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Property Investment Report
XYZ PENSION SCHEME
Third Quarter 2007
UK Institutional Pensions
www.standardlifeinvestments.com
Exceptional investments, extraordinary world
In a diverse, dynamic world, we use our insight and intellect
to seek out investment opportunities. Our ability to gather
and interpret information, following robust, repeatable
processes, helps us maintain our position as a leading
investment house.
Exceptional investments, extraordinary world
Contents
02
Standard Life Investments
03
Statement of Scheme Assets
04
Global Review
05
House View
06
Property Investment Environment
08
Investment Performance
09
Fund Structure
11
Fund Activity
13
Contact Us
Standard Life Investments
Mike Hannigan - Investment Director
This report reviews and analyses the
structure, performance and prospects of
the Standard Life Property Fund.
The Property Fund is the largest Pooled
Property Fund in the UK. This size, together
with our dedicated investment team, enables
us to obtain the diversification by location and
property type that is necessary to maximise
returns without subjecting the Fund to undue
levels of risk.
All information in this brochure is correct as at
30 September 2007, unless otherwise stated.
2
Standard Life Investments
Since inception of the Fund in March 1980, to
30 September 2007, the Property Fund has
provided an annualised return of 12.17%. The
Fund has provided consistently good returns
and regularly ranks among the top performing
Funds of its type and size.
XYZ Pension Scheme
Statement of Scheme assets as at 30 September 2007
Institutional Pooled
Property Fund
Unit Price
No. of units
Scheme value
(£000)
30 June 2007
x
x
x
30 September 2007
x
x
x
The total Scheme value was £xx,xxx,xxx.xx on 30 September 2007.
The annualised money weighted internal rate of return since the date of inception
on 11 November 1986 was +xx.xx% p.a.
The internal rate of return for your scheme has been impacted by the movement
of the pricing basis of the pooled property fund.
The money weighted internal rate of return (IRR) methodology used above shows
the since inception annual equivalent return earned by the scheme. The IRR will
differ from the time weighted return calculated for performance comparison
purposes by agencies such as CAPS. The difference arises principally because of the
timing effect of cash flows by the scheme into and out of the pooled funds.
Statement of Scheme Assets
3
Global Review
In Brief
●
Equity markets were extremely volatile during the third quarter
●
The US sub-prime mortgage crisis undermined investor confidence and provoked
liquidity problems across the credit markets
●
The Bank of England raised UK interest rates by 0.25% in July while the Federal
Reserve cut rates by 0.50% in September
●
Corporate bond markets performed poorly as the credit crunch caused liquidity in
the market to disappear
The third quarter of 2007 saw a period of
global market turmoil, as the US sub-prime
mortgage crisis undermined investor
confidence and caused a credit crunch in the
UK banking sector. Asian markets were
somewhat insulated from the fallout, with
China in particular witnessing an impressive
stock market performance.
UK equities fell during the quarter, as investors
sought to insulate themselves from the fallout
from the problems in the US sub-prime
mortgage market. The wider impact of the
liquidity crisis was felt most keenly in the
banking sector. Northern Rock was the biggest
casualty as it was forced to approach the Bank
of England for emergency funding. The UK
economy generally remained resilient and the
0.25% hike in interest rates in July failed to
seriously dent the appetite for home loans.
However as the extent of the liquidity crisis
became clear, the Bank of England was forced
to provide extra funding to the money
markets.
US equity investors endured a volatile quarter,
after the crisis in the US mortgage market
threatened to undermine the wider US
economy. The Federal Reserve cut interest rates
by 0.5% in September following signs that the
economy was heading for a slowdown, which
helped stocks to recover going into the end of
the quarter. More positively, other areas of
corporate America continued to deliver strong
earnings, including various technology-related
4
Global Review for Third Quarter 2007
stocks such as Apple, Broadcom and Hewlett
Packard and oil companies such as Murphy Oil
and Hess.
European equities posted modest gains,
although concerns over the health of the
broader US economy affected investors in
European companies reliant on US consumers.
The European economy continued to grow at
a reasonable pace, although the ECB held off
raising rates in September in light of the
financial crisis that depressed investor
confidence. In the corporate sector, the best
performing stocks included Volkswagen, Nokia
and Nestlé, while technology company Alcatel
Lucent underperformed after announcing its
third profits warning this year.
