March 2024

March was a strong month with most equity markets reaching new highs on the back of increasingly dovish central banks. We witnessed a first interest-rate cut from the Swiss National Bank while the Bank of England laid the ground for potential cuts in the not-too-distant future. Eurozone inflation retreated in March, now firmly trending towards the European Central Bank’s 2% target, mostly due to lower energy costs.

This macroeconomic backdrop provided support to listed property equities (FTSE EPRA Developed Europe), which closed out the quarter on an optimistic note, gaining +8.4% during March. It was the third-best performing equity sector among the EuroStoxx 600 Index, up +4.2%. The Trust’s net asset value (NAV) with income rose +9.1%, outperforming its benchmark by +68 basis points.

Unsurprisingly, six out of the top 10 best performers were Swedish companies, favoured for their high leverage, short-term debt maturity and high floating-rate debt exposure.

Catena (+23%; 2.3% overweight position) was the strongest benchmark performer during March. The Swedish logistics landlord and developer astutely used its strong share-price rating to raise SEK 2.1bn fresh equity at a 19% premium to NAV to accelerate its growth through accretive bolt-on acquisitions and new developments.

In terms of sector laggards, self-storage names remained weak as the market struggles to correctly price the marked deceleration in property fundamentals (both rental rates and occupancy).

The Trust’s portfolio activity in March led to a -2% net exposure decrease.

The main addition to the portfolio was Swiss diversifieds (+0.7% of NAV), driven by a more compelling macroeconomic and interest-rate outlook. Indeed, Switzerland remains the only European property market enjoying a positive gap between prime property yields of 2.5% and prevailing risk-free rates of 0.7%. This was also evidenced by the issuance of a CHF 100m green bond for 8.5 years at a 1.65% all-in coupon by PSP Swiss.

The Trust reduced exposure to industrials (-2%) as well as German residential (-1.3%), mostly through Vonovia. The shares of the latter, which remains Europe’s largest listed property company, dropped -10.5% on results day. While the company’s complex portfolio transactions were well received by the market when announced in 2023 (e.g. €2bn to Apollo), the dilutive impact on earnings has now become apparent. Vonovia cash-recurring earnings (Funds From Operations (FFO)) are down -25% from the peak due to these dilutive disposals offering generous yields to the buyer, refinancing at higher rates and revenue attrition in ancillary activities such as house building, services and privatisation sales. Frustratingly, the company decided to stop reporting the industry-standard metric for earnings (FFO), instead introducing a new hybrid profitability key performance indicator (KPI) blending cash and non-cash items, which will form the basis for future dividend distributions.

The appraisal of the physical property portfolio was carried out by Knight Frank LLP as at March 2024. The valuation of the property portfolio was £37.45m (3.5% of NAV), which reflects a net like-for-like capital increase of 2.9% over the six months, helped by asset management initiatives in Wandsworth and Gloucester. The Trust sold its largest physical asset, a retail block anchored by a 40,000 ft Waitrose in Bayswater, for £33.5m in February.

31 March 2024 marked the Trust’s year-end, showing a NAV total return of +21.0% over 12 months compared to +15.4% for the benchmark. The share price total return was +22.9%.

Over the last decade, the NAV total return has been +90.7% while the benchmark returned +37.3%. The share-price total return was +85%.

	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