March 2011

By | 15th April 2011

European property shares outperformed general markets in March. The absence of any sector specific impact from events in Japan and the near Middle East helped support prices. Pricing was also assisted by the strong indication that the EBC gave in early March that it would raise Eurozone base rate in April. There is good evidence that, while real estate shares are interest rate sensitive, they perform well at the start of a new cycle of rising interest rates. Continental property shares rose 1.3% in Euro terms and 5.4% in Sterling terms. UK property shares, by contrast, declined by 1.9%, leaving the benchmark in Sterling 2.84% higher on the month. The Ordinary NAV per share rose 3.33%, and the share price increased 6.43% as the discount to NAV narrowed.

Leading UK shares fell back by 2% to 4% over the month as investors fretted over the outlook for retail rents in the wake of a string of negative consumer news stories. The Budget included further verbal support for the expansion of the REIT sector. It also contained an intriguing comment that the Chancellor abhorred planning delays and wanted to explore the possibility of amending the use classes order to speed up the conversion of office space to residential use. The four UK property companies who might benefit most from such a change, Capital and Counties, Workspace, St Modwen and CLS were all strong outperformers over the month.

During March the share class was, on balance, a modest net seller for around £1m, leaving year end net debt at a little under £40m. Purchases included additions to the holdings in Alstria, the German office investor and in Unibail Rodamco. New holdings were opened in Wihlborgs and IGD. Sales included reductions in the holdings of Hammerson and Capital Shopping Centres. The revaluation of the directly held properties at 31 March 2011 showed an increase in value of £1m – a 2.3% like for like increase. The Trust’s final results for the year end 31 March are due to be released on Wednesday 25 May.

As announced last May, Chris Turner handed over the role of lead manager of the Ordinary share class to Marcus Phayre-Mudge on 1 April ahead of his imminent retirement. At the same time, Marcus has passed on his role as lead manager of the Sigma share class to James Wilkinson.

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