The Japanese stock market suffered a downturn
in the third quarter, caused by negative
investor sentiment in light of the US mortgage
market problems and evidence of a decline in
the Japanese economy. As America remains an
important destination for much of Japanese
trade, electronics and car companies suffered
as disappointing jobs news in the US raised the
prospects of a slowdown. On a more positive
note, rising metal prices boosted the Japanese
materials sector, with some technology stocks
buoyed by the positive tone in US technology.
Stock markets across Asia performed well in a
global context, with China and Hong Kong
among the strongest performers. Although the
US mortgage crisis affected some Asian banks,
investors seemed reassured that the local Asian
economies are more robust than in previous
financial crises. An announcement by the
Chinese authorities on the accessibility of
stocks on the Hong Kong market was a key
driver of returns, while rising commodity prices
were positive for companies in the energy and
mining sectors.
Corporate bond markets performed poorly in
the third quarter as the credit crunch caused
liquidity in the market to disappear. Investors
moved their assets into higher quality issues,
with high yield bonds being abandoned in
favour of strong investment grade bonds and
government-backed debt. The UK gilt market
and European government bonds acted as
lower risk versions of the US Treasury market,
with Japanese government bonds also joining
the global trend of falling yields and rising
prices.
UK commercial property endured a tough
quarter, as returns moderated from the strong
gains seen recently. In general, underlying
economic fundamentals remained positive for
direct property investors. However, the impact
of the crisis in credit markets resulted in
lenders tightening up their requirements,
making it difficult for debt backed investors to
enter the market. Despite this, strong
occupational demand supported the Central
London office sector, which continued to
exhibit rental growth.
House View
Major Asset Class Summary
Equities
Heavy
Bonds
Neutral
Property
Light
Equities
Very Heavy
Bonds
UK
Europe ex-UK ▲
Heavy
Japan
Neutral
Cash
US
US
Emerging Markets ▲
UK
Very Light
Euro-zone
Japan
Light
Pacific Basin ex-Japan
Very Light
The following denotes a change: ▲ increase and ▼ decrease
UK Equities – Very Heavy
●
The market is supported by a mix of
favourable valuations and strong cash
flows
UK Bonds – Neutral
●
US Equities – Heavy
●
The market remains supported by
improving valuations and positive profits
growth despite credit market concerns
European ex-UK Equities – Very Heavy
●
The region is benefiting from improving
profits growth and an upturn in M&A
activity
●
Pacific Basin ex-Japan Equities – Light
●
The region is vulnerable to a major
slowdown in global growth or domestic
monetary tightening
Bond investors could price in further rate
cuts if the economy slows noticeably
Euro-zone Bonds – Neutral within International
Bonds
●
Japanese stocks remain well positioned to
benefit from buoyant regional activity
●
We retain our preference for offices over
retail in the UK given stronger rental
prospects
●
Funds are Heavy in global property. Strong
demand and tight supply underpin office
markets. Employment trends support Asian
retail prospects
US Bonds – Heavy within International Bonds
Japanese Equities – Heavy
●
Within UK bonds, we are Neutral between
corporate bonds versus gilts, and prefer
conventional gilts over index-linked debt.
Corporate bond valuations have improved
but individual issues still require very close
examination
Global Property
Cash
●
Equity markets should outperform cash
into 2008
Markets have priced in slower economic
activity in response to credit tightening
Japanese Bonds – Neutral within International
Bonds
●
There is limited correlation with other
bond markets plus solid demand from
domestic investors
Global Emerging Market Equities – Neutral
●
Strong current account positions
defending emerging economies from
credit market turmoil
House View
5
Property Investment Environment
Commercial Property Initial Yields -v- Swap Rates
All Property Returns, Rents & Capital Values
40
Yield Shift
Total Return
Rental Growth
Capital Growth
30
0.30
10
0.20
8
0.10
6
Property yield margin over 5 yr swaps (R.H.S.)
