West Bridgford Pension Fund: Portfolio Strategy & Structure (2018)

This report provides a comprehensive analysis of the West Bridgford Pension Fund portfolio, valued at £2.6 billion as of December 2018. The portfolio consists of offices, retail, industrial, hotels, residential properties, and cash, with a significant portion invested in non-UK assets. The report addr...Read More

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REAL ESTATE INVESTMENT
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Overview
The current state of the European Property Market when compared to the overall
global performance index overs a variety of real estate investment options with promising
positive returns. However, it needs a good approach when selecting the type of market as
offered by the giant macroeconomic portrait, the trends, and other logistic sectors that bid for
a favorable environment for investment. Like, the past cases have shown proliferation
concerns in the UK, but 2018financial predictions show a promising overall growth level
marked at 1.3% in the UK market but still with increased uncertainties (BNB Paribas Real
Estate 2019). The same inefficiency applies to the Eurozone, especially considering the
reduced foreign trading that has affected the entire real estate market operations. This
examination will review the current company portfolio with other issues identified in the
sector, geographic regions, and offer an opinion on strategized procedures that will best work
for the company.
Sector Distribution
Portfolio sector weighting statistics rank industrial sector as the leading in the UK
Commercial property market averaged at 46%(BMO Real Estate Partners, 2018). The rental
sector represented 27%, while offices and other sectors represent 16% and 11% respectively
in 2018 (Knight Frank, 2018). However, major segment odds performed against the
benchmarking approximations. 2018 showed a shift in the investment plans of many
investors on capital assets based on the sectoral distribution variances. Previously, in the year
2017, specialists' assets attracted 37% of the investors, whereas most popular capital assets in
industrial and distribution section received little traction. The retail, offices, and hotel sectors
represent 7.6%, 29.3%, and 4.3% in 2018, respectively. (Wilson et al., 2018).

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Source: Wilson, et al., 2018)
Other cities in other European regions showed varying yields as attached to three
primary sectors namely retail, logistics and office, Based on the current investment portfolio
plan identified with the company, Berlin, Paris, Warsaw and Milan office prime yield was
2.75%, 3%,4.75% and 3.40% (Wilson et al. 2018). The rental portfolio, which included the
company non-UK shopping centers, represented a prime yield of 3.5% in Barcelona ( PWC
2018). The average performance of each sectoral formation as represented by the yield value
and price variances as provided by each sectoral distribution proves the potential of
improvement in different megacities in Europe and the UK.
The current investment plan of the company has included other major sectoral
segments that perform better in megacities in the UK but again debarred the cities and other
sectors that also perform better. The logistics lead in potential opportunities identified to
include critical cities in southern Europe and significant transport corridors. The effect comes
with the double-digit commerce growth that influenced the variances of sectoral property
prices in the year 2018; thus, the shifts in the investments plans of many investors (Williams,
2018). The potential of investment in different sectors may require the company to include
an alternating investment plan that will need to increase portfolios in non-UK regions. The

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primary focus should be on the projected investment yield identified in different areas as
recognized with the value of the risk that may affect the yield value.
In the UK, office and retails sectors shows a significant increase in yield amounts.
The sectors have also earned a better lure from the minority groups. However, they offer a
more risk for uncertainties, which may result from the low market value of the assets and the
future stagnations of the asset prices. The deterioration of the industry sector, as provided in
the 2018 analysis reports does not create a potential outlook of the continual future worsening
of capital asset prices traded in the sector (Santos 2018). 2019 shows the potential of another
shift, which may promote these sectoral levels. Though, the slowing price growth levels in
former hotspots do not offer a possibility for future increase investment opportunities
Geographical Distribution
In 2018, the southeast region led with 37% of the total capital value. London,
Scotland, West Midlands, East Midlands, Yorks/Humber, North East, and North West
consisted of approximately 19%,9%,9%.8%.7%.6%.4%, and 1% respectively (Knight Frank,
2018). The global rising uncertainty has seen Europe continuing to house among the most
liquid and trusted commercial real estate market globally. International investors and
domestic operators receive similar benefits offered by these variances identified in the Europe
geographical region. The entire Property European Investment volume of assets above EUR
5M totaled to EUR 277.7 billion in the year 2018 (BMO Real Estate Partners, 2018). This
valuation shows a large market with many investment opportunities that are only identical to
a significant player in different geographical regions.
The significant concerns involving the real estate investment in the broader
geographical region consists of determining suitable assets. The most active markets are
valued for offering high-quality real estate assets, but as identified with the company

