The rally upwards from the low point of 12 October continued to 12 November, with Pan-European real estate equities collectively recovering +24% during one month. However, the rest of November saw a steady pullback from this burst of exuberance. Over the month, the benchmark rose a modest +3.2%. Once again, there was a wide divergence in returns across countries and sectors. Sweden, in particular, continued its strong rally (+8.8%) as the previously weak performers such as SBB (+25%) enjoyed the benefits of short closing by short sellers. The company had previously announced the creation of a residential spinoff; November saw that demerger progress, with the publication of the EGM date in early December. For those who have short sold the shares, this could be a difficult scenario as they end up ‘short’ of shares in two entities. SBB also announced the sale of a huge SEK44 billion portfolio of educational buildings; however, this deal with Brookfield has a large amount of vendor financing, so does not substantially reduce the loan-to-value. Other Swedish companies that caught a bounce include Nyfosa (+14.1%), Wilhborgs (+12.6%) and Balder (+11.0%).
The gains were not confined to Sweden. Other highly leveraged companies enjoyed a decent recovery, such as Germany’s Aroundtown (+14.3%) and Adler (+20.4%); however, the latter must be seen in the context of a year-to-date return of -83%. It was the same theme in the Netherlands, where the most operationally leveraged business, VGP (+6.3%), enjoyed a recovery after a long period of weakness as investors fretted about its business model dominated by selling to one investor, Allianz. It is still down -67% over the year to date.
The best performing sector of the year, European retail, continued to enjoy investor demand. Klepierre added +8%, bringing the year-to-date return to over +13.5%, and Mercialys (+4.7%) brought the year-to-date return to +17.8%. Such a diverse group of top performers during the month – a combination of the previous winners and losers – is an unusual phenomenon. With its diverse range of companies, the UK was a case in point. Retail companies NewRiver (+13.7%) and Hammerson (+25.9%) performed well, as did office companies such as CLS Holdings (+13.0%). The large diversified names, Landsec and British Land, both saw returns of +7.7%, and for many generalist investors it remains hard to distinguish between them. We continue to hold Landsec.
The Trust’s interim results (for the six months to end of September 2022) have also been released, with the interim dividend rising +6.6% versus 12 months ago. The report is available here on our newly reinvigorated website, www.trproperty.com.
We continue to focus on balance sheet and earnings stability. The +30% correction in real estate equity prices across our Pan-European real estate universe has resulted in significant increases in the earnings yield of many of our companies. The vast majority are also seeing their income accounts benefit from varying amounts of indexation, and this is feeding into the Trust’s earnings.
Discrete rolling annual performance as at 31.08.2023 (%):
| 2023 | 2022 | 2021 | 2020 | 2019 | |
| Fund | -13.30 | -23.27 | 31.94 | -4.66 | 4.32 |
| Benchmark | -14.16 | -27.58 | 27.64 | -9.41 | 0.99 |
| Share Price | -16.73 | -24.22 | 41.90 | -12.52 | 4.11 |
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.