Property initial yields
UK 5yr interest rate swaps
%pa
10
0
0.00
%
20
4
-10
2
-0.10
-20
0
-0.20
-30
Source: IPD
O
-0.30
7
9
6
8
5
4
1
0
3
2
1
4
3
2
7
5
6
199 199 199 199 199 199 199 199 199 200 200 200 200 200 200 200 200
ct
Fe 9 7
bJu 98
nO 98
ct
Fe 9 8
bJu 99
nO 99
ct
Fe 9 9
bJu 00
nO 00
ct
Fe 0 0
bJu 01
nO 01
ct
Fe 0 1
bJu 02
nO 02
ct
Fe 0 2
bJu 03
nO 03
ct
Fe 0 3
bJu 04
nO 04
ct
Fe 0 4
bJu 05
nO 05
ct
Fe 0 5
bJu 06
nO 06
ct
Fe 0 6
bJu 07
n07
-2
-40
Source: IPD, Thomson Datastream
UK Property Market
As a consequence of the accelerated change in
sentiment towards the UK direct property
market, total returns from commercial property
continued to moderate again this quarter. The
lower returns were mainly a result of capital
values declining over the quarter. Quarterly
returns were -1.0% which is the lowest
quarterly return for the asset class since 1991.
Furthermore, annual returns to the end of
September at 7.2% have now slipped below
their long term average value and the last time
returns were at this level was in March 2002.
Despite the fundamentals underpinning the
asset class remaining intact, the change in
sentiment and a return to pricing levels more in
line with the long term average for the sector,
heightened by problems in the credit markets,
is likely to result in returns going forward being
lower than the above average levels of the past
decade.
The returns from the UK listed property sector
over the quarter also reflected this change in
sentiment and the lower anticipated returns.
The listed sector remains volatile and with
returns of -10.5% over the quarter to the end
of September, the sector has seen an
unwinding of the exceptional positive returns
witnessed in the second half of 2006. The UK
listed property sector now generally trades on a
substantial discount to net asset value and it is
the view of our equity analysts that the
discounts underestimate the future prospects of
the companies in the sector. As a result of the
sector’s exposure to debt costs and the
ongoing problems in the credit markets, it is
likely that the listed companies heightened
volatility will continue.
6
Property Investment Environment
The margin commercial property yields provide
over 5 year swap rates, which has
predominantly been a positive number
historically, moved into negative territory in the
second quarter of 2006. Despite the
probability of fiscal tightening lessening with
the backdrop of the recent credit problems,
the margin remains firmly negative at -96 basis
points at the end of September this year. As
yields are anticipated to move out further over
the course of this year we expect the gap to
reduce going forward.
Retail Sector
The UK retail sector continued to
underperform the other commercial property
sectors recording annual returns of 4.2% p.a.
in the twelve months to the end of September.
This compares to 12.9% p.a. for offices and
6.1% p.a. for industrials. Despite the resilience
of retail sales volume growth, which was
running at 5% year on year in August, retailers
are voicing concerns that trading remains
challenging and the trading environment is
likely to deteriorate going forward. Although
these concerns were also raised prior to last
years generally successful festive period
trading, the concerns may have more
resonance this year as the projected
fundamentals for the sector have deteriorated
compared to last year. There are some signs
that the recent monetary tightening is
beginning to have an impact on the housing
market and consumer finances which have
already been under pressure from high debt
levels and five interest rate increases since
August last year. Additionally, a significant
proportion of fixed rate mortgages are due to
expire this year and this, coupled with the
problems in the credit markets limiting the
amount of credit available and putting further
pressure on lending rates, may exacerbate
consumer woes.
As the property cycle turns, the retail sector and
particularly, secondary properties in less well
located areas are bearing the brunt of the
outward yield movement. The yield differential
between secondary property and prime has
moved in significantly over the past few years.
We are now seeing the differential revert back
closer to its historical level. This process is
anticipated to continue. Despite a lack of
transactional evidence, valuation data suggests
that the best property in the most dominant
locations is proving most resilient to the shifts in
sentiment and the outward pricing movement.
We continue to anticipate that higher quality
retail parks and shopping centres that are the
dominant retail provider in their area will
provide the best investment opportunities.
Replacement buying from the internet,
supermarkets and the generally lacklustre
offering from high street stores maintains our
pessimistic view on this retail sub-sectors
prospects.
Office Sector
The trend that has been in place over the
previous 6 quarters continued again this quarter
as offices recorded the highest quarterly sector
returns. At 12.9% over the year, office returns
were 5.7% above the all property average at
the end of September. The West End & Mid
Town markets along with the City remained the
best performers recording 22.5% p.a. and
13.8% p.a. respectively over the year. Although,
Sector Returns Relative to All Property Returns % p.a.
