REAL ESTATE - Halladale, the Scottish real estate firm backed by the Kodak pension fund, posted interim pre-tax profits of £4.12m(€6.4m) – an 8% increase over 2005.

The results, covering the six months to the end of October 2006, indicated a 42% increase in projects under management over the period from £575m in 2005.

"We believe the continuing move into the office sector in the UK and the development of our business model in mainland Europe secures the medium term outlook for the business," chairman David Lockhart said in a statement.

Halladale forecasts that offices will be the top-performing UK sector in the medium term. By October 54% of its portfolio was concentrated in this sector, up from 18% the previous year.

"They’ve seen that office will be the best-performing segment over the next few years and they’ll grow that part of the portfolio," said a spokesman for the firm. "But it’s entirely opportunistic – they’ll still do retail."

Most of Halladale’s projects are co-investment deals with pension funds – notably Kodak – including those currently in the pipeline. "There are very few that they fund themselves," said the spokesman.

Additional institutional investor interest has come from BriTel Fund Nominees, the trustee body for the British Telecom Pension Fund, which in August upped its shareholding in real estate company Halladale to just under 4%.

Halladale last week also ruled out as "unlikely" its conversion to a real estate investment trust (REIT) "because the regulations, albeit more flexible than originally anticipated, are not compatible with the Halladale model" – despite an indication last summer that it would consider converting significant parts of the business.

It added that "REITs will provide interesting opportunities for our co-investment fund management activities and as the REIT regime settles we will be alert to opportunities [that] may open up for us".

Halladale’s portfolio at the end of October totalled around £818m.