Balanced Commercial Property Trust

UK commercial property has been through a difficult period, largely as a result of rising interest rates and slowing economic growth. These add to its borrowing costs and increase the risk of tenants being unable to pay the rent, which is why many of the funds that invest in this area have been sharply de-rated.

In the last few months, the valuations seem to have stabilised and if this continues the low prices and large discounts could offer a decent buying opportunity for longer term investors. One option worth considering is the Balanced Commercial Property Trust, a member of the Select 50 that owns a diversified UK portfolio of offices, industrials, retail, warehouses and other types of buildings.

The broker Winterflood says that it offers a core exposure to the sector. They describe the portfolio, which was valued at £1.1bn at the end of March, as having a high quality, prime location. The fund also benefits from a conservative level of borrowing of 23% and a relatively low average rate of interest of 3.6%, although all of the debt will have to be refinanced next year at a potentially higher cost.

Balanced Commercial Property has an experienced manager in Richard Kirby, who is supported by a well-resourced team at CT Real Estate Partners. It is currently paying monthly dividends of 0.40p per share, which gives a prospective dividend yield of 6.6% at the current share price of 73p. This is fully covered by earnings and could increase given that further rental growth is expected to come through.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. The shares in the Balanced Commercial Property Trust are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. Funds in the property sector invest in property and land. These can be difficult to sell so you may not be able to sell/cash in this investment when you want to. There may be a delay in acting on your instructions to sell your investment. The value of property is generally a matter of a valuer's opinion rather than fact. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.