UK Retail Sales Volumes, House Prices & Rental Growth
8
10
5
0
2
0
-2
-4
-5
-6
-10
-8
Source: Thomson Datastream
capital growth has moderated from the
substantial appreciation witnessed in the
middle of last year, it is still the main driver of
returns contributing 17.9% p.a. in the West
End & Mid Town and 9% p.a. in the City.
The rental growth momentum continues in
both markets at 18% p.a. in the West End &
Mid Town and 14.8% p.a. in the City. It is
likely that the problems in the credit markets
and consequently occupier confidence along
with affordability constraints will temper these
above average levels of rental growth in the
next few quarters. Returns outside the Central
London vicinity have been disappointing,
ranging from 0.5% to 3.6%. Agents are
reporting that activity is picking up in the M25
and Thames Valley and there has been
selective rental growth in some centres.
It is anticipated that, when reported, take up
in the third quarter for the Central London
markets will remain elevated and vacancy rates
are unlikely to rise sharply from the current
low level of 4.8%. Despite several of the
worlds largest banks including UBS, Deutsche
Bank, Citigroup and Goldman Sachs reporting
fixed asset write downs in excess of a billion
dollars as a result of exposure to less
creditworthy mortgage borrowing in the US,
reductions in employee numbers so far have
been modest and have mainly been in the US.
Thus far the banks have not embarked on the
large scale cost cutting that held back the
occupier markets after the technology bubble
burst.
Although the credit markets may still take
some time to get back to normal, the drivers
Office
Jan-06
Sep-05
Jan-05
May-05
Sep-04
Jan-04
May-04
Sep-03
Jan-03
May-03
Sep-02
May-02
Jan-02
M
ar
Se 94
pM 94
ar
Se 95
pM 95
ar
Se 96
pM 96
ar
Se 97
pM 97
ar
Se 98
pM 98
ar
Se 99
pM 99
ar
Se 00
pM 00
ar
Se 01
pM 01
ar
Se 02
pM 02
ar
Se 03
pM 03
ar
Se 04
pM 04
ar
Se 05
pM 05
ar
Se 06
pM 06
ar
-0
7
Retail
Industrial
Sep-07
%P.A.
15
4
Jan-07
20
6
May-07
UK Retail Sales %p.a.
Sep-06
Nationwide House Price Index %p.a.
May-06
25
Retail Rental Growth (%p.a.)
% p.a. Total Returns v All Property
30
Source: IPD
of the occupier market have softened but
generally remain healthy. We expect some
further moderation in economic growth, M&A
activity and financial and business services
output going forward. There is a downside risk
that the current US economic weakness
deteriorates more sharply than anticipated and
consequently a global economic downturn
ensues. However, outside the banking sector,
corporate profitability remains high, stock
markets are generally healthy and emerging
markets, which are on the whole, in good
shape fiscally, may provide the economic
stimulus needed to counterbalance any further
US weakness. The current credit problems may
also aid the Central London rental cycle as
some planned speculative projects may not
now go ahead because of increasing risk
aversion by lenders and significant increase in
build costs.
Industrial Sector
Industrial returns have been on a downward
trend from the most recent highs that were
recorded in the middle of last year. Industrial
returns were 6.1% p.a. up to the end of
September. In line with the other sectors, the
exceptional period of inward yield movement
that has been evident in the industrials sector
over the past few years looks to be over and
yields moved out over the quarter. Rental
growth has edged up marginally to 1.5% p.a.
at the end of September from 1.4% in the
previous quarter.
Manufacturing activity remains robust despite
the strength of sterling and softening global
demand. The elevated pipeline of speculative
space and anticipated weakening retailer
demand for distribution space is likely to mean
moving industrial rents forward over the next
few years will be difficult.
Investment Outlook
As we anticipated, the aggressive pricing
witnessed in the commercial property market
over the last few years is beginning to unwind.
Combined with a slightly weaker economic
outlook, the recent credit crunch has
accelerated the speed of this trend. We
therefore expect pricing to return to ‘rational’
levels more quickly.
