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Fund Manager
Ian McBryde
Fund Manager Commentary
	The commercial property market has seen a dramatic turnaround from mid 2009. The sharp recovery gathered pace during the last quarter with the IPD UK Monthly Index (‘IPD’) recording total returns of 9.4%, its highest quarterly rise in its 23 year history. The improvement has been seen in all sectors of the property market with retail warehouses leading the way. For 2009, as a whole, total property returns were 2.2%, with capital values falling by 5.6%. The recovery has been investment led, with overseas investors being joined by retail and institutional investors from the UK. Investors have been attracted by property’s relatively high income, even if the positive yield gap has narrowed significantly over the year. The last quarter has seen some better economic news and some stability in the occupational market. However,rental values have continued to suffer with IPD recording falls in rents of 8.4% over 2009. In Quarter 4, the Company’s portfolio increased in value by 9.0% to £152.7m. This, together with an income yield of 1.8%, produced total returns of 10.8% over the period, which compared favourably with the IPD total return of 9.4%. In December, the Company completed its first new property purchase since 2007, a retail warehouse in Nelson,Lancashire for £5.2m, reflecting a net initial yield of 7.0 %. The unit of 31,788 sqft is located in a prominent position adjacent to Junction 12 of the M65 motorway, and is let to B&Q plc for a further 13.5 years at a rent of £390,474pa,equating to £10.50 per square foot. The next review is in June 2013. On the asset management side, the Company restructured the lease of the motor showroom complex at Clifton Moor Gate, York. With just over ten years remaining on the lease to Inchcape Estates Ltd, a reversionary lease for a further ten years has been granted to the tenant, thereby extending the term certain till 30th September 2030. A rent free period of 12 months was given to the tenant and the annual rent of £554,000 will now be subject to RPI (cap and collar at 2.0-3.0 %) uplifts every five years. The valuation of the property increased from £5.8m to £7.5m,during the period. The Company has had some success in new lettings and lease renewals, reducing the void rate from 3.9% in September 2009 to 1.6 % in December 2009. The Company entered into an agreement to lease part of the vacant wine bar premises at 7/11 Bridge Street, Guildford with Tesco plc at a rent of £60,000 per annum. Paperchase Products Limited took a new lease on an empty shop unit at 30-40, The Parade, Leamington Spa, at a rent of £84,000 per annum for fifteen years. Morgan Samuel Ltd, trading as Pilot, took a temporary lease at 67/69 King Street South Shields, although the rent is on a turnover basis only. (As at 31 December 2009)

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