Schroder Real Regulatory News (SREI)

THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS. PLEASE SEE THE APPENDIX TO THIS ANNOUNCEMENT.

21 March 2014

Schroder Real Estate Investment Trust Limited

(the 'Company')

INITIAL PLACING, OFFER FOR SUBSCRIPTION AND PLACING PROGRAMME

The Board of Schroder Real Estate Investment Trust Limited (the 'Company'), today announces a proposal to issue up to 80 million New Shares at 50.25 pence per New Share to raise gross proceeds of up to approximately £40.2 million by way of an Initial Placing (the 'Placing') and Offer for Subscription (the 'Offer').

The Company is also proposing a Placing Programme to fund future acquisitions that support the Company's investment objective and acquisitions criteria in the period from 18 April 2014 to 19 March 2015. The issue of Ordinary Shares on a non-pre-emptive basis requires Shareholder approval.

New Shares will only be issued to new and existing Shareholders at a premium to the prevailing Net Asset Value ('NAV') at the time of issue in order to take account of the costs of such issue and will therefore be accretive to the prevailing NAV for existing Shareholders.

Highlights:

· Proposal to issue up to 80 million New Shares at 50.25 pence per New Share to raise gross proceeds of up to approximately £40.2 million by way of the Placing and Offer.

· Issuing new shares at a premium to the prevailing NAV ensures future fund raises are accretive to the prevailing NAV for existing Shareholders.

· Proposed Placing Programme to enable the Company to raise additional capital in the period from 18 April 2014 to 19 March 2015 as and when it identifies properties that are suitable for acquisition. This should, in turn, enable the Investment Manager to act opportunistically, by making a series of accretive property acquisitions whilst also mitigating the risk of cash drag on Shareholders' funds.

· New equity can potentially be invested in properties offering an attractive yield with scope for adding value through asset management.

· Pipeline of potential acquisitions currently under negotiation and where terms have been agreed with the vendors.

· Future acquisitions are likely to target all the main property sectors, including, office, industrial and retail as well as alternatives to these traditional sectors.

· Opportunity to broaden the Company's investable universe through exposure to additional alternative property types, such a healthcare, hotels and student accommodation.

· At the same time as announcing the proposed equity issuance, the Company announces an estimated NAV per share of 48.7 pence as at 17 March 2014. This reflects an increase of 1.4 pence per share or 3% compared with then unaudited NAV as at 31 December 2013.

· Investors subscribing for New Shares under the Placing and Offer will not be entitled to receive any dividend for the period from 1 January 2014 to 31 March 2014.

Circular and Prospectus:

A Circular and Prospectus in relation to the proposals will shortly be available on the national storage mechanism at www.morningstar.co.uk/uk/NSM, and will also be available on the Company's website at www.srei.co.uk.

Commenting on the Placing and Offer, Lorraine Baldry, Chairman of Schroder Real Estate Investment Trust said:

"Following the success of the placing in January, it is clear that investors support our belief that good opportunities to deliver growth exist through further investment in the UK commercial property market and as such, it is important that SREIT continues to capitalise on this positive momentum.

"The proceeds of this non-dilutive Placing and Offer will enable the Company to take advantage of these prevailing market conditions and build upon its significant track record of investing in the UK commercial property market to support its objective to deliver value to new and existing Shareholders."

Commenting on the Placing and Offer, Duncan Owen, Head of Property at Schroder said:

"This disciplined approach to growth will enable us to issue new shares at a premium to the prevailing NAV as well as ensuring future fund raises are only accretive to the NAV for existing Shareholders. Furthermore we expect this transaction will provide additional liquidity in the Company's shares through a larger market capitalisation accompanied by a reduction in the level of borrowings and greater economies of scale.

"The Company has consistently outperformed its direct property peers since IPO and we understand shareholders' are keen for the Company to grow further. We anticipate that this transaction will enable the Company to capitalise on the opportunities that exist with the UK commercial property market against a backdrop of improving market conditions. With a pipeline of potential accretive acquisitions and active management initiatives in place, in line with our strategy, we expect to be able maximise the returns as the Company grows to deliver shareholder value."

For further information:

Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular to shareholders dated 20 March 2014.

