Pan European real estate equities bobbed sideways in a narrow 3% trading range through the ‘dog days’ of August with the net asset value (NAV) total return ending the month -0.3% versus the benchmark at -0.8%. The share price fell -2.1% in the month nudging the discount (share price to NAV) back out to 8%. August was marked by the usual thin volumes as the holiday season stretched across the month. However, this didn’t stop some management teams, with TAG, our largest German residential overweight position announcing a significant expansion in their Polish build-to-rent and build-to-sell business. This was partly funded through a €186m capital raise (7.1% of shares issued) which we participated in. It also extended a 2031 convertible. The combined capital raised enables TAG to maintain its loan-to-value ratio with the NAV dropping just 3% whilst earnings accretion will be c5%. The market took the deal positively and the stock which had been performing well returned 8.3% in the month. This return was far ahead of the next major German residential name LEG which returned just 2.6%. Our other large (relative) position is Phoenix Spree (Berlin residential) which was virtually flat over the month.
Warehouses de Pauw (6.8%) produced solid H1 results and the share price performance was encouraging as it held onto earlier gains without much new news. We still view the company as cheap compared to history and continue to add to our holding. Other notable winners include Merlin, the diversified Spanish name increasingly dominated by its datacentre expansion. We have continued to close our underweight position, having underestimated the market’s insatiable appetite for all things AI related.
The bottom of the monthly league table was dominated by London (and wider Southeast) office names with Derwent London (-11.9%) leading the pack following very lacklustre H1 numbers which included downward revisions to earnings expectations. Its smaller neighbour, GPE (-10%), was hit not only by the poor sub-sector messaging but was also weak on the news of a whistleblower-driven investigation into potential manipulation of diversity statistics. The claim that massaged data resulted in triggering performance hurdles for management long-term incentive plans is being investigated by external counsel. CLS (-10.2%) an owner of offices in London/Southeast, Germany and France fell on its interim report which confirmed increased vacancy levels (21% on UK assets) and this followed on from a halving of the dividend in the previous year. We don’t currently hold any of these office names.
The other major corporate activity was the announcement of agreement between Unite and Empiric for the takeover of the latter. The original announcement that they were in discussion triggered an initial 10%+ slide in the Unite share price which produced less generous terms for Empiric shareholders as the deal is a mix of shares and cash. However, investors remain unconvinced and Unite’s share price is down 17% from the end of June to the end of August. The transaction increases their exposure to the post-grad market (and contains more studios than clusters) but is barely accretive for several years. We question the timing given that Empiric shares traded 20% lower than the 97p (including dividends) deal price as recently as Q1 this year when the management of Empiric were known to be seeking an exit through merger or privatisation.
Discrete rolling annual performance (%)
Performance data is in GBP £ terms. Investors should be aware that past performance should not be considered a guide to future performance. All fund performance data is net of all fees and expenses.
As at date 30.06.2026
| 2025/2026 | 2024/2025 | 2023/2024 | 2022/2023 | 2021/2022 | |
| NAV (Inc) | – 0.5 | 11.6 | 22.5 | – 19.3 | – 16.5 |
| Benchmark | – 0.1 | 9.7 | 21.4 | – 19.8 | – 21.5 |
| Share Price | – 2.0 | 13.8 | 22.5 | – 24.5 | – 13.5 |
