Investment Report 30 June 2012
Schroders
Investment Report - Summary
Schroder Exempt Property Unit Trust
Performance Data
(unaudited)
Please see below unaudited performance data as at 31 March 2012 for the Schroder
Exempt Property Unit Trust. Audited performance data by the Investment Property
Databank will be available in the quarterly investment report on the 23 July 2012 which
can be found on the fund website at www.schroders.com/seput
Once available the performance data in the quarterly investment report replaces
the performance data provided below.
Performance
(unaudited)
Total returns
3 months
%
12 months
%
3 years
% p.a.
5 years
% p.a.
Periods to 30 June 2012
SEPUT
Benchmark1
+0.2
+4.8
+11.2
-5.8
Source: Schroders. 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.
1
Benchmark shown is the AREF/IPD UK Pooled Property Fund Indices - All Balanced Funds Index Median. The Trust benchmark has
changed over time and a composite for 10 years is available upon request.
Performance
Summary
The UK economy contracted in the first quarter of 2012 meaning the UK is now in a
‘technical recession’. There is a strong possibility that it will contract further in the second
quarter before returning to a modest level of growth. This weak economy continues to
affect occupier markets where take- up remains subdued. One sector that has bucked the
trend is technology where, according to Knight Frank, take-up in central London by
technology and telecoms companies more than doubled in 2011 compared to 2010.
The volume of commercial real estate transactions has slowed partly due to bank lending
to the sector remaining depressed. The lack of transactions has resulted in some property
values falling and accordingly to CBRE, yields on secondary and tertiary property have
risen by approximately 1% since September 2011. Given SEPUT has cash in excess of
£50 million, as pricing adjusts it is in a good position to continue to take advantage of
opportunities in the property investment market.
We estimate SEPUT will continue to outperform the benchmark over the one and two year
periods to 30 June 2012. Its relative performance over three years is also expected to
materially improve. Recent outperformance is largely attributable to asset management
initiatives improving the valuation of directly owned assets.
Portfolio Activity
Parker Tower was sold for £31 million (£596 capital value per square foot). The property
comprised a 55,000 square foot office space which was located in Holborn in the mid town
area of central London. It was let to BT Telecommunications Plc until September 2012.
The property accounted for 2.2% of net asset value and therefore would have created a
significant void later this year. While we considered a number of asset management
initiatives, in the current market environment we did not believe the risks associated with
these initiatives were justified or profitable compared to the sale price achieved.
Over the quarter a number of new lettings and rent reviews took place. Most notable was
the rent review for Cable & Wireless in Matrix Park Royal, London NW10 where
contracted rent increased by 13%.
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Investment Report 30 June 2012
Schroders
Investment Report - Summary
Policy
Following the Supervisory Board and Financial Services Authority (FSA) approval in
principle to convert SEPUT to a Property Authorised Investment Fund (PAIF), an
Extraordinary General Meeting (EGM) will be held on 16 July 2012 where unitholders can
vote on the Conversion. A circular, which provides information on the conversion and
details of how to vote, was sent to all unitholders on 6 June 2012. Further information is
available on the SEPUT website, www.schroders.com/seput.
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.
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 by Schroder Property Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial
Services Authority.
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