A slightly negative end to the calendar year with the monthly net asset value (NAV) falling -0.9% whilst the benchmark corrected -0.5%. However, the full year NAV total return was a healthy 12.6%, slightly ahead of the benchmark gain of 11.9%. Whilst our property sector wasn’t able to keep up with broader UK and EU equity indices, we remain encouraged that investors have become increasingly aware of the improving market fundamentals in so many of our subsectors. Rental growth remains healthy, particularly for prime assets, given the shortage of speculative development which has been squeezed by both rising costs of construction and elevated return requirements from risk capital.

Given the reduced market activity in December, we have taken the opportunity to comment more broadly on performance over the 2025 calendar year, although it should be noted that the Trust has a March year end. The UK element of the benchmark (in sterling) returned 11.1%, whilst the pan European (ex UK) component (in euros) returned 7.6%. When viewed in sterling the European component returned 13.7%. We remind investors that the Trust maintains currency exposure in line with the benchmark. 

Whilst all regions and sectors felt the impact of the April tariff announcements, the recovery was swift and strong as investors recalibrated (and reduced) their (worst case) expectation of inflation and risk of higher rates. The end-of-June interim point marked the high point for real-estate equities in 2025 with returns of 13.2% for the pan European benchmark split into 8.5% for the UK (GBP) and 7.1% for Europe (ex UK) in euros. The second half was much trickier, with a widespread sell off in the UK over the summer as investors reflected on stubbornly-elevated inflation data. Continental Europe benefited from the positive outlook from fiscal stimulus (Germany) alongside falling inflation across the Eurozone, despite political turmoil in France. The UK names recovered in the third quarter (Q3) only to weaken again in Q4 as investors fretted about the impact of the Budget.

The strongest regional performance was Switzerland, particularly in Q4 where it returned an extraordinary 8.5% versus the pan-European benchmark of 1.9%. The traditional ‘safe haven’ of Swiss franc (CHF) denominated stocks was bolstered by negative short-term interest rates. Real-estate names continue to offer high (relative) dividend yields. The 12-month total return (in CHF) collectively for the Swiss names was an impressive 19.8%.

The next strongest performance came from the broad-based group of stocks which were the subject of M&A and here the UK dominated with four delistings in the year. Top of the list was Urban Logistics (56.7%) acquired by London Metric, Warehouse Reit (47.5%) was taken private by Blackstone, Care Reit (32.6%) was acquired by a US healthcare Reit and finally Assura (30.9%) merged with PHP. In Continental Europe the largest transaction was the merger (subject to regulatory approvals) of Aedifica (27.6%) and Cofinimmo (54.4%). M&A continues to be a major source of returns with privatisations offering cash exits (well ahead of pre-bid discounts to NAV) and mergers offering cost efficiencies and greater liquidity. There should be more activity in 2026 but the greatest resistance is often from management (and boards) where C-suite cost savings are crucial to generating value for shareholders.

The weakest performer was Unite (-27.3%) with a catastrophic double whammy of value-destroying M&A (acquiring Empiric Student Property) in the midst of announcing a profit warning. Hard to understand why the board allowed management to persist with the transaction (resulting in increased gearing) when the market backdrop showed clear signs of oversupply. Pulling out of the transaction (with some one-off costs) would have gone a long way to repairing the damage to management credibility.

At a sector level the worst performance in the UK was offices. Derwent London (-7.2%), the largest pure London-office play, outperformed the owners of more secondary assets Workspace (-13.0%) and CLS (-17.0%). In Continental Europe Gecina (-5.0%) was the weakest Continental European performer, with names such as Colonial (10.4%) in Spain and Fabege (2.1%) in Sweden producing positive total returns. In Europe the worst sector was the highly Bund-yield sensitive sector of German residential, with Vonovia (-12.8%) and LEG (-21.2%). Our largest German residential exposure was TEG (-5.3%), still negative but a relative outperformer in the group.

Please note that the Trust went ‘ex’ the interim dividend (5.75p) on 11th December and payment was made on 8th January.

	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