F&C Commercial Property’s net asset value total return for the six month period ended 30 June 2016 was 1.4 per cent and the ungeared total return from the property portfolio was 2.0 per cent. This compares with a total return of 2.6 per cent from the industry benchmark.
The changes to Stamp Duty announced in March 2016 reduced the value of the portfolio by 0.8 per cent and the period saw income becoming the main driver of total return. Although overseas buyers remained active, institutions became net sellers as the period progressed. The yield compression that had previously driven the market became less pronounced and restricted to a smaller part of the market.
The share price total return for the period was -13.3 per cent. The share price had been trading at a premium to NAV for more than two years until the final quarter of 2015 when it fell to a discount of 0.6 per cent by the end of December. As at 30 June 2016, the share price was 113.8p, a discount of 17.8 per cent on the June NAV, but it subsequently recovered, closing the discount to 8.1% by 22 August 2016.
Monthly dividends of 0.5p per share were paid during the period, maintaining the annual dividend rate of 6.0p per share. The annualised dividend yield at the end of the period was 5.3 per cent on a closing share price of 113.8p per
share. Barring unforeseen circumstances, it is the Board’s intention that the dividend will continue to be paid monthly at the same rate. Dividend cover for the period (excluding capital gains on properties and the loss on redemption of the interest rate swap) was 88.7 per cent, an improvement on the cover achieved for the last financial year which was 80.6 per cent.
The statement says underperformance came primarily from the office sector of the portfolio where there were significant voids at Thames Valley Park One, Reading and Watchmoor Park, Camberley. There was also a mark down in the valuation of the Aberdeen properties. On the upside, all the other sectors in the portfolio produced positive total returns and were ahead of the benchmark.
There were no purchases or sales during the period and the focus has continued to be on driving income and value-creating asset management within the existing portfolio.
FCPT : Rising vacancies hold back F&C Commercial Property