UK Commercial Property Trust posts decline in NAV per share

UK Commercial Property Trust (UKCPT), the FTSE 250 investment company, has posted a decline in its year-end net asset value (NAV) per share as a result of a like-for-like decrease in its property portfolio value, the acquisition costs of an industrial portfolio, and working capital outgoings.

The NAV per share at December 31st 2012 totalled 69.6p, compared to 75.5p a year earlier.

Rental income for the period climbed 9.2% during the 12 months, mainly due to £164m-worth of acquisitions over the past two years.

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The group said the share price total return was 2.5%, which resulted in a reduction in the discount at which the shares trade to the NAV.

Over a five year period the company has returned 6.7% and 36.3% on a NAV and share price total return basis, respectively, ahead of the IPD Benchmark (1.7%) and the FTSE Real Estate Investment Trusts Index (- 25.9%).

However, the NAV total return for the year was -1.0%, with the underperformance relative to the IPD benchmark being attributed to the fact the portfolio is underweight in Central London offices where values have continued to increase due to significant overseas investment and the current perception that London is a safe haven.

The company also blamed the fact the portfolio is overweight in shopping centres compared to the benchmark and said rental and capital values have been the subject of downward pressure due to negative consumer and investor sentiment.

The group acknowledged that the commercial property market has been "affected by the travails of the wider UK economy", saying "the divergence of performance between prime and secondary properties, and between London and the rest of the UK, has continued; investors are showing little appetite for risk due to the ongoing economic uncertainty which has resulted in capital value falls over the past 12 months across most sectors".

Company Chairman Christopher Hill said: "The board believes that UKCPT is well placed to achieve its objectives by undertaking proactive asset management initiatives to preserve and improve income. The company has considerable cash resources which can be utilised for income enhancing acquisitions or asset management opportunities.

"The portfolio is of a prime nature and has a strong and well diversified tenant base which offers the potential for additional income generation. In a low interest rate environment, these factors should ensure that the company remains an attractive proposition for investors."

Looking ahead, the company expects property valuations to remain under pressure, particularly in the retail sector, with little capital growth expected outside Central London in the next twelve months. It said it believes that the key to positive performance will be the "successful implementation of asset management initiatives and preserving and growing income where possible", adding that it is well placed to achieve this.

It added: "The company has considerable cash resources which can be utilised for income enhancing acquisitions or asset management opportunities. In addition, the portfolio is of a prime nature and has a strong and well diversified tenant base which offers the potential for additional income generation.

"In a low interest rate environment, these factors should ensure that the company remains an attractive proposition for investors."

The share price rose 0.07% to 68.50p by 08:38.

NR