolio offers a wide range of initiatives and
opportunities to grow income. In addition, the Company’s
strong financial footing provides the means to take
advantage of market conditions to acquire well-specified,
attractively priced assets which will enhance dividend cover.
We are anticipating a continued easing of inflation, with
forecasts of a return to lower levels later this year. Whether
the slowing of the UK economy results in a recession is still
to be seen, but the diversification of the API tenant base, the
portfolio weighting to more favoured areas of the market,
the quality of the assets and our focus on ESG should leave
us well-placed for the year ahead.
21 April 2023
James Clifton-Brown
Images
1. 54 Hagley Road, Birmingham
2. Building 3000, Birmingham
Chair’s Statement
Continued
Strategic Report
1
2
11
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Investment Manager’s Report
For the year ended 31 December 2022
Strategic Report
2022 was another year of unexpected
challenges. The year started with
optimism of ongoing recovery in
a post COVID-19 world, before the
shock of the Russian invasion of
Ukraine changed the economic outlook
globally with inflation and rising interest
rates becoming the main narrative.
Market Review
2022 was another year of unexpected challenges. The year
started with optimism of ongoing recovery in a post COVID-19
world, before the shock of the Russian invasion of Ukraine
changed the economic outlook globally with inflation and
rising interest rates becoming the main narrative. The UK
had further challenges with a very volatile political situation.
This reached a climax in September with a mini budget that
led to a spike in inflationary and interest rate expectations,
with a sharp decline in Sterling.
During the first six months of the year, performance
for UK real estate was positive, with investment activity
remaining robust. However, the narrative changed in
the second half of the year as government bond yields
and inflation rose and economic sentiment declined.
The tightening monetary cycle increased financing costs
for real estate, which acted as the catalyst for a broad
decline in UK property values. In addition, the spread
between real estate and UK government bond yields
narrowed over the year as bond yields rose, making
the asset class relatively less attractive.
The UK real estate market recorded a total return of
-8.9% in 2022, according to the MSCI quarterly Index.
The 7.8% positive total return recorded in the first six months
of the year was more than unwound during the second
half of the year with a -4.2% fall in capital values through
the third quarter which accelerated to a -12.0% decline in
fourth quarter. The overall return of -8.9% in 2022 masks
significant divergence in returns at the sector level.
The UK industrial sector was the weakest performing sector,
posting a total return of -14.6% over the course of 2022,
whilst the office and retail sectors recorded returns of -9.8%
and -4.8% respectively over the same period. Transaction
volumes reached £62.8 billion over the course of the year,
16% down on 2021 but 26% ahead of 2020 levels.
13
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Following a very strong year of performance in 2021, the
listed property sector had a difficult 2022 with widening
discounts to net asset values (NAV). The FTSE UK REIT index
registered a total return of -31.9% in 2022, underperforming
the FTSE All-Share index, which recorded a total return of
0.3%. Sector specialists that had been trading on the biggest
premiums saw rapid moves to large discounts especially
in the logistics sector, reflecting the change in pricing of the
underlying assets which had reached low levels of yield.
Specialist funds have been increasingly popular over the last
few years, however with logistics funds being hardest hit in
terms of NAV falls in 2022 and several social housing funds
having significant challenges, there is potential for diversified
funds to return more into favour. NAV declines in Q4 led to
a narrowing of discounts for a while, but concerns over a
new banking crisis at the end of Q1 2023 mean discounts are
back to similar levels as at end 2022 despite the lower NAVs.
Offices
The office sector delivered a total return of -9.8% in the year
to December 2022 according to the MSCI Quarterly Index,
a deterioration on the +5.3% recorded in 2021. Performance
for the sector was impacted by declining capital values
as yields rose in response to increasing interest rates and
a narrowing spread over the UK 10-year gilt yield. Capital
values rose by a modest 0.9% during the first half of 2022,
but they declined by -13.9% in the second half, resulting in
values declining by -13.2% for the year.
There was a polarisation in performance at the market level
within the office sector, with West End offices posting the
strongest total return of -4.5% during 2022. With total returns
of -12.1% and -11.6% respectively during 2022, the Rest of
UK and the Rest of South East posted the weakest regional
returns within the office sector.
Despite structural headwinds facing the sector more
generally, vacancy rates in the West End office market
declined to 3.7% in 2022, having hit 5.4% during 2020
according to CBRE data. The West End office market has
benefitted from more attractive fundamentals, including
much higher office occupancy and a lower vacancy level
than the rest of the office sector. The COVID-19 pandemic
has created a longer-term structural headwind for the
office sector in the UK, largely as a result of the increased
prominence of hybrid working. The subsequent change to
office occupation is reflected in higher vacancy rates across
most UK office markets. In the regional markets, a lack of
availability for best-in-class space is evident which should
provide support for Grade A rental growth.
In central London, the vacancy rate at the end of 2022
stood at 8.2%, substantially higher than the ten-year
average of 5.1%. However, it is clear that occupier
demand remains highly polarised. Despite take-up of
central London office space reaching 12.3 million sq ft
in 2022, in-line with the 10-year average, 80% of take-up
was focused on Grade A space. Indeed, we believe that
occupier preference for the best quality space will create
an increasing wedge in rents between Grade A/best in
class space and the rest for the office sector. In central
London for example, prime rents grew by 4.6% in 2022
whilst market average rents grew by only 2.1%.
1
Retail
The retail sector delivered a total return of -4.8% in 2022
according to the MSCI Quarterly Index. In a similar vein to
other UK real estate sectors, total returns turned negative
due to weakening capital value growth. Capital values rose
by 4.9% during the first half of the year, but this was unwound
in the second half of the year when values declined by
-13.9%. Most of the capital value decline was recorded in
the fourth quarter at -10.5%.
Polarisation across retail sub-sectors was acutely evident,
with retail warehousing posting the best performance in the
retail sector, with a total return of -0.8% and capital growth
of -6.2% in 2022. Well positioned retail warehouses with
essential and discount retailers as anchor tenants continued
to attract investor interest at the expense of discretionary
and non-essential retail. Shopping centres delivered a total
return of -5.3%, whereas supermarkets delivered the lowest
total return of -13.4%, heavily impacted by the -17.5% capital
value decline in the final quarter. The supermarket sector
was more sensitive to the rising interest rate environment
given the generally low yielding nature of the sector.
1. CBRE London datasheet Q4’22 is used for prime rents,
whilst the MSCI UK Q4’22 digest is used for average rents.
Investment Manager’s Report continued
For the year ended 31 December 2022
Strategic Report
Industrial
The fortunes of the industrial and logistics sector turned
during the course of 2022, with the sector leading the
repricing of UK real estate in response to rising debt costs
and a weaker macro-economic environment. Yields within
the sector had reached historic lows in the first half of 2022
as investors continued to favour the sector but, as investor
demand weakened in response to rising debt costs, yields
moved out by between 150 – 200 bps between June and
December 2022. As a consequence, capital values fell
-17.4% during 2022 according to the MSCI Quarterly Index,
leading to it recording the weakest performance across the
UK real estate market, with a total return of -14.6%, a stark
contrast to the return of 36.4% for the sector in 2021.
Lower yielding areas of the market, such as within London
and the wider South East, were the most adversely
impacted, with London industrial seeing its largest quarterly
capital value decline in the history of the MSCI Index of
-22.2% in the final quarter.
That being said, rental growth remained positive
throughout the year, with UK industrial market rental
growth significantly outperforming the market at
10.4% in 2022 – compared to 3.8% for all property –
as occupational demand remained healthy.
Demand was principally driven by the third party logistics
(‘3PL’) sector, while demand from the manufacturing sector
saw continued growth, helping to offset the fall in take-up
from online retailers. While the level of take-up fell in the
second half of 2022, it remained well above the long term
average. ‘Big Box’ take-up for the year reached 47.99m sq ft,
the third highest level on record according to Savills. Despite
robust take-up, supply levels increased during 2022, with the
UK vacancy rate rising to 3.9%. This, however, remains near
historic lows and the existing development pipeline is unlikely
to materially alter the strong supply/demand dynamic which
the sector currently enjoys.
1
Images
1. Howard Town Retail Park,
Glossop
15
Strategic Report Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Strategic Report
Alternatives
The UK real estate alternative sector, or “Other Property” as
it is categorised by MSCI, represents real estate which falls
outside the traditional ‘Retail’, ‘Office’ or ‘Industrial’ definitions.
The alternative sector recorded a total return of -2.6% in
2022, outperforming the other sectors. The healthcare
sector, which represents approximately 10% of the “Other
Property” sector within the MSCI sample, was the standout
performer, generating a total return of 3.5%.
Despite the cost-of-living crisis placing pressure on UK
Household disposable incomes, the leisure and hotel sectors
still outperformed the wider market, returning -3.8% and
-5.3% respectively over the course of 2022. Hotel trading
improved significantly over the course of the year and
whilst room rates were the primary driving force behind
the recovery in performance, occupancy also improved,
supported by growing weekend leisure stays and a recovery
in weekday business demand. With a weaker pound, it is
likely the return of international visitors aided the recovery.
Investor appetite for the living sector continued its
strong trajectory. A total of £12.7 billion was invested in
the living sector in 2022 according to Real Capital Analytics
data, equating to 20% of all UK real estate transactions.
However, of the £12.7 billion invested, the Purpose Built
Student Accommodation (PBSA) sector accounted for
£8.5 billion, or 67% of all activity. The largest deal in the
PBSA sector last year was GIC and Greystar’s purchase of
the Student Roost portfolio from Brookfield for £3.3 billion.
The continued investor interest in the sector helped provide
support for pricing, with direct let PBSA asset yields rising
by only 25bps over the second half of 2022, much less than
other areas of the commercial real estate market.
Market Outlook 2023
Given the magnitude and speed of correction we have seen
in sectors including supermarkets, industrial and logistics,
and long duration income more generally, we believe that
the market pricing for these areas of UK real estate will find
a floor much quicker than we have seen in previous cycles.
As such, our outlook, and forecasts for these areas of the
market have improved materially, given the size of the
corrections experienced.
Following the poor reception to the mini budget in
September 2022 longer term yields may have peaked in
early 2023 and could reduce by year end if inflation falls
as predicted. Lower yields, and in particular forward swap
rates, will make utilising debt more accretive again and will
likely increase investment volumes as debt backed buyers
re-enter the market.
It is never easy to call the bottom of a market cycle, however
it appears that the industrial sector may be bottoming out
about now, with offices and retail values having further to
fall. The rapid repricing of the UK market means that the
prospective returns from today’s levels look more attractive,
along with the likely improvement of the yield premium of
growth assets over gilts as the year develops. abrdn forecasts
a market return of 4.3% over the 3 years from April 2023.
The outlook is positive for the industrial sector and
particularly for better quality assets in strong locations,
as both occupiers and investors narrow their focus on
best-in-class assets. The size and speed of value correction
in 2022 means the sector now looks better value relative
to other real estate sectors and indeed, other asset classes.
The sector continues to benefit from structural tailwinds
and a positive supply/demand dynamic, with the UK
wide vacancy rate remaining near historic lows and
new supply levels likely to remain muted due to higher
development costs. Whilst we anticipate the industrial
vacancy rate to move higher this year, largely as a result
of a weaker economic backdrop, we expect occupational
demand to remain robust as the advent of ‘onshoring’ and
continued demand for e-commerce supports demand for
good quality accommodation.
As a result, further rental value growth is expected and is
likely to drive performance in the medium term. There is the
prospect for capital value growth for best-in-class assets,
as investors once again compete for good quality industrial
accommodation with strong occupational fundamentals.
Investment Manager’s Report continued
For the year ended 31 December 2022
Strategic Report
The office sector continues to face real structural
headwinds as working habits remain altered
following the COVID-19 pandemic. Indeed, the
bifurcation between best-in-class and secondary
office space is acutely evident, becoming even
more entrenched during 2022. Secondary office
accommodation is at risk of obsolescence and
asset stranding, while the capital requirements to
ensure assets meet minimum ESG standards is
unlikely to lead to positive returns.
The office sector did not reprice as much as many
other UK property sectors in 2022, predominantly
due to limited transactional evidence. However,
we expect further pricing discovery to emerge
over the course of 2023 and for secondary
accommodation, this is likely to result in large
downward revisions to valuations. Supply of truly
best-in-class office space remains extremely
limited across the UK which will provide more
support for pricing and tenant demand.
Performance within the retail sector is expected
to remain polarised in 2023. Consumer spending
habits will be driven by consumer cost
considerations and as such, non-discretionary
led retailing is expected to be best placed.
Following a period of repricing in 2022, the retail
warehouse sector is garnering more interest from
investors, particularly for food anchored schemes
with a discount orientated line-up which will be
more insulated from any slowdown in consumer
spending. Equally, the supermarket sector now
looks attractive following a broad re-pricing
last year, but the sector will not be immune to
increasingly price sensitive consumers, with
supermarket operators adapting to changes in
consumer behaviour. A divergence in performance
between the supermarket operators is already
evident and as such, a focus on the quality of the
underlying real estate will remain crucial.
The outlook for 2023 feels a lot more positive than
it did at the end of 2022. Tenant demand remains
resilient for good quality accommodation, and the
impact of high interest rates and gilt yields seems
to be easing, although recent turmoil in the banking
sector is a timely reminder that risks still remain.
If the UK can experience some political stability
and a soft landing, then it feels as though real
estate is well placed to benefit following the short
sharp correction of 2022.
Images
1. 54 Hagley Road, Birmingham
1
17
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
1 Year 3 Year 5 Year 10 Year
100.0%
120.0%
140.0%
160.0%
180.0%
–40.0%
–20.0%
0
20.0%
40.0%
60.0%
80.0%
–.% –.9% –0.% –.%
9.% .9% 4.% .0% 4.9% .7% .% .9% 2.% 89.0% 88.5% 59.5%
Portfolio Total Return
Source: MSCI, abrdn
Portfolio total return
(per annum)
MSCI UK Quarterly
Property Index return
(per annum)
MSCI UK Monthly Index
Funds Quarterly Property
Index return (per annum)
NAV total return
(per annum)
Purchases:
As previously reported in our results to December 2021,
we completed a purchase in April 2022 for £5.0m. The asset
was a car showroom in Stockton on Tees let to Motorpoint
for 25 years (with a tenant break in years 15 and 20), with
the 5 yearly rent reviews linked to CPI. After the reporting
period (in March 2023) the Company acquired a food store in
Welwyn Garden City let to Morrisons for £18.3m, which reflected
a yield of 6.35%. The store is a strong trader for Morrisons
and was acquired off market by way of a sale and leaseback
with a new 25 year lease subject to indexation of rent.
Development:
During 2022 substantial progress was made on the pre-let
development at St Helens. Completion of the development
occurred in April 2023 with a new 15 year lease to the
local Council commencing at a passing rent of £0.7m pa.
The rent is subject to 5 yearly rent reviews linked to CPI +1%.
The property is sublet to a not for profit research body
investigating ways to manufacture low carbon glass
(the project is known as Glass Futures).
After the reporting period the Company completed the
purchase of a development site in Knowsley (Liverpool) for
£4m following grant of planning permission. We expect to
start on site in the second quarter to construct a 110,000 sq ft
grade A logistics unit.
Sales:
A total of four assets were sold in 2022 for a total of
£41.8m at a combined realised loss of £0.2m based on the
valuation as at 31 December 2021 and the net proceeds as
disclosed in note 7. Three of the assets were offices and the
decision to sell was taken as part of our general concern
over the future of offices. We also disposed of an industrial
asset (the lowest yielding asset in the company) just before
the major correction in pricing.
Asset Management:
During the COVID-19 pandemic rent collection was a major
focus for the asset management team. In 2022 attention was
able to return to more normal tenant engagement, with rental
collection back at 100% in the fourth quarter and the rate for
the year just over 99% with some rent still being collected.
The vacancy rate at the year-end was 9.8% (prior year
9.7%) which is above our target level of 5%. As noted
opposite, we have several units that are subject to an
agreement for lease, and when those leases complete
along with some other lettings under offer, the vacancy
rate is expected to be close to around that target level.
Investment Manager’s Report continued
For the year ended 31 December 2022
Strategic Report
Ten lettings were completed during the year securing
a total of £1.2m pa. In addition, an agreement for lease
(a contractual agreement to enter into a lease once the
landlord completes a refurbishment) securing a rent of
£0.6m pa was signed and we expect to complete the
works mid 2023. Since the year end two more lettings
have completed securing £0.3m pa.
In addition to the asset lettings, four leases were completed
with an operator of EV charge points in some of our
asset car parks. The combined base rent is only £8,000pa
(with a top up potential share of turnover) however we will
be undertaking more of these lettings where an operator
has the cost of installation and running the charge points,
but our tenants benefit from the service.
Six lease renewals or regears were completed over the
year securing £0.6m pa, along with six rent reviews, resulting
in an additional £0.2m pa being secured and since year
end two more rent reviews with a total increase in rent of
£0.1m pa were agreed. The majority of the increase is from
the industrial / logistics sector although we are also seeing
some increases in our office portfolio.
Rent Collection Quarter % Received
2021 1 100%
2 98%
3 97%
4 99%
2021 FY 98%
2022 1 99%
2 99%
3 97%
4 100%
2022 FY 99%
Income Growth Potential
The Company has a diversified portfolio of commercial
real estate assets let to occupiers under a variety of leases.
The rent that tenants pay will vary over time, and in the case
of the current portfolio the rent received is below market
rates giving scope for increase over the next five years.
This increase will come from rent reviews and lease
renewals on existing leases (£2.1m of reversion present),
completing development projects (£1.2m of rent) and
hopefully letting void units (£2.3m).
Rent reviews are a mixture of open market (negotiated),
fixed or indexed. The graphic below shows the Company mix.
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 % 17.1% 1.0% 3.9 (ex-uncapped income) 8.4
CPI Inflation linked % 4.0% 1.7% 3.7% 14.7
Fixed / Stepped 10.3% 2.6% n/a 10.6
Open Market Value 68.6% n/a n/a 2.6
Total 100% n/a n/a 5.7 FUND WAULT
25
30
35
Rent
£m / pa
0
5
10
15
20
Passing
Rent OMV
RPI Linked
Income
Cpi Linked
Income
Fixed / Stepped
Income
Reversion in
Let Portfolio
Development
Properties
Estimated
Rental Value
Void
Properties
7.47.4
4.3
4.3
.0.0
2.6
2.6
2.
2.
.2
.2
2.4
2.4 3.3.
19
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Case Studies
Images
1. Easter Park, Bolton
2. 101 Princess Street, Manchester
Fitted Office Solution
Office occupier demands are constantly evolving,
with flexibility a key priority in the current environment.
To cater for this, and maximise our office occupancy, the
API team have ensured that the Company’s vacant office
space has all been refurbished and is therefore available
for immediate occupation. In addition, the team have
incorporated a “fully-fitted” option into each of the office
buildings which has vacancy. This consists of installing what
might normally be expected to be a tenant’s fit-out and
typically includes furniture, meeting rooms, break-out areas,
kitchen facilities and fibre internet connection.
By undertaking this work the API team have found that
it has shortened the period that the space is vacant and
reduces the incentive that the occupiers require. Presenting
the space in a fitted condition also helps potential tenants
visualise their own operational requirements and enhances
the appeal of the API buildings. There are also sustainability
benefits to this, as there is the opportunity to reuse elements
of these fit-outs as opposed to starting afresh for each
tenancy. Lastly, the occupier avoids a significant capital
outlay for their fit-out which is instead incurred by the
Company and recovered in an enhanced rent.
