Whilst March was the first negative month since May 2012, April made up that small loss and more, putting the trend firmly back in an upward direction. The benchmark, FTSE EPRA/NAREIT Developed Europe Capped Index Total Return (in GBP) rose 5.5% bringing the year-to-date total return to 10%. The fund outperformed modestly in the month. Most asset classes benefited from the Bank of Japan (BOJ) reflationary trade. Italian sovereign 10-year yields were down 85bp to 3.25%, not far off their all-time lows in 2005. European BBB corporate bond yields hit record lows of 2.7%. Property shares seen as secure, relatively high income opportunities clearly benefited and this fed through into demand. Real estate equity funds have recorded 10 straight weeks (to 25 April 13) of positive inflows ($0.7bn).The BOJ reflationary trade also appears to have generated strong correlation between the strength of GBP/Yen and the UK REIT sector in April.
London remained the flavour of the month. Amongst the strongest performers was the flexible London office space provider Workspace up 9.3%, bringing its total year-to-date return to 25.5%. The stock also benefits from exposure to residential conversion opportunities within its portfolio. The fund remains overweight all of the London stocks except Capital & Counties, which was also a strong performer in the month (+13.1%) despite announcing that it has agreed to pay 5.5% of the residual land value of the entire Earls Court development to Network Rail in return for the use of airspace over the West London line which cuts across the site. Our other top performers in the UK were the self storage businesses where we own both Big Yellow (+13.7%) and Safestore (+15.6%). The Swiss property companies, often viewed as safe havens tend to perform poorly in strong markets and collectively they fell 1% in the month by far the weakest geographic region. The two largest European retail focused companies – Unibail and Klepierre performed surprisingly well (+9.3% and +10% respectively) but investors were clearly focused on the attractive forthcoming dividends.
A large number of stocks go ‘ex’ either annual or interim dividends in the month and this accounts for 1.3% of the total return in the period. It is interesting to note that in these momentum markets many of these stocks have made upmost and in some cases more than their dividend in the last few weeks.
Whilst the share price return year-to-date has been 13.6%,the discount to NAV remains in the range 13-16% and we made our first buyback for over three years acquiring, for cancellation 175,000 shares at a 16.1% discount.
