Following the rout in property values, unit prices have fallen, meaning dividend yields are most attractive when compared to Reits. For example, Ignis's UK Commercial Property Trust (UKCM) has no gearing and a dividend yield of 7 per cent, and its large market cap of £564m offers increased liquidity to investors who may find the trust model off-putting.
But income is not the only attraction for investors. The F&C Commercial Property Trust (FCPT) is another big beast, with a market cap of £580m. Lowly geared, it owns central London assets including St Christopher's Place, and currently holds £157m of cash which it is looking to invest in bottom-of-the-market property deals.
"What property should provide is a stable income return with a little bit of capital gain," says fund manager Richard Kirby. The trust made its first acquisition since 2005 last month – a £17m warehouse on the M1 in Daventry with a rental yield of 9 per cent – and has further deals in solicitors' hands.
Mr Kirby is confident of acquiring further distribution property at similar yields, and is also interested in acquiring regional office buildings and retail warehouses.
"We can do this because we are a cash buyer," he says. "A debt purchaser would struggle in these sectors."
F&C hasn't been brave enough to look at secondary shopping centres yet. "It is still a tenant's market, and they are very management intensive," Mr Kirby says. Further ahead, development opportunities held within the portfolio are also an attractive, if more risky, prospect.
"The good thing about property trusts is unlike investing in a Reit, you're not taking on equity risk," says Simon Moore, senior analyst at wealth management firm BestInvest. "However, as the market improves, the tables are turning from risk free ungeared trusts, to trusts with manageable levels of gearing."
In this respect, Mr Moore's top pick is the Invista Foundation Property Trust (IFD). "Gearing will enhance returns if the market picks up, there's a nine per cent dividend yield, and they trade at a small discount to NAV," he notes.
For European property, the AXA Property Trust (APT) trades at nearly a 40 per cent discount to NAV as it has a refinancing due in 2011. "With the lowest gearing and covenants in its grouping, this should not be an issue," notes Ian Wild, analyst with Edison Investment Research.
