If you could buy a selection of the best-quality UK real estate investment trusts all under one roof rather than individually, it would save a lot of time and effort. You can, thanks to the open-ended VT Gravis UK Listed Property Fund (BK8VW75).

While property has been out of favour recently, weaker valuations means you can get exposure at a cheaper price.

The fund is owned and run by Gravis Capital Management, a specialist in property and infrastructure, and managed by Matthew Norris, who brings over two decades of experience in managing real estate stocks.Norris’s strategy is to buy and hold REITs with exposure to four social and economic megatrends: an ageing UK population (which currently accounts for 16% of the portfolio), ‘digitalisation’ (46% of
the portfolio), urbanisation (10%) and what Norris calls ‘generation rent’ (25%), while avoiding the retail sector.

Within each megatrend the manager seeks out stocks with the best combination of growth, income, value and sustainability, which has resulted in several of its holdings being taken over at a premium already this year.

The average loan-to-value is conservative at 30%, and over 80% of the debt held by investee companies is fixed with an average cost of 3.2% compared with base rates of 5% today.

Across the portfolio, around a third of rents are inflation-linked or include fixed uplifts, while two thirds are open-market, which in the current environment means there is significant upward reversion potential, and higher rents mean higher earnings and dividends.

The fund trades on a 12-month trailing yield of 4.7% and pays a quarterly dividend, which it has raised every quarter since inception in late 2019, in line with many of its top holdings which have lifted their annual payouts for a decade or more.

As of the end of May the top two holdings were student accommodation firm Unite (UTG) and professional landlord Grainger (GRI), both of which are part of Norris’s ‘generation rent’ theme.

These are followed by industrial warehouse firms Segro (SGRO) and Tritax Big Box REIT (BBOX) which form part of the ‘digitalisation’ theme.

Norris is also keen to future-proof the fund from a sustainability viewpoint, and to that end over 80% of the underlying property assets have an EPC rating of between A and C compared with a national average for non-domestic property of just 40%.

With the government having set a minimum standard of a C rating by 2027, the majority of the fund’s assets already meet the criteria meaning their owners will have to invest less to meet the new standards.

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