October 2017

By | 22nd November 2017

Pan European property equities in GBP rose just 0.6% in October with Continental Europe in EUR rising 1.4% whilst the UK languished with a small negative total return of -0.2%. The Catalonian situation dominated the news headlines and led to a rollercoaster ride for Spanish equities and property stocks (as a pure domestic play) were certainly not immune.

They were all down in the month as expected with a range of -1.6% (Merlin) to -6.9% (Axiare). The Trust’s largest Spanish holding is Hispania (-2.9%) which focuses on owning tourist hotels and should, in theory, withstand any domestic economic weakness as the majority of customers are non-domestic. However the company announced the deferral of the sale of its office portfolio citing investor concerns ahead of the election on 21st December.

The strongest performance came from the Italian companies, all of whom benefited from the press speculation that listed real estate is likely to qualify for inclusion in the Italian equivalent of ISAs. Beni Stabili was +3.5% in the month bringing its performance YTD to a staggering 46% as investors have continued to focus on recovery in the Milan office market.

The Trust’s NAV rose 1.24% in October, exceeding the benchmark by 65bps and performance was aided by our ongoing underweight position towards UK retail with Intu (-4.3%) and Hammerson (-2.4%) amongst the worst performers. The other side of the UK retail coin – logistics and distribution – did well with London Metric (+6.1%) and Tritax Bigbox (+4.6%), the former is a 2% holding in the fund. Our European logistics exposure was also boosted in October as we participated in the overnight placing of new shares in Argan, the French logistics developer and investor. They have acquired 2 more distribution buildings for €40m, financed through the issuance of new shares to the vendor who immediately placed them in the market at €36 per share, a 4% discount to the undisturbed price. The Trust was allocated 14% of the 1.2m shares on offer and the stock ended the month at €39 per share and the holding is nearly 2% of NAV.

The ECB announced, the well flagged, reduction in bond buying with purchases dropping from €60bn to €30bn from January 2018. Draghi’s comments were perceived as remaining dovish and bond yields fell which helped rate sensitive stocks such as the German residential sector outperform with a collective increase of 2.8%.

Irish stocks were weak (-1.2%) as the authorities announced a 4% increase in stamp duty (from 2% to 6%).

The Interim results for the half to 30th September, including the interim dividend announcement, will be made on 23rd November.

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