TR Property posted a 15.2% increase in net asset value (NAV) to 351.1p in the year to 31 March 2024, helped by a number of its portfolio companies being the subject of merger and acquisitions (M&A).
Key highlights included:
- TRY reported a NAV total return of 15.2% and share price total return of 22.9%. These exceeded the 15.4% return of its benchmark, the FTSE EPRA/NAREIT Developed Europe Index.
- Key contributors to performance included exposure to M&A activity in the portfolio, an overweight position to industrial/logistics names, and positions in European retail companies like Klepierre. Its UK allocation also performed well, led by LondonMetric and LXI (which are now amalgamated).
- Significant progress was made by TRY’s portfolio companies reducing debt and strengthening balance sheets. Many that had suspended dividends, particularly in Germany and Scandinavia, resumed distributions, though timing and amounts are still uncertain in some cases.
- Revenue earnings per share fell by 25.8% to 12.04p, impacted by these dividend cuts, rising interest rates, and a higher tax charge. However, revenue reserves remain substantial to support the dividend. TRY’s full year dividend increased by 1.3% to 15.70p per share.
- TRY’s discount narrowed from 8.6% at the start of the year to 7.5% at the end.
- Gearing reduced in the second half and ended the year at 10.8%.
Marcus Phayre-Meudge, TRY’s manager, commented:
“In the Half Year Report in November, I highlighted both the closure of many of the remaining open-ended, daily dealing, direct property PAIFs (property authorised investment funds) and the ongoing attraction of liquid exposure to real estate through equities. In January, the manager of the largest remaining PAIF announced conversion to a hybrid model, a mix of physical property and property equities. Further vindication that real estate equities are the solution to those seeking liquid exposure to the sector. However, liquidity comes with market size and we welcome further consolidation in the sector, creating fewer but larger companies which will hopefully lead to more investor appetite. This has begun to happen but there remains more opportunity in the sector.
“The ebb and flow of investor sentiment towards our corner of the equity market remains a frustrating feature. The focus must now turn to the underlying demand and supply of good quality real estate which remains, in most sectors, in a state of positive disequilibrium. Our portfolio positioning reflects our strong belief in this rental growth. The number of sub-markets and geographies where we see this organic growth is broadening. Those businesses with the right capital structure are in a good place to take advantage of these opportunities.
“Post the year end, there has been yet another piece of M&A activity. Arima (market cap €236m) is a specialist Madrid office investor /developer who has bucked the trend with a string of letting transactions on new and refurbished CBD buildings. The share price had failed to respond given the small market cap and its focus on an unloved sub-sector, regardless of how well the management team had performed. On May 16th the board announced a cash bid (from a local property fund backed by a large Brazilian bank) at a 39% premium to the previous closing price. We were the second largest shareholder (8.1% of issued equity). Yet another example of the equity market undervaluing a well managed, listed property company – a topic we have written about many times. We will continue try and identify these opportunities given the Company’s ability to hold illiquid positions.”