Introduction

The Company was launched in July 2004 with the investment objective of providing Shareholders with an attractive level of income together with the potential for both income and capital growth from investing in UK commercial property.

Following the recent placing in January 2014 which represented 9.99 per cent. of the Company's then issued share capital, the Board and the Investment Manager believe there is potential to enhance returns to Shareholders through further disciplined and accretive growth of the Company. Therefore, to enable the Company to take advantage of the prevailing market conditions and investment opportunities, the Board is proposing an Initial Placing and Offer for Subscription, with the net proceeds used to complete purchases of properties that the Investment Manager has identified that are suitable for acquisition. The Company is also proposing a Placing Programme to fund future acquisitions that support the Company's investment objective and acquisition criteria in the period from 18 April 2014 to 19 March 2015. The issue of Ordinary Shares on a non-pre-emptive basis requires Shareholder approval.

In connection with the proposed fundraising, the Board is seeking the approval of issues of Ordinary Shares to certain Shareholders that are deemed to be related parties of the Company under the Listing Rules and/or the Listing Rules of the CISE. The Board is also taking this opportunity to seek Shareholder approval for an amendment to the Company's investment policy. The Board is therefore convening an extraordinary general meeting to seek the necessary approvals from Shareholders for the Proposals.

Background to and reasons for the Issues

Significant progress has been made strengthening the Company's balance sheet over the past 36 months in order to position the Company for a market recovery and future growth. Central to this strategy was the need to refinance the Company's loan which was due to mature in July 2014. This process was undertaken early in 2013 in order to take advantage of long term yields being at historic lows. The Company's refinancing objectives were to secure a long-term debt maturity, a reduction in the cost of debt and sufficient operational flexibility to permit proactive asset management of the portfolio.

In order to optimise terms, during the 12 months prior to the re-financing, the Company completed £67 million of disposals at an average yield of 3.4 per cent., realising good performance from asset management activity. These disposals served to reduce the Company's loan to value ratio to a level which enabled access to longer term lenders. Following negotiations with a number of prospective lenders, on 16 April 2013 a new £129.58 million loan facility was agreed with Canada Life Limited, on the following principal terms, which satisfied the Company's refinancing objectives referred to above:

· 20 per cent. of the loan will mature in 10 years' time and 80 per cent. in 15 years' time to give a weighted term as at 31 December 2013 of 14 years;

· the loan carries a total fixed interest rate of 4.77 per cent. per annum compared with the interest rate on the Company's previous loan of 5.72 per cent. per annum;

· there is no amortisation of the loan; and

· the loan provides flexibility to asset manage the Portfolio and the ability to utilise cash from disposals to fund capital expenditure.

Completion of the refinancing enabled the Board to review the Company's dividend policy and conclude that a sustainable dividend, having regard to the Portfolio, asset business plans and market conditions, was 0.62 pence per share ("pps") per quarter, representing a reduction of 30 per cent. with effect from the quarter ending June 2013. This provided a solid platform from which to review and implement the Company's longer term strategy and stated objective: namely, to provide Shareholders with an attractive level of income, with the potential for both income and capital growth.

Since April 2013, the Company has made progress with asset management initiatives and prospective disposals offering the potential to make a positive contribution to income and Net Asset Value. These include:

· exchanged conditional contracts to sell Reynards Trading Estate in Brentford to Notting Hill Home Ownership ("NHHO") on a subject to planning basis, for a price of approximately £20 million, compared to the value as at 17 March 2014 of £16 million. NHHO is responsible for making the planning application at its own cost and there continues to be uncertainty regarding the timing and prospects for achieving a residential planning consent; and

· exchanged conditional contracts to sell a one acre site at Olympic Office Centre in Wembley to UNITE Group Plc ("UNITE") on a subject to planning basis for a price of approximately £7.4 million, compared to the valuation as at 17 March 2014 of £6.25 million. The Company has already secured outline planning consent for UNITE's use of student accommodation and completion is subject to UNITE securing detailed planning consent.

