Property | Masterclass

  • |
  • 44 mins 33 secs

With Brexit looming and with uncertainty permeating markets, what are the advantages of holding commercial property? Topics also covered include foreign investment, property performance in rising rates and the key drivers for commercial property in 2018. Taking part are:

  • Andrew Hook, Fund Manager, UK Property Fund, Aviva Investors
  • Guy Glover, Director, Property Funds, BMO Global Asset Management
  • Ainslie McLennan, Fund Manager, Janus Henderson UK Property PAIF

Learning outcomes:

  1. How Brexit has impacted the property sector
  2. The outlook for retail considering how much is moving online
  3. How CVA woes have hit values



- Automatically Generated -

Hello and welcome you watching asset tv's masterclass and meet jenny ellis today. Looking at property or with brexit looming on with uncertainty permeating markets, what's the advantages of holding commercial property well, that's, exactly what we're going to be looking at over the course of this math class, and i have three experts with me today to discuss, say, uh, nc mclennan fund manager, uk property. Pay for janus henderson investors. Andrew hook, fund manager, uk property fund, aviva investors on guy glover, director, property funds, bmo global asset management. Right ? And i'm going to start with you and it seems like there's a lot happening in the macro environs of the moment, as i mentioned, may ensure we got brexit, we've got everything that's happening with the labour party on nationalization and their attack on pair of eyes rate rises. So how does this all translate in terms the investment environment ? So i think really, in mid two thousand sixteen when we all started to really think about what brexit would mean, we decided to try and cut through all of the white noise of what brexit that that kind of data de journey of brexit on dh expect chaos and position ourselves for that so that if there was to be uncertainty, which is really think the chief thing that we're talking about, we don't actually have anything solid yet. So it is about uncertainty that we would have a property portfolio that would be able to move through that gently and keep delivering steady income and potentially some asset management. And so it's been for us about positioning of actual assets and trying not to get too involved in the political and economic, and it does feel like white noise, a lot of it is data date changes so radically on dh focus on things like demographic story stories that have continuity right the way through there for the long term. I want your few andrea, and especially with the rising rates, as i mentioned, i mean, what ? So i have a lot of what it is is just said, there is uncertainty out there. We've got the clock ticking on agh! Brexit deal. I think the arguments less about hard or soft brexit is whether there's a deal with you or whether we moved to a point where there that there's no deal. So fallout back teo w t o arrangements you mentioned the labour party that's definitely a risk of a socialist government. But, you know, i suppose you have to step away from that and think through that the fact that there's quite a positive macro environment certainly was seeing that in terms ofthe both demand for property from the capital market sense, but but also from occupiers, there's a good deal of leasing activity out there in the market. So we we take comfort from that, but i suppose the fundamental point is i don't think it's a point in the cycle where we or or other investors would want to be taking undue risk, it's very much about steady, she goes, make sure that income stream is coming through think through asset management opportunities guy a few weeks ago, we had mark kearney talking about brexit and that this could see house prices dropped by thirty five percent. I know this is the ready market we've got three commercial manages here, but he's got these kind of comments from the governor of the bank inning and how useful are they in terms of investor sentiment ? Does it sort of impact the commercial space ? Okay, leslie, what happened to twenty four hours later ? Mark kearney came out and said actually it was part of a bank stress testing over brexit. It wasn't really a reflection or forecast on the uk commercial property market, it was relating to the housing market, but terms of the commercial property market is slightly divorced from that. But as you intimated, sentiment with the investor base will be affected by comments like that i think it's up to all of us to constantly lays with our investors to remind them what they're invest and how strong the income in isn't just say we're looking through these these little bumps in the road and saying what's, the real drivers behind behind property performance from an income specter i think it's really interesting to look at how international investors are looking at the uk on dso despite all this uncertainty, we're seeing material investment by foreign capital place today billion has just been put into the west end's by to european firms ponti good air on decca emma billion that's going to be a strong vote of confidence for the uk property market, i suppose when you look too asian investors and if you're a south korean investor and you've got kim jong un north of your border or you're in hong kong and, you know the chinese full chinese rule is coming in the clock's ticking on that labour governments or brexit uncertain see they're fairly minor issues to contend with on their naturally long term investors. There are really seeing through this you're not trying, teo say they're winning a