UK Property Trust - January 2012 update

Sentiment towards commercial property remains broadly unchanged with nervousness around short-term prospects driven by wider economic and European debt issues. Prime quality property let for the long-term continues to attract institutional interest, though transaction volumes are increasingly thin. Demand even for prime quality assets is also thinning out. Values in secondary and tertiary properties continue to slip.

During December there was a low volume of new investment stock available and sentiment for the month was broadly static. The Fund has not completed any purchases or sales in the last couple of months, due to a lack of good opportunities in the marketplace. After reducing the size of the REITs allocation the Fund has a relatively high cash position. We anticipate good buying opportunities later in the year, but for the short-term will remain highly selective.

There has been some asset management activity on the direct property portfolio in December which added value to the portfolio. We completed a lease re-gear at an office block occupied by Glass’ Information Services Limited in Weybridge that the Fund purchased in late 2009. A tenant break option has been removed and a lease extension agreed taking the committed lease term from 1 year to 11 years. At Libra Industrial Estate in Milton Keynes, the fund has completed a surrender of a lease to Trek and a simultaneous re-let of the unit to Babcock Training Limited for a new 10-year lease.