Strength the keyword for F&C Commercial Property Trust

F&C Commercial Property Trust was holding steady in 2015, it reported on Tuesday, as it prepared the business for a change in the cycle from capital returns to income returns.

The FTSE 250 firm saw net asset value total return of 15.9% during the year, and share price total return of 2.8%. Its portfolio total return was 14.3%, compared with a total return of 13.3% from the IPD benchmark.

F&C’s board maintained its dividend at 6p per ordinary share, providing a yield of 4.5% based on the year-end share price.Its dividend cover was increased to 80.6% from 50.5%, with net income increasing by £15.4m during the year.

“2015 was a positive year for the company as it continued to build on its strong long-term record,” said chairman Chris Russell.

“With a new ten year loan at a significantly lower interest rate in place and the next continuation vote aligned to the maturity of that loan, the focus for the year was driving income and value creating asset management rather than any further corporate change,” he added.

F&C’s share price at year-end of 134.4p represented a 0.6% discount to the net asset value per share of 135.2p.

Russell said performance in the year was driven by capital growth in the portfolio of 9.2%, with the strongest returns experienced in the logistics and industrials sector in the South East.

“The UK commercial property market is continuing to deliver good performance but there are signs that investment momentum may be easing,” he explained.

“There are concerns about pricing, particularly in London, and the market is entering a phase of the cycle where yield compression and the rate of rental growth are both expected to level off.”

Russell said there was a general consensus that returns would now revert to being more income-drive, following three years of strong capital performance, with rental growth expected to be positive at the all-property level over the next few years.