12 December 2011

Income syndicates deliver an average total return to

investors of over 8% over the 12 months to October 2011

Across the UK commercial property investment market, demand has focused on well-let properties in London, the South East and major regional centres, as investors have sought income security in an uncertain economic environment. This has had a direct impact on both opportunity and pricing. The syndicated property initiative, now operating under the Custodian Capital banner, has always been and remains an opportunity-led proposition. Over the last six months, the commercial property investment market has been relatively stable, but with reduced transaction volumes. Investors have been sharply focused on secure income, and the high-quality commercial property that can provide this. As a result, competition for the better properties in the market has been strong and it has proved difficult to acquire suitable assets. Against this background we have been extremely pleased to secure four new opportunities over the last few months at prices often below the vendor’s original aspirations.

The new properties range from retail, to retail warehouse, light industrial and a car showroom, structured as income and deferred income limited partnerships. Initial distributable income returns are up to 7.1% with tenants including Honda Motor Europe Limited, Greggs plc, Royal Mail Group Limited, Dreams plc and Travis Perkins (Properties) Limited.

Despite the 2008/2009 market turmoil, pricing in the commercial property market is, on aggregate, close to the long-run average. With income returns of 6% plus, we believe that property will form an important part of our strategy to build diversified portfolios based around robust income and long-term capital growth.

Over the 12 months to October 2011, our income syndicates delivered an average total return to investors of over 8%, while the geared syndicates delivered total returns of 17%. The larger part of these returns has been delivered through the high income return which is available through direct property ownership. Across the portfolio the average distributable income over the last 12 months has been over 6.5%. With the multiplier effect of gearing, when the cost of debt is comfortably below the income yield, the geared syndicates have relatively out-performed.

We remain firmly focused on securing further opportunities to allow investors to build bespoke portfolios, to provide long-term, stable income. The consensus forecast is that capital growth may be muted in 2012, but over the long-term commercial property has long been seen as a good hedge against inflation, maintaining or enhancing the purchasing power of capital invested. Details of new opportunities will be sent to investors, as appropriate for their investment strategies in due course.

For further information on syndicated property, click here.