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investment plan, there is a high propensity of taking more risk to increase the total yield from
the investment. Also, other investment plans of Mega Corporation may lead to overpricing of
prime assets. In 2018, the overpricing of top holdings in the London industrial sector led to
the shift of investment strategies resulting in an increased investment preference on offices by
many investors (Knight Frank, 2019).
A considerable outlook on the broader geographic region identifies emerging trends in
many sectoral formations. Like, German is a potential region for real estate investments in
Europe. The city of Berlin, according to PWC 2018, provided a better sport for investment
that offered an exclusive mixture of excellent priced residential properties with a high return
on capital assets, low uncertainty levels, and long-term growth prospects. The real estate
property value in Berlin increased by 2%, a significant change that influenced the preferences
of investors on the future potential increase in property value in Berlin (PWC, 2018). In two
years, the £85 million portfolios of the company will increase at a valuation of 2%, of which,
if the trend continues, the company will earn a maximum of more than 8% increase in its
office portfolio in Berlin for the next five years.
The property valuation trend in Berlin will increase due to the change of economic
dynamics that have led to the continual demands of the assets. The promising in the region
has shown an increased eagerness of many investors wanting to invest in German. A
considerable change in other regional settings offers global based opportunities for the
continual investment plans of the company in non-UK regions as compared to the local
market. The choice to investors will need to consider on sectoral performance. The
deterioration of industry prices in the UK in 2018 allowed the booming of offices and retail
sections as reflected in the company portfolio earning; office and retail pension fund
portfolios led by 30% and 40% of the total PFP respectively (BMO Real Estate Partners,

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2018). Current London price variances do offer the same situation for the potential increase
in the future yields of the two sectors due to fluctuating economic subtleties.
Considerations of Allowing the Investment of the Portfolio in Direct Real Estate
Expected Returns
Yield embroils the uncertainties in the market. The expected rate of return is also
determined with the market efficiencies and employed company investment procedures to
meet its target estimate (Ibbotson & Siegel, 2018). The firm aims to realize a return of £ 200.
Higher portfolio concentrations, as provided by the company 2018 data on Pension fund
portfolio, includes Offices and retails that consist of a 30% and 40% respectively. A reduced
percentage representation of the two sections will alter the current level of return.
Considering that the reason for improved levels in yields is due to the gained traction of
offices and Retails in the UK market due to a price change in the industrial section, the need
to consider the efficiencies of the two sects is to maintain the same level of return
(Gounopoulos et al.2019). This concern for an expected return, therefore, needs
consideration of a change of trends in other regional sections like Berlin in German. The
advantage of the consideration is that it will result in increased returns of the company at the
end of 2019.
Investment features
Investment features define the characteristics of a real estate investment option. An
option will include a type of capital asset, a geographical region, and sectoral conditions. The
study of London provides a stable market which has proved on its stability for a more
extended period (Boddy 2018). Therefore, the company has an advantage since it grounds in
an already established commercial property Market. Berlin characteristic shows a future
demand for houses, thus indicating an increased future trend on investment. The industrial

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operation does not, however, show a possible performance in this region as relates to other
markets. The current portfolio value in the area will also show a reciprocating increase in
valuation.
On the other hand, German shows high potentials on real estate increase in property
value beside Berlin cities. There is a consequential change of valuations identified with a
region such as German (Dieterich 2018). These changes and opportunities will also affect the
from the distributions center due to increased economic activity (Zhou 2018). Investment
scale is also essential. It determines the magnitude of the commitment made by the company
based on the conditions identified in the market. For instance, a study may provide favorable
conditions that promote the operating efficiencies in the German as a whole thus implying
that if the company diversify to include other cities such as Frankfurt, the total yield value
will increase. The effects originate from the impacts created from regional efficiencies and
operations.
Variations and growth (Phase of the Real Estate cycle)
Asset valuation includes different aspects such as asset liquidity, risks, and change of
property features and reduced increase of property value. Assessments should also consider
external elements and the investment plans offered by the company. Change of prices results
from external forces that demand the preferences of the real estate investors as identified with
the potential return of the property and projected uncertainties (He et al., 2018). Other issues
such as competitions and aggressiveness of other investors may alter the actual valuation of
the property resulting in over or under-pricing. A scramble for investment involves the
growth levels that define the investment strategies that a company should employ to meet the
demands and benefit from the investment plan at all development levels of the real estate

