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SLI Property shrugs off property market concerns with new spending spree
There are plenty of distractions for an investor in UK property at present as the Brexit process continues along its torturous route, yet the manager of SLI Property Income (SLI) Jason Baggaley likes to maintain a simple approach.
In his words, ‘I like to buy things that excite me’. More fundamentally he aims to buy commercial property assets which can provide an attractive level of income, focused on ‘good properties, in good locations, with good tenants’. This underpins a 5% dividend yield paid in quarterly chunks to shareholders.
He also pursues an active approach to managing the portfolio beyond just buying and selling assets.
By remaining plugged in with his tenants Baggaley says he does not need to be obsessed with securing assets on long leases as most of them are not interested in incurring the costs and disruption of a move anyway so long as their properties are fit for purpose.
The top 10 assets account for more than 30% of the entire portfolio which is weighted towards the South East in geographic terms, with an additional bias towards the industrial or logistics space.
KEEPING IT SIMPLE
Baggaley says he likes the simplicity of this asset type relative to retail where you need a good understanding of industry trends and dynamics.
The company recently completed three acquisitions for a combined £32.5m (5 Jul). This included a data centre office in Birmingham, an industrial building in Kettering and, showing that Baggaley is not too dogmatic about his cautious retail stance, an office and retail unit in the City of London close to Bank and Moorgate stations.
‘The purchase of the City office reflects an opportunity to re-enter that market at an attractive price point, especially as 20% of the income is secured against two small retail units that trade very well and we look forward to marketing the two vacant floors to increase the yield on the property,’ Baggaley says.
These deals helped Baggaley recycle some of the cash banked from asset sales. He sets store by having the discipline to sell at the right time – particularly if there is a risk of a property sitting vacant or if a building is likely to require significant investment in the near future.
Researchers at Edison note the current 6.5% premium to net asset value (NAV) is just below average premiums over one, three and five years with the trust issuing shares to limit the premium.
Its NAV total return has come in ahead of the IPD Monthly Index Funds benchmark on a one, three, five and 10-year view and Baggaley remains ‘cautiously optimistic’ on UK property. (TS)