A welcome base rate cut in August did little to prevent another mauling in the real estate sector, with an average 3.7% share price fall over the month. Gilt yields, and the five-year swap rate that is closely followed by the sector, widened on persistent inflation and rising public debt. Consequently, just a handful of stocks’ share prices rose during the month.
Best performing funds in price terms
| (%) | |
| DCI Advisors | 4.2 |
| Henry Boot | 3.0 |
| NewRiver REIT | 2.7 |
| First Property Group | 1.7 |
| Workspace Group | 0.6 |
| Phoenix Spree Deutschland | 0.3 |
| Regional REIT | 0.2 |
| Residential Secure Income | 0.0 |
| Ceiba Investments | 0.0 |
| Real Estate Investors | 0.0 |
DCI Advisors (DCI) tops our first table with a mere 4.2% rise. The Mediterranean luxury developer, formerly known as Dolphin Capital Investors, has suffered a spectacular fall from grace from its heyday before the 2008 financial crisis, but led the way last month as it continues to make progress on its asset disposal programme. Developer Henry Boot’s (BOOT) share price gained 3.0% on major residential planning successes. Meanwhile, NewRiver REIT (NRR) was the only other notable price riser during the month after its largest shareholder sold its 14.2% stake in the company in a placing to institutional investors.
Worst performing funds in price terms
| (%) | |
| Macau Property Opportunities | (23.1) |
| Derwent London | (11.9) |
| CLS Holdings | (10.2) |
| Great Portland Estates | (10.0) |
| International Workplace Group | (8.6) |
| Shaftesbury Capital | (7.7) |
| Grit Real Estate Income Group | (7.1) |
| Harworth Group | (6.9) |
| Unite Group | (6.7) |
| Safestore | (6.6) |
Leading the largest price fallers in August by some way was Macau Property Opportunities (MPO) after it reported an estimated 23.5% decline in net asset value. The Chinese real estate sector continues to experience a prolonged slowdown, and in order to meet financial obligations the company has been forced to make price adjustments in its asset disposal programme. Prominent office developers and landlords suffered large falls during the month as sentiment towards the sub-sector remains downcast, not helped by disappointing Derwent London (DLN) results that revealed higher vacancy and below inflation rental growth. Unite Group’s (UTG) shares fell heavily for a third consecutive month as it finalised its bid for fellow listed peer Empiric Student Property. Over the last three months, the company’s share price is down 18.9%.
Valuation moves
| Company | Sector | NAV move (%) | Period | Comments |
| Target Healthcare REIT | Healthcare | 1.6 | Quarter to 30 June 25 | Portfolio valued at £929.9m, reflecting a like-for-like increase of 0.9% |
| Alternative Income REIT | Diversified | 0.6 | Quarter to 30 June 25 | Value of portfolio up 0.4% to £107.4m |
| Schroder REIT | Diversified | 0.2 | Quarter to 30 June 25 | Portfolio capital growth of 0.3% to £481.6m |
| Tritax Big Box REIT | Logistics | 1.4 | Half-year to 30 June 25 | 1.4% portfolio capital value increase, total portfolio valued at £6.82bn |
| Derwent London | Offices | 1.2 | Half-year to 30 June 25 | Portfolio valuation increased by 1.2% to £5.2bn |
| Empiric Student Property | Student accom. | 0.5 | Half-year to 30 June 25 | Portfolio value up 0.8% to £1.16bn |
| CLS Holdings | Offices | (2.6) | Half-year to 30 June 25 | Property valuation decline of 1.6% to £1.75bn |
| Grit Real Estate Income Group | Rest of world | (16.4) | 12 months to 30 June 25 | Value of portfolio up 1.8% to $988.8m. NAV fall due to increased finance costs |
Broadly speaking, valuations remain on an upward trajectory, although there was no real standout performer as investment markets remain cautious on weak macroeconomic sentiment. Target Healthcare REIT’s (THRL) reliable inflation-linked income, as well as profitable asset sales, made for an impressive quarterly gain for the underrated care home specialist.
Tritax Big Box REIT’s (BBOX) interim results highlighted plenty of growth potential from its income-producing portfolio and development pipeline – as well as a tidy valuation uplift over the period, helped by uplifts gleamed from non-core disposals from the UK Commercial Property REIT portfolio.
