Pan European real estate equities moved broadly sideways in a narrow trading band in February. The NAV total return for the fund was -1.1%, slightly ahead of the benchmark at -1.4%. This was a pause for breath after a dramatic January, in which the sector initially corrected almost -4% before rallying nearly +8%.
February sees the start (and the bulk) of the December year end reporting season. Normally investors are able to concentrate on the company level details and assess the impact of beats/misses on earnings, asset values and outlook. However, the macro and geo-political news continues to dominate market behaviour and the broad ‘risk-off’ theme remains dominant.
Within our world, healthcare (+6.4%) was the best performing sector, with solid results from Aedifica and Cofinimmo in Continental Europe, whilst the outsized contributor in the UK was Assura. The company responded to media reports that KKR had made four cash bids for the company, the final one at a tight -2.8% discount to NAV. The board rejected the offer stating that it materially undervalued the company. The share price rose 10.3% in the month finishing at 41.72p, far below the 48p rejected offer. We have encouraged the board of Assura to engage with KKR, given the strength of the offers made from a highly credible buyer.
European shopping centre names continued to justify their large positions in the fund with Klepierre (+7%) producing solid figures slightly ahead of expectation, whilst Unibail’s announcement that they are now retaining their US mall portfolio was taken positively. In the UK, Shaftesbury announced leasing 9% ahead of ERV, like-for-like growth of 5.7% and dividend growth of 11%. However, the low yield on the portfolio in an environment of a flattening (rather than falling) yield curve offers little support for the shares.
The large German residential names (Vonovia and LEG) publish results in early March but TAG (a large overweight for the fund) posted a 7.5% beat to its FY24 FFO 2 metric, fuelled by its Polish build-to-rent business.
Student accommodation giant Unite (-2.5%) printed solid figures with 5% increase in EPS driven by like-for-like rental growth of 8.2%. The only pure student accommodation player in Continental Europe is Belgium based Xior. The company confirmed that it had brought its proforma debt ratio below 50%, which we regard as a step in the right direction, but there is much work to be done. We hold Unite but not Xior.
Picton (our largest micro-cap position) continues to execute its highly accretive buyback strategy. This is good news and we will be encouraging the board to extend the mandate beyond the initial £10m. The shares finished the month at 64.8p compared with the recently published December NAV of 98p. The LTV is just 25%, and the debt is very attractively fixed until 2032, so the company has plenty of firepower to continue this game-changing strategy.
Landsec held a strategy afternoon, where they announced a major drive into private-sector residential (PRS) funded by sales of non-core retail and long-let offices. We welcome the move but suspect that the market will need (1) more convincing on the speed of delivery and (2) more comfort on execution risk. Meanwhile it trades at a 35% discount to its NAV and provides a 7.2% dividend yield, justifying its position in the portfolio.
Just after the month end, the board of Warehouse Reit announced that it had rejected a bid from a Blackstone-backed consortium. This was the latest in a series of bids (but the first to be made public, following a leak). Whilst the offer is at a 14.6% discount to the published NAV, it is at a 30% premium to the undisturbed share price. We believe there is room for one more offer from the bidder and they have until 31st March to rebid or walk away. We have been staunch advocates of consolidation amongst these micro-stocks but, as private-equity revisits the case for owning property, we fear that there will be more privatisations rather than consolidation.
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 |
