November 2021

November was a positive month for real estate equities, and the FTSE EPRA/Nareit Developed Europe TR Index (in sterling) rose +1.1%. The trust’s net asset value (NAV) total return was just behind at +1.0%. In fact, the real estate sector was the third strongest among all the global industry classifications, with the Europe-wide STOXX 600 falling -2.5%. The month began strongly with our sector continuing its rally from October; this was driven by dovish commentary from both the Bank of England (no base rate increase at its November meeting) and the European Central Bank. Sector darlings such as logistics, industrial and self-storage performed well alongside the most leveraged group (Swedish stocks), which have been much discussed in previous monthlies. The latter part of the month saw news dominated by Covid-19’s new variant, which led to considerable price retrenchment among retail and hospitality focused companies; this was despite many shopping centre owners reporting footfall close to, or at, pre-pandemic levels.

At the stock level, news was dominated by companies with March year ends, which reported half-year results. In the UK, investors were focused on Landsec and British Land. The former’s results were eclipsed by their own corporate deal activity. Landsec bought U+I, a small listed urban regeneration specialist for £170 million; this is an eye watering 70% premium to the undisturbed share price. This was followed by the purchase of 75% of MediaCity in Manchester for £426 million. This is a firm commitment to increasing their regional development programme. British Land also saw asset value growth of 5%, which beat market expectations. There was definitively a positive outlook from both CEOs. Safestore and Big Yellow, the large self-storage operators, both reported strong figures. Big Yellow highlighted that an average occupancy of over 90% enabled average rate growth of 5.4% in the period.

Massive quantities of corporate activity were another dominant feature of the month. This ranged from private equity (Brookfield) bidding €19.5 per share for Alstria, the German office owner, which is an 18% premium to the undisturbed price through to numerous capital raisings. SBBB, the highly leveraged and acquisitive Swedish social infrastructure company, announced control of Amasten, a small residential business, at SEK 13.3 per share. This is a 20% premium to the level we bought shares at a month earlier. VGP, the rapidly growing European logistics developer, raised €300 million at €240 per share and the Trust participated. This has been one of our most successful investments in 2021 and has returned nearly 100% over the year. Assura, the primary healthcare investor, raised £182 million to help fund its development pipeline, but we would argue it can sustain much higher leverage given its gilt edged (NHS backed) income stream.

The much anticipated €8 billion rights issue from Vonovia, to help pay for the Deutsche Wohnen acquisition, got underway this month; the rights are trading into early December. Vonovia will remain the largest company in our benchmark, with a capped weighting of 10%. The share price performance has been lacklustre since the deal was announced. We remain hopeful that investors will see that a €50 share price and an estimated NAV approaching €70 per share in the next 12 months is attractive.

The interim results were published on 3 December 2021 and the Board increased the interim dividend by 2% to 5.3p from 5.2p for the first half of 2021. The NAV for the first half increased by 15.6%, and the share price total return was +22%. The full release is on the website (www.trproperty.com).

Discrete rolling annual performance as at 29.07.2022 (%):