Multi Manager recognises value in Bricks 'n Mortar

When visibility returns to markets and volatility dies down, commercial property trusts can offer investors the potential for strong long term gains according to Richard Philbin, Head of Fund of Funds at F&C.

The majority of commercial property trusts available to UK investors are today trading at large discounts but Philbin believes that the fall in share prices is being driven largely by sentiment and says that the underlying fundamentals for property companies remain strong.

"When you consider that only 12 months ago the vast majority of commercial property trusts were trading on an average premium of 15%, the recent turmoil in credit markets has really taken its toll. But I believe many of these trusts have been indiscriminately marked down by investors panic selling. If you believe in property as a long term investment vehicle, then companies such as Invesco Property Income, whose net asset value is 132p whilst its share price is currently trading at just 94p, offer a great opportunity to potentially make a significant return in the future," said Philbin.

According to Philbin although property is generally considered an illiquid asset class, large commercial property trusts such as the £1.3bn F&C Commercial Property Trust, allow investors to buy in and out fairly easily. He also said that with the majority of companies on yields of 6%, commercial property investment remained a great income generator and pointed to low void rates as proof that the business model remained attractive.

"The market is currently on a void rate of 8-9% and some of the commercial property trusts we invest in have void rates of less than 1%. This shows that demand for property remains strong.

"For the time being, market sentiment is too negative to allow us to increase our positions but with significant cash positions in both the F&C Multi-Manger Distribution Fund and the F&C Multi-Manager Cautious fund, we will look to pick up stock over the next 6 to 12 months. Property remains a great diversification tool for all our fund of funds portfolios," he concluded.