Investors looking to diversify their portfolio by investing in UK commercial property should be aware that Brexit negotiations will “strongly influence” the outlook, according to the manager of F&C Commercial Property Trust – one of Moneywise’s First 50 Funds for beginners.
Commenting on the outlook for UK commercial property in the light of the trust publishing its interim results today, Richard Kirby says: “The outlook for property continues to be strongly influenced by the Brexit negotiations and we would expect investors to remain cautious and risk averse, and for this to favour core/core plus properties [core properties are seen as safer investments while core plus properties are typically lower quality or higher risk but they return slightly more] in established locations.”
He also warns: “Industrials, distribution and alternative assets may all provide investment opportunities, but are very expensive, and we remain cautious about Central London offices until the Brexit negotiations are further advanced. The structural problems affecting much of the town centre regional retail market seem likely to persist.”
However, Mr Kirby believes that as long as there are no major economic shocks, the outlook for his fund is positive. “Assuming that the economy performs in line with consensus forecasts, and there are no major shocks, we are looking towards a period of positive total returns, supported by the income return.”
Returns beat the benchmark
Investing in a diversified range of UK commercial properties, the F&C Commercial Property Trust’s aim is to deliver an attractive level of income together with the potential for capital and income growth. Read more information about the F&C Commercial Property Trust.
According to the company’s interim results, in the six months to 30 June the trust delivered a net asset value (NAV) total return of 5.1% and an ungeared total return of 5% - higher than the reported total return of 4.6% from the company’s benchmark, the MSCI Investment Property Databank (‘IPD’) All Quarterly and Monthly Valued Funds Index.
Meanwhile, the share price total return for the period was 8.8%, taking the share price to 145.3p as at 30 June 2017. The share price has since risen further, standing at 148.9p at the time of writing, according to data from Moneywise’s parent company Interactive Investor.
Monthly dividends of 0.5p per share were paid during the period, with the annualised dividend yield at the end of the period standing at 4.1%. Barring “unforeseen circumstances”, the trust states that the dividend will continue to be paid at the same monthly rate going forward.