Valeria Martinez, Investment Week, 21 July 2023:
The UK property market is going through a “recalibration” during the higher interest rate environment, but experts told Investment Week this may represent a buying opportunity, thanks to “attractive” valuations.
Simon Marx, head of research at Lothbury Investment Management, said the UK real estate market was at a “critical juncture”, emerging from the global pandemic “only to hit upon the twin challenges” of a high inflationary environment and the rapid re-setting of interest rates…
A valuation opportunity
Richard Parfect, fund manager at Momentum Global Investment Management, said the most significant change over the last 12 months in the property space has been the increase of gilt yields, which provide the reference benchmark for property yields…
Michael Gobitschek, portfolio manager at SKAGEN m², said that while this might prove to be far-fetched, greater hybrid working is “creating a dent in short-term demand and longer-term uncertainty”…
REIT picks
Richard Williams, property analyst at QuotedData, said there was “optimism” that valuations in the logistics sector are stabilising. If this is the case, he argued logistics-focused companies look cheap.
One such company is Tritax EuroBox, which is trading on a discount to NAV of around 40%, according to data from the Association of Investment Companies, which he said looks “undeserved”.
The trust, which holds £1.3bn in assets, invests in a portfolio of continental European warehouses focused on rental growth. Its dividend, which currently yields around 8.4%, is “fully covered” by earnings and its debt cost is one of the lowest in the sector, he said.
Industrials REIT delists following Blackstone acquisition
Another trust that Williams said was “unloved” but “deserving of more attention”, was the abrdn Property Income (API) trust, which is trading on a discount to NAV of 41%, according to data from the AIC.
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