October 2012

By | 16th November 2012

Pan-European property shares rose strongly with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net Index (in GBP) up 5.5%. Financial stocks, including property performed well compared to the broader European equity market. The commitment to unfettered bond buying by the ECB – for those who asked – appears to have calmed those most bearish on the Eurozone. From a macro perspective it appeared that the market spent the month focused on the economic consequences of the alternative US presidential election outcomes.

At the country level, France was the strongest performer +9.7%, powered by Unibail, Europe’s largest listed property company which rose 12.1%. It continued to tap the bond market announcing a €500m 5-year bond at a fixed coupon of 1.625%, a record low for the group. Italian property stocks collectively rose 7.5%, these companies have developed a high correlation with the performance of Italian sovereign debt. Their performance has been dictated by investor sentiment towards the Eurozone generally rather than anything to do with local property markets – hence their strong performance in the period. As if mirroring the ‘risk-on’ response by the market, Swiss stocks rose just 0.3%.They continue to have ‘safe haven’ status, particularly amongst domestic investors but to fundamental investors (such as ourselves) they remain expensive. Sweden was notably weak, primarily driven by one stock, Kungsladen which announced the suspension of dividends in the light of further negative tax rulings. The Swedish tax authorities continue to investigate whether tax avoidance techniques used in earlier decades amounted to evasion.

The NAV rose 5.8% delivering 25bps of outperformance. This was fuelled by our overweight to French and Italian stocks and underweight to Switzerland. Our significant overweight to the UK did not help particularly, collectively rising +3.9%. However, within the group we saw strong performance from one London midcap Workspace (+13.7%), as well as our ‘alternatives’ student housing, Unite (+7.4%) and self storage with Big Yellow (8.9%).

In September, the TRPIT Board announced a proposal to convert Sigma shares into Ordinary shares, to create a larger, more liquid Trust. The offer reflects a discount to Sigma’s net asset value after costs and the Board recommends that holders of both share classes vote in favour at the EGM (14 December). The Circular and proxy forms will be circulated on 22 November.

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