April 2020

By | 6th May 2020

Pan-European broad equities (measured by the STOXX Europe 600 index, in euros) generated total returns of +6.7%. They shrugged off poor corporate earnings releases and dreadful macroeconomic news flow in April, warmed by the enormous central bank and government support actions. Pan-European property stocks (EPRA Developed Europe, sterling, total returns) returned +1.7%, lagging the wider market. This was possibly due to concerns over surging debt spreads, lease length potentially undermined by bankruptcies, dividend cuts, and a worsening outlook for the consumer-facing property sub-sectors, such as retail, hotel, leisure and serviced offices. However, the picture wasn’t quite so bleak when viewed in euros, with total return for the month at +3.7%. Sterling strengthened over 2% versus the euro over the month, carrying on its bounce from the mid-March lows. The Trust’s net asset value (NAV) rose +2.0% while the share price was up +5.5%, as the discount percentage tightened to single figures.

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March 2020

By | 8th April 2020

March 2020 saw the most dramatic real estate equity market performance in living memory (and certainly in the 24 years I have been involved in the management of TR Property). The net asset value (NAV) fell -19.8%, while the benchmark was down -19.1%. The share price fell by -26.7%. These were all unprecedented figures over the course of 22 trading days. When viewed from the sector’s peak of 19 February to the most recent trough (18 March), the NAV fall reached -37%. This information is historical, but what is still evolving – in real time – is companies’ response to the downturn in consumption and the dramatic falls in GDP. Our focus is on assessing the security (or fragility) of earnings alongside balance-sheet strength. To be clear, we do not currently draw strong parallels with the global financial crisis of 2008; the distress is on the balance sheet of the few rather than the many. The banks are not the real villain this time. Lenders and creditors have the backstop of central banks; margins will rise but liquidity is still broadly available. The exceptions to this statement are in the retail sub-sector, which was already drawn into the whirlpool of further devaluation long before COVID-19. The structural headwinds will now blow even harder as more consumers experience shopping without entering a shopping centre. There will be an immediate rebound in footfall when the lockdown ends, but we believe that this will be short-lived.

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February 2020

By | 30th March 2020

Pan European real estate equities – much like many other equity sectors – reached all time highs this month. This record statistic was swiftly followed by another more ominous one, that of consecutive daily market corrections. In the case of our index a fall of -9.1% between 21st and 28th February. The UK element of the benchmark was even weaker at -11%. Given the strong performance earlier in the month, the final tally for the benchmark return was -5.4% with the Trust’s NAV falling a similar amount in the month.

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