Investment Report – 30 September 2012
Schroder UK Property Fund (SPF)
Please see below unaudited performance data as at 30 September 2012 for the
Schroder UK Property Fund. Audited performance data by the Investment Property
Databank will be available in the quarterly investment report on the 19 October 2012
which can be found on the fund website at www.schroders.com/spf
Performance Data
(unaudited)
Once available the performance data in the quarterly investment report replaces
the performance data provided below.
Performance
(unaudited)
Periods to 30 Sept 2012
SPF
New benchmark*
Old benchmark**
+0.5
+3.5
+10.6
-5.7
Source: Schroders 30 September 2012; Performance calculated on a net asset value (NAV) to NAV price plus income
distributed, compounded monthly, net of fees and based on an unrounded NAV per unit.
*
Benchmark shown is the AREF/IPD UK Pooled Property Fund Indices - All Balanced Funds Index Weighted Average.
The Trust benchmark has changed over time and a composite for 10 years is available upon request.
**Prior to the fund’s conversion on 31 July 2012 (formerly it was called the Schroder Exempt Property Unit Trust), the
benchmark was the All Balanced Funds Index Median.
Performance
Summary
The UK economy contracted in the second quarter of 2012. This marks the third
successive quarter of decline, although expectations are that economic growth will resume
in the third quarter. Occupational demand remains patchy, although we are seeing
pockets of demand from technology companies, insurance companies and the industrial
sector.
A combination of wider bank deleveraging, over-exposure to commercial property and
tougher regulatory requirements all suggest that bank lending to real estate is set to
remain subdued. The bulk of commercial property lending is likely to remain available to
owners of well-let, good quality assets. By contrast, below average quality property is
likely to continue to underperform the broad market as landlords struggle to finance or
refinance debt secured on these assets.
We estimate SPF will continue to perform in line or ahead of the benchmark over one, two
and three year periods to 30 September 2012. Recent outperformance is largely
attributable to its central London office exposure which has outperformed other property
sectors. Asset management initiatives have helped to underpin valuations of directly
owned assets and in some cases have resulted in improved property valuations.
Portfolio Activity
A number of lettings were completed during the quarter. This included 82 Dean Street,
Soho, London. A high specification refurbishment was completed following lease expiry
and the improved office space was marketed from October 2011. Despite a weak letting
market, five of the seven floors are now let, one is under offer and we are negotiating with
two parties for the remaining floor. We estimate the building will be let at approximately
16.5% above the initial business plan and will result in an improved property valuation.
We have also completed lettings in Woking Business Park where two industrial units
(approximately 50,000 and 35,000 sq ft) were let to tenants. These lettings should reduce
the vacancy rate in the Fund.
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Investment Report – 30 September 2012
Policy
Following the approval of the Financial Services Authority (FSA) to convert Schroder
Exempt Property Unit Trust (SEPUT) to a Property Authorised Investment Fund (PAIF),
SEPUT converted on 31 July 2012 and was renamed Schroder UK Property Fund (SPF).
Further information is available on SPF’s website, www.schroders.com/spf
Given the weak market prospects, we continue to take a defensive stance and favour
those parts of the market where rents are affordable and which offer a high income return.
Our preferred sectors include South East offices and industrials and niche property types
such as car showrooms, healthcare and leisure where rents are often indexed to inflation.
We also favour convenience retail in affluent areas, where rents are at levels which
retailers can readily afford.
Notes
Socially Responsible Investing: Schroders Responsible Property Investment policy can be found on our website
http://www.schroders.com/property/home/. We also publish regular articles on Socially Responsible Investing, which can be found on Schroders Talking
Point www.schroders.com/talkingpoint.
Corporate Governance: Schroders Corporate Governance Policy can be found at http://www.schroders.com/staticfiles/Schroders/Sites/global/Int-CorpGov-Policy.pdf.
Important Information
For professional investors and advisors only. This document is not suitable for retail clients.
The Schroder UK Property Fund is authorised by the Financial Services Authority (the “FSA”) as a Qualified Investor Scheme (“QIS”). Only investors that
meet the requirements for eligibility to invest in a QIS, as specified in COLL 8, Annex 1 of the FSA’s Handbook, may invest in Schroder UK Property Fund. A
QIS may not be promoted to a member of the general public.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as
an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting,
legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Property Investment Management Ltd
(SPrIM) does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any
duty or liability that SPrIM has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory
system. SPrIM has expressed its own views and opinions in this document and these may change. Reliance should not be placed on the views and
information in the document when taking individual investment and/or strategic decisions.
Issued in October 2012 by Schroder Investments Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 2015527 England. Authorised and
regulated by the Financial Services Authority,
For your security, communications may be taped or monitored.
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