- Latest property revaluations show a marginal increase of 0.2% since September 2019
- Total return of 5.7% p.a. since launch
- Total return over the past 12 months is 3.3% across the portfolio
- Three development loan investments repaid with interest
This quarterly update comes at a time of extraordinary global economic stress and uncertainty in the midst of the COVID-19 virus crisis. The portfolio revaluation was completed before the crisis escalated in the UK and the latest valuations do not account for the impact it may have on the property market*. Current market indicators suggest that the commercial property market and the investment vehicles which provide private and institutional investors with access to property assets are suffering similar pressure to that felt across most sectors.
Equity markets and REITs have fallen approximately 30%, and 9 out of the 11 major open-ended UK commercial property funds have closed their doors to redemptions.
The past 12 months had already marked a difficult time for UK property investment, with escalating Brexit uncertainty finally being relieved by the December 2019 general election. Unfortunately, that relief has been short-lived and the Covid-19 crisis will now delay any property market recovery. We continue to believe in the long term strength, stability and attraction of UK residential property assets. Our focus is on the management of our existing portfolio, with the potential to recommence new acquisitions when conditions allow.
Latest property revaluations show a marginal increase of 0.2% since September 2019
Every six months, Allsop LLP, an independent, RICS-accredited surveyor, re-values the residential properties on the Property Partner platform. Student accommodation properties are re-valued annually in September.
The result was a marginal increase of 0.2% in the value of the residential properties in the portfolio since 30 September 2019. Of the 97 residential properties that were revalued in March 2020, 11 saw an increase compared to their previous revaluation, 72 remained unchanged and 15 experienced declines.
You can view the comparable information provided by Allsop for each of our residential property valuations here. The property revaluations took place before the escalation of the Covid-19 crisis in the UK and as such do not make allowance for the current impact of the crisis on the economy and the property market*.
Latest revaluations imply a total return of 5.7% p.a. across the platform since launch
The revaluations result in an average total return of 5.7% p.a. across all properties since platform launch. This is made up of 1.5% from capital growth and 4.2% from dividend yield, denoted by the blue bars in the chart below.
Dividend and total return figures are quoted before the impact of the AUM fee introduced in August 2019.
Taking into account the full discounts achieved at purchase and each property’s current valuation at the intended method of sale, the total return increases to 7.8% p.a. (denoted by the green bars in the chart below).
The above total return* calculation can be found here (not available on mobile).
The total return over the past 12 months is 3.3%
The bars below show that the portfolio has, on average, delivered an annual total return of 3.3% over the 12 months to March 2020, including a dividend yield of 3.6% and -0.3% in capital value growth.
UK regional residential property outperformed London in the last 12 months, with an income return of 3.4% compared to 2.3%, capital growth of 1.6% versus -0.6% and a total return of 5.0% against 1.7%. Student accommodation properties were not revalued but the impact of their capital and income performance over the past 12 months is reflected in the overall portfolio total return presented above.
Three development loan investments repaid with interest
Our residential development loans secured against schemes in Eastbourne, Chichester and Southampton were repaid early with interest in the last 6 months, delivering investors annualised total returns of 23%, 10.3% and 9% respectively.
Three new development loan investments with a total value of £2.2m were funded in the period, secured against residential schemes in Whitechapel, Epsom and the Isle of Dogs, taking the total amount raised to £7.6m, of which £2.7m has been repaid.
In January 2019, we launched our Innovative Finance ISA to enable tax free investment in these opportunities. We intend to continue to expand this part of the business in addition to our core property investment offerings, with additional property-backed debt investments scheduled for launch on platform when market conditions allow.
Please note: when you invest your capital is at risk and past performance is not a reliable indicator of future performance.
If you have any questions or comments on this article, or anything else, please email us on firstname.lastname@example.org.
* The March 2020 surveyor’s valuation for Golden Hill Fort was not received until 27-03-20 and the valuer has included an estimated adjustment for current impact of the COVID-19 crisis. To preserve consistency across the Q1 valuations and total return analysis presented above, the valuation for Golden Hill Fort has not been updated. The Golden Hill Fort investment page on platform has been updated to reflect the new valuation.
Since the launch of the platform in January 2015, properties have, after fees and corporate taxation, delivered an estimated total return of 5.7% p.a. up to 31 March 2020; including 4.2% net rental income (dividends) and 1.5% capital value growth. These returns are calculated six monthly and (i) with reference to the average dividend yields and price movements of properties with at least 3 months trading history on the Resale Market, (ii) spreading over 5 years any purchase discount to the RICS valuation, (iii) amortising property acquisition costs over 10 years, (iv) assuming the property remains tenanted, (v) assuming that investments are held for the long term, to the extent that the annualised impact of the Property Partner initial transaction fee becomes immaterial, (vi) weighting each property’s performance according to their initial funding value, and (vii) before deduction of the Property Partner AUM fee introduced on 5 August 2019.
All dividend and total return figures are quoted before the Property Partner AUM fee introduced on 5 August 2019 as the fee paid by each client varies between 1.2% p.a. and 0.2% p.a., depending on the size of the portfolio.
You can download the objective data used to calculate this estimated return here (not available on mobile). Past performance is not a reliable indicator of future performance. To go back to the quarterly close period update click here.