Investment Objective and Strategy
The Group’s investment objective is to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio. In order to achieve this objective the Group has an investment strategy that focuses on identifying and acquiring institutional grade, secure income producing assets in favoured sectors as well as identifying assets that benefit from wider infrastructure improvements delivered by others where possible. In addition the Group will look to sell assets that have limited future return prospects or where there are significant risks to achieving future acceptable returns. As part of this investment strategy, the Group also recognises that tenants are a key stakeholder and aims to foster a culture whereby the experience of tenants is seen as paramount to the future success of the Group. The Investment Manager works closely with tenants to understand their needs through regular communication and visits to properties. Where required, and in consultation with tenants, the Group refurbishes and manages the owned assets to improve the tenants’ experience, including consideration of health and safety and environmental factors, with the aim being to generate greater tenant satisfaction and retention and hence lower voids, higher rental values and stronger returns.
Investment risks to the Group are managed by investing in a diversified portfolio of freehold and long leasehold UK commercial properties. The Group invests in income producing assets across the commercial property sectors including industrial, office, retail and other alternative commercial property sector assets. The Group has not set any maximum geographic exposures within the UK nor any maximum weighting limits in any of the principal property sectors. No single property shall, however, exceed at the time of acquisition 15 per cent of the gross assets of the Group.
The Group is currently permitted to invest up to 15 per cent of its total assets in indirect property funds including in other listed investment companies. The Group is permitted to invest cash, held by it for working capital purposes and awaiting investment, in cash deposits, gilts and money market funds.
Gearing, calculated as borrowings as a percentage of the Group’s gross assets, may not exceed 65 per cent. The Board intends that borrowings of the Group at the time of draw down will not exceed 25 per cent of the Total Assets of the Group. The Board receives recommendations on gearing levels from the Investment Manager and is responsible for setting the gearing range within which the Investment Manager may operate.
Sustainable Real Estate Investment Policy (“SREI”)
The Investment Manager acquires, develops and manages properties on behalf of the Company. It is recognised that these activities have both direct and indirect environmental and social impacts. The Board has adopted the Investment Manager’s own Environmental, Social and Governance Policy (ESG) and associated operational procedures and is committed to environmental management in all phases of the investment process. The Manager has identified four ESG megatrends that are highly relevant for real estate investment now and in the future: Environment & Climate Change, Governance & Engagement, Population & Urban Living and Technology & Connectivity. The identification of risks and opportunities for the Company in relation to each of the megatrends is embedded throughout the investment process and at all levels, from Company-level strategic planning to asset underwriting and individual asset ESG action plans. To facilitate this, the Manager works in partnership with contractors, suppliers, occupiers and consultants, seeking continuous improvements in ESG performance and conducting regular reviews.
The Company was awarded a Green Star ranking from the Global Real Estate Sustainability Benchmark 2018 and improved its score by 9% compared with 2017. A Green Star is awarded to entities that perform well in both categories of the GRESB assessment: Management & Policies and Implementation & Measurement. The Company also received a European Sector Leader award as the top performer in its peer group. Following the disclosure of ESG performance against the EPRA Sustainability Best Practice Reporting guidelines in the 2018 report, the Company received both Gold and Most Improved awards from EPRA. These awards recognise the Company’s strong commitment to ESG and transparency.