During this period the Company has also benefited from a recovery in the UK commercial property market which has, in turn, been led by improving GDP growth and positive economic data relating to employment growth, retail sales and the housing market. This recovery is reflected in the latest Investment Property Databank ("IPD") Monthly Index which reported a 4.5 per cent. increase in capital values between April 2013 and December 2013. This contributed to a total return of 10.9 per cent. for the calendar year 2013, with the office and industrial sectors producing a total return of 14.4 per cent. and 14.2 per cent. respectively, and the retail sector producing the weakest total return of 7.6 per cent. As noted below, the Company's Portfolio benefited from a strategically low weighting to the retail sector in 2013.

The recovery since April 2013 followed 18 months of consecutive capital value declines and, despite the positive momentum in the market since then, average capital values remain 35 per cent. below the previous peak of June 2007. The recovery is notable for improving sentiment towards good quality secondary property outside the core central London markets. This is partly due to the yield premium available but also reflects an improving occupational market and rental value growth in the strongest centres and regions, as a result of economic growth and reducing levels of supply. This emerging trend is yet to fully feed through into IPD data, with, for example, capital values of offices (measured by IPD) outside of central London still 50 per cent. below their previous peak of June 2007.

These conditions are presenting mis-pricing opportunities for well capitalised investors amongst an increasing number of available deals offering potential total returns consistent with the Company's investment objective.

Against this backdrop, the Board and Investment Manager continue to believe that there is potential to enhance future returns to Shareholders through a gradual increase in the size of the Company. In January 2014, this led to the Company placing 35,592,128 new Ordinary Shares, representing 9.99 per cent. of the issued share capital prior to the placing, raising gross proceeds of £17.17 million. These placing proceeds were immediately invested into the acquisition of the Headingley Property, a multi-let retail, leisure and office property in a densely populated suburb just outside the CBD in Leeds, for a purchase price of £16.23 million, or £17.1 million including acquisition costs. The purchase price reflected a net initial yield of 9.14 per cent. and satisfied the Company's investment criteria by offering good underlying fundamentals in terms of location and specification, affordable rents and sustainable tenant demand.

Following the acquisition of the Headingley Property, in February 2014 the Company acquired Morgan Sindall House in Rugby for £3.95 million, or £4.17 million including acquisition costs, reflecting a net initial yield of 8 per cent. The office property is let to Morgan Sindall for 15 years without tenant break options and complements the current portfolio by offering a long lease to an established tenant at an above average yield with inflation-linked rental uplifts.

The placing of 35,592,128 Ordinary Shares in January 2014 and the acquisition of both the Headingley Property and the Rugby Property has had the following positive financial impact compared with the last reported NAV as at 31 December 2013:

· increase in the NAV from £168.5 million as at 31 December 2013 to approximately £190.6 million as at 17 March 2014;

· increase in dividend cover from 74 per cent. over the quarter to December 2013 to approximately 91 per cent. as at 17 March 2014;

· increase in the Portfolio value from £279.59 million as at 31 December 2013 to £306.48 million as at 17 March 2014;

· reduction in the loan to value ratio, net of cash, from 40.7 per cent. as at 31 December 2013 to 39.0 per cent. as at 17 March 2014.

The positive financial impact of the January placing has provided the Company with the opportunity to pursue a prudent growth strategy that is value accretive to Shareholders, with the key potential corporate benefits summarised below:

· an enhancement in net income due to the arbitrage between the Ordinary Share price yield and the yields currently achievable on UK commercial property;

· additional liquidity in the Ordinary Shares should be gained with a larger market capitalisation;

· a reduction in the Company's loan to value ratio; and

· operational leverage and economies of scale.

As illustrated by the recent acquisitions, new equity can potentially be invested in properties offering an attractive yield with scope for adding value through asset management. Furthermore, improving dividend cover enables the Company to consider acquiring lower yielding assets offering enhanced growth prospects. More specifically, future acquisitions are likely to target the following markets:

Offices:

· London sub-markets with robust demand and areas known as the London 'villages' which benefit from multiple alternative uses including commercial as well as residential occupiers; and

· cities and towns outside of London with a "knowledge-based" economy offering creativity and innovation e.g. Cambridge, Oxford, Thames Valley and Brighton.

