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UK
LISTED
PROPERTY
VT GRAVIS UK LISTED
PROPERTY FUND
February 2020
1
Contents
4 The UK property sector
11 Introduction to The Fund
20 Characteristics of The Fund
27 Appendix
2
FUND INVESTMENT TEAM
The investment advisers to the Fund
Matthew Norris CFA - Director of Real Estate & Fund Adviser Nick Barker - Strategic Adviser to the Fund
Matthew has more than two decades investment management Nick is a director of Gravis and is the lead manager of GCP
experience and has a specialist focus on real estate securities. Student Living plc.
He served as an Executive Director of Grosvenor Europe where he Nick joined Gravis from Schroders where he worked for eight
was responsible for global real estate securities strategies. He years, ultimately as head of alternatives for the real estate
joined Grosvenor following roles managing equity funds at Fulcrum business and a member of the fund management team for the
Asset Management and Buttonwood Capital Partners. Prior to that Schroder UK Real Estate Fund. Nick has over sixteen years
he worked within the equity research department for Credit Suisse. investment experience having previously also worked at
Matthew holds a BA (Hons) degree in Economics & Politics from Cushman & Wakefield and JLL.
the University of York, the Investment Management Certificate and Nick graduated from the University of Reading with a degree in
is a CFA charterholder. Investment & Finance in Property. Nick is also a Member of the
He also provides expert input to research projects run by EPRA, Royal Institute of Chartered Surveyors.
which focus on the importance of emergent real estate sectors.
020 3405 8553 020 3405 8521
matthew.norris@graviscapital.com nick.barker@graviscapital.com
3
The UK property
sector
4
THE UK PROPERTY SECTOR
Key facts Size of the investible UK Property Market (£'bn)
UK property market1 1400
• £8.7 trillion total value of UK property
• £2.1 trillion value of the investible UK property 1200
• £512 billion of this was invested by professional
investors and investment vehicles 1000
Institutional Quality Real Estate
• The sector has grown in value by 6.0% per annum
over the last 30 years Real Estate Stock
800
600
400
200
0
1. The Size & Structure of the UK Property Market: Year-End 2018 Update (December 2019) - IPF
5ASSET CLASS RETURNS
10 year annualised return by asset class (31.12.09 – 31.12.19)1
12%
10% 9.73% 9.62%
8.28%
8% 7.39%
6%
5.37% 5.30%
4%
2.93%
2%
UK Retail
REITs
0%
Corporate Bonds All UK REITs
All 10y GBP Gilt UK Equities Gold (£) IA UK Direct Inflation UK
BBB (incl retail) Property*
-2%
-2.61%
-4%
1. Data (excl. IA UK Direct Property) – Bloomberg L.P.
* IA UK Direct Property – FE Analytics
6RETAIL
A timeline of various retail companies that have faced administration over recent years
Prior to 2015 2015 2016 2017 2018 2019
1. http://www.retailresearch.org/whosegonebust.php
7CASE STUDY – FROM SHOPS TO WAREHOUSES
Market Overview
• Online retailing requires 3x more warehouse space than traditional retailing
• In 2019 online sales accounted for 20% of all retail sales.
• Between 2008 and 2019 the number of jobs in the retail sector has declined by 9%
The decline of the retail sector1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
3,550,000 25%
3,500,000
Online Sales as % of All Retail Sales
3,450,000
20%
Number of Retail Jobs (UK)
3,400,000
3,350,000
15%
3,300,000
3,250,000
10%
3,200,000
3,150,000
5%
3,100,000
3,050,000
3,000,000 0%
Number of Retail Jobs (UK) Online Sales as % of Retail Sales (UK)
1. https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/ms6y/
8LISTED PROPERTY SECURITY RETURNS
Listed property securities have produced consistent, Share Price Total Return (%)1
150
attractive historic returns
Over the last ten years, closed ended UK direct property
funds have delivered1: 100
• total shareholder returns of 110%
• an average dividend yield of 4.9%
50
Long-term performance has been driven by:
• structural benefits (e.g. no or limited cash drag) 0
1 year 3 years 5 years 10 years
• superior quality assets Open Ended Funds Closed Ended Funds
• expertise of managers
Historic Yield
• specialist and alternative property sectors 7
6
5
4
Yield %
3
2
1
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Open Ended yield Closed Ended yield
1.Source: AIC/Morningstar. Unweighted averages of all funds in relevant sectors (IA UK Direct Property vs AIC Commercial Property). Total return in % to 30/08/19.
