Quarterly Investor Report 31 March 2020

We live in interesting times. Today’s pithy understatement.

You have chosen to invest with Keills and in many ways it is at times like this people remember the odd spark of wisdom and sense. Hopefully we can give you that and see-through the current mist to clearer waters.

Alright so much for the poetry, many UK citizens will be experiencing Covid-19 directly through themselves, their extended families or friends.  To these people and the many more who will contract it over the coming weeks we wish you all a safe a speedy recovery.

As we go to press, Oxford University has released research suggesting that over 50% of the UK could already be infected so it is essential to get ‘have I had it’ tests completed as soon as is practicable.  If true, the dynamics of fighting the disease change and we are not that far away from true herd immunity.  The result would be a much shorter lockdown period (probably still six weeks or double current Government thinking) then a fairly sharp recovery.  Fingers crossed, otherwise the divorce lawyers will be very busy if families are forced to live together for three months.

The economy has and will continue to take a big hit.  There are very few areas, including the increasingly precious health service, with no special immunity.  With regard to property, high street retail is an obvious immediate loser.  There is an argument that this may be the final nail in the coffin of high street retail given that for the next period you will not be allowed to go to the high street.


Debenhams, Laura Ashley, Brighthouse in retail while Carluccio’s and Chiquito in food and beverage, are just a few to be placed into administration with no doubt, many more familiar names to follow.  One recent report has stated that more than half of the U.K.’s major non-food retailers will deplete their entire working capital should the COVID-19 lockdown continue through the summer.  (source Alvarez & Marsal/Retail Economics)  It will be a long road ahead to recovery for the retail and leisure sector.

Warehousing may be the winner while it is essential for click and delivery but workers here need to be ‘front line’ and so Amazon will win at the expense of others.  Amazon are unique in that they deliver health product as well as everything else so they can stay open.

Offices, with the awareness of the workforce of their ability to work from home, may lose in the longer term too.  Why spend hours travelling when you can do the vast majority of your work from home.  How will social distancing work in the elevator to the 25th floor?  Many questions remain unanswered.

The picture is global and real time. We have never had anything like this before with a real time feedback loop. Countries are measuring themselves against others in terms of number of deaths after x days and the statistics are available for everyone. Governments cannot afford to ignore the science and as ‘lockdown’ is seen to work watch city streets empty.

Just how Covid-19 will affect how things are done in the future is unknown. Some believe that the world will just continue as before and folk will rush to the shops, unleashing 3 months (or maybe more) of pent up demand.  There will be some kind of resurgence but we must remember that Covid-19 does not respect territorial or economic boundaries.  Everyone on the planet is exposed and generally it has been the poorer workers (e.g. nursing staff and delivery workers to name two) that have pulled us all through this nightmare.

Could it be that there will be a societal change in our attitudes towards such workers?  Who is worth more, a banker or a nurse?  Governments globally, have run their health systems assuming that a pandemic of this nature will not occur.  Clearly capacity needs to be expanded both in terms of infrastructure, equipment, medical supplies and most crucially recruiting, retaining and rewarding healthcare professionals of all levels.  That will inevitably mean that taxes rise.

Corporates are scrapping dividends and preserving cash till they know how much damage has been done and how much pain is short term or long term.  Tenants are reviewing whether they can pay their rental obligations and for some highly geared tenants this will be an issue.  As a property fund manager we will look at each case individually.

 Suspension of dealing in Keills Property Trust

We have reviewed our procedures for dealing units in the Trust in the current climate and following guideline set out by the Financial Conduct Authority and the Association of Real Estate  Funds, dealing in units in Keills Property Trust has been suspended for a minimum of 6 months.  At this stage we are not able to determine when trading in units in the Trust will fully reopen and we will keep all unitholders advised of any change.