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TR Property

TR Property

A UK based investment company, listed on the FTSE 250 index investing in Pan European property equities & UK direct property

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September 2013

About TR Property

16th October 2013

Real estate stocks enjoyed a more upbeat month after the torrid performance in August with the benchmark index (FTSE EPRA/NAREIT Developed Europe Net Total Return in GBP) rising +2.7% in the month. Unlike August when it underperformed broader European equities; September saw the sector keep up with the Euro Stoxx 600 Index rising 2.5% (when measured in GBP) and +4.5% when measured in EUR. Currencies clearly made a difference and GBP has now strengthened +4.6% versus EUR since the end of July (including 2% in August). The month was always set to be dominated by the keenly awaited Federal Reserve’s announcement on 18th September. The announcement that the monetary stimulus (in the form of €85bn of bonds being bought each month) would remain in place versus an expectation of ‘tapering’ took markets by surprise. US Treasury yields dropped back from their recent highs of 3% and asset pricing around the globe improved as a consequence.

Our view – this is merely a delay in the inevitable and we continue to focus on companies with sound balance sheets and where CFOs have been moving away from an over reliance on floating rate debt. As longer term interest costs begin to rise we need to ensure that we are exposed to businesses with portfolios that are experiencing rental growth or close to it. From here it is the anticipation of that growth which will drive investment values. The UK continues to report strong PMI figures and that has driven the anticipation of tenant demand and rental growth.

The UK stocks rose +3.8% in the month, with the strongest performers including Hansteen (+10.2%) following the acquisition of the Ashtenne Industrial Fund from the administrators of Warner Estates and LondonMetric (+11.2%) who reported a string of acquisitions which will help support the high dividend. Income remains a strong rationale for owning the sector and the high yielding Dutch names responded to the renewed realisation that income would continue to be hard to access rising 5.2% collectively. The Austrian names rose +6.8% following CA Immo’s announcement that it had sold 2/3rds of its flagship project, Tower 185 in Frankfurt.

The fund’s NAV rose +2.5%, underperforming the benchmark by 23 bps. We suffered from underweight positions in Capital & Counties (+5.5%) and Segro (+8.0%) – both were reduced positions on valuation grounds. The share price rose +2.9% on a slight narrowing of the discount.

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