FundInfo



Fund Manager
Ian McBryde
Fund Manager Commentary
	The second quarter of 2009 saw further falls in the values of commercial property, but the speed and magnitude of such decline was less severe than in previous quarters. The IPD UK Monthly Index recorded capital value falls of - 4.7%, which together with rental income produced an all property benchmark return of -2.7% for the quarter. The market has continued to see an increased level of investor appetite for prime property over the last few weeks with evidence of buyers competing for investment products and as a consequence bidding down investment yields for certain prime properties. Against this market background, the value of the Company’s portfolio fell by -1.1% which, together with an income return of 2.1% produced a total return of 1.0% for the quarter, well above the IPD Index. A number of properties continued to fall in value over the quarter, as a result of falls in rental values or short term expiries. However, three properties increased in value, the largest increase was at Beverley Way New Malden, the value of which increased by £125,000 to £5,075,000, an uplift of 2.5%. This was on the back of improving evidence in the out of town retail market. Valuation uplifts also occurred on County House Chelmsford and 3/5 Church Street Kingston on Thames. The void rate of the portfolio has risen to 1.2%, over the quarter (from 0.2% in March 2009), but is still well below the IPD average void rate of 12.1%. The increase has been as a result of a tenant failure in one of the floors in 14 Berkeley Street London W1. The valuation of the interest rate swap moved in a positive direction during the quarter with the liability falling to £4.0 million from £5.4 million as at 31 March 2009. This had the effect of increasing the NAV over the quarter by 2.5 pence per share. The Company currently has approximately £12m in cash on deposit. The Manager is looking at opportunities to reinvest some of this money in commercial property with yield and lease characteristics which will match and enhance the quality of the portfolio. Terms have been agreed for a reduction in the base management fee to 0.60% per annum on the invested assets of the group and 0.15% per annum on cash held by the group. The Company has also agreed to pay a performance fee equal to 20% of the amount by which the total return of the group's directly held properties exceeds 120% of the total return on the groups benchmark, multiplied by the company's total assets. The total fees payable to the Manager will be capped at the previous level of 0.85% of the total assets (less current liabilities) of the company. The notice period under the agreement has also been reduced from twelve to six months.(As at 31 July 2009)

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