Discount widening and portfolio repositioning drag down UK Commercial Property’s returns

UK Commercial Property Trust has published its results for 2015. The Chairman says the fund delivered a NAV total return of 9.1% over the 12 month period, outperforming the FTSE All- Share Index return of 1.0% and the ten year gilt index of 0.8%. The return from UKCM was behind that of the IPD benchmark return however – it returned 12.7% and the FTSE Real Estate Investment Trust Index returned 10.6%.

The share price at the year end stood at 85.25p resulting in a share price total return of 0.8% in the year. In line with the peer group and the wider listed Real Estate sector, the shares now trade at a discount to NAV of 3.7%.

The Chairman says one reason for the lower returns was significant ongoing portfolio repositioning, with associated ‘one-off’ costs. The total value of assets traded was over £300m resulting in a portfolio now valued at £1.32bn.

Over the course of the year, three retail properties were sold in Weston- super-Mare, Brighton and Kensington High Street, London. In addition, the Company also sold a Manchester office and an industrial unit in Brackmills, the latter as part of a swap transaction. In total these sales were above their most recent valuation. The majority of cash raised from these sales was deployed into the following properties:

Eldon Street, a City of London office purchased for £27.5m which, they say, provides the company with exposure to the vibrant City office market and a property in which some successful asset management has already been achieved by our Investment Manager.

Ventura Park, Radlett, an industrial estate purchased for £67.1m within close proximity of the M25 and offering opportunities for rental growth.

Central Square office complex purchased for £21.6m in Newcastle upon Tyne, located in the city centre and providing a secure income stream with a good tenant base.

Cineworld leisure complex, Glasgow purchased for £29.2m; this is one of the UK’s busiest cinemas with a strong anchor tenant on a long lease and the property also offers asset management opportunities.

UKCM : Discount widening and portfolio repositioning drag down UK Commercial Property’s returns