From a landlord’s perspective, the
fundamentals supporting the occupier markets
remain in place. This will help to provide solid
grounds for continued tenant demand and
consequently an environment that enables
rents to be moved forward. The economy
remains in good shape and although
momentum may soften going forward,
economists continue to forecast robust
economic expansion next year. Similarly,
financial and business services data along with
manufacturing and industrial production
forward looking surveys suggest that the
occupier market has a firm foundation. As a
consequence of the pricing correction currently
underway and despite rental growth expected
to be firm, the returns in the coming year will
be at levels well below the above average
returns investors have come to expect from
commercial property in the past decade. We
forecast a return to healthy single digit returns
thereafter.
Property Investment Environment
7
Investment Performance
NAV Performance Comparison v HSBC/AREF as at 30/09/2007
NAV Performance Comparison v HSBC/AREF as at 30/09/2007
20
20
Qtr 3
1 Year
3 Years
5 Years
10 Years
p.a.
p.a.
p.a.
p.a.
15.7
15
Standard Life Property Fund
0.1
7.8
15.7
14.0
13.2
HSBC/AREF Median
-1.0
7.0
15.1
14.3
12.6
-1.3
7.3
15.1
14.2
14.014.3
15
13.2 12.6
10
10
7.8
HSBC/AREF Weighted Average
15.1
7.0
12.9
5
5
source: HSBC/AREF All Balanced Funds Index as at 30 September 2007
0.1
0
0
-1.0
-5
-5
Q3
%
1 Year
%
3 Years
%p.a.
5 Years
%p.a.
Property Fund
HSBC/AREF All Balanced Funds Median
Performance Review for periods to 30 September 2007
The performance of the Fund is compared
exclusively to that of the HSBC/AREF Pooled
Property Fund Index (‘All Balanced Funds’).
This index, and the Fund’s performance, are
quoted on a Net Asset Value basis.
the majority of our assets to hold up well. In
addition, our absence of gearing in the fund,
unlike a number of our competitors, will also
be supportive in an environment where cash
yields are higher than property returns.
Commercial property returns slowed further
during the quarter as investors sought to
protect their investments from the effects of
the global liquidity crisis. This resulted in a
flight to higher quality assets which saw net
property fund outflows and prompted some
large institutions to step back from the market.
Another impact of the credit crunch came as
banks tightened their lending criteria and
became less willing to provide finance for
property deals, preferring instead to lend only
to existing clients and in most cases for a
lower percentage value of the property than
previously. On a positive note, while many
debt-backed investors remained priced out of
the market, global interest rate expectations
were revised down as policymakers sought
clarification of the effect of the credit problems
on the global economy.
Office sector – We have seen increasing
evidence of a change of investor sentiment in
the City of London office market, where
expectations for continued rental growth
through to 2009 have been cut back to
instead peak in 2008. As a result, yields in the
sector have moved out by around 25 basis
points. Interestingly, however, rental growth
still remains a feature of the West End market.
So although the overall tone is negative, this
will allow some interesting buying
opportunities as funds with negative cashflow
issues become forced sellers in the market. We
continue to monitor the market closely for
such developments.
Weight of money – The principal driver of
returns over the course of the last three years
has been the weight of money in the market.
This trend has now effectively reverted as a
result of the problems brought on by the
global liquidity crisis, with the impact most
keenly felt in the secondary and tertiary areas
of the market. As a result of our efforts to
retain a dominant portion of the Fund in
prime quality stock, we expect valuations on
8
Investment Performance
Development exposure – We booked further
profits on our development portfolio during
the quarter and anticipate our development
pipeline to support returns moving forward. In
our opinion, the fundamentals underpinning
the UK property market remain in place and
we are also encouraged by the limited excess
supply of development which has
characterised previous cycles. While there is
much potential development slated for the
City of London, the current tightening of
lending criteria means much of this work may
not start, which will provide further
investment opportunities moving forward.
10 Years
%p.a.
Fund Structure
Sector Comparison as at 30/09/2007
Geographic Sector Allocation as at 30/09/2007
London West End
9.9%
West Midlands 17.5%
Fund %
30/09/2007
Yorkshire & Humberside 2.7%
Listed Investments 1.4%
Wales 0.4%
South West 4.0%
Cash 2.7%
Scotland 2.5%
City of London 8.6%
East Midlands 4.0%
Eastern 3.4%
Rest of South East
20.8%
Rest of London 5.6%
Property Unit
Trusts 8.8%
Midtown 0.5%
North East 0.9%
North West 6.2%
HSBC/AREF as at
31/12/2006
Offices
29.1
30.8
Retail
46.5
40.3
Industrial
18.7
20.6
Miscellaneous
1.7
4.5
Indirect
1.4
0.5
Cash
2.7
3.3
-4
source: Standard Life Investments, HSBC/APUT
-2
0
2
4
4
6
6
8
8
source: Standard Life Investments, HSBC/APUT
Fund Structure
The Fund’s sector allocation is compared to
those property portfolios contributing to the
HSBC/AREF Pooled Property Fund Index (‘All
Balanced Funds’).
