- 20% of its real estate portfolio now in assets including care homes, student accommodation and GP surgeries
- IW&I looking at further non-standard property plays
Investec Wealth & Investment has over the past 18 months redeployed around 20% of its real estate exposure – equivalent to £200 million – from conventional property investments to a range of non-traditional property vehicles owning the freeholds of GP surgeries, student accommodation, care homes and theme parks.
According to IW&I, these property sub-sectors have become increasingly attractive for income-seeking retail investors because they are exposed to less economically sensitive areas of real estate and invest in stable assets with good cash flow profiles and the prospect of capital growth as rents increase over time.
GP surgeries – IW&I has invested for many years in Assura, Primary Health Properties and Medicx and is now one of the largest external shareholders in these REITs. These vehicles invest in UK primary health property leased principally to GPs, NHS organisations and other healthcare users. These vehicles offer attractive dividends of [around 5%] and government-backed cash flow.
Student accommodation – IW&I has invested more recently in two quoted student accommodation funds, Empiric and GCP. Given the supply / demand imbalance driven by increasing numbers of students, particularly those from overseas who are often prepared to pay higher rent, this sector is well positioned for future growth, believes IW&I.
Premium care homes – IW&I believes the premium care home sector offers considerable potential and has invested in Target Healthcare plc, which owns a growing portfolio of high quality purpose-built UK care homes. This fund, which owns over 30 freehold assets with long leases, offers a dividend yield of over 5%.
Hospitals and theme parks – The firm has also invested in Secure Income REIT, which owns a freehold portfolio of 26 health and leisure real estate assets producing a net initial yield of 5.3%. Its portfolio comprises 19 private hospitals and six leisure assets including three visitor attractions such as Thorpe Park and Warwick Castle.
Chris Hills, Chief Investment Officer at Investec Wealth & Investment said: “Property as an asset class is primarily a source of rental income and, post Brexit, projections of a cut to UK base rates will offer support. However, fears of a slowdown in the UK economy have meant that many traditional real estate investments have been hit by rising risk aversion. Many investors are looking for a healthy level of income without taking on too much economic risk in terms of voids or tenant defaults, and these non-standard property plays are ideally suited to this objective.
“These subsectors benefit from long and stable leases, strong cash flow provision and favourable demographics that are likely to result in increased levels of demand over the long term.
“We have been very pleased with the returns achieved by our exposure to these non-traditional property sectors.”