margin on potential currency, but at the same time they're really looking at the long term for sure. We're looking at some of the stats from property where it says that around five point billion pounds is invested in london in the first half of twenty eighteen, and that largely came from foreign investment. But in c can you see this actually changing with brexit ? You know, do you think people might panic and pull away slightly ? It doesn't feel like it. I mean, we're in a flatter capital environment anyway. So despite that you know that huge injection and many london from overseas investors, we you know, i would see that you don't expect the same investment volume in a time where there is no a very obvious capital growth story it's much, much more normal time than that what it is about income and asset management and that naturally should be where it is, and so you see a little bit less treated at that point anyway, the london market is quite a specific set of market on that. There have been foreign investors going into other locations region, that's the sort of minor story against what they do in london s o i feel, you know, quite sanguine about the fact that the volumes are healthy, they're probably really should be for where we are in the cycle on you know, you have to give a vendor a pretty good reason to sell because if they're going to reinvest probably hard buying back into market brothers and, you know, there's not such an obvious ghost story, and i'm going to say that yields global on people are looking at london it relative pricing globally there saying actually offered some good value compared to when yields and clone are tighter than they are in london on london's have far bigger, stronger, deeper market and that's what a lot of international investors are looking at capitol movie it and look at the yields and also a little bit maybe the currency play, but less so really we're looking at fundamentals of the buildings, i think market transparency versus of the markets that's a key factor, as is the rule of law for some investors and think about some jurisdictions globally. Having that certainty is a very important factor when they come to invest in the uk and i'm sure the week sterling helps as well for foreign investors, it does for sure the lots of discussion about how brexit might play out on stirling you can certainly see cem, i guess outcomes in terms ofthe perhaps a no deal on the fallen sterling might actually bring further foreign investments in on an opportunistic basis, even when there hasn't been that currency play. You still see quite a quite a spread on the different styles of overseas investors at different points, and we've never really seen a time we're in london there's never really been any overseas investor getting involved in the london market. It's always bean the currency advantages you know, accentuated at the moment, but it's not, you know, it doesn't prevent anyone after that maybe disappears from investing in london, i think has all these defensive qualities that makes it appealing it's a truly global market in terms of capital, but also look at the occupy base and the corporate present here on you have that international this, steve, and i think that is a major attraction for investors. Well, guy, we are going towards brexit proper there's no getting away from that, so you're not too concerned about perhaps a repeated two thousand sixteen and property funds being suspended ? No, not really what happened ? In two thousand sixteen was a lot of multi managers sold out of funds took a lot of capital out very quickly, they have less representation in the funds that wasn't a messeloff people actually learned that what happened with the referendum was the currency movement we've just been talking about so currency took most of pain. Uk commercial property market only moved a few percent which could be a volatility you see on a daily basis and the equity market, maybe the corporate bond market with with one of the ways or pressure points being taken out with currency movements, you know, going to see a big full of people are predicting a big falling uk commercial property as a result of a poor brexit adversely with a a sensible deal which looks increasingly likely hopefully we could see a little bit of bounce of some of that uncertainty is removed, consumer confidence returns because people are talking about the whole time and importantly, business confidence also picks up there's a plus side a cz well as a concern out i think there's one positive thing to take away from the peaks and troughs of the negotiations it is that i think investor base and the population at large are well aware off the risks and the possible outcomes, but like i think the the house view and increasing mood in the nation is that we will obtain a deal of sorts. Turning to a viewer question, we mentioned rising rates, but how do you expect property to perform in a rising rates environment ? Why did you take that ? So, yes, they're not ? Carney obviously has has come out and talked about the potential for for further rate rises, but he has caveat is that with the fact that they're likely to be gradual on limited and further in caveat it by the brexit questions. So i think our expectation and mr carney guided pretty much is that if you expect one rate rise a year for the next couple of years, you probably won't be far wrong. Maybe that under cooks it a little better when you look at where inflation is against target, we're pretty much on it, but mike pushed to the upside, but we're not seeing a number of rate rises stacks up that i'm going to push us into a very