Charities Property Fund

The Charities Property Fund, managed by Cordea Savills, reached £670 million having concluded another successful year of investment in 2013. Fifteen assets were acquired totalling £130 million, delivering an average yield of 6.50% after acquisition costs.

In the retail sector, the Fund acquired a Sainsbury’s supermarket in Barnet occupying a 2.5 acre strategic site adjacent to a train station that offers long-term development upside let on an unexpired lease of 24 years subject to RPI, and a fully-let open A1 consented retail park in Redditch town centre let off low rents with strong anchors including Aldi and Iceland. Barnet was acquired for £37.4 million reflecting a yield of 4.5% and Redditch for £14.4 million at a yield of 7.1%.

Six single let industrial assets were added to the Fund taking the total portfolio weighting above 25%. The industrial assets are located in Normanton (occupied by Kongsberg), Avonmouth (Kuehne & Nagel), Birmingham (SIG), Liverpool (Toyota), Redditch (SP Group) and Peterborough (Sage Publications). All the industrial assets are let to good quality tenants in sought after locations with each tenant demonstrating their commitment to the units through significant investment. The six units were acquired for £32 million in total with an average unexpired lease term of seven years delivering an average yield of 8.0%.

Another central London office, Paulton House near to the Old Street roundabout, added increasing exposure to the growing ‘Tech Belt’. The building comprises a converted Victorian warehouse which has been recently refurbished to an excellent standard and fully let to five occupiers from the TMT sector at low rents with excellent growth potential. The price of £10 million reflects a capital value of £580 per sq ft.

The Fund also continued its drive into alternative property classes with the acquisition of four car show rooms, a health and fitness club and a motorway service area totalling £35 million. These assets provide diversification benefits and are secured on long leases to good covenants with fixed income growth and high barriers to entry for competing operators. The car show rooms provided a yield of 7.2% with 23 years unexpired. The motorway service area and the health and fitness units also delivered 7.2% with an average unexpired lease term of 16 years.

The Fund sold four assets in 2013 and will continue to recycle capital from non-core assets that have enjoyed asset management success, taking advantage of improving capital market conditions to achieve exits above valuation.

Harry de Ferry Foster, Fund Director, commented:

“We are delighted with the assets acquired in 2013. It is particularly pleasing that the Fund has invested over £400 million in new acquisitions during the last four years, spread across 48 different properties. We have a diversified Fund of good quality assets that have been acquired during a recessionary environment and look inherently undervalued. This bodes well for future performance and we remain confident of our stock picking skills in an increasingly competitive market place, as evidenced by the fact that half the assets the Fund acquired last year were secured off market.“

 

“For 2014, we will continue to focus on industrial assets, fringe Central London offices, good quality out-of-town retail together with alternatives. Whilst these are our preferred sector picks we remain opportunity-led.”