Every quarter, we review the income performance of every property to ensure that the dividends paid to investors are aligned with the net rental profits generated by, and the net asset position of, each property investment.
As a result of the latest review, we have identified 19 properties where the dividend will be adjusted to reflect the current performance and financial position of the property. The dividend adjustments on these 19 properties will decrease the average dividend yield across the portfolio before the AUM fee from 3.77% to 3.66%.
From 5 February 2020, 13 properties will pay a lower dividend and 6 will pay a higher dividend. For all remaining properties, dividends will remain unchanged.
For each property where there has been a change, we have provided an explanation of the reasons for the change at the top of the “Investment Case” section for that property. Please note that the dividend yields listed here are based on the Latest Valuation of each property, which you can see in the property’s “Financials” section. We cancelled all offers on the properties that have had an increase in their dividend and all bids on the properties that have had a decrease in their dividend.
The changes in dividends for the 6 properties that will pay a higher dividend are as follows:
|Property address||Current |
|Change (%)||New |
|London Road, Brighton||4.57%||0.25%||4.82%|
|11 Murray Court, Hanwell||2.49%||0.25%||2.74%|
|Duffield Road, Derby||5.87%||0.50%||6.37%|
|22 Amhurst Walk, Thamemead||3.30%||0.50%||3.80%|
|37 Kentlea Road, Thamesmead||3.70%||0.50%||4.20%|
|Blackfords Court, Cannock||3.61%||0.50%||4.11%|
The changes in dividends for the 13 properties that will pay a lower dividend are as follows:
|Property address||Current dividend||Change (%)||New dividend|
|Finch Heights, Hastings||3.18%||(1.00%)||2.18%|
|Agecroft Apartments, Pendlebury||4.08%||(1.00%)||3.08%|
|Carlisle Mews, Gainsborough||3.68%||(1.00%)||2.68%|
|Friars Way, Newcastle||4.17%||(1.00%)||3.17%|
|Leeds Road, Harrogate||2.87%||(1.00%)||1.87%|
|Burns Street, Leicester||6.76%||(1.00%)||5.76%|
|35 Sherringham Court, Hayes||2.74%||(0.75%)||1.99%|
|Spencer Parade, Northampton||3.47%||(0.75%)||2.72%|
|Southwood Road, Hayling Island||2.73%||(0.75%)||1.98%|
|5 Scholars Way, Romford||3.23%||(0.50%)||2.73%|
|Stafford Vere, Lincolnshire||2.40%||(0.50%)||1.90%|
|Hamilton House, Liverpool||2.41%||(0.50%)||1.91%|
Why are the dividend yields changing?
As a large scale professional asset manager, Property Partner aims to deliver strong income returns for investors from the properties on our platform. We treat our tenants fairly, manage properties to minimise voids and reduce longer term repair and refurbishment costs. This enables us to maximise rental profit and the resulting dividend we are able to pay investors over time.
Each of our investment properties is held within a Special Purpose Vehicle (SPV), which is a UK limited company. The costs of managing the property and servicing the mortgage are covered by the rental income it generates, and the profit is paid out to shareholders in the form of a monthly dividend.
Both rental income and operating costs fluctuate over time due to a multitude of factors, and the profits will change accordingly. For example, higher than expected levels of vacancy would reduce rental profit, while increased demand from tenants in a local area could facilitate greater than expected rental increases.
When an individual property experiences a shortfall and does not have sufficient cash immediately, this will be covered by the property portfolio central fund extending a short-term, interest-free loan to the SPV.
To ensure that “strong” properties are not subsidising properties with management issues, we will then reduce the dividend of the borrowing SPV to create the surplus required to repay the loan over a reasonable period e.g. 6-12 months. This is consistent with our existing, quarterly review of all property dividend yields, resulting in adjustments where necessary.
The central fund benefits investors, as long-term property management decisions should not be determined solely by the immediate availability of cash within a single property SPV. And it avoids the severe volatility that would result if we were to suspend dividends every time an unexpected bill was received.
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Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however, the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested. Past performance is not a reliable indicator of future performance. Forecasts, if stated, are not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Gross rent, dividends, and capital growth may be lower than estimated. 5 yearly exit protection, exit on platform, exit in line with a specific investment case or fund strategy, subject to price and demand. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary. Financial promotion by London House Exchange Limited (No. 8820870); authorised and regulated by the Financial Conduct Authority (No. 613499). See Key Risks for further information.