REAL ESTATE – The £4.9bn (€7.1bn) Church Commissioners fund – responsible for paying vicars’ pensions – rebalanced its commercial property holdings in 2005 to increase diversity and reduce risk.
“There was a reduction in office exposure and an increase in retail warehouses with the sale of the central London office at No 1 Millbank and purchases of three retail warehouses,” a spokesperson told IPE.
According to the annual report, most of the fund is invested in equities and property. The Commissioners had 14% of its investment portfolio allocated to commercial property, 7% in rural property and 8% invested in loans.
“Residential property is a useful diversifier for the fund and we believe its long-term prospects are sound,” said the report.
“But our high weighting in housing is still a concern given the uncertain state of the housing market, with the performance of one-fifth of the fund linked to it.”
The Commissioners added that steps were in place to control the imbalance through the sale of some properties.
The spokesperson told IPE there has been a significant disposal of London residential property in 2006. The Octavia Hill Estates was sold in March “for a consideration of £167m before costs”. Reinvestment plans are underway, he added.
Overall, commercial property returned 19.5%, including a 14.5% capital growth. The Commissioners completed £102m of purchases and £138m of sales, said the report.
The rural portfolio generated net rents of £6m and capital receipts of £11.4m. The total return was 11.1%. Meanwhile, residential property returned a total of 33.5%.
“Buyers’ appetite for property of all types meant capital values rose strongly in most areas of the market,” said the report.
With regards to other asset classes, global equities returned 24.1%, the consolidated UK equities portfolio returned 20.6% and fixed interest returned 7.9%. Overall, the fund achieved a 19.1% total return on assets.