Our Q1 2022 performance announcements include property revaluations across the portfolio, the latest dividend changes, updated financial information on all properties and an update on property disposals.
To ensure that all clients have the opportunity to consider this announcement, the Resale Market will be suspended as usual, for 3 working days, re-opening at 10am on Tuesday, 5 April 2022.
We have had another strong quarter of performance within our property portfolio:
- Independent surveyors have raised the valuation of our portfolio by 5.7%
- This increases the valuation of client investments by 9.6%
- Dividend distributions will increase by 8.1% from 5 April 2022
- Total return (dividends + capital gains) on property disposals is up to 5.0% p.a.
- 1. Independent property revaluations
- 2. Dividend changes
- 3. Property financial performance
- 4. Property disposals
- 5. Development loans
- 6. Properties with fire safety issues
- 7. Upcoming quarterly announcements
1. Independent property revaluations
All properties in the portfolio have now been revalued by Allsop LLP, an independent, RICS-accredited surveyor, for the first time since 31 March 2021. Overall, property valuation increased by 5.7% (excluding properties impacted by fire safety issues). Given the leverage from mortgage finance, this increased the value of client investments by 9.6%.
To better understand this rise in valuation, we can divide the portfolio into categories:
|March 2022 change (vs March 2021)|
|Portfolio weighting||Property valuation||Client|
|Commercial / leased property||12%||2.7%||5.4%|
|Properties with fire safety issues||3%||-19%||-43.0%|
The latest ONS / Land Registry UK House Price Index shows average house prices growth of 9.4% in England (12 months to 31 January 2022). This masks wide disparities between property types and regions. Houses continued to drive the performance of the index with average price growth of 10.5%, while flats increased in price by 4.5%. Average London prices increased by 2.2%, well below the rate of growth in all other regions. London flats increased in value by 0.2%.
Our residential portfolio (excluding properties with fire safety issues) is weighted 79% to flats and 21% to houses. This high weighting in flats, combined with our high weighting in London, has clearly impaired the performance of the portfolio when compared to headline national averages.
For all properties, Allsop’s latest valuation and survey is available on each property’s respective Investment Case. For those properties that increased or decreased in value by 5% or more, we have provided additional discussion in the properties’ Investment Cases.
In addition, clients can review here what Allsop regarded as the most relevant comparable transactions for each property to inform their valuation.
2. Dividend changes
Over the last 12 months, following every quarterly dividend review, our dividend payout has increased significantly:
|Dividend yield p.a.||1.9%||2.1%||2.4%||3.2%||3.3%|
Across the entire portfolio the dividend payout has increased by 8.1%; however, the dividend yield has only increased marginally to 3.3% p.a. (far right column) due to the 9.6% increase in the valuation of client investments (see section 1 above).
In total, 60 of 70 eligible properties (where shareholders vote to sell at the 5-year anniversary process, no dividend is paid) are now paying dividends, with an average yield of 3.8% p.a.
From 5 April 2022:
- 1 property will commence paying a monthly dividend
- 16 properties will increase their monthly dividend
- 1 property will decrease its monthly dividend
You can find the full list of dividend changes at 5 April 2022 here.
3. Property financial performance
We update every property’s financial performance every 3 months. For each property, we report historical financial performance and the property’s net cash position. 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 1.1% of property value (up from 0.5%, reported on 17 December 2021), representing a continued strengthening of the properties’ balance sheets.
For the quarter ending 30 June 2022, we are making important enhancements to our quarterly performance reporting:
- 1. In addition to updating valuation and income performance each quarter, we will retain information for the year to 31 December 2021 for all financials reported, for comparison purposes (an additional column)
- 2. Instead of reporting information from the previous month (e.g. 28 February) at the end of each ‘calendar quarter’ (e.g. 31 March), as we are doing in today’s announcement, we will change to reporting the results of ‘calendar quarters’ (e.g. 30 June) one month following the end of the calendar quarter (e.g. 31 July)
These changes more closely align our reporting with disclosure norms for public companies.
4. Property disposals
Our substantial programme of property disposals continues to grow, involving 136 properties or units with an additional 41 properties or units already sold. Our detailed record of all property sales is displayed on our Selling Record, which shows an average total return (dividends plus capital gains) of 5.0% p.a. after all fees and taxes.
The first element of this disposals programme is discretionary sales of individual units within a block, where shareholders in each property have voted for the sale.
Reasons for these sales have varied, including ‘opportunistic’ sales to capture favourable market conditions, reduction in expensive mortgages, reduction of a property’s net cash deficit, reduction of mortgage refinance risk, etc.
A full list of these disposals can be found here and is summarised below:
- 19 unit sales completed
- 9 units currently under offer
- 3 units on the market
The second element of the disposals programme is 5-year anniversaries, where shareholders have determined to sell the entire property.
A full list of 5-year anniversary sales can be found here and is summarised below:
- 22 sales completed
- 19 properties / units under offer
- 7 properties / units on the market
- 98 properties / units to be sold as soon as possible, subject to vacant possession and ensuring we do not harm the market by selling too many units in the same block at once
5. Property development loans
Of the 16 development loans that our clients have funded, to date, 7 have been repaid in full with interest.
You can find the latest updates on the outstanding loans on their respective investment pages here.
6. Properties with fire safety issues
The UK-wide fire safety scandal affecting high rise blocks continues. 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 the latest update on each affected property’s investment case.
- Premier House, Edgware
- Picture Works, Nottingham
- Hamilton House, Liverpool
- Vantage Building, Hayes
- Sherringham Court, Hayes
- The Heights, West Bromwich
- Vista Tower, Stevenage
7. Upcoming quarterly announcements
29 July 2022 – market closed from 10am that day until 10am, 3 August 2022
31 October 2022 – market closed from 10am that day until 10am, 3 November 2022
If you have questions about these announcements, please email email@example.com
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.