different interest rate. Environment, so backers me, some comfort, the stiller healthy spread between property yields on dh, on rates, on dh again, i think that should should should give investors a good deal of comfort, and i think we should we should look to that normalization of interest rates is a positive that there's stability enough that that that we can move in that trajectory and we've, you know, property funds of historically done well in a relatively normal interest rate environment, so i don't think it's something to fear. I think the gradual part of it is part of the key, really, tio everyone sort of incrementally getting into that new frame of mind each time, with the interest rates going up, you should see rental growth picking up performing quite well, which will feed into that well important income growth, which we will talk about forever and a day from property because that's what people really invest in it and i think that's an important point post brexit we haven't seen gdp growth fall off a cliff way think we're in for lower of gdp story this year, one point four percent seems to be the forecast, maybe there's a little bit of upside around the key too revision at one point six percent also for for next year, but certainly not a disaster on even with no deal brexit, most the forecasts are still looking at positive growth, so point five point six percent that isn't recession is still positive territory, so i think there's a lot to take comfort from. So what do you think has been the key drivers in twenty eighteen for commercial property that andrea so we still seem strong capital markets ? Deal volumes are down slightly, but i think that's a cz much about supply coming from vendors being restricted ous muchas anything for me, it's really been about in an income play this year ? And i think that's that gives us comfort because that's naturally where property sits in the capital's spectrum, further value could be delivers on further returns through asset management and that's something that we in a guy and a very focused on but that's certainly what we're seeking to drive for investments, i guess you look at the different sectors, we've continued to see some further cooperate compression alongside rental growth in the industrial markets but in the office. Markets more stability and then obviously we've seen some retail always comes to the fore it's about how we tackle those as a a zoo business, a sector that i think will impact how property does over the next few years to say that we've seen your compression in the alternative is part of the market so everything that's no office, industrial retail you all these other areas secured data centers that your health care care home students, all of these different parts of it have actually continued to do very well this year. So the first two quarters really seeing some your compression there is well on dh that alongside the industrial i think has made for healthy part two the year really in terms of getting to this point has been a real divergence wasn't there the last twelve months between the alternative sector on the industrial sector ? Southeast industrials delivering twenty five cents full growth over a over a very short period of time really stands out as a real performer against the rest of the market, for sure on dh that's that's got to be taken into account when you look at all property delivering about ten percent returns with some obviously lack guards. They're like the retail space on some office spaces well across country it's a really diverse picture when you peer under the bonnet, how complex it is, she was much more. It feels much more dynamic in many respects. You have been running this fun nearly ten years, and it feels no in many ways much more exciting and dynamic, seeing how thes different nuances can help you in how you operate your portfolio. So, you know, the diversity is much broader and now i think, well, let's, look at some of the sectors that because you mentioned retail and do you now, how bullish are you retire ? Know that about thirty percent of your portfolio is in retail, but for you guys, are you as bullish on retail ? So in terms of retail, i think the press speculation calling the ends to bricks and mortar retail that's completely over wi ast businesses of funds, a firm believer in bricks and mortar retail we've we've had a strategy in place that has been around for thirty six months or so, which is really said that the future of retail is in high. Engagement space aware you combine retail with leisure or entertainment or its nose up your convenience needs you look at the back drop off uk property market on it's a situation where we've just had too much retail space at a time when retainers themselves have been looking to shrink their footprints. So you kind of see the backdrop of the c v a process has only helped accelerate some of that change, but that fundamentally doesn't mean that all retail is broken at all. You know, bricks and mortar retail has a position to play in terms of being able to showcase products to consumers. People want that experience. Nobody wakes up, i think, and says, hey, i want to go shopping and justin shopping if they could combine that with an experience which is going out for coffee, breakfast, having lunch, trying something on and using tector tto help make their decisions that she adds to the experience and i think really engages. But there is this concern of i mean it's been calling the amazon effect mean guy let's ? Look at next mean, fifty percent of next sales now are done online. I mean, doesn't this concern ? You, how how much