Value and Indexed Property Income (VIP), the £89m UK long-lease portfolio run by Matthew Oakeshott and Louise Cleary of OLIM Property, invested £10.2m of its cash pile in three freehold properties in the six months to 30 September: a four-screen cinema in Esher, Surrey, let to Everyman Media Group for 19.1 years with annual RPI-linked rent reviews, capped at 5% and collared at 1% per annum; a crematorium on a 31-acre site in Great Glen, near Leicester let to Westerleigh Group Holdings for 85.4 years with annual RPI-linked rent reviews, capped at 4% and collared at 1% per annum; and a new veterinary practice in Stirling, Scotland, let to Inspiring Vet Care for 20 years with five yearly RPI-linked rent reviews, capped at 3% and collared at 1%. VIP now has 29 properties with 27% in supermarkets, 20% industrial/warehouse, 14% in health club, caravan park and cinema; 13% garden centre, 10% bowling, 9% hotels, 4% other and 3% pubs. It said bowling and supermarkets rose modestly in value over the quarter with the garden centre, hotels, health club, cinema, other and pubs all stable. The values of the industrial / warehouse properties and the caravan park were slightly down with the overall portfolio rising to £143.6m from £138.4m with the £5.2m acquisitions in Leicester and Stirling included. VIP delivered a 1.8% total return over the quarter, rising to an income return of 3.8% and a capital gain of 0.2% over the six-month period. Both of these will be ahead of the MSCI UK Quarterly Property Index when it is released shortly.

QuotedData senior analyst Richard Williams said: “VIP’s update illustrates the attraction of a property strategy that can generate returns without relying on a recovery in capital values. Income accounted for almost all of the portfolio’s 3.8% six-month total return, while full occupancy and contractual rent increases provide useful visibility. The three purchases, offering an initial yield of 7.8% and long leases, should strengthen that income base. Their inflation-linked reviews offer further growth potential, although the caps mean this is not unlimited protection against rising prices. November’s interim results should show how effectively that property income translates into dividend cover after financing costs.”