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L&G UK property Trust
TrevS
Posted: 06 April 2017 16:07:09(UTC)
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Hi,
A few years ago I was advised to have some property funds (15%) as part of my portfolio and L&G UK property Trust was the fund suggested, which I now have.

I am want to invest some more money and am wondering whether I should still be investing in property funds in general and this fund in particular. The reason for the question is that the fund slapped a 15% exit fee last year. The last I heard it was 10%.

I looked at the KIID for December and there were no exit charges specifically but just looking now the bid/offer spread is 5% (Hargreaves) and 10% (L&G). Is the spread the way they make these exit charges or can they be on top of the spread?

Does anyone know the current situation with this fund? Should buy/sell or invest another property fund or something else entirely?

Thanks
JohnW
Posted: 06 April 2017 17:19:01(UTC)
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Property UT's are always a difficult place to be. If you think about it Unit Trusts invest your money in whatever it is buying and if you sell then they need to sell some shares or whatever to pay you out. And the "Whatever" when it comes to property units is property. Not the easiest thing to sell on the spur of the moment. For that reason I would personally never touch property UT's. Property IT's are a lot better bet, because you hold shares rather than units.

Regards, John
King Lodos
Posted: 06 April 2017 18:00:03(UTC)
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I've got a tiny holding in L&G's UK Property PAIF.

You can see how problematic the fund structure was during the Financial Crisis (Google: Trustnet Charting) .. Investors want to withdraw, so the fund's forced to sell properties at the bottom of the market.

There's also a risk they'll halt withdrawals (as other funds did) .. But these are probably sensible measures that benefit the average investor .. The problem with ITs can be if they're on big premiums now .. The risk with Property imo (after decades of falling rates) is Property *should* only go up with inflation .. There's a whole generation or two who think Property goes up like the Stock Market .. I wonder if that needs to correct at some point.
xcity
Posted: 06 April 2017 18:18:45(UTC)
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In reality, property has very little intrinsic value. What can be very valuable is the income stream. Office yields in central London tend to be very low and requires ever rising rents.

Most property companies are highly geared; very profitable with low interest rates and bearable for companies with stable long-term gearing at fixed rates. Less so for others.

Property values can fall quite dramatically when demand falls.

I think that the sector can be OK, but I look for rental yields that justify the risks, and preferably a payment to me that keeps me ticking over too; stable long-term financing; and concentration in a sector with secure rentals and demand likely to rise in the long-term. I pay less attention to the discount or premium to NAV.
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TrevS
Posted: 11 April 2017 11:28:54(UTC)
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Thanks for the responses. I do get a income from the fund so I think I will keep the holdings I have but not invest any more in the fund.
King Lodos
Posted: 11 April 2017 14:50:36(UTC)
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I went on Trustnet charting to see how these supposedly safer Direct Property Investment Trusts did through the financial crisis.

Generally much worse it seems.
xcity
Posted: 11 April 2017 15:42:54(UTC)
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King Lodos;45725 wrote:
I went on Trustnet charting to see how these supposedly safer Direct Property Investment Trusts did through the financial crisis.

Generally much worse it seems.

Is this a surprise?

They will mostly have been invested in offices, industrial and retail assets and will mostly have had high gearing. Their customers will have varied, but there would have been concern that many would no longer be able to meet their rental agreements or need the property. So, falling NAV, borrowings staying the same (or rising) and concern over the safety of their rents. These ones go up and down a lot.

If you want safe and steady, you have to select your REITs very carefully and they will still go up and down. I haven't looked at L&G, so have no view on that.
King Lodos
Posted: 11 April 2017 17:45:18(UTC)
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I really haven't found a direct property investment I'm willing to bet big on.

And absolutely, gearing was clearly a bigger problem for ITs in the space than the structure of OEICs (although they will have a tendency to halt withdrawals as value plummets).

I've only got about 1% in direct property at the moment .. L&G's got a hefty bid/ask spread too, which is one reason I've not built up much of a position – but it's been a very stable income generator.
xcity
Posted: 12 April 2017 06:29:22(UTC)
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King Lodos;45731 wrote:
I really haven't found a direct property investment I'm willing to bet big on.

And absolutely, gearing was clearly a bigger problem for ITs in the space than the structure of OEICs (although they will have a tendency to halt withdrawals as value plummets).

I have nearly 20%. I'm hoping that mine will perform more like bond proxies with fully let, long-term rentals, inflation-linked, debt being long rather than short-term and valued mostly by yield and net income rather than NAV.

Only 4. In order of position size BBOX, PHP, LMP and THRL. Large warehouses, medical centres, mostly warehouses, nursing homes. All bar LMP picked up at open offers (first stakes in BBOX at the same time and similar price because I'd missed the offer). I hope/think they will go up and down with the market, but less; there's no scope fro dramatic appreciation, and if the prices did fall heavily I would probably buy more to get back to the 20%ish..
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Alex Peard
Posted: 12 April 2017 17:42:47(UTC)
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I hold SLI and FCRE in ISA's. Both yield c.5% and have done extremely well in the last year.

However, on looking today I can see that SLI has moved to a premium of 10% over NAV as at 31.12.16. I was going to add more but will wait for a pull-back as this level of premium is too high for me to invest more.

Also looking art Sirius (SRE), who own business parks in Germany, as a diversifier away from UK property.
stuart smith
Posted: 12 April 2017 21:28:56(UTC)
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You might consider TR Property IT which has a discount of 13.29% and has delivered 9.8% gain YTD and has a yield of 2.55%.
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