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IPFPUT show 5% return over 2002April 02 2003
The Irish Pension Fund Property Unit Trust has weighed in with a highly creditable 5% return in its last financial year despite the worrying downward commercial property trend.
“In my 2001 report, I remarked that it had been a very difficult year for pension and managed funds with a mix of equities, bonds, property and cash,” IPFPUT chairman Conor Sexton states in the latest annual report.
“Almost without exception, they had ended the year with significant negative returns. I believed at the time that 2002 could also be a difficult year, but I certainly did not anticipate that it would be anything quite as bad as we have experienced with the average fund falling in value by something in the order of 19%.”
“It is against this background that I am pleased to report that the trust has had another excellent year in which we have produced an overall positive total return of 5% as measured by Mercer and distributed income per unit has been increased by 11%.”
IPFPUT was established in 1967 specifically to enable self-administered pension funds to invest in property. Its principal activity is ownership and management of properties on behalf of pension funds, charities and other exempt funds.
This is the second year in a row in which IPFPUT has outperformed both the IPD portfolio benchmark return and the average property return as reported by Mercer - a highly creditable achievement by chief executive Gus MacAmhlaigh and his very able team.
Mercer ranked the trust as second out of the eight comparable funds against which IPFPUT is measured. As measured by IPD, the trust recorded a portfolio return of 4.7% compared to the IPD benchmark of 2.9%.
“It is perhaps interesting to note that over the past three years the capital value of a unit has increased by 23.4% whereas the income return has increased by 35%”, the chairman said.
“We expect the income distribution in 2003 to increase by something of the order of 12% or 13% which will give a cash return in excess of €50 per unit in 2003. This should prove a very satisfactory performance for those unit holders who are reliant on a steady stream of income to satisfy the requirements of mature pension funds, as their income stream is assured and the underlying capital value of the units is being more than maintained.”
As part of its highly successful portfolio management strategy, the chairman disclosed that IPFPUT disposed of ten properties with a total value of €139m.
“Some of these were secondary office properties which we no longer saw as long term holds and we set out to lock in the capital gains which had been achieved in recent years.
“The office sales alone accounted for in excess of €50m and we achieved an average surplus on valuation of approximately 10% on each of these sales.”
Mr Sexton also revealed that IPFPUT contracted to sell two of its oldest office properties. These two sales- scheduled to be completed in the first quarter of the year - “will serve to further assist performance in the coming year”.
“We had a number of vacant properties at the commencement of the year and despite a difficult market we have managed to let a number of these at a satisfactory level,” chairman Mr Sexton says in the annual report.
“Unit 11 Broomhill Park which had been occupied by Spicers before their move to Citywest campus was let to Transland International. The former House of Denmark unit at Airside was licensed to another furniture supplier ID Design and units 3 and 4 were let to Harry Corry and Party Warehouse.”
“Units 5, 6 and 7 are under negotiation with a major international retailer having obtained the necessary planning permission to merge the units.”
“If all of these lettings fall into place, Airside will be left with only the restaurant space and one vacant unit, No 9, to let.”
“We have been of the view that Airside would not achieve its potential until the road network in the area was completed and significant progress in this regard will be achieved in mid 2003 with the opening of the new M1 motorway. “Further progress has been made in letting the trust’s industrial holdings at Furry Park where we recently concluded a letting of Unit N (3,085 sq m)to the Heiton Group and at our office campus in Swords we were successful in completing a letting of 1727 sq m to City Jet in November.”
At the end of last year, the IPFPUT portfolio breakdown was offices 58.7% (57.3% a year before); retail 25.5% (28.7%); and industrial 15.8% (13.9%).
A Profound Impact
The 3% increase in stamp duty announced by the Minister for Finance in the Budget has had “a profound impact” on property prices.
“All properties in our portfolio were immediately reduced in value by 2.7% and were it not for this decision, taken very late in the year, we would have been reporting a return of just under 8% for the year,” IPFPUT chairman Conor Sexton stated.
“The long-term impact of the stamp duty increase has yet to be seen, but the consensus view is that it will reduce the turnover in commercial property and lead to an even greater flow of funds out of the country into the UK and the continent in pursuit of other property investments.
“We have made our views on the matter known to the minister and we would hope that when he sees the consequences of this decision he may reverse it in the coming year.”