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  • The trust aims to deliver an attractive level of income together with the potential for income and capital growth from investment in a diversified UK commercial property portfolio. It offers investors prime exposure to commercial property assets.

  • How to Invest

    Open an F&C Savings Plan

    Call: 0800 136 420

    Invest online now

    Or contact your usual investment broker

  • Share Price

    97.25p0.50p

    closed

Key facts

  • Key points

    This trust offers exposure to a diverse portfolio of UK commercial property and a high level of income is paid quarterly. Investors can gain exposure to an asset class that is usually not accessible, via a readily realisable vehicle.

    Fund facts
    Investment manager F&C Investment Business Limited
    Launch date 1 June 2004
    Total assets £352.74 million (as at 30.06.16)
    Currency Sterling
    ISIN GB00B012T521
    SEDOL B012T52
    Key dates
    Annual general meeting  
    Year end 30 June
    Dividend payment date(s) March, June, September and December
  • Fund manager commentary

    Total returns for the UK property market as measured by the Investment Property Databank (‘IPD’) Quarterly Universe were 1.4% in the three months to June 2016. This continues to show a marked slowdown from the levels of return witnessed over 2015, resulting in year to date returns of 2.6% and 12 month returns of 9.1%. The flattening out of returns is predominantly down to the disappearance of capital growth which was only marginally positive over the quarter. Sentiment had become increasingly cautious regarding pricing ahead of the EU referendum vote and this was reflected in lower transaction volumes. Nevertheless the vote occurred towards the end of the quarter and most of the direct impact on performance may be felt in future periods.

    Capital values are now 4.3% higher than this time last year and income (at 1.1% over the quarter and 4.7% per annum) is now the primary driver of property returns. Rental growth at the all-property level was 0.5% over the quarter, less than half of that which was recorded this time last year. Rental growth for Central London offices remained positive but the rate of that growth slowed sharply. In terms of sector performance, total returns have broadly followed the trend of recent quarters with Central London shops, industrials and distribution properties outperforming. Retail outside of London and the South East and regional offices have continued to underperform.

    The Company portfolio returned 1.5% over the quarter, with total returns of 7.1% over the year to June 2016 driven by a 5.6% annual income return. Much like the wider index the stand out performers were the industrial assets, with Company’s assets outperformed their peers over both the quarter and the year. The portfolio continues to benefit from an average weighted unexpired lease term of in excess of 7 years and a low risk income profile with all of the top ten tenants, accounting for 43% of total income ranked as negligible or low risk by IPD. The vacancy rate fell to 4.2% of annual rent receivable by quarter end, with terms agreed on 90% of this void at the time of writing. The completion of these agreed lettings will make a meaningful contribution to income growth and dividend cover.

    There remains considerable uncertainty within the marketplace with potential for near term pricing volatility. Most industry forecasters have revised down their predictions for property in light of the vote to leave the European Union but there is a wide range of estimates and differing views on the likely path of returns. This uncertainty is likely to favour defensive, securely let assets in established locations. We will return to an environment where Income will be the main driver of returns. In anticipation of this scenario, and with the added burden of increased transaction costs, the Manager has been particularly discerning where purchases have been concerned, instead choosing to focus resources on valid projects within the existing portfolio and addressing selected disposals. Post the quarter end, and in keeping with the commitment to focus attention on the core portfolio, the sale of King William House, Hull completed realising net proceeds of £2.6 million. The current cash position and flexibility afforded by the revolving debt facility does however provide scope for acquisitions should market turbulence offer suitable opportunity. The Manager remains watchful in this regard with potential target assets continually under review.

    Despite historic low valuation yields, the case for property still stands up to scrutiny, offering rental income backed by a relatively healthy occupier market, low void rates and an attractive margin over gilts. As the capital cycle has drawn to a close the focus is now very much on management of the income stream, translating occupier demand into income growth or controlling risks where prospects are less clear. The UK offers a large, diverse economy and a transparent, mature property market which has delivered solid risk adjusted returns over the long run, all attractive characteristics in uncertain times.

    As at 30 June 2016

  • The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market movements. Past performance is not a guide to future performance. When you sell your shares, you might get back less than you originally invested. If markets fall, gearing can magnify the negative impact on performance. A fund investing in a specific country carries a greater risk than a fund diversified across a range of countries. The value of property related securities are likely to reflect valuations determined by professional valuers. Such valuations are the opinion of valuers at a particular point in time and are likely to be revised. Property and property related assets can sometimes be illiquid.
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  • Peter Lowe

    Peter Lowe

    Fund Manager

Past performance is not a guide to future results. The value of investments can go down as well as up.

Information in this section of the Website is directed solely at persons who are located in the UK and can be categorised as retail clients. Nothing on this website is, or is intended to be, an offer, advice, or an invitation, to buy or sell any investments. Please read our full terms and conditions before proceeding further with any investment product referred to on this website. This website is not suitable for everyone, and if you are at all unsure whether an investment product referenced on this website will meet your individual needs, please seek advice before proceeding further with such product.

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