Retail Park Rapid EV Charging Hubs
The Company owns 4 multi-let retail parks (Grand National
Retail Park, Aintree; The Point Retail Park, Rochdale; Howard
Town, Glossop; Victoria Shopping Park, Hednesford).
In late 2022, the company signed lease agreements
with a charge point operator, to install a series of rapid
EV charge hubs across these 4 locations in return for
a base rent and turnover agreement. In total we will install
23 rapid DC vehicle chargers across these locations.
Our asset management team assessed numerous
technologies and deal structures to orchestrate this
agreement. Opting to install rapid chargers which will
deliver upwards of 150kW to EVs, providing a full charge
in as little as 45 minutes (vehicle dependent). This initiative
will provide added amenity to our parks, drawing footfall,
increasing dwell time and boosting occupier satisfaction.
The structure of our agreement means that the fund
bears zero upfront capital expenditure for the installations.
Hence, delivering amenity to occupiers and steady income
growth to the Company, without any required investment.
Bolton Refurbishment
The Company owns a logistics unit in Bolton that
had been occupied by a national parcel delivery
company. The tenant left at lease expiry to move
to a larger unit, and on moving out we had another
tenant very keen to move in straight away and take
a new lease of the whole property.
One of the concepts we discuss internally is when
the “Optimum point of intervention” is. Rather than
let the property we decided that the optimum point
of intervention was when the lease ended – we might
not have control of the unit again for 10-15 years.
The Company specified a scope of works that
would ensure the unit met the required standards
of tenants and investors for many years. We took
out gas heating systems and replaced with electric
heating to the offices, and extended the photo
voltaic (PV) system such that the property would be
operational net negative carbon.
Sarah MacDougall the asset manager however went
a step further and took the opportunity to address
worker welfare and biodiversity opportunities.
The refurbishment included enhanced facilities
for the warehouse workers (improved WCs and
showers / amenity room) along with a revised
landscaping plan to increase biodiversity. The end
result was a letting of the unit to a national operator
at a higher rent. The Company not only benefitted
from increased value and rent today, but has an
asset that can contribute to fund performance for
many more years.
Strategic Report
1
2
21
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Debt
The Company’s £110m term loan and £50m revolving
credit facility (RCF) was to mature in April 2023, and
given volatility in the lending market the company sought
to secure an extension in 2022, which it did in October.
At year end the term loan was fully drawn and subject
to an interest rate swap giving an all in cost of 2.725%.
The RCF was undrawn following the sales undertaken
in the year (also undrawn year end 2021 although
there was some utilisation in the intervening period).
The new facility is with the existing lender (RBSI),
commences in April 2023 for three years and consists
of a £85m term loan and an £80m RCF. The margin
on both is 150bps which is considered very competitive.
At the time of agreeing the new facility swap rates
were very unattractive however there was significant
concern that rates would go even higher as a result of
the then Government policy. The Company decided to
enter into a swap given the risks of a worsening situation,
which would have fixed the cost of debt at 7.0%.
With the rapid repricing of interest rate futures following
the change of Prime Minister and Chancellor the Company
decided to break that swap in December 2022 and enter
into an interest rate cap instead. This limits the upper rate
the Company could pay to 5.5% and allows the Company
to benefit from lower rates if they occur.
The costs associated with the debt restructure were,
as detailed in the 2022 NAV and disclosed further in the
accounts, £3.6m to break the swap and £2.5m to replace this
with an interest rate cap; the latter of which will be amortised
over the three-year tenor of the loan. The LTV as at year end
was 22.6% (19.2% prior year) which is a level the Investment
Manager and Board are comfortable with at this stage of the
market cycle.
Outlook and Future Strategy
Although the economic outlook remains uncertain the
portfolio consists of good quality assets that are appealing
to occupiers. The Investment Manager will continue to focus
on growing income through active asset management of the
assets, and ensuring the assets in the portfolio meet occupier
needs. In the first few months of 2023 new occupier interest
is encouraging, and we expect that to continue given the
quality of accommodation the Company offers.
In order to have a reliable income stream with potential
for growth we will continue to focus on ESG and offering
cost effective solutions for occupiers. To reflect the
importance of ESG, the Annual Report now includes
a dedicated section on pages 29 to 41 and we have also
early adopted the Taskforce for Climate-related Financial
Disclosures on pages 42 to 45.
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:
The Company uses a MSCI Benchmark to measure
performance of the underlying assets against the general
market. The portfolio is not constructed with reference to the
MSCI index, but it can be useful to measure the performance
of the Investment Manager. At the end of 2022 the Board
and Manager changed the benchmark index it uses for this
comparison from the MSCI quarterly version of monthly
valued funds to the MSCI Quarterly index. The reason for
this change was that the quarterly index represents a much
broader measure of the market return, and is the main
index used by commentators. For the purpose of this year
end report and accounts performance review the chart
on page 18 shows the portfolio and NAV against both indices
for clarity.
At a portfolio level the Company has continued to
demonstrate performance above that of the overall
market over 1, 3, 5 and 10 years (see graph on page 18).
The improved performance relative to the benchmark
is a result from a combination of structure (having a greater
exposure to strongly performing sectors and low exposure
to poorly performing sectors), and the active approach
to managing the portfolio. Turnover in the portfolio has
been higher than the market over most time periods,
indicating a willingness to take profits and reinvest in new
productive assets.
Investment Manager’s Report continued
For the year ended 31 December 2022
Strategic Report
NAV Return:
The NAV total return is perhaps the best indication of the
Company’s performance, rather than just the property
portfolio, as it takes all costs and manager controlled factors
(such as borrowing) into account. The chart on page 18 shows
NAV total returns alongside the portfolio and market returns.
The table compares the NAV total return of the company
against the AIC peer group, and as a further source of
comparison against the IA open ended fund sector average.
NAV Total Returns to 31 December 2022
Source: AIC, abrdn 1 year
%
3 years
%
5 years
%
10 years
%
abrdn Property Income
Trust Limited
12.8 7.0 21.9 159.5
AIC Property UK Commercial
(weighted average)
0.4 20.9 39.6 32.1
Investment Association
Open Ended Commercial
Property Funds sector
7.7 1.8 1.1 35.5
Share Price:
For the investor, share price total return is the real measure
of their experience, measuring the share price performance
along with the dividends they received. The Company’s
market capitalisation at 31 December 2022 was £237.9m
against £323.5m a year earlier. The reduction in market
capitalisation reflects the wider discount and the share buy
backs undertaken by the Company – totalling £12.4m in 2022.
Share Price Total Returns to 31 December 2022
Source: AIC, abrdn 1 year
%
3 years
%
5 years
%
10 years
%
abrdn Property Income
Trust Limited
19.0 18.5 11.8 90.4
FTSE All-Share Index 0.3 7.1 15.5 88.2
FTSE All-Share REIT Index 31.6 25.8 15.0 45.1
AIC Property Direct —
UK Sector (weighted Average)
15.8 6.9 12.5 17.8
Valuation
The portfolio is valued quarterly by Knight Frank LLP under
the provisions of the RICS Red Book. As at 31 December
2022 the portfolio, including the Ralia Estate, was valued
at £416.2m (£499.9m at 31 December 2021) and the
Company held cash of £15.9m (£13.8m at 31 December
2021). The portfolio consisted of 45 assets at year-end
(48 assets at 31 December 2021).
Investment Strategy
The Company has a clearly stated investment strategy:
“To provide investors with an attractive income return, with
the prospect of income and capital growth, through investing
in a diversified portfolio of commercial real estate assets in
the UK”. The word “Income” features in both the Company’s
name, and prominently in the investment strategy.
Our investment activities are centred around providing an
attractive level of income. However, you will read throughout
the report about the importance of ESG to future returns.
The Investment Manager and Board want to provide a
level of income that is attractive to investors today, that is
sustainable and has scope to grow in the future. We also
want to provide a reasonable total return (i.e. not sacrifice
capital value to deliver an unsustainable level of income).
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 on pages 29 to 41 and we
have also early adopted the Taskforce for Climate-related
Financial Disclosures on pages 42 to 45.
23
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
●
10
●
17
●25
●
42
●
44
●
3
●
30
●
21
●33
●31
●34 ●9
●26 ●32
●5
●37
●36
●41
●40
●34
●24
●43 ●2 ●4 ●35
●38
●1
●20
●
13
●
14
●
27
●
28
●
39
●
18
●
8
●
45
●
7
●
15
●
22
●1
9
●
11
●
23
●
12
●
6
●
16
●
29
● Industrial 54.7%
● Office 21.3%
● Retail 12.9%
● Other 11.2%
Property Investments
as at 31 December 2022
Strategic Report
1. B&Q, Halesowen
2. 54 Hagley Road, Birmingham
3. Symphony, Rotherham
4. Atos Data Centre, Birmingham
5. Timbmet, Shellingford
6. Hollywood Green, London
7. Tetron 141, Swadlincote
8. CEVA Logistics, Corby
9. Walton Summit Industrial
Estate, Preston
10. Badentoy North, Aberdeen
11. The Pinnacle, Reading
12. 15 Basinghall Street, London
13. Stadium Way, St Helens
14. Bastion Point, Dover
15. Tetron 93, Swadlincote
16. New Palace Place, London
17. Ocean Trade Centre, Aberdeen
18. Flamingo Flowers Limited, Sandy
19. One Station Square, Bracknell
20. Swift House, Rugby
21. 160 Causewayside, Edinburgh
22. Mount Farm, Milton Keynes
23. 82-84 Eden Street,
Kingston Upon Thames
24. 101 Princess Street, Manchester
25. Far Ralia, Newtonmore
26. Kings Business Park, Bristol
27. Rainhill Road, Washington
28. Alston Road, Washington
29. Explorer 1 & 2 & Mitre Court,
Crawley
30. Howard Town Retail Park,
Glossop
31. Speedy Hire Unit, Glasgow
32. Wincanton, Bristol
33. Units 1 & 2 Cullen Square,
Livingston
34. Opus 9 Industrial Estate,
Warrington
35. Units H1, H2 & G, Nexus Point,
Birmingham
36. The Point Retail Park, Rochdale
37. Unit 4 Easter Park, Bolton
38. Victoria Shopping Park, Hednesford
39. Unit 2, Fareham
40. Grand National Retail Park, Aintree
41. Olympian Way, Leyland
42. Motorpoint, Stockton-on-Tees
43. 21 Gavin Way, Birmingham
44. Unit 4 Monkton Business Park,
Newcastle
45. Unit 14 Interlink Park, Bardon
1
B&Q Plc
Passing Rent: £1,560,000
6.2%
2
Public Sector
Passing Rent: £1,346,186
5.3%
3
The Symphony
Group Plc
Passing Rent: £1,225,000
4.8%
4
Schlumberger
Oilfield UK Plc
Passing Rent: £1,138,402
4.5%
5
CEVA Logistics
Limited
Passing Rent: £840,000
3.3%
6
Atos IT Services
Limited
Passing Rent: £838,910
3.3%
7
Jenkins Shipping
Co Ltd
Passing Rent: £819,390
3.2%
8
Timbmet Limited
Passing Rent: £799,683
3.2%
9
Thyssenkrupp
Materials (UK) Ltd
Passing Rent: £643,565
2.5%
10
Adexa Direct Limited
Passing Rent: £560,997
2.2%
1
B&Q, Halesowen
£22m–£24m
Retail (5.7%)
2
54 Hagley Road,
Birmingham
£22m–£24m
Office (5.6%)
3
Symphony, Rotherham
£20m–£22m
Industrial (5.0%)
4
Atos Data Centre,
Birmingham
£16m–£18m
Other (3.8%)
5
Timbmet, Shellingford
£14m–£16m
Industrial (3.7%)
6
Hollywood Green,
London
£14m–£16m
Other (3.4%)
7
Tetron 141, Swadlincote
£12m–£14m
Industrial (3.2%)
8
CEVA Logistics, Corby
£12m–£14m
Industrial (3.2%)
9
Walton Summit Industrial
Estate, Preston
£12m–£14m
Industrial (2.9%)
10
Badentoy North,
Aberdeen
£12m–£14m
Industrial (2.9%)
Top 10 Tenants Top 10 Properties
KEY TO MAP
25
Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Strategic Report
Rent expiring
£3,485,761
11.2%
11-
15
years
Rent expiring
£10,348,740
33.3%
0-
5
years
Rent expiring
£8,885,725
28.6%
6-
10
years
Lease Expiry Profile
Property Investments continued
as at 31 December 2022
# Name Location Sub-sector Market value Tenure Area sq ft Occupancy %
•
1 B&Q Halesowen Retail £22m–£24m Freehold 92,400 100.0%
•
2 54 Hagley Road Birmingham Office £22m–£24m Leasehold 136,951 72.6%
•
3 Symphony Rotherham Industrial £20m–£22m Leasehold 364,974 100.0%
•
4 Atos Data Centre Birmingham Other £14m–£16m Freehold 40,146 100.0%
•
5 Timbmet Shellingford Industrial £14m–£16m Freehold 214,882 100.0%
•
6 Hollywood Green London Other £14m–£16m Freehold 63,634 100.0%
•
7 Tetron 141 Swadlincote Industrial £12m–£14m Freehold 141,459 100.0%
•
8 CEVA Logistics Corby Industrial £12m–£14m Freehold 195,225 100.0%
•
9 Walton Summit Industrial Est Preston Industrial £12m–£14m Freehold 147,946 100.0%
•
10 Badentoy North Aberdeen Industrial £12m–£14m Freehold 67,843 100.0%
•
11 The Pinnacle Reading Office £10m–£12m Freehold 39,379 82.9%
•
12 15 Basinghall Street London Office £10m–£12m Freehold 17,083 78.9%
•
13 Stadium Way St Helens Industrial £10m–£12m Freehold 101,087 100.0%
•
14 Bastion Point Dover Industrial £8m–£10m Freehold 84,376 100.0%
•
15 Tetron 93 Swadlincote Industrial £8m–£10m Freehold 93,836 100.0%
•
16 New Palace Place London Office £8m–£10m Leasehold 18,554 98.4%
•
17 Ocean Trade Centre Aberdeen Industrial £8m–£10m Freehold 103,120 81.3%
•
18 Flamingo Flowers Limited Sandy Industrial £8m–£10m Freehold 125,774 100.0%
•
19 One Station Square Bracknell Office £8m–£10m Freehold 42,429 56.9%
•
20 Swift House Rugby Industrial £8m–£10m Leasehold 100,564 100.0%
•
21 160 Causewayside Edinburgh Office £8m–£10m Freehold 39,522 100.0%
•
22 Mount Farm Milton Keynes Industrial £6m–£8m Freehold 74,709 100.0%
•
23 82–84 Eden Street Kingston Upon Thames Retail £6m–£8m Freehold 24,234 97.8%
Strategic Report
Rent expiring
£1,268,240
4.1%
16-
20
years
Rent expiring
£1,340,096
4.3%
21-
25
years
Rent expiring
£4,556
0.0%
25 >
years
* The land at Ralia Estate, Newtonmore covers an area of 1,447 hectares.
# Name Location Sub-sector Market value Tenure Area sq ft Occupancy %
•
24 101 Princess Street Manchester Office £6m–£8m Freehold 41,096 68.5%
•
25 Far Ralia Newtonmore Other £6m–£8m Freehold N/A* 100.0%
•
26 Kings Business Park Bristol Industrial £6m–£8m Freehold 58,538 100.0%
•
27 Rainhill Road Washington Industrial £6m–£8m Freehold 149,676 0.0%
•
28 Alston Road Washington Industrial £6m–£8m Freehold 96,689 100.0%
•
29 Explorer 1 & 2 & Mitre Court Crawley Office £6m–£8m Freehold 43,123 63.3%
•
30 Howard Town Retail Park Glossop Retail £6m–£8m Mixed 47,132 96.3%
•
31 Speedy Hire Unit Glasgow Industrial £6m–£8m Freehold 61,033 100.0%
•
32 Wincanton Bristol Industrial £6m–£8m Leasehold 38,330 100.0%
•
33 Units 1 & 2 Cullen Square Livingston Industrial £6m–£8m Freehold 81,288 100.0%
•
34 Opus 9 Industrial Estate Warrington Industrial £6m–£8m Freehold 53,279 100.0%
•
35 Units H1, H2 & G, Nexus Point Birmingham Industrial £4m–£6m Freehold 46,495 100.0%
•
36 The Point Retail Park Rochdale Retail £4m–£6m Freehold 42,224 100.0%
•
37 Unit 4 Easter Park Bolton Industrial £4m–£6m Leasehold 35,534 100.0%
•
38 Victoria Shopping Park Hednesford Retail £4m–£6m Leasehold 37,096 100.0%
•
39 Unit 2 Fareham Industrial £4m–£6m Freehold 38,217 100.0%
•
40 Grand National Retail Park Aintree Other £4m–£6m Leasehold 38,223 100.0%
•
41 Olympian Way Leyland Retail £4m–£6m Leasehold 31,781 100.0%
•
42 Motorpoint Stockton-on-Tees Other £4m–£6m Freehold 44,266 100.0%
•
43 21 Gavin Way Birmingham Industrial £4m–£6m Freehold 36,376 100.0%
•
44 Unit 4 Monkton Business Park Newcastle Industrial £2m–£4m Freehold 33,021 100.0%
•
45 Unit 14 Interlink Park Bardon Industrial £2m–£4m Freehold 32,747 100.0%
Total property portfolio £416m
27
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Portfolio Allocation by Sector
Rest of UK Industrial 45.5%
Retail Warehouses 11.0%
Rest of UK Offices 9.4%
Other Commercial 9.4%
South East Industrial 9.1%
South East Offices 6.8%
London City Offices 2.7%
London West End Offices 2.3%
South East Retail 1.9%
Land 1.8%
Property Investments continued
For the year ended 31 December 2022
Portfolio Allocation by Region
South East 21.2%
West Midlands 20.9%
East Midlands 13.4%
Scotland 12.0%
North West 13.5%
North East 10.5%
South West 3.4%
London City 2.7%
London West End 2.3%
Strategic Report
Environmental, Social and Governance (ESG)
For the year ended 31 December 2022
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
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 is relatively new, and 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 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.
The report below provides details on the approach and
measures, with a particular focus on carbon and energy.
Hardly a week goes by without an extreme weather event
occurring somewhere in the world, 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.
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.
In 2022, we have been actioning our net-zero strategy
to improve on the baseline performance, with an initial
focus on offices and also a refurbishment to have our first
operational net neutral carbon logistics unit.
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 126 to 133 which also provides
disclosures required under Streamlined Energy and Carbon
Reporting (SECR).
2022 GRESB Assessment.
The GRESB Assessment is regarded as the leading
global sustainability benchmark for real estate vehicles.
The Company has submitted data to GRESB since 2012.
Whilst GRESB is a useful tool for benchmarking ESG
performance, there are significant limitations with the
default peer group selection which the company does
not believe represents its peers. Despite providing this
feedback, GRESB still does not benchmark the Company
against similar UK funds, however we continue to engage
on this matter.
29
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Our ESG Priorities
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.
The Taskforce for Climate-related Financial Disclosures
(TCFD) 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 Company. We highlight our commitments
and progress against both transition and physical risks
below with formal TCFD disclosure on pages 42 to 45.
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 less than 6% of the
Company’s carbon footprint and we have limited control
over 94% 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.
Environmental, Social and Governance (ESG) continued
For the year ended 31 December 2022
Strategic Report
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.
Net-zero delivery strategy.