* Past performance is not necessarily a guide to future performance
9BENEFITS OF REITS
The benefits of investing in REITs:
REITs are structurally suited to provide liquid access to an illiquid asset class. They are able to focus on long term portfolio
returns rather than provision of short term liquidity.
Real Estate Investment Trusts Open Ended Funds
Structure Closed ended funds, listed on LSE Open ended funds, unlisted
Investment focus Increasingly specialist Generalist
Investor entry / exit Buy / sell shares on LSE Company issues / redeems units / gating /
swing pricing / spread
Impact of day to day investor entry / None Rising and falling cash balance and share
capital
exit on fund management
Cash required to manage day to day Do not hold material cash balances – can Yes, c.20% to manage redemptions
remain fully invested
investor liquidity
Impact of extreme investor exit Likely share price fall, potential to trade In event of insufficient cash, gating of
below NAV investors, forced sale of assets at potentially
unfavourable pricing
Gearing c.20% - able to enhance returns through 0%
appropriate leverage
Appropriate for illiquid assets Yes, while offering daily liquidity Not according to the FCA1
1. https://www.fca.org.uk/publication/consultation/cp18-27.pdf
10Introduction to
The Fund
11THE FUND
Key Information Objectives
• The VT Gravis UK Listed Property Fund (the “Fund”) • To achieve capital appreciation over the course of
is a NURS OEIC with PAIF status1. market cycles2.
• Distributions are paid gross to ISA, SIPP and • Target cash yield of 4% p.a. after charges.
Offshore Bond holders and are made net of the basic
• Capped fund charges of 0.7% with no additional
rate of income tax to individuals. ongoing charges3.
• Corporate holders are entitled to receive gross
• Charges taken from capital.
distributions.
• Provide inflation-linked characteristics.
1 Non UCITs Retail Scheme (NURS), which is an Open Ended Investment Company (OEIC) and has Property Authorised Investment Fund (PAIF) status
2 We expect this to be a period of 7 years
3 The OCF (Ongoing Charges Figure) for all share classes is capped at the AMC (Annual Management Charge) and any costs in excess of the OCF/AMC are
paid by the Investment Adviser.
12INVESTMENT PHILOSOPHY AND
SECURITY SELECTION PROCESS FACTORS DRIVING INVESTMENT DECISIONS
• The fund will invest in a broad range of GBP
denominated, LSE listed property securities Yield sustainability
• Focus on the stability and security of cashflows
Cashflow
Credibility of
dependability/
management team
• Diversification through exposure to all UK REIT visibility
classifications, with the exception of retail
• The fund is actively managed with a view to maximising Inflation hedging
Low relative volatility
returns whilst keeping costs to a minimum. The fund will characteristics
offer daily liquidity
Size/daily liquidity Valuation
Minimal retail
investment
13INVESTMENT PHILOSOPHY AND SECURITY SELECTION PROCESS
The Fund Adviser takes a holistic approach to investment process, combining sector know-how and risk
awareness ensuring investors’ needs are prioritised.
FUND CONSTRUCTION ACTIVE MANAGEMENT
The fund is constructed to ensure & COST AWARENESS
diversification across the UK Listed The fund does not require aggressive
Real Estate sector. The Fund Adviser trading. The Fund Adviser seeks
makes security selections based on opportunities to minimise the entry
extensive knowledge of the price in each underlying holdings by
investible universe. participating in appropriate capital
raising opportunities.
