July 2022 Portfolio Replace | Property Associate Weblog

Beneath you will see our Q2 2022 efficiency announcement. This contains up to date monetary info on all properties (now together with comparative financials for the earlier yr), dividend modifications, disclosure of EPC rankings for the primary time, and updates on property disposals and growth loans.

To make sure that all shoppers have the chance to think about this announcement, the Resale Market shall be suspended as standard, for 3 working days, re-opening at 10am on Wednesday, 3 August 2022.

In the present day’s bulletins:

  1. 1. Portfolio efficiency and enhanced reporting
  2. 2. Dividend modifications
  3. 3. EPC rankings and sustainability
  4. 4. 5-year anniversary disposals
  5. 5. Disposals of particular person items inside blocks
  6. 6. Property growth loans
  7. 7. Properties with hearth questions of safety
  8. 8. Upcoming quarterly bulletins

1. Portfolio efficiency and enhanced reporting

As we do every quarter, at present we’ve got up to date each property’s efficiency. For every property, we report historic monetary efficiency and the property’s web money place. As well as, at present, for the primary time, we’ve got enhanced the monetary disclosures to incorporate comparative financials for the earlier monetary yr.

These financials might be present in every property’s ‘Financials’ part and the ‘Funding Case’ accommodates additional dialogue. The monetary outcomes disclosed embrace rental revenue, property working and works prices, mortgage curiosity prices, charges paid to Property Associate, dividends, and so forth.

Web money throughout the portfolio is a surplus of 1.2% of property worth (up from 0.5% reported in Dec-21 and 1.1% reported in Mar-22), representing a continued strengthening of the properties’ stability sheets.

Our portfolio has benefitted for the final 6 years from the low price of borrowing on variable fee mortgages. Nevertheless, since December 2021, the BoE base fee has elevated from 0.1% to 1.25% presently. The BoE’s Financial Coverage Committee meets subsequent on 4 August and 15 September, and additional fee rises are anticipated. We are going to contemplate any additional fee rises, together with property working efficiency, in our subsequent quarterly efficiency replace on 31 October 2022.

It’s seemingly that additional rate of interest will increase will end in reductions to dividends.

Within the subsequent quarter, we’ll proceed and speed up the next measures to scale back publicity to rates of interest:

  1. Sale of particular person items inside residential blocks: as proven on our Promoting Report, we’ve got accomplished gross sales of 27 items, with the big majority of proceeds getting used to scale back mortgages; since June 2021, the loan-to-value ratio throughout the portfolio has lowered from 53% to 49%
  2. Cut back or droop dividends of properties the place it’s obligatory or advantageous to make use of web rental earnings to scale back mortgage principal: as talked about under, we’ve got accomplished this for 18 properties at this announcement

2. Dividend modifications

Throughout the portfolio, we’re decreasing the weighted common dividend yield from 3.3% p.a. at present to 2.9% p.a. from 5 August 2022. This common contains these properties that aren’t paying a dividend. This dividend discount is due to the numerous improve in mortgage rates of interest.  That is solely partially offset by stronger web rental efficiency.

First dividend fee date 5 Apr-21 5 Jul-21 5 Oct-21 5 Jan-22 5 Apr-22 5 Aug-22
Dividend yield p.a. 1.9% 2.1% 2.4% 3.2% 3.3% 2.9%

The common dividend yield of two.9% displays the next modifications from 5 August 2022:

  • 5 properties will improve their month-to-month dividend
  • 9 properties will lower their month-to-month dividend
  • 9 properties will droop their month-to-month dividend

You’ll find the complete record of dividend modifications right here.

3. EPC rankings and sustainability

For the primary time, at present we’re disclosing the EPC (Vitality Efficiency Certificates) rankings for each residential property on the platform.  You’ll find this info in every property’s ‘Property Element’ part (exhibiting the bottom unit ranking inside every block).

Vitality use in our properties accounts for a major proportion of greenhouse gasoline emissions, contributing to each local weather change and air air pollution. With vitality prices now at report ranges, vitality inefficient properties can add a whole bunch, if not 1000’s, of kilos to payments. 

A Authorities White Paper signifies that laws shall be coming into pressure requiring many landlords to enhance residential property EPC rankings. At present, they should meet a minimal ranking of E. From 2025, new tenancies will want a ranking of C or higher and from 2028, all present tenancies will should be C or higher. 