Industrial:

· medium-sized warehouses around big cities to support e-tailing - specification is key; and

· Greater London industrial offering long-term change of use.

Retail:

· convenience retailing in affluent areas;

· "value" retailing where overall cost to retailer is low; and

· higher yielding retail in strong cathedral towns and regional centres.

Alternatives:

· target operators with pricing power who pass on rising costs to end users;

· fixed or inflation-linked rental uplifts where underlying rents will keep pace; and

· sectors including healthcare, student accommodation, affordable housing or serviced apartments.

As stated above, the Investment Manager believes that there is an opportunity to broaden the Company's investable universe through exposure to additional alternative property types such as healthcare, hotels and student accommodation. These alternative property types could make a positive contribution to performance through diversification and other benefits such as longer lease terms with inflation-linked rents.

The Investment Manager is actively targeting a pipeline of potential acquisitions which satisfy the Company's investment criteria above and it is intended that the net proceeds from the Initial Placing and Offer for Subscription will be deployed into acquisitions that are currently under negotiation and where terms have been agreed with the vendors.

In the event that the acquisitions currently under negotiation do not proceed to completion, the Company will seek to invest the net proceeds of the Initial Placing and Offer in accordance with the Company's investment policy as soon as is practicable

The Initial Placing and Offer for Subscription

Under the Initial Placing and Offer, subject to compliance with the Law and the Articles, the Company is proposing to issue up to 80 million New Shares at 50.25 pence per New Share to raise gross proceeds of up to approximately £40.2 million. The Initial Placing and Offer Price is based on the prevailing NAV per Share on 17 March 2014 plus a premium to cover the costs of the Initial Placing and Offer.

The Directors have reserved the right, in consultation with Numis and J.P. Morgan Cazenove who are acting as joint sponsors and brokers to the Company, to increase the number of New Shares offered pursuant to the Initial Placing and Offer to up to the maximum amount for which the Directors are seeking authority pursuant to the Issues, being up to 200 million New Shares. Any such increase will be announced via an RIS.

In the event that the number of New Shares applied for under the Initial Placing and Offer at the Initial Placing and Offer Price would result in the Company receiving net proceeds which are significantly in excess of the issue size then it would be necessary to scale back applications under the Initial Placing and Offer. In such event New Shares will be allocated as nearly as reasonably possible, so that applications from existing Shareholders are given priority over other applicants, and, where applicable, with a view to ensuring that existing Shareholders are allocated such percentage of New Shares as is as close as possible to their existing percentage holding of Ordinary Shares. In the event of oversubscription New Shares will be allocated to the Investec Related Party and/or the Schroders Related Party at the sole discretion of the Company, J. P. Morgan Cazenove and Numis on a basis that does not give them preferential treatment as against the other Shareholders taking into account the proportions of their shareholdings and the extent of the oversubscription.

The New Shares will rank pari passu in all respects with the existing Ordinary Shares, (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the relevant New Shares). The New Shares issued under the Initial Placing and Offer will not be entitled to receive the dividend for the period from 1 January 2013 to 31 March 2013.

The Initial Placing and Offer is conditional, inter alia, on:

(i) Resolution 4 being passed at the EGM;

(ii) the Placing Agreement becoming wholly unconditional (save as to Initial Admission) and not having been terminated in accordance with its terms prior to Initial Admission; and

(iii) Initial Admission occurring by 8.00 a.m. on 17 April 2014 (or such later date as the Company, Numis and J.P. Morgan Cazenove may agree in writing, being not later than 8.00 a.m. on 31 May 2014).

The Directors intend to apply the net proceeds of the Initial Placing and Offer in accordance with the Company's investment objective and policy. The Initial Placing and Offer is not being underwritten.

Applications will be made to the FCA and to the CISE for admission of the New Shares to their respective Official Lists. Applications will also be made for the New Shares to be admitted to trading on the London Stock Exchange and the CISE. It is expected that Admission will become effective and that unconditional dealings in the New Shares will commence on the main market for listed securities of the London Stock Exchange and on the CISE at 8.00 a.m. (London time) on 17 April 2014.

The New Shares will be issued in registered form and may be held in uncertificated form. The New Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The New Shares will be eligible for settlement through CREST with effect from Initial Admission.