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cycle. The plan stabilizes the company operations in long duration and as well as enhance the
long-term establishment of a company in a particular real estate market.
Fulfillment of the Objectives
Responsible Property Investment
The need for responsible property management is to ensure that the company meets its
objectives. The current aim of the company is to ensure that it keeps its net inflow of £ 200
in the next five years and as well outperforms the IPD local authority pension fund
performance. A scramble for good investment opportunities characterizes a good market.
Equally, a property market demands for better and transparent management procedures of a
property. Strategic management, therefore, ensures responsible property management, and it
includes a projected decision-making system that will meet the demands of the firm
stakeholders.
Current firm operations are concentrated in the UK –London Market. A change to
include other new regions will introduce more concerns; increased risks and uncertainties
and challenges posed by the larger environmental, ethical, and social society and thus
jeopardizing the viability of the properties. Responsible property management, therefore, will
include abiding by the state rules to ensure accountable competition in the company
operations (Myers, 2018). Notably, the implementations of the process will require the firm
to establish better plans which will improve the conditions of the assets and the resulting
social, governance, and environmental issues. European shows a destabilized political
environmental despite its performing real estate sector. The company should consider the
operating variances and note on the argument that will alter the investment plans and result
in other more critical issues from different regional authorities

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Implementing responsible Property investment will need the company to build an
investment rationale. Specific changes should be incorporated to develop new investment
plans. These needs require commitment and engagement in the executions of the company
strategies to reduce the associated investment risks and capitalize on the opportunities in
different regions and sectors (Read & Sanderford, 2018). The actions deal with inhibiting
potential direct and indirect effects on the property value. Investor preferences changes based
on property feature and the organization should ensure that it applies better differentials that
merge the market preferences and the type of product (Miller et al., 2018). Using responsible
property investment will also need an asset allocation plan, property section plan, and
property management actions. In investing in Berlin, the company should consider ways to
allocate properties to the potential clients and the procedures employed to assign such
property to the identified clients.
Environmental Agenda
Enhancing Sustainability
City investment and property development are one of the visionary outlook actions
that are aimed at sustainable development agendas of a given location. Assets are resources,
and their use should ensure safety to the ecosystem. Lack of sustainable management
procedures affects the future growth of the real estate market and as well as affect the future
price of real estate properties (Miller et al., 2018). Change of pricing in the market resulting
in shifts of real estate sectoral prices and return affecting the investors' preferences
(Benlemlih & Bitar, 2018). Change in preference results in s shifts in the investment plans as
witnessed in 2018 UK Market. The shifts affect other sectors, such as the industrial sector
which for a long time remains a giant in the UK and currently shows a low level of traction to
investors.

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Reduced pollution menace
Pollutions implicate the value of a real estate property in the future. Increased
urbanizations have led to an increased level of pollution in megacities and thus affecting the
increase in real estate property value. This issue affects the future value of a property that
results in reduced future cash inflow from real estate investment portfolios (Devine &
Yonder, 2018). The effects may result in the company not to realize its objectives of a
positive net return of £ 200 peranuminthenextfiveyears. The organization should take a
participatory environmental role that will ensure the safeguarding of the natural resources to
help maintain the value of a real estate property in the future periods.

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References
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Available at: https://www.pwc.dk/da/publikationer/2017/pwc-etre-europe-
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Benlemlih, M. & Bitar, M., 2018. Corporate social responsibility and investment efficiency.
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property-market-review_new-office.pdf
[Accessed 19 May 2019].
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Boddy, M., 2018. 11 The property sector in late capitalism: the case of Britain. Urbanization
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Sustainable Investment: A Test of Firm Perspective Theory. s.l.:s.n.
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He, X., Lin, Z. & Liu, Y., 2018. Volatility and Liquidity in the Real Estate Market. Journal of
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