should you hold in retail ? Considering this shift to online, okay, so next came out with their results last week, week before still making seven hundred million pounds with a profit. So there's a place for retailers in the market at the moment. And they said, fifty percent is now online or just about to turn online. Important aspect you read a bit deeper into that is twenty five. Also, fifty percent of those online sales still collected in sore, seventy five percent of all sales are still touching bricks and mortar. We're quite negative and retail. Because you had some horror stories out shopping center for a few years, going full cook twenty four million, sold for a million three years later. So if you're buying the wrong building in the wrong location, you can come home some very quickly. So it's all about the defense of locations where people syllable to shop on whether it's just not too much provisions everything for us it's about not holding shopping centre is we just don't think we're the right fund size scale, you know, to do that, i think you have to have a very dominant shopping center if you want to do well, they're a bit looking, teo are a kind of waiting to retail is actually quite london focus or london suburbs and london pubs show she sits his retail, supermarkets and retail we're hosing which again southeast dominant continues to do pretty well, there's demand there is more affordable space for many tenants in the fact that we've seen some of these administrations coming through it's been an opportunity to take tenant quite often out of the center of these locations and put them into a retail park, and they choose to do that. You know, we've put a lot of food and i am anus food. I'm going into a carpet, right ? Eun eso there are winds to be had and in the right, vito, but i think it's important that and i think particularly the regional high street is probably in one of the most vulnerable parts of the market. We don't hold department stores, you know, there were no open to that that were absolutely not immune to having cbs and administrations come through from retailers who probably needed to be flushed through it's also about talking, engaging with retailers themselves, you need to know your tenant based what they're thinking, how you could work with that that's a key part of understanding the retail backdrop. No, you would argue that if you do that properly, you should be caught short by changes in sentiment. But he mentioned cv a there's been a lot of cbs woes and headlines out there. How much is that hit values ? So in the market as a whole, it doesn't seem that much in there has to be blue, but of a question mark over that you don't really think that it should have had mohr off on impact ? We're not our person experiences being pretty good. We've seen only two small, relatively small units within our funds impacted by cvs. One of those was it was byron hamburg units at a time sight that way hold in the corn exchange in manchester. We're about to put that space under offer, teo to another restaurant where he's going to take more space within this scheme that that's good news. And then we hold mothercare in in sand location in the next they're on a reduced rent that place on were actively looking for another tenants to replace them, but the good news is we've had lots of office, and we're just fine tuning we wanted to do with that space represents some opportunities as well to move some of our other retailers around when they're looking at alternative uses in other parts of of that scheme may be thinking through a four screen boutiques cinema that allows us to move rents on, and also dr point of difference within the center itself. So it's certainly not a a picture of whoa, you've got a look at these schemes of the homes here, actually, is there ? Way to buy a building that's since eva because it's actually a great opportunity joining an existing holding that we have so it's you know it's not something that again to shy away from it it's the right thing, andi way complete a nasa management project for us to want to do that. So you know they're too is the right stuff it's looking very much at the detail on why and you know, what does it look like going forward in the uk ? What has a presence and what we should just see that's ? Okay, it's, time for it to go think that's the benefit of real asset corporate bonds or on actually where you may have lost all your value we have the ability to take hold of an asset put isn't alternative views on dh maybe add to the value of that building certainly the c b a we had a lot home base. We've managed to put an insurance lease in place before the cvi came into place. So potentially auto building, which is worth more now that would have bean with the existing incumbents still trading from the store and that's real assets for you. Where we have a team in place, tio to add value most exciting thing that i'm sure wake up in the morning. Get up for it's the fact that real estate is an operation we focus business, you can work with the property you have control on that communal for lot was the ability to create value, to go out for the space to a scheme or, in fact, a swap retailers around make sure you've got the right tenant mix now, is he going back to something you mentioned earlier ? You talked about supermarket, one of your largest holdings in terms of tenants is asked and now has been a lot of rumblings about their merger with saints. So what sort of impact you see that having and also in the greater amon a space ? Well, so to cover off the supermarkets, you know, for us, they're good ones. We holder don't