Ignis Real Estate Team
The Ignis Real Estate business unit is a strong and highly experienced team of 30+ investment and professional staff that is focused on actively searching out value in the property sector. Headed by Gary Hutcheson as Managing Director, Ignis Real Estate manages appx £3.2bn* of assets on behalf of a wide range of third party clients as well as Phoenix Life.
*Source: Internal as at 31/12/11
Review and outlook
Latest News - March 2012
UK commercial property recorded a total return of 0.3% in February 2012, which represented the lowest level of performance since the market turned positive in the middle of 2009. Income returns remained stable at 0.5%, while average capital values declined for the fourth month in a row by 0.3%. Retail underperformed the other broad sectors with a capital decline of 0.4%, while the office and industrial sectors fell 0.2% and 0.1% respectively. Average rental values declined by 0.1% with the fall again concentrated in the retail sector. Yields also drifted higher, shaving 0.2% off values. Occupational markets will continue to be difficult in 2012 with modest economic growth at best translating into weak disposable incomes and rising unemployment. The market remains polarised between London/South East versus the other regions, and prime versus secondary properties.
Inflation is starting to fall and fears over a formal double-dip recession have eased on the back of some encouraging Purchasing Managers Index (PMI) survey data, although unemployment continues to rise. The eurozone crisis also remains a major challenge as demonstrated by market reaction to the recent ‘less than successful’ auction of Spanish government bonds. The government will hope that the healthy nature of corporate balance sheets will translate into a source of investment to drive the economy forward. Confidence, however, is likely to remain low as the UK faces a long drawn out recovery.
We continue to seek new opportunities with strong fundamentals to complement the existing assets in the fund. The active management of the fund’s income stream remains a primary focus as over the short to medium term we anticipate income returns will continue as the key driver for total returns.
*Source: IPD UK Monthly Index February 2012
Property Strategy
• Focus remains on proactive management of the fund's income profile and quality
• Hold / acquire prime assets in favour of secondary stocks in all sectors
• Preference for South East Markets where economic growth prospects are higher
• Income will be the key component to performance over the short term
• The focus for strategic acquisition continues towards select high quality assets to complement and enhance the fund's existing stock
Recent Fund Activity
Some recent examples of portfolio activity include:-
• Mercedes Benz, Lower High Street, Watford - 23,866 sq ft prime car showroom purchased in July 2011 for £8.267m
• 77 Gracechurch Street, London - Acquired in July 2011 for £43.5m, the building was developed in 1985 and consists of basement, ground and six upper floors with a total area of 49,295 sq ft
• 166-168 High Street & 68-70 Regent Street, London - Retail / restaurant block acquired for £6.78m. Commands a prime pitch at the junction of High Street and occupied by Oasis / Warehouse, La Tasca Restaurants and the Party Shop
• Bligh’s Meadow Shopping Centre, Sevenoaks - Acquired for circa £28m and providing an attractive blend of national and local tenants including Marks & Spencer, Robert Dyas, Laura Ashley and Cafe Rouge
• Royal Avenue House 35-41 Kings Road London SW3 – Acquired for circa £30m this prime island site comprises four retail units let to Monsoon, H Samuel, Hawes & Curtis and Sole each with approximately 10 years unexpired term
• West End Retail Park, Glasgow – Anchored by Sainsburys with other tenants including M&S Simply Food, Boots and Argos with a new letting recently completed to Home Bargains. This c. 77,000 sq ft Open Class 1 (A1) retail park was acquired for circa £31.75m
• Minto Commercial Park, Altens, Aberdeen – The Fund has acquired five modern industrial units for circa £12.5m let to a variety of tenants for unexpired terms of approximately ten years
• Castlemore Retail Park, Chester Road, Manchester – The final unit has been let to ELS (Manchester) Limited for a ten year term. Other tenants on the park include DFS, Sleepmasters, KFC and Harry Ramsden’s
• Masthead Industrial Estate, Dartford – Agreement has been reached with Stralfors plc to lease a 32,500 sq ft industrial unit
• Refurbishment projects at The Grosvenor Building, Glasgow (50,000 sq ft) and Ellenborough House, Cheltenham (30,000 sq ft) completed early 2011
This information is for professional clients and investment professionals only and should not be relied upon by retail clients.
Past performance is not a guide to the future, the value of units and any income earned from them may fall as well as rise and is not guaranteed.
Property investments are relatively illiquid compared to bonds and equities and can take a significant length of time to trade.