Target
Timeframe Target Context
Short term Achieve net-zero 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 acknowledging the Landlord only has direct control over
approximately 6% of the energy consumed, it will 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.
31
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Environmental, Social and Governance (ESG) continued
For the year ended 31 December 2022
Delivery
Acquisitions
Action 2022 performance 2023 onwards >
In line with the Investment Manager’s
policies, benchmark assets pre-
acquisition, understand costs and build
decarbonisation into asset management
plan from the start of ownership
During 2022 1 asset was acquired and an
in-depth ESG due diligence was applied.
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 2022 performance 2023 onwards >
Improve ability to obtain tenant
energy data via:
1. Improve tenant engagement
2. Increase smart metering coverage
3. Integrate ESG into lease
agreements
100% of tenants sent ESG data request
(as at 31/12/2022)
49% data coverage by floor area
(based on 2022 GRESB submission,
data as at 31/12/2021)
5 assets by number with smart metering
(as at 31/12/2022)
15 leases signed with non-negotiable
ESG clauses
(as at 31/12/2022)
100% of tenants will be sent
ESG data request annually.
100% of assets to be targeted with
automation of energy data collection.
Every new lease will include
non-negotiable ESG clauses.
Energy efficiency
Action 2022 performance 2023 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.
266 kWh/m² with a -7% reduction in
energy intensity compared to baseline
(2019 versus 2021)
53.1 tCOe/m² with a -16% reduction in
carbon intensity compared to baseline
(2019 versus 2021)
12 tenants procured renewable energy
(based on 2022 GRESB submission,
data as at 31/12/2021)
37% of tenants with face to face
ESG discussion to further understand
ESG and decarbonisation strategies
(as at 31/12/2022)
100% of portfolio ran through
energy and carbon simulation model
(as at 31/12/2022)
73% of portfolio with EPC A-C
(as at 31/12/2022)
58% of assets of Scope 1 and 2 portfolio
reliant on gas
(based on 2022 GRESB
submission, data as at 31/12/2021)
Increase % of tenants for face
to face discussions on ESG and
decarbonisation strategies.
Strategic Report
Performance to Date
Baseline versus current performance:
Our operational carbon intensity for 2019 is shown in
the adjacent table
Normalised Portfolio Carbon Intensity
.
We have 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 2021 annual report
due to improved data coverage and the inclusion of F-gases.
This shows a total operational footprint of 25,128 tonnes of
carbon dioxide equivalent (COe). Of this, 6% is associated
with Scope 1 and 2 emissions that are directly controlled
by the Company, with 94% coming from Scope 3 emissions
from tenant procured energy. For 2019 we gathered energy
consumption data for 31% of the portfolio by floor area
with representative industry standard benchmarks used to
estimate the rest.
Based on these assumptions for 2019 the energy intensity
at the portfolio level was 286 kWh/m² which has reduced by
7% to 266 kWh/m² and the operational emissions intensity
was 63.4 kgCOe/m² across Scopes 1, 2 and 3 which has
improved by 16% to 53.1 kgCOe/m².
Normalised Portfolio
Carbon Intensity
2019 63.4 kgCOe/m²/yr
2021 53.1 kgCOe/m²/yr
-16%
change
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:
Renewable energy
Action 2022 performance 2023 onwards >
Continue to implement solar PV projects
and establish power purchase agreements
with occupiers.
1.5 MWp installed Solar PV capacity
to date with approximately 16 MWp
of opportunity.
Target to increase Solar PV energy
generation across the portfolio
Nature based carbon removal
Action 2022 performance 2023 onwards >
Progress with nature-based carbon
removal strategy at our site Far Ralia
in parallel with asset decarbonisation.
Akre (forestry parter) has completed
seed collection from the site to ensure
the provenance and genetic integrity
of the woodland and these have been
grown in Akre’s carbon-negative nursery.
Partnership with EY and the National
History Museum to pilot the Museum’s
Biodiversity Intactness Index on the
proposed restoration plans.
Planting to be scheduled during 2023.
Peatland restoration works to start post
planting. This will generate claimable
carbon units linearly after the first five
years, and every ten years thereafter.
Developments
Action 2022 performance 2023 onwards >
Direct development and development
funding to be designed to whole life net
zero principles.
1 major refurbishment completed with
embodied carbon calculation completed.
Whole life carbon assessments to be
undertaken for any new refurbishments
and developments and design to be aligned
with whole life net-zero principles.
33
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Environmental, Social and Governance (ESG) continued
For the year ended 31 December 2022
Tenant engagement:
Electric Vehicle Charging.
Although installing EV charge points does not reduce
the Company’s energy consumption, it does help with
decarbonisation, and provides further amenity to tenants.
We have tendered a package of rapid chargers for our
retail warehouse parks, where a third party will pay the
capital cost of installing the chargers and will operate them,
with a small rent coming back to the Company.
In our office properties we are generally installing the
chargers directly, mainly offering one or two fast chargers
as we see how demand develops. At Hagley Road we
have agreed terms for an operator to provide rapid and
fast chargers for the public and tenants to use – again
adding to the amenity offer at the building, and are
looking at an installation that will cater for commercial
van charging at one of our assets in Washington.
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 2030*.
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.
1,000
1,200
1,400
1,600
Emissions
tCOe
0
200
400
600
800
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Landlord Natural Gas
Landlord Electricity
Landlord F-Gas
2030 NZC Target Trajectory
% Estimated Rental Value (ERV)
EPC Rating Dec-22 Dec-21 Dec-20
A 4% 2% 0%
B 30% 21% 6%
C 48% 33% 31%
D 10% 35% 39%
E 7% 8% 9%
F 0% 0% 4%
G 1% 1% 1%
* Only one office has an EPC rating below “C”.
“E” and “G” rated assets are mostly in Scotland where there is a different
regime with no current timescale for achieving specific ratings.
35%
40%
45%
50%
0%
5%
10%
15%
20%
25%
30%
A B C D E F G
EPC rating by % applicable estimated rental value (ERV)
Strategic Report
1,000
1,200
1,400
1,600
Emissions
tCOe
0
200
400
600
800
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Case Studies
Improving Environmental Ratings
of our Office Portfolio
The API team has a special interest in ESG in offices. In order
to help future proof the Company’s investments they are
working with technical asset management consultants
EVORA EDGE to fully understand the options available,
to ensure that relevant interventions are made at the
most appropriate time.
UK legislation requires buildings that are commercially
rented to meet minimum energy efficiency standards
(MEES). Currently this is set as the possession of an ‘E’ rated
energy performance certificate (EPC). However, as part
of its drive to achieve a global commitment to being
net-zero carbon as a nation by 2050, the UK government
published an Energy White Paper in December 2020
stating its intention to raise this to a ‘B’ EPC rating by 2030.
It has since consulted on introducing an interim standard
of a ‘C’ rating by 2027. Currently only about 18% of the UK’s
commercial properties have a ‘B’ EPC rating.
EVORA EDGE already works with abrdn under a framework
contract for mechanical, electrical and public health
consultancy which includes site visits and quarterly audits
of contractors, so they have a lot of knowledge of the
asset already – EDGE APM software was already in use to
manage these assets including the production of planned
maintenance reports (PMRs). This knowledge was used
to build updated EPC models using a dynamic simulation
modelling software, that enables us to understand and
verify the existing EPC ratings and run various scenarios on
each building to identify which improvement works would
secure a ‘B’ and/or ‘C’ rating.
The modelling in these cases had to have a high degree
of accuracy to ensure recommendations were realistic
within the engineering constraints of each building. It also
had to account for the knock-on impact of each change.
For example, switching to LED lighting is more energy
efficient but may mean spaces are colder leading to an
increased heating requirement to ensure thermal comfort
for occupiers.
Using the output from the models we undertook limited
works (often small enhancements to the specification
of planned works) so that all the office portfolio has
a minimum EPC rating of C based on a modern
assessment that is valid through to 2030.
Asset management – Refurbishment to
enhance returns and future proof an asset
Members of the API team have been focussed on delivering
a comprehensive refurbishment to reposition an old
industrial asset. Following the signing of an agreement for
lease to Evri (formerly Hermes) in mid-2022 the company
has designed, tendered, and begun works on site, for the
full-scale repositioning of the 150,000 sq ft former SNOP
auto parts manufacturing factory in Washington. SNOP,
had previously used the unit for industrial use.
The unit has since been let to Evri for 15 years, with 5 yearly
rent reviews to the higher of open market or RPI, capped at
2% and collared at 4%, with a year 10 tenant break option.
The lease will commence on practical completion of
a landlord refurbishment package to reposition the asset
for distribution use.
The package of works will take the unit from an EPC of C
to at least a B, targeting EPC A. With the works including
a comprehensive internal and external upgrade to building
fabric, installation of new warehouse loading doors to create
cross docking, LED upgrades to all lighting, removal of all gas
heating and the installation of electric heating in the offices, civil
works including the reinforcement of concrete slab throughout,
drainage upgrades, yard extension and landscaping.
These works take the unit from being a manufacturing unit
to a modern logistics unit with far greater tenant demand.
In addition, the project includes the company’s largest PV
installation to date. Given the age of the property, our team
was unsurprised to learn that the load bearing capability of
the roof was below modern standards. As a result, we faced
the likelihood of having to install a reduced PV system size.
However, benefiting from the depth of knowledge from the
wider abrdn asset management team, the API team were
able to find an innovative solution which integrates PV panels
within an over cladding product. This solution has enabled
the team to more than double the installable solar capacity
and will provide the fund with a roofing warranty to future
proof the property.
On completion, this will be the largest scheme of its kind in the
UK. Having navigated hurdles with the national grid, structural
loading and roof condition, our team were able to deliver
a 1.25 MWh roof mounted array, with a power purchase
agreement in place to sell generated energy to the tenant.
The system will generate additional income for the company
as well as delivering on our ESG agenda. The finished product
will be a flagship unit for Evri in the North East, and is
expected to be operationally carbon negative on delivery.
35
Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Strategic Report
Environmental, Social and Governance (ESG) continued
For the year ended 31 December 2022
Case Studies
Using Technology to Improve Data Collection
One of the greatest challenges we face in fully
understanding the environmental performance of
our portfolio is availability of energy data. As over
90% of energy consumption in our portfolio is contracted
directly by tenants, it takes a lot of resource to request
and collect this information from each underlying tenant.
Not all tenants want to share this information so we
focus on building good tenant relationships to ensure
data sharing between both parties.
The team at API has been trying to ease this burden
for both landlord and tenant through the use of
technology. abrdn has partnered with a company
called Smart Tech to install Smart meters that not
only provide reporting data, but also help us analyse
consumption and then try to ensure it is as efficient
as possible. The technology has only recently been
developed, but we have installed it with 15 tenants
so far, and are in the process with another 12 – each
one requires a survey of the meters to ensure that an
installation will work, along with a deed of variation to
the lease.
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.
During 2022 the Company has continued the drive
to reduce our occupational carbon footprint through
renewable energy assets. We have continued to push
the design, planning and installation of photo voltaic
(PV) arrays across our portfolio. At the end of 2021,
we had six operational PV schemes, totalling 1.2MWp.
In 2022, we completed the installation of a new 286 kWp
system at Wingates Business Park, Bolton, and completed
8 deed of variation agreements with tenants, 13 grid
applications, 12 new planning permissions granted and
have signed construction contracts for Q1 2023 installations
at properties in Warrington, Milton Keynes, Rugby, Bardon
and Washington.
A broad pipeline of further developments are teed up
to be completed in 2023.
At the end of 2022 our operational PV totals 1,331 kWp,
with this increasing to circa 2,300 kWp as at the date of
signing, with potential to reach 6,800 kWp by the year end,
more than trebling the fund’s renewable energy generation
across the portfolio.
Next steps for the project include continuing to push
pipeline schemes through to fruition, negotiations with
local district network operators, continued lobbying of
planning authorities, negotiations of purchase power
agreements and lease variations with our occupiers, as well
as our continued drive to pioneer new technologies such
as lightweight systems, integrated PV roof cladding and
harnessing wind energy technologies.
Strategic Report
API Projects
Expected
Delivery
Status System
Size
(kWp)
System
Output
(Annual)
Panels Tennis
Courts
Area
Kettles
Boiled
(Annual)
Households
Powered
(Annual)
Electric
Cars
Charged
(Annual)
Street
Lights
Powered
(Annual)
Tonnes
of CO
Emissions
Reduced
(Annual)
Trees
Planted
(Annual)
Interlink Park, Bardon
2023 Q1 1. On Site
60 51,000 150 1.5 463,636 14 23 355 12 561
Unit1-4 Opus 9, Warrington
2023 Q1 1. On Site
232 185,600 580 5.7 1,687,273 49 82 1,293 43 2,043
Mount Farm, Milton Keynes
2023 Q1 1. On Site
258 193,500 645 6.3 1,759,091 51 85 1,348 45 2,130
Explorer 1&2, Crawley
2023 Q2 2. Committed
75 71,000 188 1.8 645,455 19 31 495 16 781
Wincanton, Bristol
2023 Q2 3. Pipeline
150 136,000 375 3.7 1,236,364 36 60 948 31 1,497
Swift House, Rugby
2023 Q2 2. Committed
240 205,000 600 5.9 1,863,636 55 91 1,429 47 2,256
Alston Road, Washington
2023 Q2 2. Committed
707 600,950 1,768 17.4 5,463,182 160 265 4,188 139 6,614
Drilco, Aberdeen
2023 Q3 3. Pipeline
365 276,000 913 9.0 2,509,091 73 122 1,923 64 3,038
Atos Data Centre, Birmingham
2023 Q3 3. Pipeline
100 75,000 250 2.5 681,818 20 33 523 17 825
CEVA Logistics, Corby
2023 Q3 3. Pipeline
499 442,613 1,248 12.3 4,023,755 118 196 3,084 102 4,871
Rainhill Road, Washington
2023 Q3 1. On Site
1,244 1,057,400 3,110 30.6 9,612,727 281 467 7,369 244 11,637
Timbmet, Shellingford
2023 Q3 3. Pipeline
1,500 1,125,000 3,750 36.8 10,227,273 299 497 7,840 260 12,381
Tetron 93, Swadlincote
2023 Q3 3. Pipeline
390 322,936 975 9.6 2,935,782 86 143 2,250 75 3,554
The Point Retail Park,
Rochdale
2023 Q4 3. Pipeline
102 76,500 255 2.5 695,455 20 34 533 18 842
One Station Square, Bracknell
2023 Q4 3. Pipeline
163 150,000 408 4.0 1,363,636 40 66 1,045 35 1,651
Yarm Road, Stockton-on-Tees
2023 Q4 3. Pipeline
168 142,800 420 4.1 1,298,182 38 63 995 33 1,572
Cullen Square, Livingston
2023 Q4 3. Pipeline
815 643,850 2,038 20.0 5,853,182 171 284 4,487 149 7,086
Symphony, Rotherham
2023 Q4 3. Pipeline
1,761 1,496,850 4,403 43.3 13,607,727 398 661 10,431 346 16,474
Bastion Point, Dover
2024 Q1 3. Pipeline
260 221,000 650 6.4 2,009,091 59 98 1,540 51 2,432
Speedy, Glasgow
2024 Q1 3. Pipeline
364 271,000 910 8.9 2,463,636 72 120 1,889 63 2,983
Ocean Trade Centre,
Aberdeen
2024 Q1 3. Pipeline
964 718,180 2,410 23.7 6,528,909 191 317 5,005 166 7,904
Tetron 141, Swadlincote
2024 Q2 3. Pipeline
995 814,880 2,488 24.4 7,408,000 217 360 5,679 188 8,968
Alston Road Solar Extension,
Washington
2024 Q2 3. Pipeline
861 799,008 2,153 21.1 7,263,709 213 353 5,568 185 8,794
Flamingo Flowers, Sandy
(System Extension)
2024 Q2 3. Pipeline
3,715 3,157,750 9,288 91.3 28,706,818 840 1,395 22,005 730 34,753
Total 15,988 13,233,817 39,970 392.7 120,307,427 3,520 5,845 92,222 3,059 145,648
API Existing PV Portfolio
System
Size
(kWp)
System
Output
Panels Number
of
Tennis
Courts
Kettles
Boiled
Households
Powered
Electric
Cars
Charged
Street Lights
Powered
CO
Emissions
Reduced
Trees
Planted
Flamingo Flowers, Sandy (22/06/2020) 918 1,952,299 2,295 19 17,748,173 519 862 13,605 451 21,486
Unit 4, Easter Park, Bolton
(System 1: 18/05/2012) & (System 2: 01/2023)
310 239,788 775 7 2,179,891 64 106 1,671 55 2,639
160 Causewayside, Edinburgh (27/11/2020) 90 108,874 225 2 989,764 29 48 759 25 1,198
Unit 14, Interlink Park, Bardon (29/03/2019) 50 181,518 125 1 1,650,164 48 80 1,265 42 1,998
Tetron 141, Swadlincote (11/12/2018) 50 182,020 125 1 1,654,727 48 80 1,268 42 2,003
Unit 2, Fareham (20/03/2019) 50 146,674 125 1 1,333,400 39 65 1,022 34 1,614
The Pinnacle, Reading (27/03/2017) 42 150,938 105 1 1,372,164 40 67 1,052 35 1,661
Total 1,510 2,962,111 3,775 32 26,928,282 788 1,308 20,642 685 32,600
37
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
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. 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 1.5m natural
broadleaf trees), peatland restoration and other forms of
biodiversity gain.
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.
During the course of 2022 the Company has prepared
detailed planting plans and consulted 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 we are growing
saplings ready for planting in 2023 and 2024. A number of
contracts are being placed 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,
building paths and introducing bird-watching huts and (iii) offer
discovery and volunteering opportunities to local schools and
universities. Healthy woodland will also provide flood mitigation
benefits, improved soil quality and protection against erosion,
as well as enhanced water quality downstream.
Strategic Report
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.
Images
1. Flamingo Flowers Limited,
Sandy
1
39
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Environmental, Social and Governance (ESG) continued
For the year ended 31 December 2022
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 achieving
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 land
purchase of Far Ralia provides an opportunity to
consider biodiversity on a greater scale, as described
on the previous page.
These planned changes should really
increase the area’s Biodiversity Intactness
Index, meaning Far Ralia can expect
strengthened resilience and eco-system-
service security … certainly a successful
outcome for the regeneration plan!
Biodiversity expert, Professor Andy Purvis
Strategic Report
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.
Wellbeing
Within the industrial sector we have added new
requirements when we undertake refurbishments, to include
biodiversity measures and wellness considerations for the
workers. Such actions will help our tenants recruit and retain
staff, enhancing the appeal of the unit. The office sector is
where we can have the greatest impact, ensuring we create
places that attract people to work. This is done by assessing
the offering we provide in terms of flexibility, amenity,
connectivity, technology, and sustainability.
Practical examples include on-site amenities such as
showers, changing facilities, break out areas with coffee
machines and shared meetings rooms.
Health and Safety
Alongside environmental principles the Company has
a health and safety policy which demonstrates commitment
to providing safe and secure buildings that promote
a healthy working/customer experience that supports
a healthy lifestyle. The Company, through the Investment
Manager, manages and controls health & safety risks as
systematically as any other critical business activity using
technologically advanced systems and environmentally
protective materials and equipment. The aim is to achieve
a health and safety performance the Company can be
proud of and allow the Company to earn the confidence
and trust of tenants, customers, employees, shareholders
and society at large. The Board reviews health & safety
on a regular basis in Board meetings.
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.
