Key points
- Interim earnings per share rose 11.6 per cent year-on-year
- M&A highlights appetite for undervalued real estate assets
- Capital raises underscore renewed confidence and market opportunity
TR Property Investment Trust (‘the trust’ / ‘TR Property’), the only FTSE company specialising in listed real estate across the UK and Europe, has released strong interim results for the six months ending 30 September 2024.
The trust’s share price total return for the period was 13.0 per cent, while the net asset value (NAV) return reached 10.9 per cent. Over the same period, the benchmark[1] total return was 9.3 per cent.
Marcus Phayre-Mudge, fund manager, TR Property Investment Trust, comments: “We believe we are now witnessing a broader recovery in listed real estate, following the protracted decline between 2021 and late 2023. The recovery continues to be bumpy, but demand for the highest-quality assets is clearly outstripping supply across all sub-sectors.”
TR Property’s interim earnings per share of 8.17p were 11.7 per cent ahead of the same period in 2023 (7.31p), but below those achieved in 2021 (10.31p) and 2022 (12.05p).
Kate Bolsover, chairman of TR Property Investment Trust, comments: “When interest rates rose, some of our underlying companies paused dividend distributions as a precautionary measure. These distributions are now recovering at a measured pace, and we are encouraged by the broad earnings growth across our portfolio.
“Rental income from our physical asset portfolio dipped due to the sale of our largest London asset alongside the ongoing refurbishment of another. We expect this to be temporary as we not only re-let the renovated units but also add new properties to our portfolio. Against this backdrop, the board has maintained the interim dividend at the prior year level of 5.65p.”
M&A activity and capital raises
During the period, TR Property invested more than £30 million (2.7 per cent of NAV) across eight offensive capital raises, reflecting underlying companies’ renewed confidence and their desire to capitalise on market opportunities.
Merger and acquisition (M&A) activity continued to support returns, with notable UK transactions including NewRiver REIT’s acquisition of Capital & Regional; Brookfield’s cash purchase of Tritax Eurobox; Starwood’s acquisition of Balanced Commercial Property Trust. In Spain the cash bid for Arima by a private property company was at a 39 per cent premium to its share price.
These transactions prove the persistent allure of undervalued real estate assets for private capital. Consolidation within the sector remains a key theme, offering the potential to create larger, more efficient, and liquid companies that can better navigate the evolving market landscape.
Performance drivers across sub-sectors
Notably drivers of performance included European shopping centres, where Paris-listed Klépierre delivered a 27.1 per cent return. UK diversified companies also did well, with an important contribution from our small cap holding Picton, which significantly strengthened its financial position through the sale of its largest office asset, having gained permission to convert it to residential.
The trust’s largest sub-sector exposure is to German residential, where performance broadly matched a strong half-year in this market. Overweights in small cap Phoenix Spree Deutschland, which produced a 16.5 per cent return, and TAG (30.1 per cent), offset the trust’s underweight in sector behemoth Vonovia, which produced a strong 23.4 per cent return.
TR Property’s managers remain hypervigilant regarding UK offices, with the only exposure here coming via Workspace. This paid off in the period in question, with a 31 per cent return.
Looking ahead
TR Property remains focused on building on the market recovery; stable monetary policy, better debt conditions, and growing demand for high-quality property make the current environment attractive.
Central banks have acted decisively to stabilise inflation and interest rates. This has created a more predictable backdrop for investors. In the UK, the Autumn Budget announcement added fresh uncertainty, particularly in bond markets, where new debt issuance pushed yields higher toward the end of the year. Meanwhile, Continental Europe has performed better than the UK in recent months.
Mr Phayre-Mudge comments: “This more encouraging period marked a shift from concerns about rising debt costs back towards identifying companies that have two key ingredients – assets with rental growth and the financial strength to seize market opportunities. This change in mindset, from playing defence to offense, drove a wave of fresh capital raising and ongoing merger and acquisition (M&A) activity. We expect to see even more of this as the cycle progresses.”
TR Property’s half-year results can be viewed here.
[1] FTSE EPRA NAREIT Developed Europe TR (in GBP)
Capital at risk. Approved by Columbia Threadneedle Management Limited on 02/12/2024.
