F&C Commercial Property Trust’s results for 2014 are good. The fund’s property portfolio beat the IPD Index by 2.4%, delivering a return of 20.3% compared to 17.9% for the benchmark. This helped generate a return on net assets of 22.1%. The return to shareholders was a little lower however, 18.8% as the company moved to trade on a lower premium.
The dividend was maintained at 6p. this was covered 0.5x but, with interest savings on their debt (see below) and without some one-off costs, they think it will be around 0.75x for 2015.
The statement says demand from overseas investors for UK property continued to be substantial and they say this was the main reason for the high returns during the year. The demand led to further yield compression across the sector, with the yield gap between prime and secondary properties narrowing.
They were buyers too – adding four office blocks in Aberdeen, a new production and distribution unit at The Hive, Liverpool International Business Park, Speke, Liverpool, two units at their existing site at Sears Retail Park, Solihull, and a small property within St. Christopher’s Place Estate, London W1 (St. Christopher’s Place is the largest investment in the portfolio).
They refinanced their debt at the end of 2014 – replacing £230m of bonds with an interest rate of 5.23% with a ten year loan with an interest rate of 3.32%. gearing at the year end was 18.3% and the weighted average cost of their debt was 3.57%.
FCPT : F&C Commercial Property expects improving dividend cover