Shaftesbury

Shaftesbury represents a unique cluster of London based retail assets, backed by extremely high management ability within this sector and locality. As the company highlights, this collection of assets is irreplaceable. Shaftesbury duly re-rated strongly over 2014, outstripping most analysts’ expectations of yield compression. The good news continued throughout 2015, culminating in full year results which revealed Net Asset Value growth of +22% for the year mainly driven by an +18% increase in capital value. Shaftesbury capitalised on these favourable markets with like-for-like rental income growth of +9%. These positive trends have continued into 2016 with footfall driving demand which in turn is generating rental growth. Shaftesbury’s impressive growth and yield compression reflects the very strong consumer environment in London’s West End. Despite the ongoing tight letting background for retail, the trading performance implies peak cycle conditions, with no material room for any bad trading news. I am cautious on the property sector as a whole, given the nature of the shallow interest rate cycle. I acknowledge the unique characteristics at play here but highlight the inherent medium term risks.