RISK MANAGEMENT
Risk is mitigated by diversifying
across real estate sub-sectors and
focusing on higher quality companies
with relatively low leverage. The
Fund Adviser closely monitors sector
developments and performance at an
asset level utilising Gravis
expertise.
INVESTOR OUTCOMES
The Fund Adviser seeks to deliver
dependable and secure quarterly
income and capital appreciation in
real terms over the course of market
cycles.
14KEY TRENDS
There are five key themes in the real estate sector; ageing population, digitisation, urbanisation, generation rent
and changing consumer behaviour.
PROPERTY
TRENDS
Changing Consumer
Ageing Population Digitisation Urbanisation Generation Rent
Behaviour
Healthcare Alternative Industrial & Commercial Housing & Retail
Logistics Accommodation
GP Surgery Industrial PRS Shopping Centers
Self Storage Office
Pharmacies Logistics Student Department Stores
Residential Care High Street
15LIQUIDITY
Provided below is a breakdown of the universe for the VT Gravis UK Listed Property Fund
UK Real Estate
80+ Listed Companies
>£80bn combined market cap
Excluding Retail
70+ Listed Companies
>£70bn combined market cap
Liquid & Tradable
45+ Listed Companies
>£50bn combined market cap
>£80mn average daily volume
VT Gravis UK Listed Property
20+ Investments
16DIVERSIFIED PORTFOLIO - Sample
The fund invests in multiple REITs, which own or invest in a diversified pool of properties
VT GRAVIS UK LISTED PROPERTY FUND
Portfolio of REITs & REOCs
Primary Health Great Portland
Impact Healthcare Segro Derwent London Unite Group Tritax Big Box
Properties Estates
73 properties 131 properties 86 properties 125 properties 56 properties
484 properties 47 properties
> 5,000 individual properties*
> 100,000 individual tenants*
* Gravis Advisory Limited/Company Data
17LEASE LENGTHS AND RENT PROFILES - Sample
Portfolio average WAULT 8.5yrs
100%
100%
65% 35%
54% 46%
% of rent
Open Market Income
100%
Contractual Income
RPI-linked Income
100%
Hybrid
49% 51%
68% 7% 25%
37% 11% 45% 7%
98% 2%
0 2 4 6 8 10 12 14 16 18 20
WAULT and rent profile data taken from Company Data Weighted Average Unexpired Lease Term (WAULT)
and/or Investor Relations
18ENERGY PERFORMANCE CERTIFICATE (EPC) ANALYSIS – Sample
Obsolescence Risk Reduced
38% Commercial property rated EPC A-C (England and Wales)*
98% 2%
100%
61% 39%
72% 28%
46% 54%
51% 49%
68% 32%
73% 27%
76% 24%
80% 20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
EPC A-C EPC D-G
Asset EPC Data taken from Company Data and/or Investor Relations
*England, Wales commercial property ratings sourced from HM Government
19Characteristics of
The Fund
20FUND GUIDELINES AND CHARACTERISTICS
Limits within which the Fund is managed
• In line with the existing Gravis funds, the new fund is expected to deliver low volatility, dependable cashflows, regular
income of 4% paid quarterly and capped charges to be taken from capital.
• Investors can benefit from the tax efficient structure of REITs, as income is delivered in the form of Property Income
Distributions (PIDs).
