June 2021 Portfolio Update

Our Q2 2021 performance announcements include the latest dividend changes, updated financial information on all properties and an update on property sales.

To ensure that all clients have the opportunity to consider this announcement, the Resale Market will be suspended for 3 working days, as usual, re-opening at 11am on Monday, 5 July 2021.

During the past 3 months we have made continued progress in efficiently managing the property portfolio and delivering strong returns:

  • 11 property sales completed; 5 properties that completed their 5-year anniversary processes and 6 opportunistic sales of individual units within larger blocks
  • From 5 July the average dividend across all properties will increase to 2.1%
  • The Ottershaw development loan was repaid in full with interest, delivering a total return of 14.8% to investors (9.9% p.a.)

Today’s announcements:

1. Property financial performance (new quarterly update cycle)
2. Dividend changes
3. 5-year anniversary processes
4. Opportunistic sales of single flats within blocks
5. Resale Market update
6. Property development loans
7. Properties with fire safety issues
8. Next quarterly announcements and close period

UK property market activity surged this month as buyers rushed to complete purchases in time to meet the 30 June deadline for the full stamp duty holiday. The Nationwide House price index reports growth of 3.8% in the 3 months to June. HMRC data shows more than 600,000 transactions completed between January and May 2021, 31% above the average for this period in the past 5 years. 

Buyers seeking houses with outdoor space have continued to drive the market. Flats and other lower value properties, where stamp duty is typically of less concern, have not experienced the same increase in demand, and price growth has been lower in London than all other regions of England. 

Looking beyond the recent activity, the government’s Office for Budget Responsibility (OBR) forecasts that UK house prices will continue to increase over the next five years, supported by high demand for good quality housing and continued limited supply. Existing holders of UK residential investment property will benefit from increases in asset value while those looking to purchase properties will face higher entry prices in addition to purchase costs. 

The UK student accommodation market and the PBSA properties on our platform face a critical 3 month period. Undergraduate applications for the 2021/2022 academic year have increased by more than 8% compared to 2020, but the outlook remains uncertain. Universities are unable to guarantee a return to in person teaching or unrestricted social activity, causing many students to delay a final decision on enrolling or booking accommodation. The 2021/2022 bookings status of each PBSA property in our portfolio has been updated on its investment page.

1. Property financial performance

Following our last update on 31 March, we will now update each property’s financial performance every 3 months, as part of our commitment to continually enhancing disclosure. 

For each property, we report historical financial results and the property’s net cash surplus or deficit.  These financials can be found in each property’s ‘Financials’ section and the Investment Case contains further discussion. The financial results disclosed include rental income, property operating and works costs, mortgage interest costs, fees paid to Property Partner, dividends, etc.  Overall, the net cash position of the portfolio is a surplus of 0.1% of property value.  

2. Dividend changes

In total, 53 of 90 eligible properties (properties that shareholders have voted to sell through their 5-year anniversary process do not pay dividends) are now paying dividends, with an average dividend yield of 3.4% p.a., based on the latest independent valuations.  Across the entire portfolio, including those not paying dividends, the average dividend yield has increased to 2.1% p.a.

Below is a list of all properties for which dividend payments will change from 5 July 2021, including 14 increases, 2 restarts and 1 decrease.

Prior to the Covid crisis, all dividends were quoted before deduction of the AUM fee; we have changed that policy, and all dividends are now quoted after deduction of the AUM fee. For example, the 3.4% yield quoted above, would have been quoted pre-crisis as 4.6%. Those clients with larger portfolios receive a rebate that reduces the net AUM fee paid on investments in excess of £25,000 from 1.2% to 0.7%, hence receiving higher yields than those quoted.

All dividend yields below are quoted as a percentage of their latest valuation.

The following 14 properties are already paying a dividend and will increase their dividend payments from 5 July 2021:  

PropertyAsset typePrevious dividend yieldNew dividend yield 
1. Terence House, NewcastlePBSA4.00%4.50%
2. Pitt Street, NewcastlePBSA5.25%5.75%
3. Verney Street, ExeterPBSA5.25%5.75%
4. Pierpoint Street, WorcesterPBSA5.25%5.75%
5. Ramsay Place, AberdeenPBSA7.00%7.50%
6. Sandars Maltings, Gainsborough, LincolnshireResidential3.00%4.00%
7. St Catherines Mews, LincolnResidential2.00%3.00%
8. Compass Court, EastbourneResidential3.00%3.50%
9. Blanchmans Road, WarlinghamResidential3.50%4.00%
10. Agecroft Apartments, PendleburyResidential3.00%3.50%
11. Station Road, SuttonResidential2.25%3.00%
12. Riverside House, Bourne EndResidential1.50%2.00%
13. Cubbington Road, Leamington SpaCommercial4.00%4.50%
14. Bath and Oxford PortfolioResidential4.00%5.00%

The following 2 properties will re-commence paying a monthly dividend from 5 July 2021:

PropertyAsset typeDividend yield p.a.
1. Sherringham Court, HayesResidential2.00%
2. Keogh House, SwindonResidential1.50%

The following property is already paying a dividend and will decrease its dividend payment from 5 July 2021

PropertyAsset typePrevious dividend yield New dividend yield
1. Flat 3, Tower MintResidential2.25%1.50%

For properties not currently paying a dividend, any net rental income accumulates within that property’s account, strengthening its financial position.