Local Community
Part of engaging with the local community is to create
local partnerships and provide a wider social impact.
Where possible, we partner with local charities to
provide charity stalls or drop off points within our buildings,
hosting of fundraising activities such as cake bakes and
providing free access to facilities and meeting rooms for
local charity use.
At Hagley Road, we have offered meeting rooms for free
to local charities including Cash for Kids.
It is important to note that the Company has no direct social,
community or employee responsibilities. The Company
has no employees and accordingly no requirement to
report separately in this area as the management of the
portfolio has been delegated to the Investment Manager.
Due to the nature and structure of the Company, the
human rights policy of the Investment Manager is utilised
and applied. This is especially important with regards to the
suppliers used by the Company and ensuring their policies
also adhere to best practice on human rights issues.
41
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
The Taskforce for Climate-Related Financial Disclosures
(TCFD) was established to provide a standardised way to
disclose and assess climate-related risks and opportunities.
Recommendations are structured around four key
topics: Governance, Strategy, Risk Management and
Metrics & Targets.
The Company is committed to implementing the
recommendations of the TCFD to provide investors
with information on climate risks and opportunities
that are relevant to the business.
Taskforce for Climate-Related Financial Disclosures
For the year ended 31 December 2022
TCFD Recommendation Company Approach Further information
Governance
Board oversight of
climate-related risks
and opportunities
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.
Sustainability Committee
Report on page 73.
Management’s role in
assessing and managing
climate-related risks and
opportunities
At an operational level, the Investment Manager is responsible for integrating
a consideration of climate risks and opportunities into the investment and asset
management process. In the first instance this is undertaken by adopting abrdn
real estate’s internal process and policies, and reporting to the Board.
The Company 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.
The Investment Manager reports a number of KPIs to the Board on a quarterly and
annual basis.
The Company’s
approach is set out in the
Environmental, Social
and Governance section
on pages 29 to 41.
Strategy
Climate-related risks
and opportunities the
organisation has identified
over the short, medium,
and long term
As part of our investment and asset management process we consider climate-related
risks and opportunities over a range of timescales. A summary of our initial assessment
over the short, medium and long term is as follows.
In the short term (0–5 years) we anticipate regulations affecting the energy
performance and emissions of buildings to tighten to align more closely with
Government targets for economy-wide decarbonisation. Whilst this will provide clarity
of direction to the sector, it is likely to increase development and refurbishment costs
and will start to affect valuations. However, these trends will also create opportunities
to benefit from shifting occupier and investor demand for low-carbon, future-fit assets.
Over the medium term (5–15 years) these trends will continue and we expect
regulations and market sentiment to further drive energy efficiency and
decarbonisation. We anticipate significant technological change in this period
particularly in relation to heat pump solutions which will improve the technical and
financial feasibility of decarbonising heat in buildings.
Over the long term (15+ years) we are likely to see climate-related extreme weather
events increase in frequency and severity which may impact built environment
assets depending on their location and characteristics. The Company has already
started assessing physical climate risks and opportunities based on geographical
location of its assets.
An overview of the
Company’s approach
to addressing physical
climate risks is on
page 39.
Strategic Report
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
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.
In recognition of the importance of decarbonisation, the Company has set its own
net-zero target of 2030 for emissions associated with landlord-procured energy.
Alongside our net-zero planning, 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.
In 2022, we completed an assessment of value at risk as a result of physical climate
risks under the RCP8.5 climate scenario which implies a 4.3° C temperature rise by
2100 (which are described above in Physical Climate Risk). We are currently finalising
the results, of the next phase of our climate scenario analysis, which includes the
assessment of climate risks under a broader range of climate scenarios.
In assessing new investment opportunities, and making hold / sell decisions, the Board
has adopted the Investment Manager’s policy to have a stronger recognition of the
potential impact of climate change on the asset’s future performance.
A particular focus is on flood risk and energy performance.
While the Company is not yet in a position to disclose meaningful quantitative data on the
impact of climate related issues on financial performance, the Company plans to account
for appropriate costs in cash flow calculations, so that any costs associated with transition
or physical climate risks are adequately accounted for in investment return calculations.
The EPC profile of the
Company’s properties is
set out on page 128.
The Company’s
approach to net-zero is
set out on page 30.
Resilience of the
organization’s strategy,
taking into consideration
different climate-related
scenarios, including a 2°C
or lower scenario
We have set out our short-term target to be net-zero for company-controlled emissions
(Scope 1 and 2) by 2030 and to reduce the emissions intensity of our assets by 50% over the
same period. Our long-term target for full decarbonisation aligns with the UK-wide date
of 2050 although this will be continually reviewed in the context of the market and policy
drivers. We will track progress against our long term aim using interim energy and emissions
intensity targets at the portfolio and asset levels.
Our work to establish a net-zero pathway for the company is informed by industry
benchmarks including the Carbon Risk Real Estate Monitor (CRREM) 1.5°C Paris-aligned
emissions trajectories. As part of this work we have identified high-level cost estimates for
transitioning assets to net-zero.
We consider that the portfolio and Company strategy is well-positioned to decarbonise in line
with this trajectory assuming national energy and climate policy is also supportive of this goal.
We will continue to engage with industry bodies such as the Better Building Partnership
to standardise net-zero definitions across the industry. We recognise that we cannot act
in isolation and that achieving this level of decarbonisation will require supportive climate
policy and the cooperation of our occupiers and suppliers.
Our recent work on understanding value at risk as a result of physical climate risk has
highlighted the importance of considering changes in wind speeds and flood risk over time
as well as the implications of rising temperatures on cooling loads. Our initial assessment of
these results is that in general under the RCP8.5 scenario, physical climate risks do not become
material until after 2040 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 30.
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.
43
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
TCFD Recommendation Company Approach Further information
Risk Management
The Company’s
processes for identifying
and assessing
climate-related risks
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.
Sustainability Committee
Report on page 73
and our approach to
environmental risk as
set out on page 54.
Company approach to
integration/assessment
of ESG factors, including
climate risks, is available
on pages 30 to 39.
The Company’s
processes for managing
climate-related risks
A high-level overview of the Company and Investment Manager’s processes
for assessing and managing climate risks on ‘acquisition’ and ‘standing investments’
is included below:
On Acquisition:
Transition Risks: our current 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 Company’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 (including the use of EPC ratings and comparing against current and
emerging legislation), alongside our in-house decarbonisation guidance and ESG
priorities of the Company, 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 DD 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 Company 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.
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.
Standing Investments:
Transition Risks: The Company has completed net-zero analysis with the support
of a third-party consultant, to establish a carbon baseline for 2019, and a carbon
footprint update for 2021. Such analysis allows the Company to review progress
against its net-zero targets, and flag any high risk assets.
Physical Risks: An exercise has been undertaken with an external consultant
to assess the assets within the Company against 7 hazards which are expected to
impact real estate due to climate change out to 2080. These have been modelled
in a worst-case scenario (RCP8.5). The results of more recent analysis under
a greater number of scenarios are currently being finalised.
An overview of the
findings of the latest
net-zero and physical
climate risk analysis
is provide above on
pages 30 to 33 and
page 39.
Taskforce for Climate-Related Financial Disclosures continued
For the year ended 31 December 2022
Strategic Report
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. As part of our
decarbonisation strategy we will track progress against our long-term aim using
interim energy and emissions intensity targets at the portfolio and asset levels.
Information on year-on-year performance is included in the net-zero pathway section
above (on pages 30 to 33) and in the EPRA disclosures on pages 126 to 133.
The metrics from the 2022 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 2022 calendar year
throughout the first half of 2023).
The EPRA disclosures
included on pages
126 to 133 include
the relevant climate-
related performance
data, including
GHG emissions.
Further information on
our net-zero pathway
are included above in
pages 30 to 33.
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 126 to 133).
This covers Scope 1 and 2 emissions associated with landlord-procured energy as
well as Scope 3 emissions from energy sub-metered to occupiers. Our revised 2019
baseline emissions including tenant consumption (actual and estimated) is presented
on page 33. 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
126 to 133.
The targets used by
the organisation to
manage climate-related
risks and opportunities
and performance
against targets
We have set long term and short term decarbonisation targets and defined
a practical delivery strategy and KPIs.
The Company aims to achieve net-zero emissions for Scope 1 and 2 by 2030 and
is also targeting net-zero across all scopes before 2050. Whilst acknowledging the
landlord only has direct control over approximately 6% of the energy consumed,
it will work with tenants and upgrade properties when it can to target reducing all
scopes by 50% by 2030, based upon the 2019 baseline.
Our delivery strategy
is set out on page 30.
There is still significant uncertainty and methodological
immaturity in assessing climate risks and opportunities and
there is not yet a widely-recognised net-zero standard.
Nonetheless, we have progressed already with work to model
the implications of decarbonising the portfolio in line with
a 1.5°C scenario and undertaken analysis to understand
potential future physical climate risks.
The table below provides a brief overview of our Company
approach to 10 of the 11 TCFD recommendations.
Note that this disclosure against the TCFD recommendations
is entirely voluntary, and we are working towards a more
comprehensive TCFD disclosure in the coming years, towards
being consistent against all 11 TCFD recommendations.
We also expect that our reporting against TCFD
recommendations will continue to evolve over time as industry
methodologies improve and our own work develops further.
45
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Images
1. 15 Basinghall Street, London
2. The Pinnacle, Reading
3. Badentoy North, Aberdeen
Stakeholder Engagement
For the year ended 31 December 2022
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
2022. 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. As noted in the Chair’s Statement
(page 8), it is the stated intention of the Board to maintain
the current dividend level for the next two years.
•
Buyback of shares – the Board bought back 15,703,409
ordinary shares into treasury. The Board believes that
investment by the Company in its own shares at the
levels of discount to net asset value during the year
offered an attractive investment opportunity for its
shareholders against the financial resources the
Company had available.
•
Ongoing investment activity – the Company, with
oversight from the Board, disposed of three property
assets. The disposals reflected concerns over the
pandemic-accelerated structural changes for office
demand. The Company invested in a car showroom
in Stockton on Tees let to Motorpoint for 25 years
(with a tenant break in years 15 and 20), with the
5 yearly rent reviews linked to CPI.
The Board’s primary focus is to promote the long term
success of the Company for the benefit of its stakeholders
as a whole. The Board oversees the delivery of the
investment objective, policy and strategy, as agreed by
the Company’s shareholders. As set out above, the Board
considers the long term consequences of its decisions on its
stakeholders to ensure the sustainability of the Company.
1
Strategic Report
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Stakeholder Engagement continued
For the year ended 31 December 2022
Shareholders
Shareholders are key stakeholders and the Board places
great importance on communication with them. The Board
welcomes all shareholders’ views and aims to act fairly to
all shareholders. The Board believes that the Company’s
shareholders seek an attractive and sustainable level of
income, the prospect of growth of income and capital in the
longer term, a well-executed sustainable investment policy,
responsible capital allocation and value for money.
The Investment Manager and Company’s Broker regularly
meet with shareholders, and prospective shareholders, to
discuss Company initiatives and seek feedback. The views
of shareholders are discussed by the Board at every Board
meeting, and action taken to address any shareholder
concerns. The Investment Manager provides regular
updates to shareholders and the market through the
Annual Report, Half-Yearly Report, Quarterly Net Asset Value
announcements, Company Factsheets and its website.
The Chair offers to meet with key shareholders at least
annually, and other Directors are available to meet
shareholders as required. This allows the Board to hear
feedback directly from shareholders on the Company’s
ongoing strategy.
The Company’s AGM provides a forum, both formal and
informal, for shareholders to meet and discuss issues with
the Directors and Investment Manager of the Company.
The Board welcomes correspondence from shareholders,
addressed to the Company’s registered office. All shareholders
have the opportunity to put questions to the Board at the
Annual General Meeting.
This year’s AGM is being held on Wednesday 14th June
2023 at 2.30pm at:
Wallacespace
15 Artillery Lane
London
E1 7HA
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
The Board has decided to hold an interactive Online
Shareholder Presentation at 2.30pm on Tuesday
13 June 2023. As part of the presentation, shareholders
will receive updates from the Chair and Manager as
well as the opportunity to participate in an interactive
question and answer session. Further information
on how to register for the event can be found on
www.workcast.com/register?cpak=9811658259471291
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.
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Strategic Report
Investment Manager
The Chair’s Statement (pages 7 to 10) and Investment
Manager’s Report on pages 12 to 23 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 69.
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 29, our Taskforce for
Climate-related Financial Disclosures on pages 42 to 45,
page 52 of our Strategic Overview and the EPRA Financial
and Sustainability Reporting from page 126, for more
information on the Company’s approach to ESG.
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49
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
Images
1. Far Ralia, Newtonmore
Strategic Overview
For the year ended 31 December 2022
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.
The overall intention is to continue to distribute an attractive
income return alongside growth in the NAV and a good
overall total return relative to the peer group.
At the property level, it is intended that the Group
remains primarily invested in the commercial sector,
while keeping a watching brief on other classes such
as student accommodation and care homes as well as
other sectors which will enable the Company to meets its
environmental targets.
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.
Strategic Report
1
The Board continues to seek out opportunities for further,
controlled growth in the Group.
The Group maintains a tax efficient structure, having
migrated its tax residence to the UK and becoming
a UK REIT on 1 January 2015.
The Board
As at 31 December 2022, 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 2022 and at the date
of this report appear on pages 60 and 61 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”). These APMs are in line with recognised industry
performance measures both in the Real Estate and
Investment Trust industry and help to assess the overall
performance of the portfolio and the wider Group:
Property income and total return is measured against the
MSCI UK Quarterly Property Index (“the Index”). Previously
the Company used the MSCI UK Monthly Index Funds
Quarterly Property Index however this has reduced in size
and become less relevant to the Company.
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).
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API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
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 23.
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.
1
Images
1. B&Q, Halesowen
2. One Station Square, Bracknell
Strategic Report
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 is mitigated through regular contact with
shareholders, a regular review of share price performance
and the level of the discount or premium at which the
shares trade to net asset value and regular meetings
with the Company’s broker to discuss these points and
address any issues that arise. Geopolitical risk increased
the volatility of the Company’s share price and, reflecting
wider market sentiment, has resulted in the Company’s
shares trading at a discount to prevailing NAV of 26.4% as
at 31 December 2022, in-line with other diversified peers
in the Company’s AIC peer group.
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.
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.
2
53
API Annual Report & Accounts Year End 31 December 2022
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During 2022 the significantly heightened geopolitical
uncertainty and cost of living crisis have resulted in
inflationary pressures and vulnerabilities in supply chains
being exposed. Government initiatives have eased some of
these pressures and we are yet to see the full impact which
could impact upon our tenants’ ability to trade profitably.
Uncertainty or change in the macroeconomic
environment results in property becoming
an undesirable asset class, causing a decline
in property values.
This risk is managed through regular reporting from, and
discussion with, the Investment Manager and other advisers.
Macroeconomic conditions form part of the decision making
process for purchases and sales of properties and for sector
allocation decisions.
The impact of 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.
Strategic Overview continued
For the year ended 31 December 2022
1
Strategic Report
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.
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 67 to 72.
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.
Economic and Geopolitical.
Russia’s invasion of Ukraine is the largest, most dangerous
military conflict in Europe since WWII. Russian President
Vladimir Putin failed in his initial aim to destroy Ukrainian
sovereignty and has since increased attacks on Ukraine’s
energy and civilian infrastructure. A settlement or even
a ceasefire looks unlikely for now. Instead, an extended
conflict is anticipated, alongside a long term political,
economic and military standoff between the West and
Russia. Intentional or accidental escalation between NATO
and Russia remains a risk.
The Investment Manager expects global markets to
remain volatile. From a macro-economic perspective,
higher medium-term oil, gas and food prices alongside
financial market disruption and sanctions on Russia could
lead to a continuation of the already elevated inflationary
environment, which will in turn weaken the outlook for
economic growth. There is also the risk of further interest
rate increases. A period of prolonged instability, with impacts
for Europe in particular, is now clearly a potential outcome.
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 uncertain and as one of the largest
producers and exporters of microchips in the world
could cause considerable disruption if its independence
was threatened.
Images
1. Tetron 141, Swadlincote
55
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
The current economic and geopolitical environment is
unpredictable, and changing rapidly, and this may affect
the 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 1.2ºC 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.
The Legacy of COVID-19.
Although the direct impact of COVID-19 on our lives has
receded, it has 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.
COVID-19 has also impacted the way that we that we shop:
social distancing measures in response to the pandemic
have accelerated the increase in on-line shopping and
decline in physical retailing. This has 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.
Technology is also 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.
Viability Statement
The Board considers viability as part of its programme of
financial reporting and monitoring risk. The Board regularly
reviews the prospects for the Company over the longer
term taking into account the Company’s current financial
position, its operating model, and the diversified constituents
of its portfolio. In addition the Board considers strong initial
due diligence processes, the continued review of the
portfolio and the active asset management initiatives.
Given the above, the Board believes that the Company
has a sound basis upon which to continue to deliver returns
over the long term.
In terms of viability, the Board has considered the nature of
the Group’s assets and liabilities and associated cash flows
and has determined that three years is the maximum
timescale over which the performance of the Group can
be forecast with a material degree of accuracy and so is an
appropriate period over which to consider the Group’s viability.
This timescale was assessed as being more accurate than the
previous five year period used by the Board and also brings
the Group more in line with its peer group and reflecting the
term of the long-term debt..
Strategic Overview continued
For the year ended 31 December 2022
Strategic Report
The Board has also carried out a robust assessment of the
principal and emerging risks faced by the Group, as detailed
on pages 53 to 56. The main risks which the Board considers
will affect the business model are: future performance,
solvency, liquidity, tenant failure leading to a fall in dividend
cover and macroeconomic uncertainty.
These risks have all been considered in light of the financial
and economic impact that arose from COVID-19 and
considering the emerging geopolitical risks.
The Board takes any potential risks to the ongoing success of
the Group, and its ability to perform, very seriously and works
hard to ensure that risks are consistent with the Group’s risk
appetite at all times. In assessing the Group’s viability, the
Board has carried out thorough reviews of the following:
•
Detailed NAV, cash resources and income forecasts,
prepared by the Company’s Investment Manager,
for a 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 2023;
•
Demand for the Company’s shares and levels of
premium or discount at which the shares trade to NAV;
•
Views of shareholders; and
•
The valuation and liquidity of the Group’s property
portfolio, the Investment Manager’s portfolio strategy
for the future and the market outlook.
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.
This assessment is based on the current financial position of
the Company, its performance track record and feedback it
receives from shareholders.
Approval of Strategic Report
The Strategic Report comprises the Financial and Portfolio
Review, Performance Summary, Chair’s Statement,
Investment Manager’s Review, Environmental, Social
and Governance, Taskforce for Climate-related Financial
Disclosures, Stakeholder Engagement and Strategic
Overview. The Strategic Report was approved by the Board
and signed on its behalf by:
21 April 2023
James Clifton-Brown
Chair
57
API Annual Report & Accounts Year End 31 December 2022
Governance Financial Statements Additional InformationStrategic Report
1
Image
1. 101 Princess Street, Manchester
Governance
59
Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022GovernanceStrategic Report
1
3
5
2
4
Board of Directors
For the year ended 31 December 2022
Governance
1
James Clifton-Brown
Chair
James Clifton-Brown is a UK resident. He joined CBRE Global
Investors in 1984 as a fund manager on the Courtaulds Pension
Scheme Account (now Akzo Nobel Pension Scheme) and became
the firm’s UK Chief Investment Officer (“CIO”) in 1996. He retired
from this role on 30 April 2017. In his role as UK CIO, James had
responsibility for the firm’s UK house strategy and risk management
as well as client and investor relationship management. Since 2004,
he has also been a Director on a number of boards relating to CBRE
Global Investors Limited. He is a voting member on the USA and
European Investment Committees of CBRE Global Investors.
