F&C UK Real Estate points at sector recovery

F&C UK Real Estate Investments has announced in its interim results for the six months to 31 December 2014, a period of robust performance.

The Company’s net asset value (NAV) per share total return for the six month period was 11.9% with strong share price total return of 15%. The shares were trading at a premium to the NAV of 3.5% at the period end.

The first interim dividend for the year ending 30 June 2015 of 1.25 pence per share was paid in December 2014, with a second interim dividend of 1.25 pence per share to be paid on 31 March 2015. It is expected that the Company will continue to pay quarterly dividends at this rate, the equivalent of 5 pence per share per annum.

The company’s portfolio recorded further capital growth during the six month period, with overall values increasing by 6%. Industrial properties witnessed the highest capital returns at 8.7 per cent, followed by offices which increased in value by 6.9%.

The property with the largest increase in capital value was 1-2 Lochside Way, Edinburgh, which saw an uplift of 23.5% on the back of an improving market and the lease renewal with the tenant HSBC plc. The portfolio delivered an income return of 2.8% over the six month period.

The period to December 2014 saw the Company approved to enter the UK REIT regime, with effect from 1 January 2015. By obtaining UK-REIT status, the group is no longer subject to UK income tax on the profits and gains from their qualifying property rental business provided that it meets certain conditions. This effectively reduces the burden of taxation for most shareholders.

Commenting on the outlook for the UK Commercial Property sector, fund manager Ian McBryde said: “The recovery of the commercial property market is broadening beyond London and the past six months saw the yield gap between prime and secondary narrowing.

“The approaching UK election and possible EU referendum, together with global economic and political uncertainty, may act to temper performance over the coming five years, with rental growth becoming a more important factor in performance. However, property yields remain attractive against the risk free rate, and with interest rates expected to stay low for some time, the outlook for property remains favourable.”

The company’s net gearing level, as at 31 December 2014, was 30.7%. Since the period end, the Company has issued 3 million ordinary shares at a 4% premium to the prevailing NAV.


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