Investment Report – 30 June 2011
Schroders
Schroder Exempt Property Unit Trust
Schroder Exempt Property Unit Trust
Performance Data
(unaudited)
Please see below unaudited performance data as at 30 June 2011 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 22 July 2011 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 2011
SEPUT
Benchmark1
1.8
-
8.6
-
-2.6
-
-3.9
-
Source: Schroders, 30 June 2011; 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 information is not available at the time of publication. Benchmark is the 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
Although rental and capital values were broadly flat at the aggregate level in the first half of
2011, this stability masked wide variations across individual sectors. At one extreme,
office rents in the West End of London rose by 5% in the first half of this year, reflecting
strong demand from international IT, legal and media companies. Office rents also rose in
the City, although the market appears to have lost some momentum following a spate of
large lettings to banks in 2010. At the other extreme, shop and shopping centre rents fell
by a further 1-3% in the first half of 2011, depressed by a new wave of retailer insolvencies
and store closures. While this turmoil partly reflects the current squeeze on household
incomes, the deepest in real terms since 1977, it is clear that structural forces, in particular
the growth of on-line sales and the expansion of supermarkets into non-food items, are
also intensifying the pressure on retailers.
We estimate SEPUT should outperform its benchmark over the 12 and 24 month periods
to 30 June 2011. Indirectly owned assets have driven performance over the last 12
months from both valuation increases, the impact of gearing and profitable sales. Looking
ahead, following the manager's strategy of repositioning the portfolio into predominantly
quality direct assets these, combined with sector and stock selection, will become the key
drivers of performance.
Annualised 6 month rental
growth.
Top 5/ bottom 5 sectors
(% pa)
Rental growth in central
London offices has
outstripped other sectors
Central Lo ndo n Sho ps
West End Offices
City Offices
Supermarkets
Retail P arks
Rest UK Industrials
So uth East Sho ps
In To wn Sho pping Centres
Rest UK Offices
Rest UK Sho ps
-4
-2
0
2
4
6
8
10
12
14
percent per annum
Source: IPD Quarterly Index, May 2011
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Investment Report – 30 June 2011
Schroders
Schroder Exempt Property Unit Trust
Portfolio Activity
SEPUT secured the remaining 0.2% of units in Schroder Emerging Retail Property Unit
Trust (SERPUT). The 100% ownership of SERPUT effectively brings a total of ten direct
retail properties into SEPUT reducing its indirect exposure to around 10% (based on 31
March 2011 portfolio). SEPUT acquired a 50% share in the Motor Retail Partnership
Limited comprising 12 car showrooms across the UK. The portfolio has a net initial yield of
over 7% and benefits from a 19 year unexpired lease term. The majority of leases are
linked to capped annual RPI uplifts.
Policy
The manager’s strategy of repositioning the portfolio is now largely complete, with
exposure to indirectly owned assets reduced to around 10% after securing 100%
ownership of SERPUT. Cash and proceeds from sales have been used to invest in
assets with the objective of improving both the quality and duration of Trust income. Asset
management initiatives have also contributed to a fall in the portfolio’s vacancy rate. The
Trust is structured in line with our research view which favours central London offices over
retail.
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
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