- Overview
- Chairman & Chief Executive's Statement
- Operating & Financial Review
- Property Review
- Management, Governance & CR
- Financial Statements
- Highlights & Introduction
- Objectives
- Activity during the Year
- Financial Results
- Cash Flows
- Portfolio Valuation
- Views on the Property Market
- Finance & Capital Structure
- Important Trends in the UK Market
- Risks & Uncertainties
- Explanatory Notes
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Operating & Financial Review
Risks & Uncertainties
Real Estate Investment Trusts – prospects
The Group’s objective is to achieve attractive long-term total returns whilst minimising risks. In order to identify and evaluate risks and design controls to mitigate them, a regular comprehensive assessment is undertaken which has identified some 50 individual risks affecting the Group. Responsibility for management of each key risk is clearly identified and delegated by the Board to specific executive directors and senior executives within the Group.
Most of the risks faced by the Group arise out of natural market volatility, relating to supply and demand imbalances in the following core areas:
- demand for space from occupiers against available space (including new developments)
- differential pricing for previous locations and buildings
- alternative use for buildings (particularly redevelopment)
- demand for returns from investors in property, compared to other asset classes
- price differentials for capital to finance the business
- legislative initiatives, including planning consents and taxation
- economic cycles, including the impact on tenant covenant quality, interest rates and inflation
- mis-pricing of property assets by the equity markets.
Our preference for long-term investments let on long leases to strong tenants with upward only rent reviews provides stable long-term cash flows which enables the Group to ride out much of this natural market volatility.
Following discussions held in 2002 and 2003, there has been a further round of consultation on corporation tax reform, in advance of intended legislation. We operate, in common with most other corporate entities, with considerable uncertainty as to when and how any legislation will take effect.