34
|
THE INVESTOR
THE INVESTOR CENTRE
T
he commercial property market is
responding to the early stages of
economic recovery and there are signs
of improved tenant demand in some
locations, leading to areas of tightening
supply.The bulk of overseas capital
maintains its focus on central London;
however there is a signi cant increase
in investor demand in other growth
locations such as Cambridge, Manchester
and Edinburgh. Our patient, disciplined
approach to investment and focused asset
management continues to reap rewards as
asset valuations have risen steadily during
the fourth quarter. New acquisitions for
2013 amount to £262m versus sales of
£74m. Fourth-quarter acquisitions for
the life and pension portfolios include the
£96m PT Portfolio, which comprises six
multi-let industrial estates inWest London,
all within three miles of HeathrowAirport.
The unit trust has acquired Stadium
Retail Park inWembley for £14.2m.
The 40,000sq ft retail park is fully let to
ve tenants and will provide both steady
income and growth potential. Prospects
for UK commercial property continue to
improve as evidenced by the independent
Investment Property Forum consensus
forecasts, anticipating average annual
returns of 7.6% pa over the next ve
years.The portfolios are well positioned to
bene t from this forecast growth.
Chris Bartram
ORCHARD STREET
Property
Patient approach to investment
continues to reap rewards
Overseas capital
maintains its focus
on central London
T
he recent recovery in momentum
of the Japanese market has been
helpful to the portfolio. Companies
like Hitachi are undergoing radical,
palpable transformation. Sceptics
grumble that ShinzoAbe’s third arrow
is blunt. Economically, however, so far
so good. De ation is, probably, over.
Our most recent new purchase in Japan
is of JapanAirlines – having emerged
from bankruptcy with a balance sheet in
excellent shape and a management now
rmly independent of the government
– which has cut back unpro table
international routes and reduced the
number of employees by one-third.
The Japanese domestic airline market
is the third largest in the world and highly
pro table.The shares trade (deducting
cash from the market capitalisation) on ve
times earnings. Lukoil is the second largest
oil company, by reserves, in the world.We
are well aware of the risks of investments
in Russia but we believe these risks are
more than discounted in valuation. Lukoil
trades at four times earnings. It has
little debt. Production has stabilised. In,
admittedly, a not very competitive eld,
Lukoil always ranks at the top of surveys
of corporate governance in Russia.
Lukoil has a dividend yield of 4.5% and is
committed to raising the dividend by 15%
a year over the next several years in which
it expects its production to increase by
3.5% per annum.
OLDFIELD PARTNERS
High Octane
Deflation is probably over as
Japanese market gains momentum
Japanesemarket
has beenhelpful to
the portfolio
Richard Oldfield
A
fter a rip of a year, expectations for
the nal quarter were for a traditional
year-end rally.The US delivered, but
markets stalled in December as robust
data thrust tapering talk back onto the
agenda.The UK elbowed its way into the
spotlight, brandishing data that had the
politicians wet-lipped with excitement.
It was a di erent picture in the eurozone
however, as the ECB cut rates to heed
o fears of de ation, as the grind back
to economic growth continued to be
held back by insipid consumer demand.
Quarter three results spurred BP higher,
as a strong message on cash ow came in
the form of a 6% hike to the dividend.The
turnaround at Aviva contributed positively
after a trading statement con rmed its
restructuring remained on track.Weak
outlook statements from many consumer
stocks exposed to emerging markets also
played to our positioning in BAT and an
expensive Diageo. On the negative side,
BAE Systems laboured under budget cut
fears, and the holding in Royal Bank of
Scotland continued to disappoint. Looking
into 2014, we think uncertainty will persist
and the transition to more normalised
monetary policy leaves the outlook for
equities unclear. Signs of economic growth
in the US are encouraging but, like the
UK, eager expectations are already pricing
in an improvement.
MAJEDIE
UK Growth
Joint manager: UK & General Progressive
Europe’s grind back to growth held
back by insipid consumer demand
TheUS delivered,
butmarkets stalled
inDecember
James de Uphaugh