• Exposure to best-in-class specialist managers selected by Gravis, the Investment Adviser
Wider Limits
− Minimum of 16 holdings
− Subject to NURS / PAIF regulations
− Maximum holding 9.5%
− Minimal exposure to retail
− No shorting of stock
− No leverage at fund level
− No stock lending
21REAL ESTATE UNIVERSE
22PORTFOLIO CHARACTERISTICS & TOP 10 HOLDINGS
Portfolio as at 31 January 2020
Company Holding Sector Breakdown
SEGRO PLC 7.76%
Tritax Big Box REIT PLC 7.57%
Industrial & Logistics 25.2%
Unite Group PLC 7.33% Housing & Accom 17.5%
Healthcare 14.4%
Workspace Group PLC 5.22% Office 12.4%
Cash 8.0%
Warehouse REIT PLC 5.10%
Diversified 12.5%
Safestore Holdings PLC 5.06% Self Storage 10.0%
Assura PLC 5.05%
Secure Income REIT Plc 4.99%
Grainger PLC 4.96%
Big Yellow Group PLC 4.92%
234 YEAR PERFORMANCE – SIMULATED PORTFOLIO
4yr performance from 31 October 2015 to 31 October 2019
Simulated Portfolio vs MSCI UK IMI Core Real Estate vs MSCI UK (Total Return after charges)
150
140
130
120
110
100
90
80
70
Oct 15 Apr 16 Oct 16 Apr 17 Oct 17 Apr 18 Oct 18 Apr 19 Oct 19
MSCI UK in GBP (Total Return) MSCI UK IMI Core Real Estate in GBP (Total Return) Simulated Portfolio (Total Return)
Hypothetical past performance is not necessarily indicative of future results. Simulated performance is after charges of 0.7%
244 YEAR RISK & REWARD – SIMULATED PORTFOLIO
4yr returns and volatility from 31 October 2015 to 31 October 2019
45 GULP (simulated Average 4yr Volatility – 14.60%
portfolio)
40
35
MSCI UK GBP
30
Return (%)
25
20 Average 4yr Return – 18.94%
15
10
MSCI UK IMI Core Real
5
Estate GBP
0
iShares UK Property
-5 ETF GBP
0 5 10 15 20 25
Volatility (%)
Simulated Portfolio vs MSCI UK vs MSCI UK IMI Core Real Estate vs iShares UK Property ETF
4yr Total Return 4yr Volatility 12 Month Yield
Simulated Portfolio 41.65% 10.88% 3.73%
MSCI UK GBP 33.01% 13.03% 4.43%
iShares UK Property ETF GBP 0.31% 16.81% 3.02%
MSCI UK IMI Core Real Estate GBP 0.79% 17.66% 0.93
Hypothetical past performance is not necessarily indicative of future results. Simulated performance is after charges of 0.7%
25KEY TERMS
VT Gravis UK Listed Property Fund
Fund Size (31/1/2020) £24.81m
Target Dividend Yield 4%
Inflation Protection Yes
Share Classes Income & Accumulation
Minimum Investment £100
Capped fund operating charges 0.7%
Launch Price (31/10/2019) £1
Valuation and trading Daily 12pm
Investment Association Sector Property Other
Holdings London Stock Exchange Listed Securities, Real Estate Investment Trusts,
Bonds & Closed ended funds exposed to REITs
Number of holdings 22
Distributions Quarterly (payable 1 month in arrears)
Classification Non-complex
£ ISINs & SEDOLs Main Share Class Feeder
£ Acc GB00BK8VW755 / BK8VW75 £ Acc GB00BKDZ8Y17 / BKDZ8Y1
£ Inc GB00BK8VW532 / BK8VW53 £ Inc GB00BKDZ8V85 / BKDZ8V8
$ Acc GB00BK8VYN55 / BK8VYN5 $ Acc GB00BKDZ9049 / BKDZ904
$ Inc GB00BK8VMH57 / BK8VMH5 $ Inc GB00BKDZ8X00 / BKDZ8X0
€ Acc GB00BK8VW862 / BK8VW86 € Acc GB00BKDZ8Z24 / BKDZ8Z2
€ Inc GB00BK8VW649 / BK8VW64 € Inc GB00BKDZ8W92 / BKDZ8W9
*The OCF (Ongoing Charges Figure) for all share classes is capped at the AMC (Annual Management Charge) and any costs in excess of the OCF/AMC
are paid by the Investment Adviser.