We retained a marginally overweight position
in retail property although our sales
programme over the year to date has been
predominantly in this sector. Our office sector
exposure was slightly underweight during the
quarter, however, this is somewhat masked by
our development pipeline, which is
predominantly in the central London office
sector. We continue to hold an underweight
position in the industrial sector, where the
prospects for rental growth remain limited in
the short term. The Fund continues to hold a
low level of cash.
We believe that the Fund is in a structurally
strong position. Having been fully invested at
the end of 2006, we are not under pressure to
acquire any further standing investments in
what we perceive to be an expensive market,
and where numerous sub sectors look over
priced. This allows us the discretion to focus
on selective sales and quality purchases for
strategic or cashflow reasons. Other than our
development properties, the emphasis of the
Fund over the next six months will be on
disposals.
We remained in discussion about the
possibility of amending the Fund specifications
with a view to allowing direct property
investment in global property markets. At
present, the Fund guidelines allow for an
investment of up to 10% of the total portfolio
valuation in Europe. We feel it is in the best
interests of our clients to allow exposure to
sectors of the global market that are not
directly correlated to the underlying cycles of
the UK, thereby offering diversification benefits
in terms of performance and risk. We are
continuing to communicate with a number of
clients and consulting actuaries, and will
announce in due course our intentions.
The Fund’s exposure to three Jersey Property
Unit Trust vehicles is shown in each of the
respective retail categories, rather than the
‘indirect’ category. They are an efficient means
of boosting the Fund’s structural weighting in
those sectors of the market rather than a
position in ‘indirect’ vehicles per se.
Portfolio Summary
The current Property Fund was launched in
March 1980 and was valued at £3,600.3
million as at 30 September 2007. The Fund is
managed by Standard Life Investments’
property team, consisting of approximately 90
personnel, including around 30 surveyors. This
provides investors with access to a large team,
which is widely experienced in property
investment and development work throughout
the UK. The team manages over £15.7 billion
of property in aggregate as at 30 September
2007.
The property team supervises all of the
administrative matters associated with
acquiring and maintaining a sizeable property
portfolio. All rental payments are collected and
monitored in-house and, together with our
agents, we seek to maximise the value of our
portfolio. In addition, we have our own
research team to monitor market trends and
Five Largest Holdings
Location
Property
Sector
Value
Band
Solihull
Solihull Retail Warehouse Park
Retail
£130-140m
Harlow
The Water Gardens
Retail
£120-130m
Lincoln
St Marks Shopping Centre
Retail
£110-120m
London
200 Piccadilly/34 Jermyn St
Office
£100-110m
Hemel Hempstead
The Marlowes Shopping Centre
Retail
£100-110m
Fund Structure
9
Fund Structure (continued)
provide strategic advice. We also have our
own in-house development team to manage
the construction, refurbishment and
redevelopment of existing buildings and new
site acquisitions.
The Fund is the largest pooled fund in the UK
and is well diversified across sectors and
geographic regions.
Standard Life Investments was delighted to be
named “Property Manager of the Year” at the
Professional Pensions Awards 2006. This
accolade was for product innovation, fund
performance and client servicing.
