Value and Indexed Property Income Trust (VIP) has reported its annual results for the year ended 31 March 2025, a period defined by its strategic evolution into a pure-play UK commercial property vehicle and its formal conversion into a UK Real Estate Investment Trust (REIT), effective from 1 April 2025. The move marks the culmination of a long-term plan first set in motion in 2021 and aligns VIP’s legal structure with its operational focus, bringing tax efficiency, regulatory alignment, and, it is hoped, potential appeal to a wider pool of institutional and income-focused investors.

Performance highlights

VIP delivered a net asset value (NAV) total return of 7.1% over the period, underpinned by strong portfolio-level returns and positive income dynamics. Share price performance was stronger still, with a total return of 15.0%, reflecting a narrowing of the discount to NAV and improved market sentiment towards the vehicle, particularly following confirmation of the REIT transition. The directly held property portfolio produced a total return of 9.0%, significantly ahead of the MSCI UK Quarterly Property Index return of 6.3%. This outperformance continues the long-term trend of consistent value-add, with VIP’s portfolio exceeding benchmark performance by 2.6% per annum over 5 years, 1.8% per annum over 10 years, and 3.0% per annum over 38 years under OLIM Property’s management. VIP says that its total shareholder return since its launch in 1972 launch now stands at 76,279%, a compound annual growth rate of 11.9%, compared to 8.3% from the MSCI index over the same period.

Portfolio strategy and asset management

VIP remains fully invested in a diversified portfolio of 30 assets located across the UK, with no exposure to traditional high street retail or office sectors. Instead, the trust maintains a high-conviction focus on long-let, index-linked assets in alternative sectors, including supermarkets, industrials, leisure, hotels, and garden centres. The portfolio is 100% let, with no voids or arrears. Rent collection for the year was 100%, continuing a long-standing trend of zero defaults since 2004.

During the year, VIP completed six disposals for a combined gross consideration of £12.4m, achieving an average 5% premium to book value. These sales predominantly involved smaller, shorter-let, or lower-quality assets and were aligned with the trust’s strategy to enhance portfolio quality and resilience. Capital was recycled into a key acquisition: Bridgemere Garden Centre in Cheshire, purchased for £16.5m at a 6.75% initial yield, rising to 7.8% in year two due to uncapped RPI-linked reviews. The property is let on a 30-year lease to Blue Diamond Ltd, the UK’s largest garden centre operator, with no breaks.

As at 31 March 2025, the portfolio’s weighted average unexpired lease term (WAULT) stood at 13.3 years. Rental growth on held assets was 3.2% year-on-year, driven by indexation and rent reviews. Nine reviews were completed during the year, with uplifts averaging 3.0%, and 97% of all leases are now inflation-linked – 88% to RPI and 9% to CPI – with the remaining 3% fixed.

Income, dividends, and capital structure

Gross contracted rental income for the year increased to £9.8m (FY2024: £9.3m). Total revenue return (excluding capital items) was £7.4m or 17.5p per share. The board declared a final dividend of 3.6p per share, payable as a property income distribution (PID), bringing total dividends for the year to 13.8p – an increase of 4.5% from FY2024. Dividends have now risen in every year since OLIM Property’s appointment in 1986, representing a cumulative increase of 1,004% over 39 years, significantly outpacing the RPI increase of 293% over the same period.

VIP’s shares yielded 7.5% at the year-end share price, providing an attractive level of income backed by long leases and high inflation linkage.

Borrowing decreased over the year to £56.8m from £57.6m at the prior year end, and the company repaid £10m of a £15m term loan during the period. The average debt maturity stood at 6.9 years, and 96% of the borrowings are fixed at a blended interest rate of 4.5%. However, despite the modest reduction in borrowings, the reduction in the value of the property portfolio pushed the loan-to-value (LTV) ratio stood up to 39% at year-end from 37% a year prior.

REIT conversion and governance developments

Following the shareholder vote in July 2024, VIP transitioned into a UK REIT on 1 April 2025. The board believes the new structure better reflects the trust’s real estate investment focus, aligns it with peers, and enhances income tax efficiency for the company and its shareholders.

To protect existing holders and provide optionality, the board reiterated its intention to offer shareholders an exit at NAV less costs in 2026, a commitment first made in 2021. In the interim, the board remains actively engaged in promoting the trust and communicating its differentiated investment strategy.

The year also marked the retirement of long-standing chairman John Kay after 31 years on the board. He will be succeeded by senior independent director David Smith. Kay oversaw the trust’s strategic shift from a generalist investment mandate to a specialist, inflation-linked property income trust.

Outlook and positioning

VIP remains confident in the structural appeal of its investment strategy, particularly in the current macroeconomic environment. It believes that its portfolio’s inflation-linked rental income, full occupancy, strong tenant covenants, and long lease durations provide a robust platform for sustainable income generation and long-term capital protection.

The manager continues to avoid traditional retail and offices, where structural headwinds persist, and focuses instead on asset-backed operational real estate with strong tenant fundamentals and predictable income streams. The trust sees continued opportunity in niche alternative sectors such as garden centres, roadside retail, leisure and logistics.

While acknowledging that geopolitical uncertainty and domestic political risk remain elevated, the board believes that real assets delivering secure, index-linked cash flows are well placed to meet investor needs for income, resilience, and inflation protection over the long term.

[QD comment MR: VIP continues to quietly deliver in a difficult environment. The trust’s strategic shift towards long-let alternative assets appears to have been well timed, help brace it against the structural headwinds that have been facing traditional property sectors. The completion of its REIT conversion is a natural next step, and the clarity it provides around tax treatment and income distribution should support broader investor appeal. With a fully let portfolio and a 7.5% yield largely protected from inflation risk, VIP should be able to deliver resilient returns – even if market sentiment remains cautious for a time. There’s still quite a lot of headroom on the debt but this will be an area to watch. The planned exit mechanism in 2026 adds a further layer of investor protection.]