November 2013

By | 16th December 2013

European real estate stocks pulled back slightly in the month, in line with broader pan European equities. The Fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP fell -1.74% whilst the NAV fell less at -0.96%, leading to relative performance of 78bps. The share price fell -2.4% in the month. There was little differential between the performance of the UK and Continental Europe in the month and the YTD performance gap between the two remains at, an astonishing 1300bps (21.8% v 8.6%). Pan European property stocks have now pulled back 5% from the October recovery point and 6.1% from the 2013 peak in mid May. However US Reits have fallen over 16% from their May highs and are down 8% from the more recent October recovery. We think that US stocks are being (overly) penalised for the continuing expectation of near term tighter monetary policy. Europe is in a very different position and whilst all risk assets ultimately price off the risk free rate (US long dated Treasuries generally) and are therefore exposed if Treasury yields rise – the impact is much more muted this side of the Atlantic. The ECB has cut inflation forecasts for the Eurozone and ultra loose monetary policy remains in place.

At the stock level, CA Immo, the Austrian developer/investor rose 9.4% in the month as investors responded to the partial sale of Tower 185 in Frankfurt. There are only two Austrian companies and the gulf in performance YTD could not be starker. CA Immo has returned 20.8% whilst Conwert (which the fund does not hold) has fallen -2.8% YTD. In Germany, Deutsche Wohnen rose 6.7% in the month as the acquisition of GSW went unconditional. The GSW shares have now converted into Wohnen stock but remain a separate class of share until after 28th May (when the original Wohnen shares receive the final dividend).

The worst performers in the month were Nieuwe Steen (-16.9%), the Dutch owner of mainly secondary offices and DIC Asset (-12.5%) in Germany. Both carried out what were effectively deeply discounted capital raisings (in order to de-gear their balance sheets) but veiled behind more complex corporate activity. The fund doesn’t hold Nieuwe Steen and has a de minimis holding in DIC.

We are also pleased to report that the Trust has won an award – the Investment Week Awards 2013, Investment Trust of the Year – Property. The judging panel commented on both performance and the successful re-merger of the two share classes as contributing factors. The Trust went ‘ex’ its interim dividend of 2.85p on 4th December.

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