Can charities benefit from investment in UK real estate in 2020? James Lloyd

09 February 2020

The Conservative Party’s election success in December 2019 removed one of the key risk factors holding back the UK economy and investor confidence. Boris Johnson’s new government can now move forward with the Brexit negotiations, however, the deadline on a agreeing a trade deal with the EU may continue to weigh on business and investor confidence this year. 

At Mayfair Capital we foresee lower GDP growth in 2020 at 1.1%, compared to our 1.3% forecast for 2019. Despite the economic slowdown, property remains attractive for its income yield at a time of continuing low interest rates. Mayfair Capital’s thematic investment approach places income resilience, creation and growth as its central tenet, to drive long-term returns for investors.

Through managing our Property Income Trust for Charities (PITCH) we see charities invest into UK real estate for a variety of reasons: diversification from other asset classes; to benefit from the taxexemption afforded to charities when investing in property; the long-term performance of commercial property; and perhaps most importantly property’s income characteristics. Income is an important element to a charity’s investment returns, whether it is dividends from equities or rent from commercial property. Whilst many charities have moved to a total return (capital and income) objective, income remains a key driver of real estate returns and therefore investment performance in the longer term.

Our thematic investment strategy is focussed on acquiring buildings that will benefit from structural change, whilst avoiding those at highest risk of functional obsolesce. This allows property to be bought at higher yields on the expectation that pro-active management of the assets, coupled with the benefit of structural change, will deliver the income return. 

We see real estate opportunities in highly connected, modern, well-specified logistics units and multi-let offices in major regional cities across the UK as well as segments of the residential market. We are also positive on the outlook for London’s office sector, as occupational demand is expected to remain resilient regardless of politics, given London’s attractiveness globally predicated on talent, geographical location, history and culture.

At Mayfair Capital we are committed to a sustainable future, and it is essential to have robust processes in place to manage ESG factors across our real estate portfolios. For example, in Solihull, the refurbishment of an asset on Trinity Park, which is held in PITCH, helped move the EPC rating from an E to a B. The improvements also included enhancing disabled access, cycle storage, car charging points, energy efficient VRF air conditioning, LED lighting and sensors and efficient sanitary ware to reduce water usage. All the power to the multi- let buildings held in the PITCH portfolio is provided by renewable energy sources.

Overall, the 2020 outlook is subject to a high number of variables. However, by following a prudent investment strategy which aims to capitalise on long-term thematic trends, emanating from evolving technologies, demographics and infrastructure, we believe it is possible to deliver sustainable returns from a carefully positioned real estate portfolio and protect capital value over the long term.

James Lloyd

Head of Business Development

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