26Appendix
27CASE STUDY – STUDENT ACCOMMODATION
Market Overview – London
• Supply is constrained due to land availability, planning tax, infrastructure levy
• Potential for development of new schemes in London remains low
• London has the largest international student population in the UK with over 100,000 students1
• The total number of international students in the UK is currently at a high of c.450,0001
Demand and Supply for Student Accommodation in
London1
450,000
400,000
350,000 International
students
300,000
250,000 Domestic
postgraduates
200,000
150,000
Domestic Pipeline
100,000
undergraduates
Private halls
50,000
University halls of
residence
-
Demand Supply
1. Higher Education Statistics Agency, KF Research
28RESPONSE TO STRESS: FUNDS GATED 3 MONTHS POST EU REFERENDUM
Open-ended direct UK property funds – September 2016
Fund still gated 59.9% (3 months after Referendum)
Lifting of suspension pending 4.7%
Price adjustment still in effect 12.3%
Price adjustment now removed 21.1%
No action taken 2.1%
During Periods of Stress
Directly Invested open-ended structures Closed-ended Structures (e.g. REITs)
Trading May be suspended Continuous
Price Pricing adjustments may be imposed Discount likely to widen
Assets need not be sold (and assets can be
Effect on Portfolio Assets need to be sold
bought if attractive)
AIC – September 2016
29GRAVIS CAPITAL MANAGEMENT - HISTORY
Gravis Timeline
• Since launching its first product (GCP Infra) in 2010, Gravis has grown to c.£3.2bn of AUM in three closed-ended funds and
three open-ended funds.
• Gravis has launched a range of funds focused on secure, dependable income and low volatility
2008-10 2013 2015 2016 2017 2018 2019
• Gravis was • Launched the • Launched GCP • Launched first • GCP LLP • Phil Kent • Gravis launch
founded in 2008 UK’s first REIT Asset Backed OEIC investing in becomes Gravis became lead third OEIC,
by six partners. investing in listed Capital manager of Gravis UK Listed
• 2010, launched student infrastructure, Management Ltd GCP Infra Property
the first UK accommodation, Gravis UK Infra • William Argent
listed fund, GCP Student • Phil Kent joined joined as a fund
investing in UK • David Conlon as a Director manager for
infrastructure joined Gravis as Gravis UK Infra £3187m
• Nick Barker
debt, GCP Infra a director and Gravis Clean
joined as a
Energy
Director and Co- £2699m
Lead Manager of • Launched second
GCP Student OEIC at the end of
2017, Gravis
Clean Energy £2157m
£1677m
£1053m
£674m
£522m
£266m
£111m
£40m
Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Dec-19
30PLATFORMS & WRAPPERS
Available on the following platforms Suitable for
Aegon Direct investors
AJ Bell SIPPs
Ascentric ISAs
Aviva Charities
CoFunds Offshore bonds
Fidelity Companies
Funds Network
Hargreaves Lansdown
James Hay
Novia
Nucleus
Old Mutual
Pershing
Raymond James
Sanlam
Standard Life
Standard Life Elevate
Transact
Zurich
31CONTACT INFORMATION
Investment Manager and Dealing
Valu-Trac Investment Management Limited Valu-Trac Dealing
01343 880217 01343 880344
Investment Adviser Matthew Norris Fund Adviser 020 3405 8553 matthew.norris@graviscapital.com
Nick Barker Director & Fund Adviser 020 3405 8507 nick.barker@graviscapital.com
Distribution William MacLeod Managing Director 07836 695442 william.macleod@graviscapital.com
Ollie Matthews Sales Director 07787 415151 ollie.matthews@graviscapital.com
Robin Shepherd Sales Director 07971 836433 robin.shepherd@graviscapital.com
Nick Winder Sales Director 07548 614184 nick.winder@graviscapital.com
Cameron Gardner Sales Manager 07835142763 cameron.gardner@graviscapital.com
32INVESTMENT AND DISTRIBUTION
Investment Manager Investment Advisor Distribution
Valu-Trac Investment Management Ltd. Gravis Advisory Ltd. Gravis Advisory Ltd.
i. Valu-Trac Investment Management i. Gravis Advisory Limited is owned i. The team of four consultants has
Limited was established as an and managed by Gravis Capital assisted in raising over £2bn since
authorised investment manager in Management Ltd (‘Gravis’). launch in 2009.
