Adding value in cautious times
Standard Life Investments Property Income Trust (SLI) has a long-term track record of market-beating returns achieved by investing in a diverse portfolio of commercial property in the UK. Minimal retail holdings and a bias to industrial property have proved beneficial to the fund. However, its active approach to asset management, aiming to keep voids low and rent flowing, has also been fundamental to its performance. Identifying and selling assets where the rental income may be at risk, and recycling the capital into property with strong rental growth prospects, has been the name of the game for SLI’s manager, Jason Baggaley, in recent months. A yield around 5% and returns ahead of listed peers (see page 6) help to justify SLI’s premium.
Commercial UK property exposure
SLI aims to generate an attractive level of income, along with the prospect of both income and capital growth, by investing in a diversified portfolio of UK commercial property assets. It invests in three principal commercial property sectors: office, retail (including leisure) and industrial. SLI borrows money with the aim of enhancing returns; the board’s intention is that SLI’s loan-to-value ratio (LTV) will not exceed 45%. The current LTV is 24.6% and the manager says that the intended range at this point in the cycle is 25-30%.
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