Contribution: The Board, through the Nomination Committee,
has reviewed the contribution of James Clifton-Brown in light
of his forthcoming re-election at the AGM in June 2023 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.
3
Jill May
Board member
Jill May is a UK resident. She is an External Member of the Prudential
Regulation Committee of the Bank of England, 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 June 2023 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.
5
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 June 2023 and has concluded that his
industry experience benefits the Audit Committee in particular
alongside his knowledge of the real estate sector and the
regulatory and operating environment in Guernsey, where the
Company is registered. Mike assumed responsibility for chairing
the Sustainability Committee, from Mike Balfour, on 1 January 2023.
2
Sarah Slater
Board member
Sarah Slater is a UK resident. She is the Chief Executive of
The Eyre Estate, a private family trust, a former trustee of Dulwich
Estate and was a Board member of GRIP REIT Plc, one of the
UK’s largest residential REITs. During her career, Sarah held senior
positions at The Canada Pension Plan Investment Board (CPPIB),
ING Real Estate Investment Management (now CBRE GI) and
Henderson Global Investors (now Nuveen) with responsibility
for the delivery of major real estate programmes.
Contribution: The Board, through the Nomination Committee,
has reviewed the contribution of Sarah Slater in light of her
forthcoming re-election at the AGM in June 2023 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.
4
Mike Balfour
Board member
Mike Balfour is a UK resident. He is a member of the Institute of
Chartered Accountants of Scotland and was Chief Executive at
Thomas Miller Investment Ltd from 2010 to January 2017. Prior to
this, he was Chief Executive at Glasgow Investment Managers and
Chief Investment Officer at Edinburgh Fund Managers Limited.
Mike has 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 chairs the Investment Committee of
TPT Retirement Solutions.
Contribution: The Board, through the Nomination Committee, has
reviewed the contribution of Mike Balfour in light of his forthcoming
re-election at the AGM in June 2023 and has concluded that his
chairmanship of the Audit Committee is strong. Mike also led
the Board in the creation and development of the Sustainability
Committee and continues to provide the Board with expert
knowledge of investment companies, financing and capital markets.
61
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
The Directors of abrdn Property Income Trust Limited
(“the Company” or “API”) present their Annual Report and
Audited Consolidated Financial Statements for the year
ended 31 December 2022.
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 9 on page 112.
On 1 January 2015 the Company migrated its tax residence
to the UK and became a UK REIT.
Listing
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.
The Group
At 31 December 2022, the Group consisted of the Company
and four subsidiaries: abrdn Property Holdings Limited
(formerly Standard Life Investments Property Holdings
Limited), a company with limited liability incorporated
in Guernsey; abrdn (APIT) Limited Partnership (formerly
Standard Life Investments (SLIPIT) Limited Partnership),
a limited partnership established in England & Wales;
abrdn APIT (General Partner) Limited (formerly Standard
Life Investments SLIPIT (General Partner) Limited),
a company with limited liability incorporated in England
& Wales; abrdn (APIT Nominee) Limited (formerly Standard
Life Investments (SLIPIT Nominee) Limited), a company
with limited liability incorporated in England & Wales.
Hagley Road Limited, a company incorporated in Jersey,
was subject to solvent dissolution in May 2022.
Results and Dividend
The Group generated an IFRS loss of £51.1 million (2021:
Profit of £85.7 million) in the year equating to earnings
per share of -13.12p (2021: 21.54p). In addition the Group
generated cash of £2.1 million (2021: generated cash of
£4.4 million) in the year and had cash at the year-end
of £15.9 million (2021: £13.8 million). The Group paid
out dividends totalling £15.6 million (2021: £15.0 million)
in the year.
Share Capital and Voting Rights
At 31 December 2022 there were 406,865,419 ordinary
shares of 1p each in issue, comprising 381,218,977 (2021:
396,922,386) ordinary shares with voting rights and an
additional 25,646,442 (2021: 9,943,033) ordinary shares held
in treasury. During the year, the Company bought back
15,703,409 (2021: 7,394,036) ordinary shares into treasury.
There have been no changes to the ordinary shares in issue,
or held in treasury, since the year end.
Directors’ Report
For the year ended 31 December 2022
Governance
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.
Substantial Shareholdings
As at 31 December 2022 and 31 March 2023, the following
entities had notified the Company of a holding of 3% or
more of the Company’s issued share capital.
Holdings (%)
31.12.2022 31.03.23
Hargreaves
Lansdown
12.1 12.4
Mattioli Woods 9.4 9.3
Interactive Investor 9.1 9.2
RBC Brewin Dolphin 6.1 5.8
AJ Bell 6.0 6.1
BlackRock 4.7 4.7
Brooks Macdonald 3.2 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 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 is 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, in relation to the year ended
31 December 2022. With effect from 1 January 2023, the
annual fee is changing 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.
63
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Strategic Report Financial Statements Additional InformationGovernance
The Management Engagement Committee reviews the
performance of, and contractual arrangements with,
the Investment Manager on an annual basis. The Board
has considered the appropriateness of the continuing
appointment of the Investment Manager in view of the
performance of the Investment Manager, the fees payable
to the Investment Manager and the notice period under the
Management Agreement. The Board has concluded that
the appointment of the Investment Manager on the terms
agreed (including the revised terms in effect from 1 January
2023 as set out above) continues to be in the best interests
of shareholders as a whole.
Directors
The names and short biographies of the Directors of the Group
at the date of this Report, are shown on pages 60 and 61.
The Directors each hold the following number of ordinary
shares in the Company (audited):
Ordinary Shares held
2022 2021
Huw Evans
A
n/a 60,000
James
Clifton-Brown
21,500 21,500
Jill May 128,592 128,592
Mike Balfour 125,000 125,000
Sarah Slater 20,000 —
Mike Bane
B
— n/a
A As at date of retirement as a Director on 15 June 2022
B Appointed as a Director on 31 January 2022
There have been no changes in the above interests
between 31 December 2022 and the date of approval of
this Report.
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.
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 over the going concern period. 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.
The Directors have not identified any material uncertainties,
including risks related to significantly heightened geopolitical
uncertainty and cost of living crisis, which might cast
significant doubt on the ability of the Group to continue
as a going concern for a period of not less than 12 months
from the date of the approval of this Annual Report.
The Directors have satisfied themselves that the Group has
adequate resources to continue in operational existence and
the Board believes it is appropriate to adopt the going concern
basis in preparing the consolidated financial statements.
Directors’ Report continued
For the year ended 31 December 2022
Governance
Corporate Governance
The Directors’ report on Corporate Governance is detailed
on pages 67 to 72 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.
Disclosure of Information to Auditor
In the case of Directors at the time when the Annual Report
and Consolidated Financial Statements were approved,
the following applies:
•
so far as each Director is aware, there is no relevant audit
information of which the Group’s auditor is unaware; and
•
they have taken all the steps that they could reasonably
be expected to have taken as Directors in order to make
themselves aware of any relevant audit information
and to establish that the Group’s auditor is aware of
that information.
Independent Auditor
A resolution to re-appoint Deloitte LLP as the Group’s auditor
will be proposed to the shareholders at the Annual General
Meeting on 14 June 2023.
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.
Annual General Meeting
The notice of the Annual General Meeting, which will
be held this year at Wallacespace, 15 Artillery Lane,
London, E1 7HA on Wednesday 14 June 2023 at
2.30pm, may be found on pages 141 to 143.
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.
In order to allow shareholders who may not be able
to attend the Annual General Meeting the chance to
raise any matters, the Board has decided to hold an
interactive Online Shareholder Presentation at 2.30pm
on Tuesday 13 June 2023. Shareholders will receive
updates from the Chair and Investment Manager
and be able to participate in an interactive question
and answer session. Further information on how
to register for the event can be found on page 10.
The Board welcomes correspondence from
shareholders in writing to the Company’s
registered office (see page 140) by email to:
property.income@abrdn.com
The following resolutions are being proposed in
relation to approval of the Company’s dividend
policy and the Directors’ authorities to buy back and
allot shares.
65
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
Dividend Policy ordinary resolution 3
As a result of the timing of the payment of the Company’s
quarterly dividends in February, May, August and November,
it is impractical for the Company’s shareholders to approve
a final dividend each year. As an alternative, the Board puts
forward the Company’s dividend policy to shareholders for
approval at each Annual General Meeting.
Resolution 3 which is an ordinary resolution, relates to the
approval of the Company’s dividend policy which is to pay
four quarterly interim dividends with the ability to pay further
interim dividends should the need arise, for example, to
ensure compliance with the REIT rules.
Directors’ Authority to Buy Back Shares
special resolution 11
During the year to 31 December 2022, the Company
bought back 15,703,409 ordinary shares into treasury.
Unless renewed by shareholders, the current authority of the
Company to make market purchases of shares expires at
the end of the Annual General Meeting.
Consequently, special resolution 11, as set out in the notice
of the Annual General Meeting, seeks authority for the
Company to make market purchases of up to 14.99 percent
of the issued ordinary share capital, such authority to last
until the conclusion of the annual general meeting in 2024
or if earlier on the expiry of 15 months from the passing of
the resolution. Any buy back of ordinary shares will be made
subject to Guernsey law, the FCA’s Listing Rules and within
any guidelines established from time to time by the Board
and the making and timing of any buy backs will be at the
absolute discretion of the Board.
Purchases of ordinary shares will only be made through
the market for cash at prices below the prevailing net
asset value of the ordinary shares (as last calculated)
where the Directors believe such purchases will enhance
shareholder value. The price paid will not be less than the
nominal value of 1p per share.
Such purchases will also only be made in accordance
with the rules of the FCA’s Listing Rules which provide
that the price to be paid must not be more than the higher
of; (i) 105 percent of the average of the middle market
quotations (as derived from the Daily Official List of the
London Stock Exchange) for the ordinary shares for the
five business days before the shares are purchased; and
(ii) the higher of the last independent trade and the highest
current independent bid on the trading venue on which the
purchase is carried out. Any shares purchased under the
authority will be cancelled or held in treasury.
Directors Authority to Allot Shares on
a Non-Pre-Emptive Basis resolution 14
Resolution 14 as set out in the notice of the Annual
General Meeting gives the Directors, for the period until
the conclusion of the annual general meeting in 2024 or if
earlier on the expiry of 15 months from the passing of the
special resolution, the necessary authority to either allot
securities or sell shares held in treasury, otherwise than to
existing shareholders on a pro-rata basis, for cash, up to an
aggregate nominal amount of £381,219. This is equivalent
to approximately 10% of the issued ordinary share capital of
the Company as at 21 April 2023 as at the date of approval
of this Report. It is expected that the Company will seek this
authority on an annual basis. The Directors will only exercise
this authority if they believe it advantageous and in the best
interests of shareholders and in no circumstances would
result in a dilution to the net asset value per share.
The Directors believe that the resolutions being put to the
shareholders at the Annual General Meeting are in the best
interests of the shareholders as a whole. Accordingly the
Directors recommend that shareholders vote in favour of
all of the resolutions to be proposed at the Annual General
Meeting, as the Directors intend to do in respect of all of their
own beneficial shareholdings totalling 295,092 shares.
Approved by the Board on
21 April 2023
James Clifton-Brown
Chair
Directors’ Report continued
For the year ended 31 December 2022
Governance
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. Huw Evans was Senior
Independent Director until his retirement at the AGM on
15 June 2022, following which he was succeeded by
Jill May. Biographical details of each Director may be
found on pages 60 and 61.
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.
Corporate Governance Report
For the year ended 31 December 2022
67
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
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.
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
intends to report against the targets set out in the FCA’s
Listing Rule 9.8.6R (9)(a) within its Annual Report for the
Company’s year ending 31 December 2023.
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.
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
Corporate Governance Report continued
For the year ended 31 December 2022
Governance
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 74 to 75.
Management Engagement Committee.
The Management Engagement Committee, which
comprises the full Board, was chaired by Huw Evans until
his retirement following the Annual General Meeting on
15 June 2022, and by Jill May thereafter. 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. The Board has concluded that the continuing
appointment of the Investment Manager on the terms
agreed is in the best interest of shareholders as a whole.
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.
In respect of the appointment of Mike Bane, who was
appointed to the Board as an independent non-executive
Director on 31 January 2022, the Board engaged an external
search consultant, Sapphire Partners. Sapphire Partners is
independent of the Company and Board of Directors.
New Directors appointed to the Board receive a formal
induction and appropriate training is arranged for new
and current Directors, as required. The Group’s policy on
diversity is noted on page 68. 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 Balfour until
31 December 2022 and 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.
69
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
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 2022.
This involved the completion of questionnaires by each
Director and follow-on discussions between the Chair and
each Director. The appraisal of the Chair 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 pages 60 and 61.
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. The intention is that the annual
evaluation is externally facilitated at least every three years
with the next such review expected to be conducted for the
year ending 31 December 2023.
Meeting Attendance
The table on page 71 sets out the Directors’ attendance at
each scheduled quarterly Board and Committee meetings.
The number of meetings which the Directors were eligible
to attend are shown in brackets. In addition to the scheduled
meetings detailed below, there were a further 18 ad hoc
Board and Committee meetings held during the year.
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.
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
pages 60 and 61 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.
Corporate Governance Report continued
For the year ended 31 December 2022
Governance
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.
Board
Audit
Committee
Property
Valuation
Committee
Management
Engagement
Committee
Nomination
Committee
Remuneration
Committee
Sustainability
Committee
Huw Evans
A
1/1 1/1 1/1 —/— —/— —/— 1/1
Mike Balfour 4/4 3/3 4/4 2/2 1/1 1/1 4/4
James Clifton-Brown
B
4/4 —/— 4/4 2/2 1/1 1/1 4/4
Jill May
C
3/4 2/3 3/4 2/2 1/1 1/1 3/4
Sarah Slater 4/4 3/3 4/4 2/2 1/1 1/1 4/4
Mike Bane 4/4 3/3 4/4 2/2 1/1 1/1 4/4
A Retired as a Director on 15 June 2022.
B 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.
C Did not attend certain meetings due to a close family bereavement.
71
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
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 [email protected]. This year’s AGM is being
held at:
Wallacespace,
15 Artillery Lane,
London,
E1 7HA
on Wednesday 14 June 2023 at 2.30pm.
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 79
and the Statement of Going Concern is included in the
Directors’ Report on page 64 and the Viability Statement
can be found on pages 56 to 57. The Independent Auditor’s
Report is on pages 80 to 88.
Approved by the Board on
21 April 2023
James Clifton-Brown
Chair
Corporate Governance Report continued
For the year ended 31 December 2022
Governance
Sustainability Committee Report
For the year ended 31 December 2022
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
Following its establishment in November 2021, the
Committee convened formally in April 2022 for the first
time and considered its terms of reference, together with
the design of the reporting framework required for the
Committee to discharge its responsibilities.
The Company has, this year, established its 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 29 to 45). The Sustainability Committee looks
forward to monitoring these KPIs during 2023.
21 April 2023
Mike Bane
Sustainability Committee Chair
73
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
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 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.
As rental income is the Group’s principal source of revenue and
a significant item in the Statement of Comprehensive Income,
a key risk relates to the recognition and collection of rental
income. Specifically the risk is that the Group does not recognise
rental income in line with its stated policy on rental income
recognition. The Audit Committee reviews the controls in place
at the Investment Manager in respect of recognition of rental
income on a regular basis and, along with the external auditor,
reviews the rental income policy, the pattern of rental income
received and the amount recognised in the consolidated
financial statements at each year end. In addition it considers
the detailed process in place at the Investment Manager to
identify potential provision for bad debts, also referred to as
the impairment of trade receivables, based on the intelligence
and knowledge the Manager has of each individual tenant.
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 page 70. 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.
Audit Committee Report
For the year ended 31 December 2022
Governance
Review of Activities
The Audit Committee met three times during the year under
review, in March, September and November 2022. Following
the year end, the Audit Committee met in March 2023.
At each March and September 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 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 and September 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 September 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 2022.
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 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 first year of involvement in the audit.
The Audit Committee Chair also meets the audit partner
at least twice a year.
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 2022, Deloitte received
fees of £nil in relation to non-audit services (2021: £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.
Auditor
On the recommendation of the Audit Committee, it is
the Board’s intention to propose, at the Annual General
Meeting on 14 June 2023, that shareholders approve the
reappointment of Deloitte as the Group’s auditors and
approve the Board to authorise the Directors’ remuneration
as resolutions 4 and 5, respectively.
Approved by the Board on
21 April 2023
Mike Balfour
Audit Committee Chair
75
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Financial Statements Additional InformationGovernance
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 80 to 88.
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 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.
Directors’ Remuneration Report
For the year ended 31 December 2022
Governance
Implementation Report
Directors’ Fees.
The level of fees for the year 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.
2022 £ 2021 £
Chair 50,000 48,000
Chair of Audit Committee 41,500 40,000
Director 37,000 36,000
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 would
have suggested an increase in the Directors’ fees but the
Committee decided on this occasion to leave the Directors’
annual fees unchanged for the year ended 31 December
2023, reflecting a desire to minimise the ongoing costs of
the Company in the face of rising debt costs and economic
uncertainty, and in the light of a negotiated reduction in the
Investment Manager’s fees.
Company performance
The graph shows the share price total return (assuming
all dividends are reinvested) to Ordinary shareholders
compared to the total return from the MSCI Quarterly
Index for the ten year period ended 31 December
2022 (rebased to 100 at 31 December 2012).
This index was chosen for comparison purposes, as it
is the benchmark used for investment performance
measurement purposes.
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 67.
MSCI UK Monthly Index Funds Quarterly Property Index
API Direct Portfolio Total Return
MSCI UK Quarterly Property Index
Share Price Total Return
Dec 15
Dec 17
Mar 17
Jun 17
Sep 17
Dec 14
Mar 15
Jun 15
Sep 15
Dec 13
Mar 14
Jun 14
Sep 14
Dec 12
Mar 13
Jun 13
Sep 13
Dec 18
Mar 18
Jun 18
Sep 18
Dec 19
Mar 19
Jun 19
Sep 19
Dec 20
Mar 20
Jun 20
Sep 20
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Mar 21
Jun 21
Sep 21
Dec 16
Mar 16
Jun 16
Sep 16
100
150
200
250
300
0
50
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Strategic Report Financial Statements Additional InformationGovernance
Directors’ Fees
The Directors who served during the year
received remuneration as shown in the table.
2022
£
2021
£
% change in
Director fees
Huw Evans
A
17,124 36,000 -52.4%
Mike Balfour 41,500 40,000 3.8%
Mike Bane
B
34,059 n/a n/a
James Clifton-Brown 50,000 47,000 6.4%
Jill May 37,000 36,000 2.8%
Sarah Slater 37,000 36,000 2.8%
Employers national insurance contributions 22,885 17,338
239,568 212,338
Directors’ expenses 8,035 9,404
247,603 221,742
The table indicates the expenditure during the
year in relation to Directors’ remuneration and
shareholder distributions.
2022
£
2021
£
Aggregate Directors’ Remuneration 247,603 236,953
Aggregate shareholder distributions 15,610,827 15,018,379
A Retired as a Director on 15 June 2022.
B Appointed as a Director on 31 January 2022.
