New portfolios bank on property rise

The resurgence of activity in the property sector continued last week with the planned launches of a pair of funds, one focusing on commercial and one on residential property.

Seven Dials unveiled the Lighthouse Prime High Street fund, a commercial property portfolio focusing on prime retail properties on British high streets. The closed-ended fund in­vests in commercial prop­erties valued at between £1m and £7m in locations including Cambridge, ­Canterbury, Chester, and Nottingham.

Astrid Cruickshank, the manager of the new vehicle, says she considers the British commercial property market has reached a turning point as the volatility of the past 18 months has created attractively priced stock opportunities.

The residential offering comes from Garratt Property Group. It is a Luxembourg-domiciled Sicav that will hold properties bought at a 15% to 20% discount to their valuations.

Garratt says the fund will benefit from the recovery it is expecting in the British residential property market. He points to figures from the National Housing Federation, which predicts that house prices will be 20% higher than current ­values by 2014, when the fund’s term ends.

However, financial advisers have mixed feelings on the revival of the sector.

Meera Patel, a senior analyst at Hargreaves Lansdown, says it is too soon to advise clients to move back into property.

“The reason we think it is too early is that there is still mixed economic data,” says Patel. “The key indicator will be unemployment, which has had a huge impact on property. In the next ­couple of months it may be time to revisit it.”
But Gavin Haynes, the managing director of Whitechurch Securities, is more confident.

“It is definitely time to start looking at the sector again,” he says. “Most clients have enough exposure to residential property through their own dwel­lings, but commercial property reached ­bubble valuations and has ­cor­rected much more quickly than in previous cycles, and yields look compelling.”

Haynes generally prefers to get exposure through established funds, but he points out that new funds have the advantage of coming to market with high cash positions, allowing them to buy up distressed assets from forced sellers.