Agenda item

A report was submitted that provided an overview of the current property market and informed Members of the individual property transactions relating to the Fund.

It was anticipated that interest rates would remain high but that inflation was moving in the right direction.   Although property values had been volatile, income return had been consistent and predictable.  There was rental growth in some sectors at the moment and some uncertainty in listed markets.  Transaction volume levels for 2023 were £40 billing which was the same as in 2020, due to pricing uncertainty and debt.  Banks were unwilling to lend on property and there were more sellers than buyers at the moment.  Despite this, there had not been much distress selling in the market over the year.  Open-ended property funds were under pressure due to defined benefit pension funds looking to sell their assets and de-risk.  A number of properties would be coming up for refinancing this year and there should be some attractive opportunities for the Fund.  There was limited appetite for the retail and office sectors but industrials and alternatives would remain strong.  The future was uncertain but CBRE was confident that property would provide good returns for the Fund.

The Fund had completed the purchase of an Industrial unit located in Washington, Tyne & Wear, let to BAE Systems Ltd for £50.25 million. The property totalled 346,465 sq ft and was let for an average unexpired term of 12.25 years.  This was now the largest asset in the Fund’s Direct Property Portfolio. 

In Q2 2021 the Fund forward funded the development of a 210,000 sq ft industrial unit in Yeovil. The development of the property was now complete and had been added to the Direct Portfolio. The unit was occupied by Leonardo UK Ltd, for a term of 35 years at a rent of £1.6m p.a., subject to annual reviews at 2.7%.

Details of the top ten holdings by capital value were included in the submitted report and it was noted that the allocation of the Fund’s assets in the North East was approximately 28%, which was the largest geographical allocation.  

In terms of asset management, the Fund had completed a lease renewal with Currys Group for a term of 10-years at a rent of £312,500 per annum.  The tenant would benefit from 21 months rent free from the lease commencement date.

The Fund had completed a strategic review of asset Energy Performance Certificates (EPCs) across its Portfolio.  All assets within the Portfolio now had an EPC rating that complied with current, and incoming regulations in 2025.

With regard to portfolio arrears the collection statistics were consistently high.  Since the report was issued arrears had reduced by a further £20K and CBRE continued to work with clients to bring accounts up to date.

It was noted that CBRE currently relied on Experian reports to categorise risk but was looking at a new reference system that took a more holistic view of governance, looking at broker reports and trading styles and taking a wider view. 

ORDERED that the information provided was received and noted.