generally talk fifty or talk quarto and stores for you to individual in the individual locations and as those two as does on dh, they both worked very well in those catch me and there's, not a sainsbury's around them that would be in direct competition and but they give us very long leases. We only really hold now. We sold a couple last year there were open market right now, you know, we really only hold one's there are index linked with rp i linked and i mean that that's actually quite a useful place for us to be. We've got what we've got over a third of income coming to the funds currently has fixed kickers or index linked leases and her impatience and play it can be quite helpful toe have that so we feel that part of the market is quite defensive and it's about how you doing as well. So it helps with dividend and, you know, i suspect there will be more emini going forwards, it's all about cherry picking assets that you feel have long deputy in the fund, and if they are the right assets, they should still be in play despite emini. But, you know, we've been looked at that portfolio very carefully in terms of asda and sainsbury's, teo just make sure that we're not at risk of any of them if it came to pass and i knew he said that wouldn't happen, but in time. Of course it could. And to make sure that they are the right stories in the right locations no guy, no, your highest waiting is industrial. Why what appeals to you about this sector ? Look aside, i mentioned earlier in the industrial sectors formed incredibly well a lot off back of e commerce on people leaving the re celebration online effectively that's looks set to continue with open logistics as well picking up in terms of rental growth there. Our portfolio which is very much mid box, more open logistic focused, has done very, very well there's some caution innovation to pricing which soul untouched on later that's why you have to be very specific on where your buying buildings but for us, having over thirty percent in the industrial sector has been a great philip in terms of returns over the last twelve months, rent growth really, really healthy looks set to continue for the next five years, according to most forecasters, but obviously different locations will behave differently. Got to really drill down on that stock selection. We're talking about these values and new york concerned about the pricing their way fundamentally like the structural story behind industrial and particularly the logistics or last fulfillment center part of the equation. You know, this is a really strong story about that lack of supply. The fact is that some of those high values are underpinned by relatively high intrinsic land values as well, potentially residential conversion angles on some sites, which is really exciting. But i suppose there has been an element that the wider markets across the uk has perhaps has been caught up in this. So wei have some concern about some sites that price does, though either urban logistics or southeast industrial when they're very far from that, you know, t get to the pricing levels that are being paid, you have tio price in significant compound growth annually, and they're just not going to see that. In fact, some of the end users and operators have been affordability question there, so it is very site specific, but you got to understand the location where it fits into the supply chain. Andi really underwrites the ss were trying teo because we really love we would love to keep upping like you are industrial waiting, we think that's a really healthy, healthy backbone along with our alternatives. And in the funds, but we've been trying to buy into, you know, even sites brain from developers on taking on that letting risk ourselves where we feel the struck the story is so strong, so that we're getting a prime asset at the end up aziz assets are letting, but we haven't gone in a very sharp you was because i completely agree is, andi think you know, that's more of a southie story for us, but it has been a way of accessing more industrials into the fund without necessarily and good logistics without actually going in a very, very sharp, very hot eudes, which are a concern. I think we're looking at other sectors, officers. Now i know both guy an entry, you're quite volition offices, but is there a concern that not not primer for space, but in the second in the areas that the government and developers attorney in this a lot into ? Raysy say we're a second tier office space at a premium now ? Because there's not that money ? No, i don't think so. In fact, we've moved away from from secondary senses were very firmly said that outside central on we will only concentrate on a small number of markets which broadly birmingham, cambridge on manchester and then a little bit of across the strategy through the corridor so that's, not a a sector that we would want to be be focused on. In some ways, the residential conversion is a good thing it's taking away surface stock from some off those secondary markets it's not handcuffing the business district's no, no, it isn't, i think equally the businesses are now engaged in something of a war for talents they want to make sure they got the best employees available. So you're increasingly seeing business is moving to the hearts ofthe major sensors like, like manchester in particular that's because they offer immunity, they offer a strong and diverse and increasing the international labor force on dso we're actually seeing that some off those smaller, more secondary sensors that maybe some of the russian market towns, they're actually dwindling at the expense off