The Charities Property Fund, the first and largest property fund designed specifically for charities, has outperformed the Association of Real Estate Funds’/IPD UK All Balanced Funds Index for the fifth year in a row.
On a total return basis, the Fund has outperformed the AREF/IPD UK All Balanced Funds Index by 2.3% per annum on average1.
This is due in large part to its focus on delivering a high and secure level of income. Its current distribution yield payable to investors of 6.0% makes it highly attractive to charities seeking income and compares favourably with the 4.6% per annum average dividend payable by the funds in the IPD Pooled Property Funds Index2 as well as UK 10-year Gilt yields3 of 2.3% and 3.7% yielded by the FTSE All Share4.
Harry de Ferry Foster, Fund Director, commented: “We are delighted to have raised almost £300 million of new equity over the last two and a half years and have invested it successfully to maintain outperformance of the Index. The Fund has low voids, sup covenants and continues to deliver an above average income return. Income is vital to this Fund and the high level we are delivering, along with sup covenants and sup growth potential, has made it very popular with charities. We believe it will continue to outperform with its focus on key growth areas such as London offices and supermarkets.”
The Fund, which is managed by Cordea Savills and has been running for 11 years, is open to all UK charities and currently has 1,261 investors. It aims to deliver a high and secure level of income and has no borrowing.
Since June 2009, the Fund has purchased 40 properties, in 27 separate transactions taking advantage of opportunities that offer significant value. Purchases over the last 12 months or so include a John Lewis internet distribution centre in Redditch for £15.175 million (9.4% income yield to the Fund), a Tesco Supermarket in Nailsea (Bristol) for £21.5 million (5.2% income yield) and an office building in Farringdon, EC1 for £23.0 million (7.1% income yield).
The Fund has good diversification against specific property risk with 68 properties let to reliable tenants on long leases with few voids. Leases in the Fund have an average of 9.8 years to expiry which provides a long-term income stream. The vacancy rate will fall to 5.2% once a number of transactions have completed, well below the 10.7% in the IPD Quarterly Index (June 2012). In addition, 86.1% of the Fund’s properties are secured on low or negligible risk covenants, compared with 70.5% in the IPD Index.
1 Source: Investment Property Databank, basis: NAV-to-NAV with gross income reinvested, net of expenses
2 Source: Investment Property Databank
3 Source: FT, June 2012
4 Source: FT, June 2012
Contacts:
Patrick Evans / Stephen Sheppard
Citigate Dewe Rogerson
Phone: +44 (0)20 7638 9571