10
Fund Structure
Fund Activity
Fund Activity Year to 30/09/2007
Structure Comparison as at 30/09/2007
Fund %
30/09/2007
Offices - London
Offices - Rest of S East
Offices - Rest of UK
Single Shops
Shopping Centres
Retail Warehouses
Industrial - London & S East
Industrial - Rest of UK
Miscellaneous
Listed Investments
Cash
HSBC/AREF as at
31/12/2006
17.7
5.1
6.2
10.9
12.6
23.0
11.4
7.3
1.7
1.4
2.7
16.1
8.6
6.1
12.3
8.3
19.8
9.6
11.0
4.5
0.5
3.3
0
-4
-6
-2
0
2
4
Fund Activity
Value
(£)
% of Fund Value
Purchases
20,775,723
Sales
(197,052,063)
Development Exp
64,289,127
0.62%
(5.91%)
1.93%
source: Standard Life Investments
6
6
source: Standard Life Investments, HSBC/APUT
Fund Activity in the Third Quarter
The Fund made no acquisitions during the
course of the quarter, however we continued
with our programme of selectively reducing
exposure to smaller lot sizes within the retail
sector. Included among the sales made or
about to complete were retail units in Slough,
Harrow, York and Oldham. The aggregate
value of these sales fell in the region of £17.1
million.
We took the opportunity to book profits on
some of our holdings in other sectors. We
agreed the sale of an office building in
Haymarket, London, for a consideration of
circa £13 million, which we expect to
formalise during the early part of the fourth
quarter. In addition, we also agreed the sale of
three industrial units in Coventry for a total of
£60 million, which again is due to exchange
early in the fourth quarter.
of the rental income earned by the assets of
the Fund towards our development pipeline.
Within our listed holdings we eliminated our
holdings of Great Portland Estates and Slough
Estates and also sold around 50% of our
holding in Hammerson, raising approximately
£16.3 million. Alongside Hammerson, we
continue to hold our positions in Land
Securities and British Land holdings, which are
trading at significant discounts to net asset
values. We consider these valuations
underestimate the future prospects of these
companies and as such have no immediate
plans to reduce our holdings further.
Indirect property vehicles
We maintain our holdings in ‘indirect’ vehicles,
particularly the three ‘unregulated collective
investment schemes’ (CIS’s) held in the form
of Jersey Property Unit Trusts, all in the retail
sector. In total, the Fund currently holds
approximately £220 million in these three
J-PUT investments, equivalent to circa 6% of
total fund value. We will consider further
investments in other indirect vehicles, up to a
ceiling (currently set at 17.5%), if we believe
we can obtain exposure to high quality assets
in sectors or sub-sectors where we wish to
boost the Fund’s weightings.
Our development pipeline continues to
advance on schedule and we have made good
progress in de-risking our London
development portfolio. Our office site at 200
Piccadilly is now fully let and we anticipate
exchanging contracts during the course of the
fourth quarter with prospective tenants for a
full letting of our development at 1 Old Jewry.
In addition, we also have four floors under
offer at our development at 40 Portman
Square. We continue to commit the majority
33 Jermyn Street, London
Fund Activity
11
Standard Life Investments and You
UK Institutional Funds
XYZ PENSION SCHEME
Policy No xxxxxx
Investment Director
Investment Director
Euan Baird
Tel:
0131 245 6114
Fax:
0131 245 2547
email:
[email protected]
Mike Hannigan
Tel:
0131 245 2707
Fax:
0131 245 8262
email:
[email protected]
Institutional Fund Reporting
Institutional Business Servicing
Reports and other literature requests
Contributions, withdrawals, fund switches,
valuations, client records, mailing lists and
general enquiries
Elaine Cowan
Tel:
Fax:
email:
0131 245 0951
0131 274 8112
[email protected]
Investment Management
Association Pension Fund
Disclosure
Level One: house policies, processes and
procedures in relation to the management of
costs incurred on behalf of clients.
Level Two: client specific information.
Available on request: e-mail
[email protected] or telephone
0131 245 9710 for information.
Sinead Mcmahon
Tel:
Fax:
email:
0131 245 2756
0131 274 8113
[email protected]
Bank Details
The Bank of Scotland
38 Threadneedle Street
London EC2P 2EH
Sort Code: 12-01-03
A/c No:
00745398
A/c Name: London Collections
UK Institutional Funds
Standard Life Investments Limited
1 George Street
Edinburgh EH2 2LL
Tel: 0131 245 9696
www.standardlifeinvestments.com
Under normal circumstances unit prices are calculated at 2 p.m. (UK time) each
working day. These may differ from the close of business position in some
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moves. In order to facilitate such a comparison, where indicated (*) in this report,
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return. e.g. If the Fund return is +10.0% and the Benchmark return is +8.0%, this
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(Private Equity) Limited. Standard Life Investments Limited acts as Investment Manager for Standard Life Assurance Limited and Standard Life Pension Funds Limited.
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