UKCM’s objective is to provide ordinary shareholders with an attractive level of income, together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio. The majority of the portfolio will be invested in direct holdings across four key sectors: industrial, retail, office and leisure. The preferred lot size is between £20m and £50m, larger than many in the peer group and reflecting its larger size.
UK Commercial Property REIT (UKCM) achieved a 10.6% NAV total return over the year to the end of June 2018, but its share price has lagged its steadily rising NAV and its discount has widened to 5.2%, among the widest in its UK direct property peer group. In July 2018, UKCM became a UK REIT to mitigate the risk of significant potential tax charges falling due from 2020 and agreed a reduced management fee, effective January 2019. UKCM is significantly overweight in the industrial sector, which is expected to continue to lead market performance, while exposure to the weaker retail sector has been reduced. The manager sees considerable scope for near- and medium-term earnings improvement from the portfolio’s reversionary potential, which implies c 26% upside to rental income if market rates are achieved across all property assets.