Broker snap: First Property in pole position

Fund manager First Property has launched a new fund, Fprop Opportunity (FOP) to invest in commercial property in Europe, concentrating on Poland, in a move which house broker Arden sees as a step towards a simpler business model for the company.The fund will have a 10 year life and will focus on property that has an attractive yield which, with gearing, should be able to generate returns on equity in excess of 15%. External investors will be able to invest along side First Property (Fprop) in FOP, the broker noted. "In the medium/longer term we see this move as a step towards a simpler business model, with Fprop becoming primarily a property fund manager, with co-investments in its funds. This closely aligns Fprop interests with its external investment clients," Arden Partners analyst Chris Thomas said. The broker is not making any changes to full year forecasts as a result of the development "but we would expect that it will be followed in due course by announcements on property acquisitions by FOP."The broker suggests that almost any property purchase is likely to outstrip the returns currently being earned on cash deposits. "In addition, Fprop will also earn management fees on any external investments in FOP or in the individual properties," Arden added."The group remains very significantly undervalued from both an assets and earnings perspective. The PE [price/earnings ratio] is 8.6x falling to 7.6x and there is an attractive and growing yield of 6.1%, which is 2x covered. We reiterate our Buy recommendation," the broker concluded. First Property