some of those larger senses. So we're very focused on making sure that we're in the right places where we think the knowledge economy is going to continue to grow and going to continue to support growth, okay ? And so you mentioned about second, your office is being converted to residential that's removed fast out of supply. That supply overhang has just boosted rental growth. We're seeing strong rental growth in the main cities like andrew. Here we're focused on these university towns and cities across the u, k, bath, bristol, birmingham, manchester, etcetera those locations we get slightly higher income return in london, but also the fundamentals with the rental growth coming through are now in play and that's the important aspect linking to the universities where you've got great tell a retention as well is also a really strong strategy. It is not a graduate, retention is a key stats and look at some of those senses in manchester's now the middle eight, forty percent in terms of graduate tension that's a very different story from one of the clock back twenty years or so way probably taken a different different, which is really good for investors because they get diversity within the degree in security funds. But and when you went through the two thousand sixteen, we've decided to regis the tenant stick, but there were financial businesses within the fund, and naturally that led to a sale it's a very strong eudes of off our office portfolio. In fact, we took her are waiting in london and the western, waiting down to zero we are not in any regional office other than an office in cambridge, so we wait took that view partly as a result of wanting to don't wait from financial tenants, but also we were crystallizing some quite good returns, and we were worried that brexit would create for some of these businesses and some uncertainty that could be hard to further sent punishments forward, that kind of thing and what we have kept and retained our good fringe london holdings like souther click clark in a world where we're seeing some really great growth coming through, but we're not heavy to city midtown west end way haven't taken on a regional exposure thes air opportunities for us to go back into these markets, but i feel just at the moment, it's probably sensible for us. We've never had such a small office tweeting in fact, in the past thirty nine and a half years, its sovereign fifteen percent, and i would say that and it's interesting as we've been going through brexit. All are sections of the market that were invested in sit somewhere between fourteen and nineteen percent. So there's a huge diversity now across the portfolio, including, you know, alternatives that so fifteen, sixteen percent being you know, i think much more diverse picture if we were going to take that income from a cz we go through the next twenty four, thirty six ? Yeah, no guy, an interest in your portfolio that car share rooms where any world some point four percent if you're portfolio. I thought this was interesting because we've talked about the amazon effects and i read an article on the bbc today about the title was this will be the last car your own because it's all going electric and then it's going driverless. We know how much you have to consider in terms of disruption, that sort of thing when you're choosing your asset. Okay, way have some car show because they're very long. Let juicy our income growth in the portfolio on dh there in key locations. So one inspector in london also won in milton keane's, which is our most successful car dealership, that holwell argument over what's going to happen with cars we discussed the entire time. It's it's, great chat and how it's going to influence dealerships. We're seeing more more people concentrating on the suspected dealers, concentrating on fewer dealerships, but that's show they're shutting down the secondary ones on just saying, look, we're going to have something which rep sent our brand within the region ? And then, of course, you drill down and realized that quite a lot of the profits from the dealership come from car servicing or selling second hand cars. It's just not the new cars, which could theoretically be sold online. I'm not sure if it's going to go quite that far, but we still see a future for car dealerships over the next twenty years. But like all sectors, we're constantly reevaluating our stock selection on dh with not those buildings are suitable for suitable for the business is selling family is really embracing electric cars, you know, in many ways, if it's the best trader and you know, in milton keynes the best fighter in the u k, then you know you've got to imagine that's going to be hope for them. The wrong came out a couple of weeks ago big campfire on dh be bought from the u k something like milton keynes which would be great. I guess it is interesting. You look a car shirt, car showrooms and dealerships and you think about what's happening in the retail sector. Discussed that there is a natural retention to those those primary sites. But that brings up opportunities in terms ofthe alternative use on dh conversion for some of those secretary sites, they tended to be in and around the location. So again, we talked about the shortfall ofthe urban logistics there's always the potential therefore, actually are higher and better use through through that conversion angle. Exactly. Okay, so let's, turn some viewer comments or questions. And in light of the recent fc, a consultation report on property from liquidity giving manages the ability to get to get in times of valuation uncertainty. How do you think this will