Further details of the Initial Placing and Offer and as to how Shareholders can apply for new Ordinary Shares are set out in the Prospectus.

The Placing Programme

The Company is also proposing the Placing Programme to enable the Company to raise additional capital in the period from 18 April 2014 to 19 March 2015 as and when it identifies properties that are suitable for acquisition. This should, in turn, enable the Investment Manager to act opportunistically, by making a series of accretive property acquisitions whilst also mitigating the risk of cash drag on Shareholders' funds. Further details of the Placing Programme are set out in Part 3 of the Prospectus.

Conditional on Resolution 4 being passed at the EGM, the Directors will be authorised to issue up to 200 million New Shares pursuant to the Placing Programme less any such shares issued pursuant to the Initial Placing and Offer without having to first offer those New Shares to existing Shareholders. The Placing Programme is being implemented to enable the Company to raise additional capital in the period from 18 April 2014 to 19 March 2015 as and when it identifies properties that are suitable for acquisition. This should, in turn, enable the Investment Manager to act opportunistically, by making a series of accretive property acquisitions whilst also mitigating the risk of cash drag on Shareholders' funds.

The Directors intend to apply the net proceeds of the Placing Programme in making investments in accordance with the Company's investment objective and policy. The Placing Programme is not being underwritten.

New Shares will be issued from 8.00 a.m. on 18 April 2014 until 8.00 a.m. on 19 March 2015. The issue of New Shares pursuant to the Placing Programme is at the discretion of the Directors.

The Placing Programme is conditional, inter alia, on the following:

(iv) Resolution 4 being passed at the EGM;

(v) the Placing ProgrammePrice being determined by the Directors as described below;

(vi) Admission of the New Shares issued pursuant to such issue; and

(vii) a valid supplementary prospectus being published by the Company if such is required by the Prospectus Rules and/or the Authorised Closed-Ended Investment Schemes Rules 2008.

In circumstances where these conditions are not fully met, the relevant issue of New Shares pursuant to the Placing Programme will not take place.

The Placing Programme is flexible and may have a number of closing dates in order to provide the Company with the ability to issue Ordinary Shares over a period of time.

All Ordinary Shares issued pursuant to the Placing Programme will be issued at a premium to the Net Asset Value per Ordinary Share at least sufficient to cover the costs and expenses of the Placing Programme (including without limitation, any placing commissions).

Applications will be made to the Financial Conduct Authority, the London Stock Exchange and the CISE for all the Ordinary Shares to be issued pursuant to the Placing Programme to be admitted to the Official Lists of the FCA and of the CISE and to trading on the London Stock Exchange's main market for listed securities and the CISE throughout the period from 18 April 2014 to 19 March 2015. It is expected that such admission and dealings in the Ordinary Shares issued pursuant to the Placing Programme will commence in the period from 18 April 2014 to 19 March 2015.

Authority for the Issues

In order for the Directors to issue Ordinary Shares for cash pursuant to the Issues free of pre-emption rights, such pre-emption rights must be dis-applied in accordance with the Articles. Shareholders are therefore being asked to approve, by way of special resolution at the Extraordinary General Meeting, the disapplication of pre-emption rights in respect of the issue of up to 200 million Ordinary Shares (representing just over 50 per cent. of the issued share capital of the Company as at the date of this announcement) pursuant to the Issues.

Whilst 50 per cent. is higher than the disapplication of pre-emption rights authority ordinarily recommended by corporate governance best practice, the Directors believe that taking a larger than normal authority is justified in the present circumstances to enable the Company to issue New Shares on an ongoing basis to fund future acquisitions.

New Shares will only be issued to new and existing Shareholders at a premium to the prevailing NAV at the time of issue in order to take account of the costs of such issue and will therefore be accretive to the prevailing NAV for existing Shareholders. Whilst Shareholders' voting rights will be diluted, the Directors believe that this consideration is outweighed by the flexibility that a larger authority provides. It will also mean that the Company should save the costs of having to issue further prospectuses in order to obtain further authority. The Directors intend to use this authority when they consider that it is in the best interests of Shareholders to do so and when the Investment Manager has identified suitable properties for acquisition.

