Aberdeen Property Share fund's Sanjeet Mangat tells Cherry Reynard how she is playing the UK property sector's recent revival.
After some years in the investment backwaters, the commercial property sector has been buoyed by a combination of the low cost of borrowing and improving property prices.
Property companies have been the key beneficiaries, enabling property share funds to trounce their bricks and mortar rivals over the past three years. The Aberdeen Property Share fund has been top of the pack.
The low cost of borrowing has enabled many property companies to refinance through the corporate bond markets at low rates. With rental yields in certain parts of the market still high, it has been earnings generative for many groups. However, the market has still demanded selectivity: parts of the commercial property market, such as out-of-town retail, remain in structural decline.
“ Our bottom-up nature has come into its own in this market ”
For the Aberdeen Property Share fund, a focus on quality has been extremely important. As Sanjeet Mangat, one of the managers, explains: “We buy good quality companies at a reasonable valuation and hold them for the long term. That means we will be sitting down with the management of each company every six months and the turnover in the portfolio is very low – below 20%.”
This has been vital in avoiding some of bear traps in the commercial property market over the past few years. Mangat says: “We have a long-term focus on London and the South East. They have always proved the most resilient areas and also have the potential for long-term growth. In general, we prefer prime assets, also because of this resilience. We also like areas where tenant demand is rising ahead of supply.”
She gives the example of London’s West End. The fund holds Shaftesbury, which owns significant property assets in Carnaby Street and around Regent Street. “They haven’t seen the recession; tenants come knocking on their door,” she adds.
The team has also incorporated companies with a track record of adding value through asset management. Mangat points to holdings such as Helical Bar, which has developed and managed the property within its portfolio to great effect, increasing its value and rentability.
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