

| Risk | Mitigation |
|---|---|
Market risk Property markets are cyclical. Performance depends on general economic conditions, a combination of supply and demand for floor space as well as overall return aspirations of investors. Constrained credit markets have served to put downward pressure on property valuations and slowed occupational demand with the potential for increased void levels and tenant defaults. |
Prior to committing to a development the Group conducts a detailed Financial and Operational appraisal process which evaluates the expected returns from a development in light of likely risks. During the course of a development, the estimated returns are regularly monitored to allow prompt decisions on leasing and ownership to be determined. The Group’s rents remain low by comparison to the market. Tenants are proactively managed to ensure changing needs are met with a focus on retaining income, where appropriate, and maintaining a diverse tenant mix by industry sector and size. Formal covenant procedures are completed on all new tenants to ensure rent deposits or guarantees are secured where appropriate. |
| The impact of changes in legislation particularly in respect of environmental legislation and planning regulations. |
Through the use of experienced advisers and direct contact, senior Group representatives spend considerable time ensuring that buildings are maintained and refurbished or redeveloped in line with current regulations and changing tenant demands including, for example, changing environmental legislation requirements, in the most cost-effective manner. |
| Development Failure to obtain or delays in gaining planning consents. |
Planning applications are proactively managed. The Company monitors changes in planning legislation and has strong relationships with planning authorities and consultants. |
| Investment Difficulty in sourcing investment opportunities at attractive prices. |
The Company has dedicated resources whose remit is to constantly research each of the sub-markets within central London seeking the right balance of investment and development opportunities suitable for current and anticipated market conditions. |
| Portfolio returns impaired by inappropriate recycling of capital. | Business plans are produced on an individual asset basis to ensure the appropriate churn of those buildings with relative limited potential performance. |
| Attracting and retaining the
right people Achieving the Company’s aims requires people of the highest calibre. |
The Company has a remuneration system that is strongly linked to performance and a formal appraisal system to provide regular assessment of individual performance and the identification of training needs. |
| Reputation Health & Safety and Environment ("HSE"). |
The Company has dedicated HSE personnel to oversee the Company’s HSE Management Systems including regular risk assessments and annual audits to proactively address key HSE areas including energy usage and employee, contractor and tenant safety. |
| Financial risks
Liquidity risk. |
Funding maturities are managed across the short-, medium- and long-term. The Group’s funding measures are diversified across a range of bank and market bonds. Strict counter party limits are operated on deposits. |
| Adverse interest rate movements. | Formal policy to manage interest rate exposure by having a high proportion of debt with fixed or capped interest rates through derivatives. |
| Breach of borrowing covenants. | Financial ratios are monitored and regularly reported to the Board. |
| Non compliance with REIT regulations. | The Group’s accounts and forecast financial measures are regularly compared to REIT limits and reported to the Board. |