This £299.2m investment trust was launched in 2004 and has produced consistent returns for investors.
It is also an Investment Adviser 100 Club 2014 member. Co-managers Duncan Owen and Nick Montgomery actively invest in UK real estate, with an emphasis on commercial property. “Our objective is to outperform [the IPD Quarterly Version of Balanced Monthly Index funds], while having a good level of sustainable dividend that we can distribute, with a long-term total return of somewhere around 8-9 per cent,” Mr Owen says.
As proof of its active credentials, he adds: “What we’re trying to do is acquire the worst properties in the best locations and turn them – through active management – into the best properties in the best locations and realise the gain and recycle it into something else.”
The manager notes their preference is for “clever towns and cities”, with most of their target investments located in roughly 10 such places in the UK. “There are some obvious ones,” he concedes. “There are still parts of London and Manchester where our largest investments are and we are keen to invest in those towns and cities that have strong fundamentals.”
Thus the managers look for locations where there is employment growth and above-average earnings growth. “The key word is sustainable income and we find that is the best way of getting sustainable performance because you get competing uses for the same location,” he adds.
Mr Owen refers to a series of properties in Wembley, northwest London, which they sold at the end of last year as an example of where good fundamentals and infrastructure improvement added to value. The manager recalls that when they purchased a piece of land near Wembley Stadium, it had one office block and a large car park on it.
He says: “We bought this property for £8.5m. We got planning consent to build a student block on one acre of the site and we sold that site to student property developer Unite. We got planning consent on the other acre of the car park to build a block of flats with 600 units, and we sold that – with the benefit of the gain – to housebuilder Redrow and ended up exiting at a total price of £38.5m.”
While Cambridge is what Mr Owen calls a “clever town”, he admits it is now very expensive. “We break London up into about 20 villages and half of those are too expensive. But we think some, such as Bloomsbury, have not yet run their course,” he suggests.
One significant change to the portfolio has been its exposure to the retail sector, with the managers taking its retail weighting down during the last five or six years to 25 per cent in 2014.
“We didn’t like the structural changes and what it meant for the high street shops because of e-commerce and home delivery,” he explains. He believes the sector has bottomed out so the managers have already begun to increase their weighting to retail in the portfolio again.