Kames continues to see value outside central London
Excellent property investment opportunities exist for those investors willing to look outside of central London, according to Kames Capital.
Kames, which has been targeting the secondary property market through the GBP100m Active Value Property Fund for nearly four years, believes that outside the prime London markets return prospects are more attractive than they have been for many years, primarily due to the attractive income returns that are available.
Kames says it has recently seen an uptick in interest for the fund. Investors are increasingly willing to move up the risk curve towards the secondary property market, this coinciding with the improvement in the wider economy.
Despite a slight hardening of yields in the secondary market, in some cases leading to excessive property seller aspirations, Kames says there remain a number of distressed borrowers under pressure from their banks to unwind portfolios. Furthermore, the banks themselves still have a need to sell down property portfolios from their own balance sheets, a process that is expected to take several years.
Kames believes its strategy is one that is being increasingly replicated by others with the entry of a number of competitors into this space in recent months but it explains that it is vital investors opt for managers with experience in the sector as stock selection is a key to performance.
The open-ended Active Value Property Fund, which has a net initial yield of over eight per cent and does not use debt, has delivered a return of 8.5 per cent per annum to investors since the launch of the fund in December 2009. This compares favourably with the IPD/AREF benchmark return of 7.2 per cent per annum.
Kames property director David Wise (pictured) says: "We believe there are still plenty of opportunities in this part of the market away from the prime London and big city sites favoured by many investors. However, making the most of these opportunities requires significant experience and stock-picking ability, to not only identify the right properties but to also manage them to maximise their potential – and determine the best time to sell."