Strategy
We believe that medium term economic and financial conditions create a unique investment opportunity for those seeking immediate exposure to a broadly diversified commercial real estate portfolio.

A number of market factors are expected to produce superior returns for UK real estate investment:

• economic growth and prosperity arising from stable
  economic policy
• continued rental growth recovery across all major real
  estate market sectors
• strong positive income from historically high real estate yields
• increasing liquidity with the broadening of the market
  investor base.

Th UK economy is expected to continue to experience the period of healthy growth and low inflation which has set it out from much of the late twentieth century. Rental growth is increasing although rental levels remain generally, in real terms, lower than those attained in the late 1980s. In addition, investment yields are stabilising at higher than historical long run levels whilst interest rates are low. As a result, investors in institutional grade real estate are enjoying attractive 'real' running yields that provide a strong buttress for higher asset values.

The HPUT portfolio will be diversified by asset class as well as geography and will hold property directly to ensure performance and management control. HPUT will also focus on innovative indirect vehicles and joint ownership structures, selecting those which offer access to attractive asset portfolios and specialist management teams and which could benefit significantly from financial market expertise.

From our perspective, the optimal real estate portfolio consists of attractive, strongly performing assets spread across major real estate sectors and markets in a number of UK regions. However, the portfolio must be structured to allow flexibility in order to take advantage of changing market opportunities rather than rigidly filling marginal sector allocations.

We will use indirect vehicles in an innovative way to achieve flexibility and to gain exposure to large multi-let assets and specialist leisure and commercial related real estate assets with strong cashflow and operating characteristics.

Indirect vehicles offer an efficient and effective means of gaining discreet exposure to very large lot size assets such as shopping centres.

They also permit access to other specialist markets which would discourage many PUTs because of lot size or management intensity.

The HPUT will seek to build a diversified portfolio, setting broad sector strategic target allocations for retail, industrial and office markets. The allocations will be based upon the investment universe of PUT investors as represented by the IPD Monthly Index and the IPD All Balanced Index. The HPUT will also seek to pursue a highly focused and selective investment policy, seeking indirect vehicles that offer:

• exceptional growth potential
• specialist management
• proven operating experience and
• alternative options for realising liquidity.

Again, flexibility is key. The HPUT will take a proactive approach to structuring transactions and will consider a wide variety of markets and sectors within the UK real estate market. In the near term, the HPUT will seek attractive investment opportunities.