Investec redeploys 20% of real estate exposure


Investec Wealth & Investment has revealed it has redeployed £200m of its real estate exposure into non-traditional property vehicles, such as student accommodation, rest homes, GP surgeries and theme parks.

The asset manager says the new positions face less risk from voids or tenancy defaults, which are risks for traditional commercial real estate assets following Brexit.

Representing 20 per cent of Investec’s exposure to the sector, the new positions include quoted student accommodation funds, Empiric and GCP, rest home company Target Healthcare, and the Secure Income Reit, which owns 26 health and leisure assets, including Thorpe Park and Warwick Castle.

Investec says these sectors, which it has added to over the last 18 months, are less economically sensitive areas of real estate, with good cash flow and the prospect of capital growth as rents increase.

Chris Hills, chief investment officer at Investec Wealth & Investment says: “Property as an asset class is primarily a source of rental income and, post Brexit, projections of a cut to UK base rates will offer support.

“However, fears of a slowdown in the UK economy have meant that many traditional real estate investments have been hit by rising risk aversion.

“Many investors are looking for a healthy level of income without taking on too much economic risk in terms of voids or tenant defaults, and these non-standard property plays are ideally suited to this objective.”

Investec says it is now one of the biggest shareholders in Reits such as Assura, Primary Health Properties and Medicx, which it says offer dividends around 5 per cent and government-backed cashflow. The vehicles invest primarily in in UK primary health property leased to GPs, NHS organisations and other healthcare users.

Its investments in premium care homes, via Target Healthcare, and its Secure Income Reit also offer dividends over 5 per cent.

In the student accommodation space, the asset manager says it sees a supply-demand imbalance driven by increasing numbers of students – particularly those from overseas who are willing to pay higher rent.