Statement of Proxy Voting at
Annual General Meeting
At the Company’s latest Annual General Meeting, held
on 15 June 2022, shareholders approved the Directors’
Remuneration Report (other than the Directors’
Remuneration Policy) in respect of the year ended
31 December 2022 and the proxy votes received on
the relevant resolution were: For – 173,022,475 (99.09%);
Discretionary – 45,149 (0.03%); Against – 1,052,173 votes
(0.6%); and Withheld votes – 494,162 (0.28%).
Directors’ Shareholdings
The Directors’ interests in the Company’s ordinary shares
are shown in the Directors’ Report on page 64.
An ordinary resolution for the approval of the Directors’
Remuneration Report will be put to shareholders at the
Annual General Meeting on 14 June 2023.
Approved by the Board on
21 April 2023
Jill May
Director
Directors’ Remuneration Report continued
For the year ended 31 December 2022
Governance
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
21 April 2023
James Clifton-Brown
Chair
Statement of Directors’ Responsibilities
For the year ended 31 December 2022
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Strategic Report Governance Financial Statements Additional InformationGovernance
Additional Information
Financial Statements
Independent
Auditor’s Report
Independent Auditor’s Report to the
Members of abrdn Property Income Trust Limited
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 2022 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 25.
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.
Report on the Audit of
The Financial Statements
3 Summary of our Audit Approach
Key Audit Matters The key audit matter that we identified in the current year was:
•
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 £3.2m 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 with the exception of Hagley Road Limited are subject to full scope audits.
Significant
Changes in our
Approach
There were no significant changes in our approach in the current year, except for the removal of the
recoverability of rental income receivable as a key audit matter. We have no longer identified recoverability
of rental income receivable as a key audit matter as the impact of COVID-19 on the Group had significantly
reduced during the period under audit.
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continued
4 Conclusions Relating to Going Concern
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the directors’ assessment
of the Group’s and parent company’s ability to continue to
adopt the going concern basis of accounting included:
•
Challenged management’s assessment of going
concern and the assumptions, including income,
expenditure and cash forecasts, used in their
12 month and 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;
•
Checked banking covenants to assess compliance
as at the balance sheet date; and
•
Assessed the appropriateness of the going concern
disclosures in the financial statements.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and parent company’s
ability to continue as a going concern for a period of at
least twelve months from when the financial statements
are authorised for issue.
In relation to the reporting on how the Group has applied
the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the
directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
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.
Given the reduced uncertainty arising from COVID-19
compared to prior year, we have no longer identified
recoverability of rental income receivable as a key
audit matter.
Financial Statements
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 2022 amounted to
£401m (2021: £485m).
Refer to notes 2.2 of accounting policies on pages 95 and note 7 on page 107 to 111 of the notes
to the financial statements. Also refer to the audit committee report pages 74 to 75.
How the scope
of our audit
responded to the
key audit matter
We performed the following:
•
Obtained an understanding of the relevant controls in relation to the valuation process;
•
Evaluated the competence, capability and objectivity of the external valuer in order to obtain
an understanding of the work of that expert;
•
Challenged the valuation process and assumptions, performance of the portfolio, significant
assumptions and significant judgements, by benchmarking the valuation assumptions, in particular
the equivalent yields and estimated market rates, to relevant market evidence including specific
property transactions and other external data. Where our risk assessment identified properties
of interest, we performed these procedures with the involvement of our real estate specialists;
•
Assessed the integrity of information provided to the external valuer by testing a sample back
to underlying lease agreements; and
•
Evaluated the financial statements disclosures to assess whether the significant judgements
and estimations are appropriately disclosed.
Key observations We concluded that the fair value of the Group’s investment property valuation as determined
by management is appropriate.
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continued
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 £3.2m (2021: £4.0m)
Basis for determining
materiality
1% of the net asset value, in line with
prior year.
Rationale for the
benchmark applied
Net assets is the key balance
considered by the users of the
financial statements which is
consistent with the market approach
for such entities. Net assets was
selected as investors are seeking
capital appreciation in addition to
dividend streams, and the net asset
value per share is an important
indicator of performance to investors.
NAV £323m
Group
Materiality £3.2m
Audit Committee
reporting threshold
£0.16m
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 2022 audit (2021: 60%).
In determining performance materiality, we considered
the following factors:
a. the reduced impact of COVID-19 on the Group’s
operations in the year and on the wider real
estate sector;
b. the fact that we have not identified any significant
changes in business structure; and
c. our experience from previous audits has indicated
a low number of corrected and uncorrected
misstatements identified in prior periods.
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 £0.5m
(2021: £0.7m), which equates to 5% (2021: 5%) of
that measure for testing all balances impacting that
measure, including trade receivables and trade payables.
Financial Statements
6.3. Error reporting threshold
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess
of £0.16m (2021: £0.2m), 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. Identification and scoping of components
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,
and those in relation to our key audit matter.
We have obtained the Assurance Report on Controls at
Service Organisations of the Investment Manager, which
documents the suitability of the design and operating
effectiveness of controls. We reviewed the report and
identified relevant controls and have adopted a controls
reliance approach with respect to the rental income and
deferred income business area.
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.
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 29 and strategic overview
on page 54 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
entity 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 and therefore we engaged with our ESG
assurance specialists to assist with assessing 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.
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Independent Auditor’s Report to the
Members of abrdn Property Income Trust Limited
continued
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 specialists and valuation specialists
regarding how and where fraud might occur in the
financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential
for fraud in the 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.
Financial Statements
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 the
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
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 64;
•
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 pages 56 to 57;
•
the directors’ statement on fair, balanced and
understandable set out on page 79;
•
the board’s confirmation that it has carried out
a robust assessment of the emerging and principal
risks set out on pages 55 to 56;
•
the section of the annual report that describes the
review of effectiveness of risk management and
internal control systems set out on pages 70 to 71; and
•
the section describing the work of the audit committee
set out on page pages 74 to 75.
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Independent Auditor’s Report to the
Members of abrdn Property Income Trust Limited
continued
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 four
years, covering the years ending 31 December 2019 to
31 December 2022.
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).
16 Use of our Report
This report is made solely to the company’s members, as
a body, in accordance with Section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report
and/or those matters we have expressly agreed to report to
them on in our engagement letter and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rule (DTR) 4.1.14R,
these financial statements form part of the European Single
Electronic Format (ESEF) prepared Annual Financial Report
filed on the National Storage Mechanism of the UK FCA in
accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditor’s report provides no assurance over
whether the annual financial report has been prepared using
the single electronic format specified in the ESEF RTS.
Siobhan Durcan ACA FCCA
For and on behalf of Deloitte LLP
Recognised Auditor
St. Helier, Jersey
21 April 2023
Financial Statements
Financial Statements
89
Strategic Report Additional Information API Annual Report & Accounts Year End 31 December 2022Governance Financial Statements
Notes
12 Months to
31 Dec 22
£
12 Months to
31 Dec 21
£
Rental income 2 6 , 6 9 7, 9 3 1 26,485,585
Service charge income 4 4,4 11,821 4 , 0 9 7, 3 4 4
Service charge expenditure 4 (5,57 6, 812 ) (4,9 3 8 ,92 0 )
Net Rental Income 2 5 , 5 3 2 ,94 0 25,644,0 09
Administrative and other expenses
Investment management fees 4 (3 , 4 8 0 ,9 63 ) (3,30 1,0 7 4 )
Other direct property expenses 4 (3,08 9 , 96 0 ) (2,564,156 )
Impairment gain/(loss) on trade receivables 4 852 ,0 62 (406,475 )
Other administration expenses 4 (1 , 1 3 4 ,9 19 ) (1,1 62 ,009 )
Total Administrative and other expenses (6 , 8 5 3 , 7 8 0 ) (7, 4 3 3 , 7 1 4 )
Operating profit before changes in fair value of investment properties 18,6 79 ,160 1 8,21 0,2 95
Valuation (loss)/gain from investment properties 7 (62 , 2 57 ,7 82 ) 72, 188 ,55 0
Valuation loss from land 8 (6 0 , 3 2 2 ) (501,550 )
Loss on disposal of investment properties 7 (2 0 7, 1 5 3 ) (6 3 4 , 3 6 8 )
Operating (loss)/profit (43,846,097 ) 8 9, 2 6 2 ,9 2 8
Finance income 5 27,543 76 3
Finance costs 5 (3,6 72,685 ) (3 , 530 , 870 )
Loss on termination of interest rate swaps 14b (3 , 5 62 , 24 8 ) —
(Loss)/profit for the period before taxation (51,053,48 7 ) 8 5,732,82 1
Taxation
Tax charge — —
(Loss)/profit for the period, net of tax (51,053,48 7 ) 8 5,732,82 1
Other comprehensive income
Movement in fair value on existing swap 14a 1,470, 570 3,16 7 ,218
Movement in fair value on interest rate cap 14c 4 3, 29 2 —
Total other comprehensive gain 1, 51 3, 862 3,16 7 ,218
Total comprehensive (loss)/gain for the period, net of tax (4 9, 5 3 9, 6 2 5 ) 8 8,900 ,039
Earnings per share 2022 (p) 2021 (p)
Basic and diluted (loss)/earnings per share 19 (1 3 . 1 1 2 1 .5 4
All items in the above Consolidated Statement of Comprehensive Income derive from continuing operations.
The notes on pages 94 to 121 are an integral part of these Consolidated Financial Statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
Financial Statements
Approved and authorised for issue by the Board of Directors on 21 April 2023 and signed on their behalf by James Clifton-Brown.
The accompanying notes on pages 94 to 121 are an integral part of these Consolidated Financial Statements. Company Number: 41352 (Guernsey).
Consolidated Balance Sheet
as at 31 December 2022
Assets Notes
31 Dec 22
£
31 Dec 21
£
Non-current assets
Investment properties 7
Lease incentives 7 8 , 3 5 7, 0 3 6 8 , 8 0 2 , 2 94
Land 8 7 ,500,000 7 ,500 ,000
Interest rate cap 14c 2,211,007 —
Rental deposits held on behalf of tenants 751 ,7 82 90 4, 189
Current assets
Trade and other receivables 10 7, 4 5 7, 0 8 3 11,02 4,100
Cash and Cash equivalents 11 15 , 871 , 0 5 3 13,818,008
Interest rate swap 14a 1 , 2 3 8 , 197 —
Interest rate cap 14c 3 3 9, 4 6 2 —
Total Assets 444, 9 43,15 6 5 2 6 , 5 6 2 , 6 76
Liabilities
Current liabilities
Trade and other payables 12 10, 8 80 , 310 1 3, 618,457
Interest rate swap 14a — 546,526
Non-current liabilities
Bank borrowings 13 109,1 23 ,937 1 0 9, 7 2 3 , 3 9 9
Interest rate swap 14a — 21 ,510
Obligations under finance leases 15 8 9 9, 5 7 2 901 , 129
Rent deposits due to tenants 751 ,7 82 90 4, 189
Total liabilities 121,6 55,601 12 5, 7 15,210
Net assets 323,287,555 400, 84 7 ,466
Equity
Capital and reserves attributable to Company’s equity holders
Share capital 17 2 28, 3 83 , 857 228 , 38 3, 8 57
Treasury share reserve 17 (1 8 , 4 0 0 , 8 76 ) (5 ,9 91 , 417 )
Retained earnings 18 4 , 3 82 , 024 8,521,081
Capital reserves 18 11,084,17 8 7 2, 095 ,57 3
Other distributable reserves 18 97 , 83 8 ,37 2 97 ,838,372
Total equity 323,287,555 400, 84 7 ,466
91
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Notes Share
Capital £
Treasury
Shares £
Retained
Earnings £
Capital
Reserves £
Other
Distributable
Reserves £
Total
Equity £
Opening balance 1 January 2022 228 , 38 3, 857 (5 ,9 91 , 4 17 ) 8,521 ,081 7 2,0 95 ,57 3 97 ,838,372 400,847 ,466
Loss for the year — — (51,05 3,48 7 ) — — (51,05 3,487 )
Other comprehensive income — — — 1, 513 , 862 — 1 , 513 ,8 62
Total comprehensive income for the period — — (51,05 3,48 7 ) 1 ,51 3, 8 62 — (49, 5 3 9, 6 2 5 )
Ordinary shares placed into treasury
net of issue costs
17 — (12,409 ,459 ) — — — (12,409 ,459 )
Dividends paid 20 — — (15, 610, 827 ) — — (15 ,610 ,827 )
Valuation loss from investment properties 7 — — 62,257,782 (62 , 2 57 ,7 82 ) — —
Valuation loss from land 8 — — 60 , 322 (6 0 , 3 2 2 ) — —
Loss on disposal of investment properties 7 — — 2 0 7, 1 5 3 (2 0 7, 1 5 3 ) — —
Balance at 31 December 2022 228 ,3 83 , 857 (1 8 , 4 0 0 , 8 76 ) 4 , 3 8 2, 0 24 11,084,178 97 , 83 8 , 372 323 ,287 , 555
Notes Share
Capital £
Treasury
shares £
Retained
Earnings £
Capital
Reserves £
Other
Distributable
Reserves £
Total
equity £
Opening balance 1 January 2021 228 , 38 3, 857 (1 , 4 5 0 , 7 8 7 ) 7, 3 3 9, 2 0 9 (6 0 4 , 2 1 4 ) 97,8 38 , 372 331 , 506 ,4 37
Profit for the year — — 85 ,732,820 — — 8 5,732,820
Other comprehensive income — — — 3,16 7 , 218 — 3,16 7 , 21 8
Total comprehensive income for the period — — 85 ,732,820 3,16 7 ,218 — 8 8 ,9 0 0 , 03 8
Ordinary shares placed into treasury
net of issue costs
17 — (4, 540,630 ) — — — (4,540,630 )
Dividends paid 20 — — (1 5 , 0 1 8 , 3 7 9 ) — — (15 , 0 1 8 , 3 7 9 )
Other transfer between reserves 18 — — 1, 520 ,0 63 (1 , 5 2 0 , 0 6 3 ) — —
Valuation gain from investment properties 7 — — (72,18 8, 550 ) 72, 188, 550 — —
Valuation loss from land 8 — — 501,550 (50 1,550 ) — —
Loss on disposal of investment properties 7 — — 634 , 36 8 (6 3 4 , 3 6 8 ) — —
Balance at 31 December 2021 228 ,3 83 , 857 (5 ,9 91 , 4 17 ) 8,521,08 1 72, 09 5, 573 97 , 83 8, 372 400,847 ,466
Consolidated Statement of Changes in Equity for the year ended 31 December 2021
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 December 2022
Cash flows from operating activities
Notes
12 months to
31 Dec 22
£
12 months to
31 Dec 21
£
Loss/profit for the year before taxation (5 1,053,48 7 ) 8 5,732,820
Movement in lease incentives (8 41 , 39 8 ) (2 ,96 6 , 03 3 )
Movement in trade and other receivables 3 , 7 19, 4 2 4 (2 7 0 , 2 2 6 )
Movement in trade and other payables (3,23 7 ,15 1 ) 536 ,4 04
Loss on termination of interest rate swaps 3 , 56 2, 24 8 —
Finance costs 5 3,6 72,6 85 3, 530 , 870
Finance income 5 (2 7, 5 4 3 ) (76 3 )
Other transfer between reserves — 1 ,5 20, 06 4
Valuation loss/(gain) from investment properties 7 62,257,782 (72, 188 ,550 )
Valuation loss from land 8 60 , 322 501,550
Loss on disposal of investment properties 7 2 0 7, 1 5 3 634 , 36 8
Net cash inflow from operating activities 18, 320, 035 17, 0 3 0 , 5 0 4
Cash flows from investing activities
Interest received 5 27,543 76 3
Purchase of investment properties 7 (5 , 5 0 1 , 3 2 1 ) (11,7 41,501 )
Purchase of land 8 (6 0 , 3 2 2 ) (8 , 0 01 , 5 50 )
Capital expenditure on investment properties 7 (13,52 4,813 ) (1 , 8 19, 2 2 9 )
Net proceeds from disposal of investment properties 7 41 , 142 ,8 47 31, 8 40 ,63 2
Net cash inflow from investing activities 22,08 3, 934 10, 279,11 3
Cash flows from financing activities
Shares bought back during the year 17 (12,409 , 45 9 ) (4,540, 630 )
Drawn-down on RCF 13 1 7 ,000,000 —
Repayment of RCF 13 (1 7 ,000, 000 ) —
Bank borrowing arrangement costs 13 (8 04 , 29 7 ) —
Interest paid on bank borrowing (2, 95 9 ,023 ) (1 , 8 7 2 , 5 4 5 )
Payments on interest rate swaps (4 7 3 , 4 2 5 ) (1 , 4 1 8 ,9 1 6 )
Swap breakage costs 14b (3 , 5 62 , 24 8 ) —
Cap arrangement fees 14c (2 , 5 0 7, 1 7 7 ) —
Finance lease interest 5 (2 4,468 ) (2 4 , 5 1 1 )
Dividends paid to the Company’s shareholders 20 (15 , 610, 827 ) (1 5 , 0 1 8 , 3 7 9 )
Net cash outflow from financing activities (3 8 , 3 5 0 ,92 4 ) (2 2 , 8 74 ,9 8 1 )
Net increase in cash and cash equivalents 2,053,0 45 4,43 4, 637
Cash and cash equivalents at beginning of year 11 13,81 8,008 9, 38 3, 371
Cash and cash equivalents at end of year 11 15 , 8 71 , 0 53 13,818,008
93
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
95
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
97
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
99
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
101
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
103
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
105
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Financial Statements
107
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Financial Statements
109
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
111
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
113
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
115
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
117
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2022
Financial Statements
119
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Strategic Report Governance Additional InformationFinancial Statements
Financial Statements
121
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Additional InformationFinancial Statements
Additional Information
unaudited
Governance
31 December
2022
£
31 December
2021
£
EPRA earnings 11,471,770 14,680,188
EPRA earnings per share (pence per share) 2.94 3.69
EPRA Net Tangible Assets (“NTA”) 319,498,889 401,415,502
EPRA NTA per share (pence per share) 83.8 101.1
EPRA Net Reinstatement Value (“NRV”) 347, 288,789 434,899,739
EPRA NRV per share (pence per share) 91.1 109.6
EPRA Net Disposable Value (“NDV”) 322,830,926 400,451,035
EPRA NDV per share (pence per share) 84.7 100.9
EPRA Net Initial Yield 4.9% 4.2%
EPRA topped-up Net Initial Yield 5.2% 4.7%
EPRA Vacancy Rate 9.8% 9.7%
EPRA Cost Ratios – including direct vacancy costs 30.1% 31.3%
EPRA Cost Ratios – excluding direct vacancy costs 23.5% 24.4%
A. EPRA Earnings
31 December
2022
£
31 December
2021
£
Earnings per IFRS income statement (51,053,487) 85,732,820
Adjustments to calculate EPRA Earnings, exclude:
Net changes in value of investment properties 62,257,782 (72,188,550)
Loss on disposal of Investment properties 207,153 634,368
Net change in value of land 60,322 501,550
EPRA Earnings 11,471,770 14,680,188
Weighted average number of shares 389,565,276 398,041,380
EPRA Earnings per share (pence per share) 2.94 3.69
B. EPRA Net Tangible Assets
31 December
2022
£
31 December
2021
£
IFRS NAV 323,287,555 400,847,466
Fair value of financial instrument (assets)/liabilities (3,788,666) 568,036
EPRA NTA 319,498,889 401,415,502
Basic number of shares 381,218,977 396,922,386
EPRA NTA per share (pence per share) 83.8 101.1
EPRA Performance Measures
In October 2019, EPRA issued new best
practice recommendations (BPR) for
financial guidelines on its definitions of
NAV measures: EPRA net tangible assets
(NTA), EPRA net reinvestment value (NRV)
and EPRA net disposal value (NDV).