impact your investors perception of liquidity in real estate firms and that overall appetite for property risk in today's, uncertain environment ? Andre, i'm going to ask you so the papers is really interesting and i must say firstly, it's it's very welcomed. I think anything that protects consumers has to. Be welcomed by the industry so we're very supportive for example, off the position in terms of making sure that consumers are adequately informs and that they're invested in the right product for them. That goes without saying, but we also welcome other elements, like the full engagement's off depositories in a process that has to be a a good thing it's interesting t their proposal about the values and that the issue evaluation uncertain see being the mechanism and the problems for future suspensions, and that will need some debate leave. We've always got to make sure that unintended consequences don't don't don't don't flow from this sort of thing. But, you know, i think there's an industry that's something that embracing girl engaged in industry bodies, that they're going to be debating this as well as with our wider team's, productive, compliant specialists, asar businesses so, you know, we welcome that base and certainly look forward to discussing and putting back are fusing comments too, to the your thoughts i mean it's, a very sensitive subject and i think it's just it's hot off the press, waiting to give it full consideration and, you know, what's best for investors got anything for me, it's all about continued liaison with the investor base, too get them to know exactly what they're investing in importantly for assets also who they're interested alongside so that they're like minded investors. Looking to allocate capital is part of a bottle portfolio, so they're not switching money in and out. It could be a five percent allocation, which make up seven half down to five again over a prototype. But having a long term holders in the fund, it does remove some of that liquidity stress she might have elsewhere on. You've got to remember the open end of funds actually worked that follow talk bear teo, someone listed sector over the time where you can trade it. Tv's a discount ? Navias well, so you gotta really look through it, and part of what i like doing is educating investor bates say there's many ways of accessing property, but they have their pros and cons on dh we've got to continue their engagement, i think. Also when we mentioned the reach sector, some of that liquidity or supposing liquidity in some of the smaller reese is slightly illusory. It can take on time to on wines positions that something we hear from our investor base, in fact, with engaged with investors bone who's withdrawing from a particular reason just finding this quite difficult t place that investment, you know, it's, it needs to be thought of in the round. And his guy said property is a medium to long term investment is going to be done coming in. It seems amazing that people still consider property funds is short time investment anyway. So looking at the cash holdings in your funds, then the orphan eighteen point six percent andrew twenty percent guy about twenty percent. These all seem quite high to me. Go first full. I mean what's the a good level of cash to be holding in your hands. Okay, so our is slightly too high. We have a number of properties under off the moment where we're looking to purchase and buildings which will bring the cash level down around sixteen percent, which is about right. Our long term target is between ten and twelve cents. Wei have been above that as we've had a strong and steady in flows over the last twelve eighteen months looks set to continue the task. For me is to invest that money, but wisely, sensibly and sometimes takes a little time, and i'll communicate to the investor base that we're not just spending the money. How important thing is to invest it in accordance with the requirements of the fund on what we said well due to the investors to get the right quality stock to a place that that money market on andrea, what would be a good level of cast so way typically would say a ten to fifteen percent bracket on dh that's, very much the basis on which you work so twenty percent we are like guy slightly too high, but we are under offer on a really interesting projects that's something we hope teo contract on in a month or six weeks time. Just working through our due diligence on that way are we do have a number of other interesting opportunities that were running the slide rule over the echo, the guy's message that it is not about spending and just deploying money to make sure we find the cash balance is making sure that we acquire sensible opportunities that really fit the funds that really fit the portfolio. On dh compliment the portfolio that's right over the long term for investors and i think we'll probably stick around where we are way are buying a couple of things that we've had a couple of things that are moving through the portfolio is where the sale so i think all in we would like to stay near that twenty percent mark. I think that as we go through brexit, we just want to make sure that we have plenty of liquidity. And last year we were sitting with the total liquid assets basket of about twenty three percent of me give eight point, seven percent return on this year we're short three point nine percent up here today, despite holding these kinds of cash levels, and i think, you know, it is the property fundamentals air there, and we are seeing good assets to buy, you know, we have to be quite dynamic, how we do it. And but it's more just