Pan European real estate equities (+5.2%, total returns, in sterling terms) were among the best-performing equity sectors and outperformed wider equities (STOXX 600 Index (+3.3%)). With slowing economic indicators and disinflationary pressure underway, the European Central Bank (ECB)’s deposit rate peaked at 4% and markets firmly priced a 25 basis-point (bps) rate cut in June 2024. This marks the first time the ECB will cut outside of a recession and also ahead of any US Federal Reserve cut. The Governor of the Bank of England also continued to highlight that the UK’s central bank would respond to slowing growth.
The month was characterised by renewed capital markets activity in the sector.
In the UK, Great Portland Estates (now known as GPE) launched a fully underwritten three-for-five rights issue to raise £350m to take advantage of acquisition and development opportunities in Central London offices. This respected management team has a solid track record of “contra-cyclical” capital management, having last raised £304m in 2009 and invested through 2010-12. They then returned £616m of capital between 2018 and 2020. They now expect a cyclical upturn in the market following years of post-Brexit capital value correction and have identified a large potential acquisition pipeline on top of existing re-development schemes. With a last reported loan-to-value of 33%, GPE didn’t exactly have the firepower to pursue those opportunities and needed fresh cash to maintain a robust balance sheet. The raise has been taken positively, even allowing for the 8% reduction in net asset value (NAV) per share due to raising at such a large discount to the reported NAV.
In Spain, our small cap holding Arima (we own 8% of the equity), which owns a high-quality portfolio of nine offices and one logistics asset, all located in Madrid, received a cash bid at a 39% premium to the undisturbed share price. The offer is from a property company controlled by the Safra Sarasin Group. This well-managed company has generated +17% NAV growth since its pre-pandemic initial public offering and a challenging market environment. The cash bid is a positive signal for the overall sector and reflects the demand for high-quality office assets trading at implied pricing well below rebuild cost.
In Italy, Klépierre (a top long conviction in the fund, equating to 6% of NAV) has arguably the best shopping centre property platform, which it gained 10 years ago through the Corio acquisition. It announced the acquisition of the RomaEst shopping centre; the price paid was over €220m and a yield close to 9%. With a 10 million footfall, it is the sixth most visited centre in Italy. The 97,000 sqm scheme has 214 stores, benefiting from a 2.2m consumer catchment area. Concurrently to this deal, S&P upped Klépierre’s credit metrics outlook to ‘positive’, citing Klépierre’s capacity to make further opportunistic acquisitions at high attractive yields (above 8%). S&P expects Klépierre to make acquisitions, with €500 million projected for 2024 and €200 million in 2025 in its base-case scenario.
The Trust’s NAV rose 5.4% during the month, slightly ahead of the benchmark, while the share-price return was 5.8% as the discount narrowed slightly. Reviewing the attribution, the most significant single contributor was Arima (+30bps), while the largest detractor was our pain trade, overweight Landsec and underweight British Land, which delivered -27bps during the month. Neither company significantly beat expectations with their fiscal-year results, but British Land’s retail warehouse portfolio (24% of assets) saw values stabilise in the second half as rental growth returned to the sub-sector. The portfolio remains historically over rented but the future outlook is much more promising.
The Trust’s fiscal year 2024 results will be announced on 10 June.
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 |