The Ordinary Shares issued pursuant to the authority conferred by Resolution 4 will rank pari passu with the Ordinary Shares then in issue (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the relevant new Ordinary Shares).

The authority conferred by Resolution 4, if passed, will lapse on 30 September 2015, being approximately 18 months from the date of passing the Resolution.

Related party transactions

As at the date of this announcement, the following persons are, or should be considered to be, related parties of the Company:

§ Investec Wealth & Investment Limited, a subsidiary of Investec plc (the "Investec Related Party"); and

§ Schroders plc and each entity within the group of companies of which Schroders plc forms part which, in each case, holds Ordinary Shares either as principal or on a discretionary basis (the "Schroders Related Party"),

(together, the "Related Parties" and each a "Related Party").

A person can be a related party for a number of reasons, including, by virtue of the size of its holding in a company or because it is the investment manager of the relevant company or otherwise connected to the investment manager. Under the Listing Rules, unless a relevant exemption applies, when a company issues shares to a related party, there is a requirement to obtain shareholders' approval for that transaction.

The Investec Related Party is deemed to be a related party of the Company for the purposes of the Listing Rules by virtue of its current holding in the Company's issued share capital, being 13.2 per cent. at 18 March 2014. The Schroders Related Party is deemed to be a related party of the Company pursuant to Listing Rule 15.5.4 which provides that any investment manager of a closed-ended investment fund, together with members of its group, is a related party.

As set out above, the Company completed a placing of 35,592,128 Ordinary Shares on 14 January 2014 (the "January Placing"). Investec Wealth & Investment subscribed for 6,565,956 Ordinary Shares for an aggregate consideration of £3,168,074 under the January Placing and Schroders Group subscribed for 11,579,647 Ordinary Shares for an aggregate consideration of £5,587,180 under the January Placing. At the time of the January Placing, the Company received advice from Numis that the issue of Ordinary Shares to the Related Parties was fair and reasonable insofar as Shareholders were concerned. Shareholder approval was not required at that time because of the relative size of the subscriptions by the Related Parties under the January Placing.

However, if further Ordinary Shares are placed with either of the Related Parties pursuant to the Initial Placing and Offer or the Placing Programme, the Company may be required to seek Shareholder approval. The Company, in consultation with Numis and J.P. Morgan Cazenove, has agreed that it would be desirable to have the ability to place Ordinary Shares with each of the Related Parties under the Initial Placing and Offer and the Placing Programme without requiring a Shareholder vote on each such occasion. Accordingly, the Directors are proposing Resolutions 1 and 2 at the EGM, the effect of which is to permit the Company to place Ordinary Shares, both pursuant to the Initial Placing and the Placing Programme, with each of the respective Related Parties (the "Related Party Transactions"). Each of the Related Parties has undertaken not to vote the Ordinary Shares in which it is interested in respect of Resolutions 1 and 2 respectively and will take all reasonable steps to ensure that its associates will also abstain from voting on such resolutions. The Board, having been so advised by Numis and J.P. Morgan Cazenove, considers that the Related Party Transactions are fair and reasonable insofar as Shareholders are concerned.

Although the Board is proposing to issue up to 200 million Ordinary Shares on a non-pre-emptive basis, the Board will seek to observe the principles of pre-emption in terms of its allocation of Ordinary Shares under the Initial Placing and Offer. If Resolutions 1 and 2 are passed, it is theoretically possible that all Ordinary Shares could be placed with either the Investec Related Party or the Schroders Related Party. However, the Board will not place Ordinary Shares with either of the Investec Related Party or the Schroders Related Party if such placing would trigger the requirement of the relevant Related Party to make a mandatory bid for the Company under Rule 9 of the UK Code on Takeovers and Mergers.

For illustrative purposes, if 200 million Ordinary Shares are issued pursuant to the Issues the maximum potential holding of either the Investec Related Party or the Schroders Related Party would be 177,394,787 Ordinary Shares representing 29.99% of the then total issued share capital of the Company.

In the event that there is a material change to the terms of the Placing Programme contemplated in the Circular, then the Company will, save as stated below, seek new Shareholder approval for any further issue of Ordinary Shares to any of the Related Parties.