1989. ii. Gravis was established in May 2008 ii. The team has raised new capital for
ii. Valu-Trac Investment Management as a specialist investor in IPOs, and further capital raising
Limited launched Valu-Trac infrastructure and now manages c. through C share offerings and
Administration Services in 2010, to £3.2bn of assets in the UK. Placing Programs, UCIS Funds,
provide Authorised Corporate iii. Funds under management include UCITS funds, UK OEICs, VCTs and
Director (ACD) and administration the FTSE 250 company GCP. Private Equity.
services to UK regulated funds and Infrastructure Investments Limited, iii. The team has combined experience
their delegated investment which has invested over £1bn in UK of over 80 years in the UK.
managers. infrastructure, and GCP Student
iii. Valu-Trac Investment Management Living Plc which has invested over
Limited, as ACD, administers over £1bn in UK student accommodation.
£6.57bn of assets under iv. Gravis Advisory Limited is a
management. subsidiary of Gravis Capital
iv. Valu-Trac Investment Management Management and is Investment
Limited employs 55 staff and has Adviser to the Fund.
offices in the North of Scotland and
London.
33IMPORTANT NOTICE
WARNING: The information in this Report is presented by Valu-Trac using all The information provided is "as is" without any express or implied warranty of
reasonable skill, care and diligence and has been obtained from or is based on any kind including warranties of merchantability, non-infringement of intellectual
third party sources believed to be reliable but is not guaranteed as to its property, or fitness for any purpose. Because some jurisdictions prohibit the
accuracy, completeness or timeliness, nor is it a complete statement or exclusion or limitation of liability for consequential or incidental damages, the
summary of any securities, markets or developments referred to. The above limitation may not
information within this Report should not be regarded by recipients as a apply to you.
substitute for the exercise of their own judgement.
Users are therefore warned not to rely exclusively on the comments or
The information in this Report has no regard to the specific investment conclusions within the Report but to carry out their own due diligence before
objectives, financial situation or particular needs of any specific recipient and is making their own decisions.
published solely for informational purposes and is not to be construed as a
solicitation or an offer to buy or sell any securities or related financial Unless otherwise stated Equity Market price indices used within this publication
instruments. In the absence of detailed information about you, your are sourced or derived from data supplied by MSCI Inc 2019.
circumstances or your investment portfolio, the information does not in any way
constitute investment advice. If you have any doubt about any of the Valu-Trac Investment Management Limited and its affiliated companies,
information presented, please consult your stockbroker, accountant, bank employees of Valu-Trac Investment Management Limited and its affiliated
manager or other independent financial advisor. companies, or individuals connected to them, may have or have had interests of
long or short positions in, and may at any time make purchases and/or sales as
Value of investments can fall as well as rise and you may not get back the principal or agent in, the relevant securities or related financial instruments
amount you have invested. Income from an investment may fluctuate in money discussed in this Report.
terms. If the investment involves exposure to a currency other than that in
which acquisitions of the investments are invited, changes in the rates of © 2020 Valu-Trac Investment Management Limited. Authorised and regulated by
exchange may cause the value of the investment to go up or down. Past the Financial Conduct Authority (UK), registration number 145168. This status
performance is not necessarily a guide to future performance. can be checked with the FCA on 0800 111 6768 or on the FCA website (UK). All
rights reserved. No part of this Report may be reproduced or distributed in any
The hypothetical performance measurements are illustrative only and offer no manner without the written permission of Valu-Trac Investment Management
guarantee of future performance, profitable or unprofitable, actual or theoretical. Limited. Valu-Trac™ is a registered trademark.
Since hypothetical performance measurements do not represent actual trading
they may not reflect the impact that material economic or market factors might
have made on a portfolio manager’s decisions were the portfolio manager
actually managing a client’s money.
Any opinions expressed in this Report are subject to change without notice and
Valu-Trac is not under any obligation to update or keep current the information
contained herein. Sources for all tables and graphs herein are Valu-Trac unless
otherwise indicated.
34INVESTMENT IDEAS FOR THE LONG RUN
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