Trust Commentary

Having experienced a significant correction in values, and whilst uncertainty persists regarding the inflation outlook and the timing of interest rate cuts, the real estate sector should benefit from looser monetary policy going into 2025. A nascent recovery is arguably reflected in the portfolio value remaining unchanged over the quarter to March 2024.

More positively, much of the real estate sector is now delivering an income return and nominal rental growth above the long run average due to the inflationary environment, a resilient occupational market and limited development. Alongside recovering industrial values, well located, fit-for-purpose offices and retail assets are benefiting from a gradual shift back to the office and more consumers switching back to in-store shopping. At the same time, there is increased demand for operational real estate assets such as hotels, self-storage, and data centres.

The Company is well placed to benefit in this environment due to our exposure to higher growth sectors, low-cost long-term debt, and significant potential to drive earnings growth from active management and a higher reversionary income profile compared with peers.

Finally, alongside these nearer-term factors, our strategy continues to reflect the impact of longer-term structural trends such as urbanisation, technological change, demographics and, arguably most critical for the real estate sector, sustainability. We therefore have conviction that our strategic evolution to place sustainability at the centre of our investment proposition should enhance our long-term total returns.

Investments in real estate are relatively illiquid and more difficult to realise than equities or bonds.

Yields may vary and are not guaranteed.

The use of gearing is likely to lead to volatility in the Net Asset Value ("NAV") meaning that a relatively small movement either down or up in the value of the Company's total assets will result in a magnified movement in the same direction of that NAV.

There is no guarantee that the market price of shares in a UK Real Estate Investment Trust such as SREIT will fully reflect their underlying NAV.

The value of real estate is a matter of a valuer's opinion rather than fact.

This UK Real Estate Investment Trust should be considered only as part of a balanced portfolio, of which it should not form a disproportionate part.