The rationale behind each of these
measures is set out below the table.
abrdn consider EPRA Net Tangible Assets
(NTA) to be the most relevant NAV
measure for the Group and report this
as our primary non-IFRS NAV measure.
Rationale: EPRA Net
Tangible Assets
The 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.
123
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
C. EPRA Net Reinstatement Value
31 December
2022
£
31 December
2021
£
EPRA NTA 319,498,889 401,415,502
Real Estate Transfer Tax and other acquisition costs 27,789,900 33,484,237
EPRA NRV 347,288,789 434,899,739
EPRA NRV per share (pence per share) 91.1 109.6
D. EPRA Net Disposal Value
31 December
2022
£
31 December
2021
£
IFRS NAV 323,287,555 400,847,466
Fair value of debt (456,629) (396,431)
322,830,926 400,451,035
EPRA NDV per share (pence per share) 84.7 100.9
Fair value of debt per financial statements 109,580,566 110,119,830
Carrying value 109,123,937 109,723,399
Fair value of debt adjustment 456,629 396,431
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.
E. EPRA Net Initial Yield and
‘topped up’ NIY disclosure
Completed property portfolio
31 December
2022
£
31 December
2021
£
Investment property – wholly owned 408,675,000 492,415,250
Allowance for estimated purchasers’ costs 27,789,900 33,484,237
Grossed up completed property valuation 436,464,900 525,899,487
Annualised cash passing rental income 25,501,414 25,690,060
Property outgoings (4, 279,419) (3,430,243)
Annualised net rents 21,221,995 22,259,817
Add: notional rent expiration of rent free
periods or other lease incentives
1,550,927 2,243,687
Topped-up net annualised rent 22,772,922 24,503,504
EPRA NIY 4.9% 4.2%
EPRA “topped-up” NIY 5.2% 4.7%
EPRA Performance Measures continued
Additional Information
F. EPRA Cost Ratios
31 December
2022
£
31 December
2021
£
Administrative / property operating
expense line per IFRS income statement
8,043,241 8,299,803
EPRA Costs (including direct vacancy costs) 8,043,241 8,299,803
Direct vacancy costs (1,765,552) (1,828,982)
EPRA Costs (excluding direct vacancy costs) 6,277,689 6,470,821
Gross Rental income less ground rent costs 26,697,931 26,485,585
EPRA Cost Ratio (including direct vacancy costs) 30.1% 31.3%
EPRA Cost Ratio (excluding direct vacancy costs) 23.5% 24.4%
For the Period Ending 31 December 2021
Rental
growth
2022
£
Portfolio value
by sector
2022
£
Rental
growth
2021
£
Portfolio value
by sector
2021
£
G. Like-for-like rental growth reporting
Sector:
Industrial 1,127,510 227,525,000 919,777 262,690,000
Offices 128,893 88,450,000 98,049 126,275,000
Retail 22,300 53,550,000 (54,400) 56,525,000
Other 83,400 34,600,000 (10,000) 36,050,000
Total portfolio value 1,362,103 404,125,000 953,426 481,540,000
* Rental growth figures have been computed based on the movement in estimated rental values from prior to current year-end.
All properties held within the portfolio are located within the UK.
H. Property-related CapEx
2022
£
2021
£
Acquisitions 5,501,321 11,741,501
Development
Investment properties:
Incremental lettable space — —
No incremental lettable space 13,524,813 1,819,229
Tenant incentives (162,619) 803,327
Other material non-allocated
types of expenditure
— —
Total capital expenditure incurred 18,863,515 14,364,057
I. LTV
2022
£
2021
£
Borrowings from Financial Institutions 109,123,937 109,723,399
Exclude
Cash and Cash equivalents 15,871,053 13,818,008
Net Debt (a) 93,252,884 95,905,391
Investment properties at fair value 391,115,008 481,738,835
Land at Fair Value 7,500,000 7,500,000
Exclude IFRS16 adjustment (899,572) (901,129)
Properties under development 10,050,000 2,775,250
Net Receivables 8,722,475 5,639,901
Net Assets (b) 416,540,440 496,752,857
LTV (a/b) 22.4% 19.3%
125
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
ESG Performance
ESG Performance
This section details the Company’s sustainability
performance using the EPRA Sustainability Best Practice
Recommendations Guidelines (sBPR). It also meets the
requirements for Streamlined Energy and Carbon Reporting
(SECR) under the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018.
Explanatory notes on methodology
Reporting period.
Sustainability data in this report covers the calendar
years of 2021 and 2022.
Organisational boundary and data coverage.
For the purposes of sustainability reporting, we have
included single-let assets within the organisational boundary
even though operational control is limited and we have
limited coverage of consumption data from tenant-
managed utility supplies. It was judged that these should be
included to enable the reporting of landlord consumption
associated with any void units at these assets. The coverage
numbers in the tables below therefore appear low due to
the inclusion of all of the Company’s assets in the totals.
Where there is no data coverage for a sector (for example,
water consumption for unit shops where there was no
landlord consumption during the period), the sector is
excluded from the table but the number of assets in the
sector is included in the total possible coverage number.
The like-for-like portfolio is determined on the basis of assets
that were held for two full reporting years and were not subject
to major refurbishment or development during that time.
Note that the Company does not employ any staff and
does not have its own premises; these corporate aspects fall
within the scope of the Investment Manager.
Emissions calculation.
Emissions are calculated in line with the GHG Protocol
using UK Government location-based conversion factors.
Scope 1 emissions include emissions from gas consumption
and F-gas 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.
In the reporting period, all landlord-procured electricity
was from 100% renewable sources. Natural gas consumed
was not from renewable sources.
The Company is also continuing the roll-out of Solar PV
installations across its portfolio. Further detail on this is
included in the main body of the report on pages 29 to 41.
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 (ISAE3000). A copy of the assurance statement can be
found on www.abrdnpit.co.uk/en-gb/literature
Materiality.
We have undertaken a review of materiality against each
of the EPRA sBPR indicators. The table below indicates the
outcome of the review.
Additional Information
Code Performance measure Review outcome
Environmental
Elec-Abs Total electricity consumption Material
Elec-LfL Like-for-like total electricity consumption Material
DH&C-Abs Total district heating & cooling consumption
Not material – none of
the Company’s assets
are connected to district
energy supplies
DH&C-LfL Like-for-like total district heating & cooling consumption
Fuels-Abs Total fuel consumption Material
Fuels-LfL Like-for-like total fuel consumption Material
Energy-Int Building energy intensity Material
GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions Material
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions Material
GHG-Int Greenhouse gas (GHG) emissions intensity from building energy consumption Material
Water-Abs Total water consumption Material
Water-LfL Like-for-like total water consumption Material
Water-Int Building water intensity Material
Waste-Abs Total weight of waste by disposal route Material
Waste-LfL Like-for-like total weight of waste by disposal route Material
Cert-Tot Type and number of sustainably certified assets Material
Social
Diversity-Emp Employee gender diversity
Not material – API 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
(pages 67 to 72 for
content related to
Governance)
Gov-Selec Process for nominating and selecting the highest governance body
Gov-CoI Process for managing conflicts of interest
127
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
Environmental Indicators
Like-for-Like Energy Consumption
Landlord electricity consumption across like-for-like assets decreased by 3% year-on-year.
This overall decrease was primarily driven by decreases in landlord consumption at Retail Warehouse
and Office assets; albeit offset partially by increases in consumption at industrial business park and
leisure assets. Landlord gas consumption across like-for-like assets decreased by 23%, due to the
reduction in 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 1% overall. We have implemented a
number of energy-saving initiatives across the portfolio and identified more for future roll-out as part
of asset five-year plans. These include lighting upgrades, BMS optimisation and plant replacement.
Landlord Electricity
(kWh)
Occupier Electricity
i.e. sub-metered to
occupiers (kWh)
Total Landlord-obtained
Electricity (kWh)
Landlord-obtained Gas
(kWh)
Energy Intensity
(kWh/m²)
Indicator references Elec-LfL Elec-LfL Elec-LfL Fuels-LfL Energy-Int
Sector
Coverage
(assets)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
Industrial,
Business
Parks
2 of 3 4,325 14,211 229%
No sub–metered
consumption
N/A 4,325 14,211 229%
No Landlord-
consumption
N/A 0 1 229%
Industrial,
Distribution
Warehouse
1 of 21 6,699
No landlord-
obtained
consumption
N/A
No sub–metered
consumption
N/A 6,699
No landlord-
obtained
consumption
N/A
No landlord-
obtained
consumption
N/A 1
No landlord-
obtained
consumption
N/A
Offices 8 of 8 2,184,039 2,132,235 -2% 1,723,705 1,748,060 1% 3,907,744 3,880,296 -1% 3,421,759 2,649,427 -23% 209 186 -11%
Leisure 2 of 2 51,943 52,362 1%
No sub–metered
consumption
N/A 51,943 52,362 1%
No Landlord-
consumption
N/A 5 6 1%
Retail,
Warehouses
2 of 5 46,864 21,770 -54%
No sub–metered
consumption
N/A 46,864 21,770 -54%
No Landlord-
consumption
N/A 6 3 -54%
Totals 15 of 41 2,293,871 2,220,579 -3% 1,723,705 1,748,060 1% 4,017,575 3,968,639 -1% 3,421,759 2,649,427 -23% 99 88 -11%
Sustainability Certifications
Two assets in the portfolio have BREEAM ratings; 54 Hagley
Road in Birmingham (BREEAM Rating: Very Good) and The
Pinnacle in Reading (BREEAM Rating: Excellent). This asset
accounts for 8% 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–22 Dec–21 Dec–20
A 4% 2% 0%
B 30% 21% 6%
C 48% 33% 31%
D 10% 35% 39%
E 7% 8% 9%
F 0% 0% 4%
G 1% 1% 1%
Additional Information
Like-for-Like and Absolute Waste Generation and Treatment
We are responsible for waste management at 11 multi-let assets across the Company. Our waste management
consultant undertakes regular waste audits and works closely with our Property Manager to implement interventions
to improve segregation of materials and ultimately increase recycling rates.
In total across the nine like-for-like assets at which we manage waste, 512 tonnes of non-hazardous waste was
generated in 2022 with approximately 46% recycled and 54% 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 tables below.
Social Indicators
Health & Safety.
Every asset in the portfolio (i.e. 100% coverage) was
subject to a health and safety inspection during the
reporting year, with no incidents of non-compliance with
regulations identified.
Community Engagement.
Our community engagement activities are focused around
development or construction projects that the Company
implements. Our Property Manager regularly undertakes
community and charity engagement activities, particularly
at multi-let offices.
Governance Indicators
The Board is made up entirely from Non-Executive Directors.
The average tenure of the Board is 4.4 years, with the
longest serving Director being Mike Balfour at almost 7 years
and the shortest being Mike Bane who was appointed on
1st February 2022. There is a clear succession plan in place
so that no Director serves for more than 9 years.
The five Non-Executive Directors provide a variety of
experience, from real estate, corporate banking, and
finance and all have a keen focus on ESG matters and
responsibilities of the Company, with all Directors being
members of the newly created Sustainability Committee.
In addition, the Audit Committee reviews the environmental
risk of the Company’s operations and the Valuation
Committee also assesses the impact upon the portfolio.
Two of the six Directors are female, and all are independent
of the Investment Manager.
Indicator reference Waste-Abs
Total Waste
(tonnes)
Waste to Landfill
(tonnes)
Waste Recovered
(tonnes)
Waste Recycled
(tonnes)
Sector Coverage 2022
(assets)
2021 2022 2022 2022 2022
Offices 8 of 11 105 218 0.1% 0.2 53% 116 47% 102
Retail,
High Street
1 of 1 30 27 0.0% 0 77% 21 23% 6
Leisure 2 of 3 291 290 0.0% 0 53% 154 47% 136
Totals 11 of 54 426 534 0% 0.2 54% 290 46% 244
Indicator reference Waste-LfL
Total Waste
(tonnes)
Waste to Landfill
(tonnes)
Waste Recovered
(tonnes)
Waste Recycled
(tonnes)
Sector Coverage 2022
(assets)
2021 2022 2022 2022 2022
Offices 6 of 8 77 195 0.1% 0.2 52% 102 47% 93
Retail,
High Street
1 of 1 30 27 0.0% 0 77% 21 23% 6
Leisure 2 of 3 291 290 0.0% 0 53% 154 47% 136
Totals 9 of 41 398 512 0% 0.2 54% 277 46% 235
129
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
Environmental Indicators continued
Like-for-Like Greenhouse Gas Emissions
Like-for-like Scope 1 emissions decreased by 33% year on year, driven by decreased gas
consumption at office assets in 2022. In addition, the absence of any reported losses of
F-gases from refrigerant plant in 2022 contributed to this decrease in Scope 1 emissions.
The like-for-like electricity consumption figures above translate into a 12% reduction in
Scope 2 emissions and an 8% reduction in Scope 3 emissions; primarily driven by further
improvements in the carbon-intensity of the grid.
Scope 1 Emissions
(tCO)
Scope 2 Emissions
(tCO)
Scope 3 Emissions
(tCO)
Emissions Intensity
Scopes 1, 2 & 3 (kgCO/m²)
Indicator references No relevant EPRA indicator
Sector Coverage
(assets)
2021 2022 Change
(%)
2021 2022 Change
(%)
2021 2022 Change
(%)
2021 2022 Change
(%)
Industrial,
Business
Parks
2 of 3
No Landlord-
consumption
N/A 0.9 2.7 199% 0.1 0.3 209% 0.1 0.2 200%
Industrial,
Distribution
Warehouse
1 of 21
No landlord-
consumption
N/A 1.4
No landlord-
consumption
N/A 0.1
No landlord-
obtained
consumption
N/A 0.2 — N/A
Offices 8 of 8 708 477 -33% 464 412 -11% 439 407 -7% 46 37 -20%
Leisure 2 of 2 No meters N/A 11 10 -8% 1.0 0.9 -5% 1.3 1.2 -8%
Retail,
Warehouses
2 of 5 No meters N/A 10 4 -58% 0.9 0.4 -56% 1.4 0.6 -58%
Totals 15 of 44 708 477 -33% 487 429 -12% 441 408 -8% 22 17 -20%
Additional Information
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 2021 and 2022. 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)
Landlord-obtained Gas
(kWh)
Energy Intensity
(kWh/m²)
Indicator references Elec-Abs Elec-Abs Elec-Abs Fuels-Abs Energy-Int
Sector Coverage
(assets)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Change
(%)
2021 2022
Industrial,
Business
Parks
2 of 8 2 of 3 4,325 14,211 229%
No sub–metered
consumption
N/A 4,325 14,211 229%
No Landlord-
consumption
N/A 0.3 0.9 229%
Industrial,
Distribution
Warehouse
1 of 18 1 of 23 6,699
No landlord-
consumption
N/A
No sub–metered
consumption
N/A 6,699
No landlord-
obtained
consumption
N/A
No landlord-
consumption
874 N/A 1
No landlord-
consumption
N/A
Offices 11 of 15 11 of 11 2,418,559 2,367,994 -2% 2,150,448 2,074,160 -4% 4,569,007 4,442,154 -3% 3,526,632 2,744,195 -22% 198 175 -11%
Leisure 2 of 2 2 of 2 51,943 52,362 1%
No sub–metered
consumption
N/A 51,943 52,362 1%
No Landlord-
consumption
N/A 5 6 1%
Retail,
Warehouses
2 of 6 2 of 6 46,864 21,770 -54%
No sub–metered
consumption
N/A 46,864 21,770 -54%
No Landlord-
consumption
N/A 6 3 -54%
Totals 18 of 56 18 of 54 2,528,390 2,456,338 -3% 2,150,448 2,074,160 -4% 4,678,839 4,530,497 -3% 3,526,632 2,745,069 -22% 101 83 -18%
131
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
Environmental Indicators continued
Like-for-Like and Absolute Water Consumption
Water consumption decreased by 17% and 20% across like-for-like assets and
across the whole portfolio, respectively. 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)
LfL Water Consumption
(m³)
Indicator references Water-Abs; Water-Int Water-LfL; Water-Int
Sector Coverage
(assets)
2021
(m³)
2021
(litres/m²)
2022
(m³)
2022
(litres/m²)
Change
(%)
Coverage
(assets)
2021
(m³)
2021
(litres/m²)
2022
(m³)
2022
(litres/m²)
Change
(%)
2021 2022
Offices
9 of 15 7 of 11 18,903 510 15,740 425 -17% 7 of 8 18.341 522 14,735 419 -20%
Leisure 1 of 2 1 of 2 53 9 35 6 -33% 1 of 2 53 9 35 6 -33%
Totals 10 of 56 8 of 54 18,956 441 15,775 367 -17% 8 of 41 18,395 448 14,770 360 -20%
Streamlined Energy and
Carbon Reporting (SECR)
For the purposes of Streamlined Energy
and Carbon Reporting (SECR), total Scope
1 and 2 emissions are also summarised in
the following table. Total Landlord Energy
Consumption (kWh) used to calculate
Scope 1 and 2 emissions is also outlined in
the table below, and a breakdown of energy
type is included in the Absolute Energy
Consumption table above. Note that the
Total Scope 1 and 2 Emissions reported below
include emissions associated with refrigerant
losses as well as energy consumption.
Please note that data has been included
back to 2019, which has been chosen as
the baseline year for reporting (primarily
given that it was not influenced by energy/
carbon reductions associated with COVID-19
restrictions). Percentage change has been
provided on a 2021 vs 2020 basis, and 2021
vs 2019 basis. Emissions intensity has
increased over time due to the inclusion of
landlord consumption associated with vacant
units. It is important to include this data, given
it forms part of the Company’s Scope 1 and
2 emissions, but, when included in intensity
calculations it has the effect of skewing the
outcome at the portfolio level.
2019 2020 2021 2022
% Change
2022 vs 2021
% Change
2022 vs 2019
Total Scope
1/2 Emissions (tCO
2
e)
1,496 1,384 1,264 969 -23% -35%
Emissions intensity
(kgCO
2
e/m
2
Net Lettable Area)
16.0 12.2 15.6 11.1 -29% -31%
Total Landlord Energy
Consumption (kWh)
6,401,310 6,211,751 6,055,022 5.201,407 -14% -19%
Additional Information
Absolute Greenhouse Gas Emissions
Absolute Scope 1 emissions decreased by 32% in 2022. Note that emissions associated with
refrigerants are included in this figure alongside natural gas (albeit there were only any recorded
refrigerant losses in 2021). Total Scope 2 and 3 emissions both reduced by 12% year-on-year.
