Approach to property investment

The objective of our property funds is to provide income‌ from a diversified portfolio of UK properties, as well as capital growth over the long term (defined as any rolling period of five years).

Prior to purchase

Following the identification of a potential acquisition the Property team, supported by the Sustainability team, perform initial due diligence to ensure that there are no issues that would prevent the property from being purchased. These include but are not limited to: due diligence and adverse media checks to ensure we adhere to market practice in preventing financial crime and an initial environmental assessment for contamination.

Should the property, tenant and vendor pass this initial stage, the teams then undertake a more enhanced due diligence process designed to:

• safeguard against risks to the building posed by climate change and other environmental factors including flooding and wildfires
• review the energy efficiency of the building
• identify the potential to drive improvements through refurbishment.

This information is drawn from a variety of sources:

• data, e.g. from existing building management systems, utility bills, engagement with tenants
• third-party reports, e.g. energy audit reports, certification schemes such as BREEAM or Fitwell¹  
• independent databases, e.g. for flood risk.

Day-to-day management

Once we have purchased a property, we may refurbish to improve the financial value of the asset, at an appropriate point in the lifecycle of our investment. This may include improving amenities or characteristics of the building, such as the inclusion of electric car charging points, cycle spaces, showers and changing facilities and, where we believe there is sufficient demand, on site cafés.

Our primary focus is on reducing costs and risks. We aim to achieve this within each property by:

• installing energy-efficient equipment that reduces both operational cost and energy demand
• better knowledge of a building’s overall environmental ratings 
• staying ahead of regulatory requirements.

Our standard lease terms feature Green Lease clauses² which are designed to support our access to data across a range of metrics such as tenants’ energy and water consumption, and waste and recycling regimes and ensure that tenants do not make alterations to the detriment of a building’s carbon emissions.

Energy performance certificates (EPCs) are an important area of focus. As part of our approach, prior to lease renewal, costings are obtained to determine whether it is cost effective to improve the EPC rating of the lower rated properties. As a minimum, we aim to ensure compliance with the Minimum Energy Efficiency Standards (MEES) regulations.

External legal counsel and sustainability consultants are used to ensure that our teams are aware of potential regulatory changes.

Role of property managers and property sustainability consultants

For all our properties we use property managers and/or property sustainability consultants to:

• Collect energy use, water consumption, waste and carbon emissions where possible
• seek to undertake monitoring for environmental risks such as flood, wildfire and heat.

For our properties let to more than one tenant, the property managers also undertake the following:

• procuring energy from renewable sources
• taking action to minimise health and safety incidents.

Our property managers and property sustainability consultant report on a regular basis.

Tenant engagement

Tenant engagement allows us to obtain data on building performance and identify opportunities for improvement.  Additionally, a formal tenant engagement survey is used to identify tenant issues relating to building performance and improvements and where applicable the property manager’s performance.

Property sales

The focus on reducing costs and risks enables us to enhance the value which can be realised on the sale of an asset.  We also undertake due diligence and adverse media checks to ensure we adhere to market practice in preventing financial crime.

Matthew Meaden
Fund Manager (Property)

November 2024