October was a difficult month for pan-European real estate equities, with the benchmark (FTSE EPRA Nareit Developed Europe Total Return Index, in sterling) falling -4.76%. The net asset value (NAV) dropped a little more, at -5.12%. The bright spot was the share-price performance at +1.0%, which saw the discount to net asset value tighten to 6% (from 10%).
Sentiment has weakened again as Europe grapples with a new set of lockdowns. Retail, hospitality and travel-related industries once again bore the brunt of these measures. Encouragingly, schools and universities have stayed open and employees can generally go to work (where they can’t work from home). From an economic perspective, these measures are far less draconian than those imposed in March and reflect the clear imperative to keep all economies running as normally as possible.Continue reading
Pan European real estate equities fell -0.58% (when measured in GBP) with the Trust’s NAV falling slightly less at -0.22%. The share price fell -4.3% as the discount widened to an attractive level of -15%. When viewed in EUR the sector fell -1.5%, the weakening of GBP added to absolute returns.
Pan European real estate equities rose +1.49% (when measured in GBP) with the Trust’s NAV +2.15%. The share price rose an encouraging +5.4% as the discount tightened towards 10%. The month was characterised by a continuation of the theme of the top performing sectors (industrial/logistics, residential, long income) keeping on winning and weakened sectors (retail, hospitality, short income) falling further. The most prominent casualty was Unibail Rodamco which fell -12% as short sellers were emboldened by the (so far unfounded) rumour of an equity raise. The problem for URW is partly one of size, if it does need to raise then it requires several billion euros. The second issue is that the problems in the US portfolio will be harder to resolve. This is amplified by a newly configured management team following the departure of previous (Westfield) management. However, the poorest performance in the month goes to Hammerson (-24.5%) as investors were presented with the details of a £525m emergency deeply discounted rights issue alongside the disposal of its 50% share in the VIA Outlets to its JV partner for c.£275m. The wilful ignoring of clear market trends and the siren call of (short lived) earnings enhancement through increased (cheap) leverage ensured the mass destruction of shareholders’ equity firstly at Intu and now at Hammerson. Across Europe, retail names fared poorly with Mercialys (-16%) as the major shareholder, Casino, tries to reduce its holding. The only bright spot was Vastned (+14%) but that looks short lived with the largest shareholder (a private investor) demanding managerial change which we don’t agree with.
The Trust’s net asset value (NAV) with income rose +1.39% versus a return of +0.07% for the benchmark, while the share price returned +2.55%. The discount still stands at an attractive -13%.
European property companies, measured by the FTSE EPRA Developed Europe Index, generated total returns of +1.2% in euros, outperforming general equities (measured by the EuroStoxx 600 Index, total returns, in euros), which returned -0.9% in July. They were helped by depressed bond yields (the 10-year German bund fell -7 basis points (bps) in the month, ending at -52bp) and the spread of negative real interest rates across several major economies.Continue reading
As announced on 22nd June 2020, TRY held the AGM on 28th July 2020 as a closed meeting in order to protect the health and safety of the Company’s shareholders and officers. The results of the voting at the Trust’s 2020 Annual General Meeting have been published separately here. In lieu of the usual AGM presentation, the Investment Manager posted a webcast regarding the Trust’s portfolio and performance that can be accessed here.
The new financial year ending 31st March 2021 has started strongly with the NAV total return rising +11.5% against a benchmark total return of +8.1%. Disappointingly the share price performance has risen only +7.6% (data as at 24th July) as the discount to NAV has increased to a little over 14% offering a dividend yield of 4.2% based on last year’s annual dividend of 14p.
David Watson succeeded Hugh Seaborn as Chairman of the Board and expressed his thanks to the outgoing Chair for his sage and insightful advice and leadership of the Company and the Board.
Speaking at the AGM Hugh Seaborn observed “Whilst we are in uncharted waters in many respects, it is important to recognise key points made by the manager in his presentation. The Trust has performed well as a result of its active stock selection approach with significant exposure to Healthcare, Logistics, Industrial, PRS and Supermarkets, all of which have performed well through the COVID 19 crisis.
Conversely the Trust remains underweight in Central London offices and all non-food retail sectors. As we approach the Brexit deadline, investors should also recognise that 70% of the Trusts assets are denominated in currencies other than Sterling.” At the Board meeting earlier in the day the Board noted and reaffirmed the Chairman’s comments in the 2019/20 Annual Report that the company benefited from a healthy level of revenue reserves (equating to approximately 14p per share) that can be used to supplement the company’s dividend payments in the event of any short to medium term fall in earnings.
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