Hospitality (40.4 per cent of funded investment portfolio) ? The largest hotel exposure in the portfolio is Hotel, Spain (accounting for 27.6 per cent of current hospitality

exposure and 11.1 per cent of the total funded investment portfolio). This coastal resort hotel completed a heavy

refurbishment programme in 2020 and the hotel re-opened during May 2021 as a luxury destination 5-star property.

The property has achieved very high guest ratings since opening and forward bookings for the remainder of the

season are excellent, with average room rates ahead of business plan. This demonstrates the strength of pent-up

demand for leisure travel, particularly to resort locations. ? The next most significant hotel exposure is Hotel, Dublin which accounts for 25.0 per cent of current hospitality

exposure. As previously reported this property has, to a significant extent, mitigated the negative impacts of

reduced conference and leisure business caused by the pandemic, by leasing the property to the Irish government's

Health Service Executive ("HSE"). This contract is expected to be in place for most of 2021. The sponsor has

continued to work on value accretive asset management initiatives across the wider estate which is subject to the

loan's security and this has been verified such that following a recently updated formal valuation, the loan has

been further de-risked with the loan to value ratio decreasing by approximately 2.6 per cent. ? The UK hotel exposures predominately comprise of three hotels (Hotel, Oxford, Hotel, Scotland and Hotel, North

Berwick, accounting for 40.2 per cent of hotels in the portfolio). These hotels have been undergoing comprehensive

refurbishments in line with the underwritten business plan. They will re-open during summer 2021 with the benefit

of attractive new branding and a fully refurbished offering which is expected to be well placed to benefit from

pent-up UK domestic leisure travel demand, particularly with two of these assets being located directly adjacent to

well-known landmark Scottish golf courses. Remaining UK hotel exposure comprises a 50-key hotel ground up

development within the Hotel and Residential, UK loan. Construction is progressing well, with completion forecast

in 2022. This loan is residential-led and the value of pre-sold residential units is higher than the total loan

commitment (inclusive of the hotel), which very significantly reduces hospitality exposure on this loan. ? All hospitality loans have adequate resources to meet their cash needs in the medium term.

Retail (12.7 per cent of funded investment portfolio) ? The Group's exposure to retail is predominantly comprised of the "Three Shopping Centres, Spain" and "Shopping

Centre, Spain" loans. These are the only stand-alone retail loans in the portfolio and comprise 11 per cent of the

Group's total funded investment portfolio. All other retail exposure is contained in a limited number of mixed use

portfolios where the retail sector represents less than 25 per cent of the total loan balance. ? With pandemic related restrictions beginning to be eased, along with vaccine progress in Spain being one of the

strongest in Continental Europe, retail footfall traffic is beginning to increase. Footfall in May 2021 had

recovered, on average, to over 70 per cent of the same period, pre-pandemic, in 2019. This is expected to continue

to increase over the coming months. Occupancy on average in the centres has remained robust with limited tenant

failures in contrast to the level of retailer insolvencies in the UK and US. The sponsor's asset manager has been

successful in leasing up some vacant space to gym operators and sports brands in particular, amongst others. This

has involved the sponsor injecting new equity into the deals in order to assist with capital expenditure for new

store fit outs and they continue to be very actively engaged in the assets. ? Across the investment portfolio, loans with retail exposure continue to have adequate cash reserves and underlying

income generation to pay interest.

Construction & heavy refurbishment (25.2 per cent of funded investment portfolio) ? Over 95 per cent of the Group's construction and heavy refurbishment loans are located in the UK. These projects

have continued to operate on site throughout the period since the outbreak of the pandemic, albeit at times,

on-site capacity was reduced for safety reasons. Notwithstanding this, all projects are progressing satisfactorily

and no unfunded cost overruns have occurred. ? Non-essential construction sites in the Republic of Ireland were mandated by the government to close from 8 January

2021 through to early May 2021; however, we note that the Group's exposure to Irish construction loans is limited

to under one per cent of total loans funded as of 30 June 2021. In any event this project has remained adequately

capitalised with funding in place to complete, and we do not consider that the delay in timing of final completion

to adversely impact asset value or the loan. ? Please note that the construction & heavy refurbishment exposure noted above will include assets also included in

hospitality and in office, industrial, logistics & residential.

