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“Having completed around £1 billion worth of transactions over the past 12 months, Aberdeen Asset Management’s UK property team believes that the market will become more opportunistic in the year ahead as it pauses after a period of strong performance. Consequently the team is looking to source a wide range of attractive properties to invest £530 million of new monies during 2011.
Over the last 12 months, Aberdeen’s UK property team has completed approximately £1 billion worth of transactions, including £382 million worth of purchases. This compares to annual transaction levels for the team of between £200-600 million over recent years and is the first time levels have approached £1 billion since 2006.
The increase in transaction volume reflected a general pick up in activity within the market since the summer of 2009. Attractive pricing and the search for income have fuelled investor interest in UK property. In addition, the relative weakness of sterling has attracted international investors, particularly those based in Asia.
Through Aberdeen’s rigorous investment process – incorporating in-depth, top-down research and bottom-up fundamental analysis – and its extensive market contacts, the UK property team have been able to source and complete 59 deals on behalf of clients. With £530 million to be invested, the team remains focused on acquiring prime property let across all sectors on long leases to strong covenants.
For 2012, the team projects a renewed improvement in total returns, aided by a gradual improvement in occupier market conditions. Nevertheless, the prospect of rising interest rates and bond yields will mean downward pressure on property yields is likely to be modest after 2012.
From a five-year perspective, annualised‘All Property’ total returns are forecast to be around 8% per annum. The majority of this, approximately 6.5%, is forecast to be delivered by income, with the remainder aided by some capital growth concentrated mainly at the back end of the forecast period.
John O’Connor, Managing Director – UK Property Fund Management at Aberdeen, comments:
“The volume of transactions Aberdeen has completed over the past 12 months is testament to a greater appetite for UK property from our clients and importantly due to the ability of our UK property team to source deals. The market has also presented us with the opportunity to make some tactical disposals. With at least £530 million to be invested into the market over the next year we believe there remain attractive opportunities available to lock-in good and stable levels of rental income for our clients with the possibility of capital value appreciation over the longer term.”
Property examples
Central London Office, EC2
Aberdeen Asset Management acquired the city office building for £20.3m.
The property is multi-let to a range of tenants with lease events in the next three years let of a low base rent of £35 psf.
DIY warehouse, Dewsbury
Aberdeen Asset Management acquired the retail warehouse at a net price of £5.2 million.
The property is let to Dreams and B&Q for in excess of 10 years and the price reflects a yield of 7.25%.
Open A1 Retail Park, Bournemouth
Aberdeen Asset Management acquired the retail warehouse park for £17.21m.
The property is let to a TK Maxx, JJB Sports, Argos and Sportworld of a low base of c.£17.50 psf and the weighted average unexpired lease term is seven years” (CS della Società).
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