March saw pan-European real-estate equities more than reverse all of the gains achieved in the first two months of the year (11.6%) with a fall of -14.4%. The scale of this dramatic correction places March 2026 alongside March 2020 (Covid) and September 2008 (Lehman bankruptcy) in the record books of largest single month negative performances. These are, of course, just snapshots in time and the unresolved situation in the Middle East continues to weigh on sentiment and returns as we move into April. Given the sensitivity of real-estate values to the rate curve, it probably won’t come as a surprise that the sector was amongst the poorest performers in the EuroStoxx 600’s 19 sectors. The only note of optimism at this juncture is to remind readers that the starting point for yield movement is much higher (than in the last correction) when the rate cycle upswing in 2022 got underway against a backdrop of virtually zero (and in some cases negative) base rates.

The Trust’s net asset value (NAV) fell -16.6% in the month, delivering relative underperformance of 121 basis points (bps) versus the benchmark. The share price also corrected 16% leaving the discount (to the asset value) at 8.5%. It is encouraging to note that in a record-breaking negative return month the discount hardly widened. This relative underperformance came on the back of a two-month period of strong absolute (13.3%) and relative performance (176 bps). Our positive outlook for the asset class throughout 2025 and into 2026 was reflected in the use of gearing. After adjusting for the exposure to physical property (6% of assets) the gearing to the equity portfolio was c12% during January and February. This figure reduced drastically with net sales of £73m by 9 March. However, the impact on relative performance had already been felt, such was the speed of the market correction. The lowest-yielding sectors suffered the most with residential stocks collectively correcting -23% and logistics names -17%. Retail property, particularly Continental European shopping centre names, did best falling just -9%. Unsurprisingly, Switzerland (-5.1%) was the safest haven at the country level. Whilst we hold a large amount of both Swiss Prime Site (7.1% of assets, our second largest holding) and PSP, we are underweight the wider group collectively as we don’t hold Mobimo or Allreal. These are high-quality businesses but very expensive (large premiums to asset value). However, that was very much what you needed in March. The range of individual performances was staggering, with the worst being Vonovia (-24.9%) – our largest underweight position, and VGP (-25.4%) – a zero holding, through to PSP down just -4.3% and Mercialys (-5.2%).

The geo-political storm overshadowed a very respectable results season with the majority of our companies reporting the benefits of improving fundamentals across most property markets on the back of very little new supply. This was aided by improving finance costs both in terms of tightening margins (through competition amongst lenders) but also strengthening expectations of base-rate cuts. At the end of February, the market was pricing in an expectation of two cuts from the Bank of England and a further one from the ECB. This has now completely reversed with expectations of three hikes from each. However, even with this change in outlook, well-financed property companies were still able to access attractive financing. London Metric lowered the margin by 49 basis points (to 105 bps) on a £1.5bn bond with maturity extended to 2029. Colonial issued a €500m 5-year green bond at 3.875% which represented a credit spread of 105 bps. Capital markets also remain open, with Merlin raising €768m from a share offer via an accelerated book building at no discount to the previous close. The allure of funding new data centres obviously proved too attractive a proposition even in these tricky times. Sirius raised £77m at a1% premium to the undisturbed share price to acquire more defence-related assets in Germany. The Trust participated in both these raises.

March is the financial year end for the Trust and even after the turmoil of the last four-and-a-half weeks, the NAV total return for the financial year ending 2026 was 6.7%, in line with the benchmark. The share price total return was 8.4% as the discount tightened slightly in the period. The property portfolio saw a modest increase in value with a gain of £2m bringing its value up to £64.5m (6% of net assets).

	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