A review and outlook for the VT Gravis UK Listed Property (PAIF) Fund

6 minute read

Matthew Norris

Director, Real Estate Securities

The VT Gravis UK Listed Property (PAIF) Fund marked its fourth anniversary at the end of October 2023. In this Q&A, taken from a recent webinar presentation, Matt Norris, investment adviser to the Fund, and Emma Ballard, senior research analyst, provide a brief review of 2023, discuss the opportunities they are finding today, and give their views on the outlook for the sector in 2024.

A five-minute video with highlights from the discussion can also be viewed here:


Government bond yields are falling back to levels seen at the end of 2022, what do you anticipate regarding NAV valuations this year?

With bond yields coming down, valuation yields have now stabilised. I think values of the prime assets that we invest in, may well increase in 2024.

Do you think valuations in the secondary market of real estate are holding up, if so, in what sectors?

We are confident that we have weathered the real valuation outward yield shift. At this point, we find ourselves in a phase where the valuation yields of direct properties are likely to plateau and may well come in as we see interest rates cut later this year. Anecdotally, we received a trading update from Unite, leading provider of purpose-built student accommodation, and it is noteworthy that the valuations of the underlying assets are holding up well.

If inflation stays at around 3-4%, how do you expect the fund to perform?

The strategy benefits from two things: embedded rental growth and contractual rental growth. If we see 3-4% inflation, our investments will generate increased rent because of the contractual nature, in addition to which they will capture more of this embedded rental growth. I believe it will be good news for rental growth, and I believe as rates come down, that takes away the refinancing headwind.

What percentage of the portfolio do you think is attractive to private equity?

In the realm of digitalisation, private equity has been actively involved, with the most recent example being the acquisition of Industrial REIT by Blackstone. Notably, private equity has shown interest in investing in the digitalisation and generation rent megatrends, particularly within purpose-built student accommodation.

PRS REIT, owners of 5,000 family homes, stands as an ideal target for private equity. However, it is worth noting that private equity has yet to explore opportunities within the ageing population and urbanisation megatrends.

Interestingly, while major private equity houses have encountered challenges in the realm of offices, our approach at Gravis is selective, especially when it comes to office investments. Our preference is strongly inclined towards London, particularly the West End. In contrast, certain private equity houses have exposure to underperforming office spaces.

Taking a closer look at the numbers, it becomes evident that approximately 70% of the portfolio is in areas that private equity is actively exploring.

Is there a predominant sector or megatrend where the properties rated C and below sit in?

Within the generation rent sector, particularly the purpose-built student accommodation, there tends to be a distinct trend towards very modern purpose-built buildings with very strong EPC ratings and environmental credentials, and this his holds true for portfolios like PRS and Grainger. However, it is worth noting that other areas might require more substantial improvements, especially in the run-up to 2030.

For investors seeking reassurance, when assessing the EPC ratings, our portfolio leans significantly towards ‘C’ rather than ‘G’. Therefore, the portfolio is positioned closer to achieving a ‘B’ rating to elevate environmental standings.

What sectors do you think will perform well in 2024?

Definitely generation rent! We anticipate robust performance in this sector. The ongoing trend of demand surpassing supply in purpose-built student accommodation remains strong, as evidenced by Unite’s recent trading statement. This sets the stage for continued rental growth. Notably, Unite reported reservations for the 71%, equalling their record high. They also anticipate a 5% rental growth for the current academic year.

Important information

This article and video have been prepared by Gravis Advisory Limited (“the Investment Adviser”) and are for information purposes only. They are not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction. 

The information should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any securities or enter into any other transaction with the VT Gravis UK Listed Property (PAIF) Fund, or any other Fund affiliated with the Investment Adviser.  The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities.   

Although high standards have been used in the preparation of the information, analysis, views and projections presented, no responsibility or liability whatsoever can be accepted by the Investment Adviser for any errors, omissions, misstatements, loss or damage resultant from any use of, reliance on, or reference to the contents. The views and opinions contained herein may not necessarily represent views expressed or reflected in other Gravis communications, strategies or funds and are subject to change.

VT Gravis UK Listed Property (PAIF) Fund, is a UK Non UCITs Retail Scheme (NURS) Open Ended Investment Company (OEIC) with Property Authorised Investment Fund (PAIF) status.

Past performance is no guarantee of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

Gravis Advisory Limited (Registered Number: 09910124) is an Appointed Representative of Valu-Trac Investment Management Ltd, which is authorised and regulated by the Financial Conduct Authority.

Gravis Advisory Limited’s principal place of business is: 24 Savile Row, London, W1S 2ES.


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