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Shaftesbury looking Brexit-proof

Shaftesbury owns a big chunk of the West End's favourite leisure destinations, where footfall is on the rise.
July 20, 2017

At a time when political uncertainty and Brexit appear to be creeping into every crevice, it is reassuring to find a company that has remained relatively aloof from all of this. With 14.5 acres of property in the heart of London’s West End, Shaftesbury (SHB) does just that. The property portfolio, accumulated over three decades, comprises nearly 600 buildings focusing mostly on restaurants, cafes, pubs and shops, but with a sprinkling of offices and apartments. And given that a large proportion of footfall in the estate is made up of the 19m or so tourists that visit London each year, there is a distinct international angle to this domestically-placed real-estate investment trust (Reit). Footfall is also expected to swell further once the new Crossrail link is completed, improving travel options for visitors.

IC TIP: Buy at 978p
Tip style
Growth
Risk rating
Low
Timescale
Long Term
Bull points

Strong rental income

Unaffected by Brexit

Significant reversionary value

Modest loan-to-value eatio

Bear points

Modest dividend

Vulnerable to terrorist acts

One of the main strengths of the portfolio is the lack of new space that is available in the West End, and the thriving local economy. This means tenants tend to stay put, and when vacancies arise there is always someone ready to fill the space, usually for a higher rent. The vacancy rate is just 3 per cent of the estimated rental value (ERV), and much of this is from properties that are undergoing refurbishment. Meanwhile, exposure to obsolescence is almost nothing because premises are supplied to tenants in shell form, leaving the occupier to finance the fit-out.

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