Scope 1 Emissions
(tCO)
Scope 2 Emissions
(tCO)
Scope 3 Emissions
(tCO)
Emissions Intensity
Scopes 1, 2 & 3 (kgCO/m²)
Indicator references GHG–Dir–Abs GHG–Indir–Abs GHG–Indir–Abs GHG–Int
Sector Coverage
(assets)
2021 2022 Change
(%)
2021 2022 Change
(%)
2021 2022 Change
(%)
2021 2022 Change
(%)
2021 2022
Industrial,
Business
Parks
2 of 8 2 of 3
No Landlord-
consumption
N/A 1 3 199% 0.1 0.3 209% 0.1 0.2 200%
Industrial,
Distribution
Warehouse
1 of 18 1 of 23
No landlord-
consumption
0.2 N/A 1
No landlord-
consumption
N/A 0.1
No landlord-
obtained
consumption
N/A 0.2
No landlord-
obtained
consumption
N/A
Offices 11 of 15 11 of 11 727 494 -32% 514 458 -11% 542 480 -12% 44 35 -22%
Leisure 1 of 3 2 of 2
No Landlord-
consumption
N/A 11 10 -8% 1.0 0.9 -5% 1.3 1.2 -8%
Retail,
Warehouses
2 of 6 2 of 6
No Landlord-
consumption
N/A 10 4 -58% 0.9 0.4 -56% 1.4 0.6 -58%
Totals 18 of 56 18 of 54 727 494 -32% 537 475 -12% 545 481 -12% 22 7 -25%
Taskforce for Climate Related
Financial Disclosures (TCFD)
In support of our clients’ own TCFD
obligations, core TCFD metrics for the
Fund for the 2022 period are disclosed
in the adjacent table.
2022
Total Scope 1 Emissions
494
Total Scope 2 Emissions
475
Total Scope 1 + 2 Emissions
969
Total floor area (m²)
87, 216
Total FGAV (£million)
164
Scope 1 and 2 GHG Intensity (tCOe/m²)
0.011
Scope 1 and 2 GHG Intensity (tCOe/£M)
5.9
133
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
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.
2022 2021
Total comprehensive income/(loss) for the year (49,539,625) 88,900,038
Add back:
Unrealised (gains)/losses on investment properties 62,257,782 (72,188,550)
Realised losses on investment properties 207,153 634,368
Unrealised loss on land 60,322 501,550
(Gains)/losses on cash flow hedge (1,513,862) (3,167,218)
Profit for dividend cover 11,471,770 14,680,188
Annual dividend 15,610,827 15,018,379
Dividend cover 73% 98%
Dividend yield Annual dividend expressed as a percentage of share price on any given day.
Earnings per share
(EPS)
Surplus for the period attributable to shareholders divided by the weighted average number
of shares in issue during the period.
EPRA European Public
Real Estate Association
The industry body representing listed companies in the real estate sector.
ERV The estimated rental value of a property, provided by the property valuers.
Fair value
Fair value is defined by IFRS 13 as ‘the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date’.
Fair value movement
Fair value movement is the accounting adjustment to change the book value of an asset or liability
to its market value, and subsequent changes in market value.
Financial resources Uncommitted cash balances plus undrawn element of revolving credit facility.
Gearing ratio
Calculated as gross borrowings (excluding swap valuation) divided by total assets. The Articles
of Association of the Company have a 65% gearing ratio limit (see page 115 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 note 13 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 Quarterly version of MSCI Monthly Index Funds.
Glossary
Additional Information
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.
2022 2021
Opening NAV 101.0 82.0
Closing NAV 84.8 101.0
Movement in NAV (16.2) 19.0
% Movement in NAV (16.0%) 23.2%
Impact of reinvested dividends 3.2% 5.4%
NAV total return (12.8%) 28.6%
Net initial yield (NIY)
The net initial yield of a property is the initial net income at the date of purchase, expressed
as a percentage of the gross purchase price including the costs of purchase.
Over-rented Space where the passing rent is above the ERV.
Passing rent The rent payable at a particular point in time.
Portfolio fair value
The market value of the Group’s property portfolio, which is based on the external valuation
provided by Knight Frank LLP.
Portfolio total return (including
Portfolio capital return and
Portfolio income return)
Combining the Portfolio Capital Return (the change in property value after taking account of property
sales, purchases and capital expenditure in the period) and Portfolio Income Return (net property
income after deducting direct property expenditure), assuming portfolio income is re-invested.
Portfolio yield Passing rent as a percentage of gross property value.
Premium/Discount to NAV
The difference between the share price and NAV per share, expressed as a percentage of NAV.
Premium representing a higher share price compared to NAV per share, discount the opposite.
Rack-rented Space where the passing rent is the same as the ERV.
REIT
A Real Estate Investment Trust (REIT) is a single company REIT or a group REIT that owns and
manages property on behalf of shareholders. In the UK, a company or group of companies can
apply for ‘UK-REIT’ status, which exempts the company from corporation tax on profits and gains
from their UK qualifying property rental businesses.
Rent Collection The percentage of rents paid compared to the rents invoiced over a specified period.
Rent free
A period within a lease (usually from the lease start date on new leases) where the tenant does
not pay any rent.
Reversionary yield Estimated rental value as a percentage of the gross property value.
RICS
The Royal Institution of Chartered Surveyors, the global professional body promoting and enforcing
the highest international standards in the valuation, management and development of land, real estate,
construction and infrastructure.
Share price
The value of each of the company’s shares at a point in time as quoted on the Main Market of the
London Stock Exchange.
Share price total return
The return to shareholders,
expressed as a percentage
of opening share price,
calculated on a per share
basis by adding dividends
paid in the period to the
increase or decrease in share
price. Dividends are assumed
to have been reinvested in
the quarter they are paid,
excluding transaction costs.
2022 2021
Opening share price 81.5 60.0
Closing share price 62.4 81.5
Movement in share price (19.1) 21.5
% Movement in share price (23.4%) 35.8%
Impact of reinvested dividends 4.4% 7.6%
Share price total return (19.0%) 43.4%
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.
135
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
AIFMD/Pre-Investment Disclosure
Document (“PIDD”)
The Company has appointed abrdn Fund Managers Limited
(formerly Aberdeen Standard Fund Managers Limited) as
its alternative investment fund manager (the “AIFM”) and
Citibank UK Limited as its depositary under the Alternative
Investment Fund Managers Directive (“AIFMD”). AIFMD requires
the AIFM to make available to investors certain information
prior to such investors’ investment in the Company.
These pre-investment disclosures that are required to
be made by the AIFM under AIFMD are included within
a pre-investment disclosure document (“PIDD”) which can
be found on the Company’s website at www.abrdnpit.co.uk.
There have been no material changes to the disclosures
contained within the PIDD since its last publication in June 2022.
Investor Warning: Be Alert to Share Fraud
and Boiler Room Scams
abrdn has been contacted by investors informing them that
they have received telephone calls and emails from people
who have offered to buy their investment trust shares,
purporting to work for abrdn.
abrdn has also been notified of emails claiming that certain
investment companies under their management have
issued claims in the courts against individuals. These may
be scams which attempt to gain your personal information
with which to commit identity fraud or could be “boiler room”
scams where a payment from you is required to release the
supposed payment for your shares. These calls/ senders do
not work for abrdn and any third party making such offers/
claims has no link with abrdn.
abrdn does not “cold-call” investors in this way. If you have
any doubt over whether a caller is genuine, do not offer any
personal information, end the call and contact the Customer
Services Department (see below for their contact details).
The Financial Conduct Authority provides advice
with respect to share fraud and boiler room
scams: www.fca.org.uk/consumers/scams
Share Register Enquiries
Shareholders who hold their shares in certificated form can
check their shareholding with the Registrar.
Notifications of changes of address and all enquiries regarding
certificates or dividend cheques should be sent in writing to
the Registrar whose details are shown on page 140.
Keeping You Informed
The Company’s shares are listed on the London
Stock Exchange and the share price is quoted daily in
the Financial Times.
Details of the Company may also be found on the
Company’s own dedicated website at: www.abrdnpit.co.uk
This provides information on the Company’s share
price performance, capital structure, stock exchange
announcement and an Investment Manager’s monthly
factsheet. Alternatively you can call 0808 500 0040
(free when dialling from a UK landline) for trust information.
If you have any questions about your Company, the
Investment Manager or performance, please telephone the
Customer Services Department (direct private investors)
on 0808 500 0040. Alternatively, please send an email to
inv.trus[email protected] or write to abrdn, PO Box 11020,
Chelmsford, Essex CM99 2DB. In the event of queries
regarding holdings of shares, lost certificates, dividend
payments, registered details, shareholders holding their
shares in the Company directly should contact the Registrar,
Computershare Investor Services (Guernsey) Limited on
+44 (0) 370 707 4040 or by writing to the address on page 140.
Calls may be recorded and monitored randomly for security
and training purposes. Changes of address must be notified
to the Registrar in writing.
How To Invest In The Company
Individual investors can buy and sell shares in the Company
directly through a stockbroker or indirectly through a lawyer,
accountant or other professional adviser. Alternatively, for
retail clients, shares can be bought directly through the
abrdn Investment Plan for Children, Investment Trust Share
Plan or Investment Trust ISA.
abrdn Investment Plan for Children.
abrdn runs an Investment Plan for Children (the “Children’s
Plan”) which covers a number of investment companies
under its management including the Company. Anyone can
invest in the Children’s Plan, including parents, grandparents
and family friends (subject to the eligibility criteria as stated
within the terms and conditions). All investments are free
of dealing charges on the initial purchase of shares,
although investors will suffer the bid-offer spread,
which can, on some occasions, be a significant amount.
Lump sum investments start at £150 per trust, while regular
savers may invest from £30 per month. Selling costs are
£10 + VAT. There is no restriction on how long an investor
need invest in the Children’s Plan, and regular savers can
stop or suspend participation by instructing abrdn in writing
at any time. In common with other schemes of this type,
all investments are held in nominee accounts. Investors have
full voting and other rights of share ownership.
Investor Information
Additional Information
abrdn Share Plan.
abrdn runs a Share Plan (the “Plan”) through which shares
in the Company can be purchased. There are no dealing
charges on the initial purchase of shares, although investors
will suffer the bid-offer spread, which can, on some occasions,
be a significant amount. Lump sum investments start at £250,
while regular savers may invest from £100 per month.
Selling costs are £10 + VAT. There is no restriction on how
long an investor need invest in a Plan, and regular savers
can stop or suspend participation by instructing abrdn in
writing at any time. In common with other schemes of this
type, all investments are held in nominee accounts. Investors
have full voting and other rights of share ownership.
abrdn ISA.
abrdn operates an Investment Trust ISA (“ISA”) through
which an investment may be made of up to £20,000 in the
tax year 2023/2024.
There are no brokerage or initial charges for the ISA,
although investors will suffer the bid-offer spread, which
can, on some occasions, be a significant amount.
Selling costs are £15 + VAT. The annual ISA administration
charge is £24 + VAT, calculated annually and applied
on 31 March (or the last business day in March) and collected
soon thereafter either by direct debit or, if there is no valid
direct debit mandate in place, from the available cash in the
Plan prior to the distribution or reinvestment of any income,
or, where there is insufficient cash in the Plan, from the sale
of investments held in the Plan. Investors have full voting and
other rights of share ownership. Under current legislation,
investments in ISAs can grow free of capital gains tax.
abrdn ISA Transfer.
You can choose to transfer previous tax year investments
to the abrdn Investment Trust ISA which can be invested
in the Company while retaining your ISA wrapper.
The minimum lump sum for an ISA transfer is £1,000 and
is subject to a minimum per trust of £250.
Literature Request Service
For literature and information on the abrdn Investment
Plan for Children, Share Plan, ISA or ISA Transfer including
application forms for the Company and the Manager’s
investment trust products, please contact:
abrdn Investments Trust Administration
PO Box 11020
Chelmsford
Essex CM99 2DB
Tel: 0808 500 00 40
(free when dialling from a UK landline)
Terms and conditions for the abrdn managed savings
products can also be found under the literature section
of www.invtrusts.co.uk
Online Dealing Details
Investor Information.
There are a number of other ways in which you can
buy and hold shares in this investment company outside
of abrdn savings products.
Online Dealing.
There are a number of online dealing platforms for private
investors that offer share dealing, ISAs and other means to
invest in the company. Real-time execution-only stockbroking
services allow you to trade online, manage your portfolio and
buy UK listed shares. These sites do not give advice.
Discretionary Private Client Stockbrokers.
If you have a large sum to invest, you may wish to contact
a discretionary private client stockbroker. They can manage
your entire portfolio of shares and will advise you on your
investments. To find a private client stockbroker visit the
Wealth Management Association at www.pimfa.co.uk
Independent Financial Advisers.
To find an adviser who recommends on investment trusts,
visit www.unbiased.co.uk
Regulation of Stockbrokers.
Before approaching a stockbroker, always check that they
are regulated by the Financial Conduct Authority:
Tel: 0800 111 6768 or at www.register.fca.org.uk
Email: register@fca.org.uk
137
Strategic Report Governance Financial Statements API Annual Report & Accounts Year End 31 December 2022Additional Information
Investor Information
Suitable for Retail/NMPI Status
The Company’s shares are intended for investors, primarily
in the UK, including retail investors, professionally-advised
private clients and institutional investors who are seeking
exposure to UK commercial property, and who understand
and are willing to accept the risks of exposure to this asset
class. Investors should consider consulting a financial adviser
who specialises in advising on the acquisition of shares and
other securities before acquiring shares. Investors should
be capable of evaluating the risks and merits of such an
investment and should have sufficient resources to bear any
loss that may result.
The Company currently conducts its affairs, and intends to
continue to do so for the foreseeable future, in order that its
ordinary shares can be recommended by a financial adviser
to ordinary retail investors in accordance with the FCA’s rules
in relation to non-mainstream pooled investments (NMPIs).
Effect Of Reit Status
on Payment of Dividends
REITs do not pay UK corporation tax in respect of rental
profits and chargeable gains relating to property rental
business. However, REITs are required to distribute at least
90% of their qualifying income (broadly calculated using the
UK tax rules) as a Property Income Distribution (“PID”).
Certain categories of shareholder may be able to receive
the PID element of their dividends gross, without deduction of
withholding tax. Categories which may claim this exemption
include: UK companies, charities, local authorities, UK pension
schemes and managers of PEPs, ISAs and Child Trust Funds.
Further information and the forms for completion to apply
for PIDs to be paid gross are available from the Registrar.
Where the Group pays an ordinary dividend, in addition to
the PID, this will be treated in the same way as dividends
from non-REIT companies.
Retail Distribution
On 1 January 2014, the FCA introduced rules relating to the
restrictions on the retail distribution of unregulated collective
investment schemes and close substitutes (non-mainstream
investment products). UK investment trusts are excluded
from these restrictions.
Note
Please remember that past performance is not a guide
to the future. Stock market movements may cause the
value of shares and the income from them to fall as well
as rise and investors may not get back the amount they
originally invested.
As with all equity investments, the value of real estate
investment trusts purchased will immediately be reduced
by the difference between the buying and selling prices
of the shares, the market maker’s spread.
Investors should further bear in mind that the value of any
tax relief will depend on the individual circumstances of
the investor and that tax rates and reliefs, as well as the tax
treatment of ISAs may be changed by future legislation.
Additional InformationAdditional Information
AIFMD Disclosures unaudited.
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 the AIFM.
•
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 140) and the remuneration disclosures
in respect of the AIFM’s reporting period for the period
ended 31 December 2021 are available on the
Company’s website.
Leverage.
The table above sets out the current maximum permitted
limit and actual level of leverage for the Company.
There have been no breaches of the maximum level
during the period and no changes to the maximum level
of leverage employed by the Company. There is no right
of re-use of collateral or any guarantees granted under
the leveraging arrangement.
Changes to the information contained either within
this Annual Report or the PIDD in relation to any special
arrangements in place, the maximum level of leverage
which the AIFM 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 136 to 139 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 Investments Limited which is authorised
and regulated by the Financial Conduct Authority.
Other Information
The Company is a member of the Association of
Investment Companies. The Association publishes
a Monthly Information Service which contains a wide
range of detailed information including statistical and
performance data on all its members.
A sample copy can be obtained free of charge from:
AIC
9th Floor, 24 Chiswell Street
London
EC1Y 4YY
Tel: 020 7282 5555
along with full details of other publications available from the
AIC. Alternatively, visit their website on www.theaic.co.uk
Gross method Commitment method
Maximum level of leverage 500% 300%
Actual level at
31 December 2022
169% 135%
139
Strategic Report Governance Financial Statements Additional Information API Annual Report & Accounts Year End 31 December 2022Additional 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
United Kingdom
GY1 3HW
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Walkers (Guernsey) LLP
New Street
Guernsey GY1 2PF
Broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Principal Bankers
The Royal Bank of Scotland plc
135 Bishopsgate
London EC2M 3UR
Property Valuers
Knight Frank LLP
55 Baker Street
London W1U 8AN
Depositary
Citibank UK Limited
Canada Square, Canary Wharf
London E14 5LB
Directors and Company Information
Environmental Statement
This Report is printed on Oxygen Offset, manufactured using 100% FSC® Recycled fibre
sourced from de-inked post consumer waste. Oxygen Offset is a Carbon Balanced paper,
100% of the CO
2
produced in the manufacture of the paper has been offset using Carbon
Footprint Ltd and it also carries the EU Eco Label.
The Printer and the manufacturing mill are both credited with ISO14001 Environmental
Management Systems standard and both are FSC® certified.
The production of this Report has been Carbon Balanced through the printer who are
a certified partner of ClimateCare.
Additional Information
To consider and, if thought fit, pass the following
resolutions as ordinary resolutions
1
To receive and approve the Annual Report and Consolidated
Financial Statements of the Company for the year ended
31 December 2022.
2
To receive and approve the Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy) for the year
ended 31 December 2022.
3
To approve the Company’s dividend policy to continue to
pay a minimum of four quarterly interim dividends per year.
4
To re-appoint Deloitte LLP as Auditor of the Company until
the conclusion of the next Annual General Meeting.
5
To authorise the Board of Directors to determine the
Auditor’s Remuneration.
6
To re-elect Mike Bane as a Director of the Company.
7
To re-elect Mike Balfour as a Director
of the Company.
8
To re-elect James Clifton-Brown as a Director of the
Company.
9
To re-elect Jill May as a Director of the Company.
0
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.
Notice is hereby given that the Annual General Meeting of
abrdn Property Income Trust Limited (‘the Company’) will be
held at Wallacespace, 15 Artillery Lane, London, E1 7HA on
Wednesday 14 June 2023, at 2.30pm, for the following purposes:
Annual General Meeting
Notice of the Annual General Meeting
141
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
2
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 21 April 2023.
By Order of the Board
For and on behalf of
Northern Trust International Fund
Administration Services (Guernsey) Limited
Secretary
21 April 2023
Annual General Meeting continued
Notice of the Annual General Meeting
Additional Information
1
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.
2
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.
3
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.
4
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 2.30pm on 12 June 2023.
5
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 12 June 2023.
6
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 12 June 2023. 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.
7
The Directors’ letters of appointment will be available for
inspection for fifteen minutes prior to the Meeting and during
the Meeting itself.
8
By attending the Meeting a holder of ordinary shares
expressly agrees they are requesting and willing to receive
any communications made at the Meeting.
9
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.
10
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.
1
The resolutions to be proposed at the Meeting will be
proposed as ordinary and special resolutions which, to be
passed, must receive the support of a majority (in the case
of the ordinary resolutions) and not less than seventy five
percent (in the case of the special resolutions) of the total
number of votes cast for, or against, the ordinary and special
resolutions respectively.
12
As at 21 April 2023, 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
21 April 2023 was 381,218,977 shares.
13
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.
Annual General Meeting
Notes to the notice of Annual General Meeting
143
API Annual Report & Accounts Year End 31 December 2022
Strategic Report Governance Financial Statements Additional Information
1
Images
1. 54 Hagley Road, Birmingham
Annual Report & Consolidated Accounts
Year ended 31 December 2022
abrdnpit.co.uk