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First Property is greedy when others are fearful
Commercial real estate investor First Property (FPO:AIM) is becoming more serious about the UK for the first time in 10 years.
The company exited most of its UK property in 2007 as its chief executive Ben Habib says the market had ‘topped out’. The company subsequently moved into Polish properties, Habib noting they had lower valuations with higher yields.
Habib is now interested in UK property because ‘of the nervousness of the institutions, they’re not buying [since Brexit]’. The company recently invested in two UK properties costing in excess of £23m.
For First Property, the business model is all about the yield gap, which is the yield on the property compared to the cost of borrowing against it. This had disappeared in 2007 hence the company’s retreat from the UK but due to low interest rates and attractive valuations has now returned.
The firm trades on a price-to-earnings ratio of nine times and yields 3%. First Property has its assets split equally between the UK and Poland at the moment, but Poland brings in 85% of the revenue. Habib says this gap will narrow once the UK funds are fully invested.
At 51p the shares look an interesting prospect with a return to the UK property market.