Shareholders should be aware that under the Listing Rules, if the transaction with a related party is sufficiently small in size, it is not necessary to obtain the approval of shareholders as referred to above in respect of it (a "Small Related Party Transaction"). Accordingly, in the event that Resolutions 1 and/or 2 are not passed, it would still be open to the Company to issue further Ordinary Shares to the relevant Related Party up to such limits as would ensure that the issue, together with any issue in the last 12 months from the date of that issue, still constituted a Small Related Party Transaction.

The tests for whether a related party transaction is small are set out in the Listing Rules. In summary,if the relevant percentage ratios of the tests are less than 5 per cent. the requirement to obtain Shareholder approval will not apply.

Amendment to investment policy

Currently the Group invests in the three traditional commercial property sectors of office, retail and industrial and it may invest in other sectors from time to time, such as residential and leisure.

The investment policy has not changed materially since the launch of the Company but has been amended from time to time by the Board in consultation with the Investment Manager.

Evolving structural and cyclical changes in the UK commercial property market means that, in the view of the Investment Manager, there is an opportunity to broaden the Company's investable universe through exposure to additional alternative property types such as healthcare, hotels and student accommodation. These alternative property types could make a positive contribution to performance through diversification and other benefits such as longer lease terms with inflation-linked rents.

Whilst this is not a material change to the investment policy but more an expansion of it, the Board believes that this is an appropriate opportunity to formally restate the investment policy so as to provide a clear and definitive version of it. Further, the Board believes that the Shareholders should be given the opportunity to approve this restated investment policy.

The Directors are therefore seeking Shareholder approval for the restated investment policy.

Extraordinary General Meeting

The Proposals are conditional on the approval by Shareholders of the Resolutions to be proposed at the Extraordinary General Meeting of the Company which has been convened for 10.00 a.m. on 16 April 2014.

The Resolutions that will be put to Shareholders at the Extraordinary General Meeting are to:

§ authorise the Company to issue Ordinary Shares to the Investec Related Party on the basis described in this announcement ("Resolution 1");

§ authorise the Company to issue Ordinary Shares to the Schroders Related Party on the basis described in this announcement ("Resolution 2");

§ amend and restate the Company's investment policy ("Resolution 3"); and

§ disapply statutory pre-emption rights otherwise applicable to the allotment of up to 200 million Ordinary Shares such that new Ordinary Shares do not first have to be offered to Shareholders in proportion to their holdings of Ordinary Shares ("Resolution 4").

Resolutions 1 to 3 will be proposed as ordinary resolutions. Resolution 4 will be proposed as a special resolution. The Resolutions are not inter-conditional.

An ordinary resolution requires a simple majority of members entitled to vote and present in person or by proxy to vote in favour in order for it to be passed. A special resolution requires a majority of at least 75 per cent. of members entitled to vote and present in person or by proxy to vote in favour in order for it to be passed.

All Shareholders are entitled to attend and vote at the Extraordinary General Meeting (save in respect of Resolutions 1 and 2 on which the Related Parties are not permitted to exercise their voting rights). In accordance with the Articles, all Shareholders entitled to vote and present in person or by proxy at the Extraordinary General Meeting shall upon a show of hands have one vote and upon a poll shall have one vote in respect of each Ordinary Share held. In order to ensure that a quorum is present at the Extraordinary General Meeting, it is necessary for two or more Shareholders holding 5% or more of the voting rights applicable at such meeting present in person or by proxy.

Recommendation

The Board, which has received advice from Numis and J.P. Morgan Cazenove, considers that the Proposals are in the best interests of the Company and its Shareholders as a whole. In providing its advice, each of Numis and J.P. Morgan Cazenove has taken into account the Board's commercial assessment of the effects of the Proposals. Accordingly the Board unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting. The Directors intend to vote in favour of the Resolutions in respect of their holdings of Ordinary Shares amounting to 234,880 Ordinary Shares in aggregate (representing approximately 0.06 per cent. of the issued share capital of the Company as at 18 March 2014 (being the latest practicable date prior to the publication of the Circular)).

EXPECTED TIMETABLE

All references to time in this document are to London time.