November 2014

By | 16th December 2014

European real estate equity markets continued their collective climb upwards during November. The dramatic recovery in prices which started in mid-October continued almost unabated during the month with the fund’s benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in GBP) rising 5.4% in November. The fund returned 6.0% in the month outperforming the benchmark by 56bps. The sector has now risen over 14% from its recent low point of 15th October, more than making up the ground lost in the 10% sell off between mid-September and mid-October. Property equities have continued to outperform broader European equities in this recent period of heightened volatility. Investors are anticipating further ECB stimulus in Q1 2015. The most optimistic were hoping for significant QE even sooner (December) but that has not come to pass with Draghi maintaining his watching brief on economic data into the New Year. European property companies continue to reduce their cost of debt with refinancing and access to bond markets. Banks are happy to lend to well-financed property companies – plus ca change!

In the UK we saw interim results from the two largest companies, Land Securities and British Land amongst others. These two bellwethers of the sector beat consensus NAVs and illustrated the strength of the underlying investment demand with sales significantly exceeding March valuations. The Swedish names rose 6.3% (in SEK) responding to the Riksbank base rate cut (from 0.5% to 0%). Collectively the Swedish companies have the highest LTVs in the region with the most levered Klovern and Hemfosa rising 12% and 13.1% respectively. Both companies announced the issuance of preference shares (which their lenders treat as equity) enabling them to grow faster. In Germany, the residential names were solid performers with Deutsche Annington the outstanding stock (+12.2%) as its free-float weight in the various indices increased significantly following a EUR 450m capital raise and stock placings by cornerstone private equity investors earlier in the year. Shortly after the month end, Deutsche Annington announced an agreed part cash /part paper takeover of Gagfah (more detail in next month’s commentary). Finland was once again the laggard with renewed concerns over the impact of economic weakness in Russia, its largest trading partner. The Finnish stocks have returned 0.5% YTD versus 17.8% for the sector.

The Trust announced its Interim results on 26th November. The interim dividend rose to 2.95p, a 3.5% increase on the previous year. The shares went ‘ex’ on 4th December and the dividend is payable on 6th January. The full results are on the website ( and include the usual in depth manager’s statement and outlook alongside the Chairman’s comments.

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