Office, industrial, logistics, healthcare, life science & residential (46.9 per cent of funded investment portfolio) ? These sectors continue to display resilient characteristics in terms of overall performance with high rent

collection and robust rental and investment yields. Sponsors with asset sell down strategies are succeeding in

achieving above underwrite pricing, particularly on the disposals that we have witnessed within the industrial and

residential sectors. ? The Group's exposure to office is 22.2 per cent of the funded investment portfolio. Within this sector, the

exposures are well diversified across Europe. The largest exposure within this sector represents 31 per cent of

total office and just 7 per cent of the total investment portfolio. This loan has a high occupancy of institutional

tenants in prime city centre locations. While generally new lease tenant incentives have increased slightly as a

result of a slower take up related to pandemic disruption, rental levels and investment yields based on actual

transactions have remained fairly robust. The Group's weighted average loan to value of the loans with a greater

than 50 per cent office weighting is 64 per cent which reflects a modest position. ? The Group's exposure to residential is under construction product, of which a large proportion has been pre-sold.

The level of legally exchanged unit pre-sales has now reached a level that exceeds the total loan commitment, which

has therefore significantly de-risked the loan.

Market commentary and outlook

The largest vaccination campaign in history is underway. According to Bloomberg more than 3.3 billion doses have been administered across 180 countries. The UK has been one of the clear leaders in vaccinations and for the reopening of the economy and society. As at the end of the second quarter 115 doses have been administered per 100 people, with 66 per cent having received a first dose, putting the UK ahead of the US and the rest of Europe. Spain is at 90 doses per 100 people with 55 per cent having received a first dose, which is ahead of Germany, France and Italy. The current pace of vaccination in Spain is also very impressive at 1.14 doses per 100 people per day compared with 0.92 for Germany, 0.51 for UK and only 0.25 for the US.

The UK opening plan that was set out in February has remained almost entirely on schedule. In the first quarter factsheet we outlined that we expected crowds of 10,000 people at mass events and the opening of short haul travel later in the year. In sports we have seen progress to more than 60,000 people attending football's Euros final and a capacity crowd of 15,000 for the final weekend on centre court at Wimbledon. This has been enabled by checks on negative test results or vaccination status. In the hotel market we have seen the anticipated performance for UK leisure driven markets coming through as hotels were able to more fully open over the last weeks. One example of a strong leisure performance is the Bath market, where occupancy rates had been running lower than 30 per cent all year to May, which achieved occupancy percentage rates in the 80s during the half term week. While there will be some bumps in the road the general pace of opening for international travel is likely to be similarly facilitated by high levels of vaccination and advances in the tracking of testing and vaccination status.

In the last factsheet we commented on a change in sentiment back toward working from the office with a reduction from 69 per cent of CEOs of major companies to 17 per cent expecting to reduce office space between the third quarter of 2020 and the first quarter of 2021. Property Week now reports that the amount of office space available for sub-leasing in London has turned a corner as occupiers begin to U-turn on "knee-jerk" decisions made during the pandemic to sublet space. Savills' data shows that May saw the largest monthly decline in the total amount of tenant-controlled space on the market since March 2020, falling 7 per cent to 5.88 million square feet, although this figure is still 45 per cent higher than the long-term average. Savills' data also shows West End investment market cumulative annual turnover of GBP1.19 billion is 53 per cent down on the five year average but comments that with GBP2.4 billion of stock under offer it bodes well for a busy summer. In the West End occupier market, while leasing pace is still off historical averages, the available supply has now dropped for the first time since August 2020 and Savills report leasing activity is picking up.

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July 23, 2021 02:00 ET (06:00 GMT)