Vitality effectivity of properties that we bought has all the time been a consideration and our portfolio is nicely positioned for the potential laws, with over 70% of items rated C or higher. We’re preserving a detailed eye on the progress of the draft laws and can present updates sooner or later.

For these properties that aren’t already rated C, we’ll develop enchancment plans that minimise the price of works and offset this price with vitality price financial savings. As well as, for the overwhelming majority of our portfolio already rated C or higher, there could also be vitality effectivity alternatives which are nonetheless value pursuing. Other than the environmental advantages, in time, this will likely probably end in reductions in the price of borrowing, lowered payments and elevated desirability of our properties, for each tenants and purchasers.

A property’s vitality effectivity will proceed to extend in significance sooner or later, so at present’s extra disclosure of EPC rankings is a primary step in understanding this elementary facet of our portfolio.

4. 5-year anniversary disposals

In current months, there was sturdy assist from shareholders for properties going via their 5-year anniversary processes.  In July, 3 out of 4 properties, and in June, all 4 out of 4 properties, have been totally funded within the ‘blocklisting’ stage and can stay on the platform.

For these properties which have beforehand been voted by shareholders on the market, you may view their present standing on their property pages and monitor general gross sales progress on our Promoting Report:

  1. Accomplished gross sales: properties which have been bought and funds returned to shareholders
  2. Particular person unit gross sales: particular person items which have been bought inside a block that has been elected on the market via the 5-year anniversary course of

A full record of 5-year anniversary gross sales is summarised under:

5. Disposals of particular person items inside blocks

These are discretionary gross sales of particular person items inside a block, the place shareholders in every property have voted for the unit sale.  Causes for these gross sales have different, together with opportunistic gross sales to seize beneficial market situations, discount in costly mortgages, discount of a property’s web money deficit, discount of mortgage refinance danger, and so forth.

Once more, shoppers can monitor the efficiency of those gross sales on our Promoting Report.

A full record of those disposals is summarised under:

6. Property growth loans

We have now efficiently repaid two growth loans this quarter. Bickley Highway, Leyton was repaid in full, reaching a complete return of 26.1% (in any case charges), equal to an rate of interest of 9.25% p.a. Jubilee Road, Whitechapel was repaid in full, reaching a complete return of 24.3% (in any case charges), equal to an rate of interest of 10% p.a.

Of the 16 growth loans that our shoppers have funded, 9 have been repaid in full with curiosity.  You’ll find the newest updates on the excellent loans on their respective funding pages right here.

7. Properties with hearth questions of safety

The UK-wide hearth security scandal affecting excessive rise blocks continues. While the federal government has taken steps to handle the problems, the scenario stays removed from resolved. For additional particulars on this and our 8 properties impacted, learn the newest replace on every affected property’s funding case.

8. Upcoming quarterly bulletins

31 October 2022 – market closed from 10am that day till 10am, 3 November 2022

31 January 2023 – market closed from 10am that day till 10am, 3 February 2023

When you have questions on these bulletins, please e mail [email protected]

Greatest needs, 

The Property Associate Staff

Capital in danger. The worth of your funding can go down in addition to up. The Monetary Providers Compensation Scheme (FSCS) protects the money held in your Property Associate account, nonetheless, the investments that you just make via Property Associate will not be protected by the FSCS within the occasion that you don’t obtain again the quantity that you’ve got invested.

The efficiency info (together with any expression of opinion or forecast) displays probably the most up-to-date knowledge on the time of manufacturing; publication is made in good religion on the premise of publicly out there info or on sources believed by Property Associate to be dependable.

Previous efficiency and / or forecasts (if acknowledged) will not be a dependable indicator of future efficiency. Curiosity and capital returned could also be decrease than anticipated. Gross hire, dividends, and capital development could also be decrease than estimated. Exiting your investments (on the resale market, by way of the 5-year anniversary course of or in response to focused methods) is topic to cost and demand. Property Associate doesn’t present tax or funding recommendation and any basic info is offered that will help you make your individual knowledgeable choices. Clients are suggested to acquire acceptable tax or funding recommendation the place obligatory. Monetary promotion by London Home Alternate Restricted (No. 8820870); authorised and controlled by the Monetary Conduct Authority (No. 613499). See Key Dangers for additional info.

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