3. 5-year anniversary processes

In October 2020, we recommenced the 5-year anniversary processes for individual properties.  Since then, we have launched the process for 28 properties, of which 19 are proceeding with a sale and 9 have been held.

Of the 19 sales, 6 sales have completed, and 7 are “deal agreed” and progressing toward exchange.

Our record of all property sales is displayed on our Selling Record.  For all properties that we have either sold or are deal agreed, clients have earned an average total return (dividends plus capital gains) of 5.0% p.a. after all fees and taxes.

4. Opportunistic sales of single flats within blocks

We are continuing with our strategy of targeted disposals within the portfolio, where an SPV with multiple units would benefit from the disposal of one or more of those units (i.e. not the disposal of an entire property/block).

In all cases, the shareholders in each property vote to determine whether or not a sale goes ahead.

These disposals can be for a broad range of reasons, including opportunistically realising an attractive valuation, addressing a historic financial deficit, reducing future mortgage refinance risk, etc.  In each case, we agree with the mortgage provider how the proceeds will be used, but typically this involves the majority of proceeds paying down the mortgage.

In the past 3 months we have completed 6 unit sales. We are currently marketing 19 individual units for sale, of which 14 are under offer and shareholders have voted to proceed with the deal we have secured. You can view the unit sales that have completed and those under offer below, and you can review the returns achieved by each of these on our Selling Record:

Unit sales completed

1. Flat 48, Sandars Maltings, Gainsborough

2. Flat 41, Sandars Maltings, Gainsborough

3. Flat 10, Southwood Road, Hayling

4. Flat 5, Keogh House, Swindon

5. Flat 7, Carlisle Mews, Gainsborough

6. Flat 7, Spencer Parade, Northampton

Units under offer

1. Flat 6, Queen Street, Sheffield

2. Flat 5, Blackfords Court, Cannock

3. Flat 3, Stokes Mill, Stalybridge

4. Flat 11, Dutch Quarter, Colchester

5. Flat 54, Whitewell Road, Frome

6. Flat 21, St. Catherine’s Mews, Lincoln

7. Flat 11, St. Catherine’s Mews, Lincoln

8. Flat 11, Bridgewater Street, Deansgate

9. Flat 6, Lydan House, Redditch

10. Flat 27, Dutch Quarter, Colchester

11. Flat 6, Spencer Parade, Northampton

12. Flat 8, Prospect Court, Market Drayton

13. Flat 3, St. Catherine’s Mews, Lincoln

14. Flat 13, St David’s Lodge, Hastings

Units on the market

1. Flat 19, Sandars Maltings, Gainsborough

2. Flat 28, Sandars Maltings, Gainsborough

3. Flat 30a, Cherrington Road, Hanwell

4. Flat 6, Stafford Vere Court, Woodhall Spa

5. Flat 6, The Warehouse, Chester

5. Resale Market update

In May and June, trading volumes on the Resale Market were in line with the previous 12 months’ average.

PPX (the index of trading prices for all properties) has decreased 4% after a rally of 10% since late-December 2020.

Clients can select their own properties on the Resale Market or invest via an Investment Plan, which selects the best portfolios available according to one of 2 strategies:

  • Income Investment Plan provides a portfolio of the 10 highest dividend paying properties; the plan targets a portfolio with a yield in excess of 3% p.a. (after AUM fee), but is currently delivering in excess of 4.5% p.a. (after AUM fee)
  • Capital Discount Investment Plan selects a portfolio of 20 properties with the largest discounts to independent surveyors’ valuation; based on Resale Market trading prior to this close period, the plan was delivering an average discount in excess of 30%

6. Property development loans

This quarter, we repaid the Ottershaw development loan, delivering a net return to investors of 14.8%, being 9.9% p.a. over 18 months.

Of the 16 development loans that our clients have funded, 7 have now been repaid in full with interest.  

You can find the latest update on the outstanding loans on their respective investment pages here.

7. Properties with fire safety issues

The UK-wide fire safety scandal affecting high rise blocks continues to gather momentum.  Whilst the government has taken steps to address the issues, the situation remains far from resolved.  For further details on this and our 7 properties impacted, read our latest update here.

8. Next quarterly announcement and close period

  • 30 September 2021 – market closed from 10am that day until 10am, 5 October 2021
  • 17 December 2021 – market closed from 10am that day until 10am, 22 December 2021

If you have questions about these announcements, please email support@propertypartner.co.

Kind regards
The team at Property Partner

Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however, the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested.

The performance information (including any expression of opinion or forecast) reflects the most up-to-date data at the time of production; publication is made in good faith on the basis of publicly available information or on sources believed by Property Partner to be reliable.

Past performance and / or forecasts (if stated) are not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Gross rent, dividends, and capital growth may be lower than estimated. Exiting your investments (on the resale market, via the 5-year anniversary process or according to targeted strategies) is subject to price and demand. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary. Financial promotion by London House Exchange Limited (No. 8820870); authorised and regulated by the Financial Conduct Authority (No. 613499). See Key Risks for further information.