UK - Investors in UK property limited partnerships obtained better returns on average in 2002 than pension funds and other institutions investing directly in property, according to a new study.
These unlisted real estate investment funds returned 12.6% last year as against 9.5% for directly held property.
The ABN AMRO/IPD Directory of UK Property Vehicles 2003 covers around 80 limited partnerships with asset value estimated at 16.1 billion pounds (23 billion euros), but only 8.8 billion pounds of this is performance-measured by London-based performance measurer and databank group IPD, whose annual UK universe comprises 102 billion pounds of directly held property, mainly in the hands of UK institutions.
Outperformance was achieved at both the portfolio level and through gearing, says IPD, which says that the UK limited partnerships had standing investment returns of 10.0%, with portfolio returns increasing this to 10.4%, to which the gearing impact added 2.7%, less the impact of cash holdings minus 0.2% and other costs of minus 0.3%, to yield the overall estimate of average returns of 12.6%.
The directly held property returns of 9.5% for 2003 are un-geared, and the UK property unit trusts had total average returns of 8.5% in 2003. FT real estate shares returns were minus 2.1% last year.
Phillip Rose, European head of real estate at ABN AMRO, said: “These limited partnership really delivered the goods for investors in 2002.” The results show the benefit of institutions investing through vehicles which offer expert management and the opportunity for gearing, he added.
The study also shows that limited partnerships continued to grow strongly in the last year with some three billion pounds invested in 18 new funds.
Next month, ABN AMRO and IPD will publish a companion guide to private real estate funds in continental Europe.