| CATEGORY: AIM BULLETIN SECTOR: PROPERTY |
First Property to re-enter UK market |
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By John Harrington
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Tue 02 Jun 2009
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LONDON (SHARECAST) - Central and Eastern Europe-focused property fund First Property is sizing up a return to the UK market as confidence returns to the commercial property market.
The group has just 5% of its funds invested in the UK but is looking to boost these, as activity and property valuations in its core regions tail off.
The group has £10m of its own cash to invest in the UK, plus £40m of cash from the fund it manages on behalf of the Universities Superannuation Scheme (USS).
‘Institutional interest in the UK commercial property market is returning, which is tremendous for us,’ First Property’s chief executive officer, Ben Habib, told Sharecast.
‘Yields are high, and rents are pretty solid. Rents may fall but the high yields provide a cushion,’ Habib added.
The group’s share price advanced briskly on Tuesday morning as the company announced an increase in assets under management to £310m, as at the end of March 2009, compared to £290m at the end of £290m at the end of March 2008.
Revenue and pre-tax profit both fell however, due to a much lower performance fee payment. ‘Strip out the performance fee element and revenue and profit both increased,’ Habib observed.
Revenue fell to £11.2m in the year to 31 March 2009 from £15.6m the year before, while pre-tax profit slipped to £3.9m from £6.3m.
The performance fee, which is based on the rate of return achieved by the group’s funds, dived to £0.6m from £5.7m the year before.
Despite the lower performance fee, Habib maintained that the group had put in a robust performance. ‘We’ve been rated number one performer by IPD [International Property Databank] in the [CEE] region for the three years to end-2008, and we’ve increased assets under management, unlike many other funds.’ Habib observed.
The current year figures to be a lot tougher, what with the flight of international capital from central and eastern Europe. First Property does not expect a lot of activity in Poland, its main area of investment, in 2009, but remains convinced of the region’s growth potential.
‘The question for us is at what point in time will international capital return? The performance of the [Polish] Zloty is key; it needs to strengthen a bit. If it goes to four to the euro, that will be tremendous, but if it moves out to five, that would signal a hard time,’ Habib said.
Rents in the region are typically denominated in the euro, so a decline in the value of the Zloty against the euro has a dampening effect on rents and therefore the property market.
The full-year dividend has been increased by 25% to 1p, and is well covered by earnings.
‘The dividend is very sustainable, and we’ll look to grow it in line with earnings,’ Habib said.
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