from the investors mindset. How he'll feel about brexit on dh ho other asset classes will fear because you've got to remember property's taken in context against equities and bonds and what happens with equities azan effect. On the waiting's people have in their portfolios and property and other sectors, and so just be mindful of that, really ? I think we'll probably stick around the kind of level we're at for the time being. Finally, i want to finish with one trend, i think that's going throughout the asset management industry and that's the sd no guy, i know that you're the any property firm that's living wage accredited ? I mean, how does that work doesn't limit you in terms of you know, the asset not really ? S so weird. Bar building on dh office building in the market on we might have to do an intervention to ensure that some security guards the cleaners are getting a living wage because, quite frankly, we feel it's right thing to be doing. I was part of the process became credited. The debate, i think, has moved on from the environmental side. Carbon emissions. We went two hundred cent renewables a few years ago. Cop twenty one targets we know where they are that good. Because of the one hundred seven year bill, we're now seeing where we can intervene in the social side to really make a difference. On the ground for vulnerable people is e s t much consideration. It is absolutely and that's not just within our real estate business, but are wider. The investor's business is critical and there's a lot of investment being put into yes, i completely agree with guys points that environmental piece focus, but something that has been in place for a while. But we're looking more to the, especially on governments pieces. I think real estate has a really interesting role to play that way. We have a zonas of real estates can create place on make places better for consumers, better for occupiers, and so there's something that we really can bring to the the equation in terms ofthe improving the life and feel of our senses. So, you know, it's incumbent upon us to make sure you have a huge city on us to be part of that. You know, if you were operating a three billion pound funds, we should be very active in ho be engaged. Hobie technology is making it even cheaper as well to make sure that the carbon element is covered often that you know, forty, forty three sort of panels wind turbines. All of that is in play all the time. It's a very regular thing in the portfolio. We have just a living wage review as well, you know ? And i think that's really important and all of these elements or click in and they make, you know, make a difference when you're doing over eighty five assets, and we should be doing it. There is absolutely no excuse for it, and it makes good business ends. You know, on our forty politics, we get somewhere between five and eight percent. You don't cost for, you know, the ones we have, and that makes sense. So, you know, it's important and it's. Good business. So i was just about to say, i think also in terms ofthe working with plaza is not working against plan, is we we found a huge benefit working with local authorities matched the city council extra city council, vincke examples it's understanding what they want and what they would like us to bring to the table. That's mutually beneficial. Well, sadly, we are out of time, so i'm gonna have to ask you your final thoughts. So, guy, why don't you go first ? What you like ? Of years to take away from this master class property ? Is there fight income opportunities ? Capture income ? Yes, their threats in the retail market at the present time, but as far as we're looking at next five years and get a nice income return of around five percent, depending on your stock selection, you should be able to capture some growth as well. We're very focused on income, but i think we're also looking i'm through to some of the structural trends of safe through logistics and supply chain equally retail that's been in the forefront of our our thoughts over the past eighteen months and certainly impacted assets that we've sold on those that we've wanted teo retain, so we're fully focus now on making sure we get the most from our portfolio through through active asset management. Yeah, so it's it's, a non correlated asset class against other asset classes, is providing a very useful income, and we feel that it's one of the most dynamic times that we could be operating in property with so much shift, having taken place on that's an opportunity, and i think we're well placed for that with her industrials and with our alternatives, particularly andi, you know the sort of everything to play for. In that respect, it's very much about protection of our values, driving that asset management to give extra return and very steady on the income. Well, do you stay with us here on our set tvs ? We've got information coming up on how you can put this master class towards your structured cpd, so all that remains is to thank my panel today, so let me give you their names again. We had a scene mcclennan from manager uk property. Pay for janus henderson investors on drew hook, fund manager, uk property fund, aviva investors and guy glover, director. Property funds, bmo global asset management say to all of you, thanks so much and to you, thanks for watching and see next time. By the end of this video, you'll be ableto understand and describe how brexit has impacted the property sector. The outlook for retail ? Considering how much is moving online and how cva woes have hit values, please complete the reflective statement to validate your c p day.