The average real estate share price was flat in September, a welcome respite after a couple of bruising months of losses, although persistent inflation and high gilt yields continue to cloud the outlook. There were some big winners and losers in the month.
Best performing funds in price terms
| (%) | |
| PRS REIT | 11.5 |
| Alternative Income REIT | 10.4 |
| International Workplace Group | 10.3 |
| AEW UK REIT | 6.9 |
| Big Yellow Group | 6.8 |
| First Property Group | 6.8 |
| Custodian Property Income REIT | 6.3 |
| Picton Property Income | 5.8 |
| Ceiba Investments | 5.8 |
| Land Securities | 5.1 |
On the positive side, PRS REIT’s (PRSR) shares responded to a proposed sale of the company (although the deal would leave substantial value on the table, being at a 19% discount to NAV). Shares in Alternative Income REIT (AIRE) were also up double digits having fallen considerably over the previous two months weighed down by an impending debt refinancing. New bank facilities were agreed in September at an improved margin, although the overall higher debt costs saw it reduce its dividend target. Serviced office specialist International Workplace Group (IWG) was the other double-digit riser, with its share price rebounding strongly from an irrational 16% one-day drop following the release of half-year results in August.
Worst performing funds in price terms
| (%) | |
| Grit Real Estate Income Group | (16.2) |
| Globalworth Real Estate | (10.5) |
| Town Centre Securities | (8.3) |
| Ground Rents Income Fund | (7.1) |
| Henry Boot | (6.3) |
| Regional REIT | (4.5) |
| Life Science REIT | (3.9) |
| Sirius Real Estate | (3.8) |
| Macau Property Opportunities | (3.5) |
| Harworth Group | (3.4) |
Investors seem to have given up on Grit Real Estate (GR1T) as it grapples with high debt costs, falling property income and challenged investment markets in Africa. With the disappointing news that Life Science REIT (LABS) had been unable to attract a bid for the company on acceptable terms, the share price dwindled as the board proposed that a drawn-out managed wind down was the best option for shareholders. Another notable name on the list was Regional REIT (RGL), which during the month reported another drop in NAV in interim results. The regional office landlord is progressing its strategy to sell non-core assets to reduce debt and invest in upgrading the remaining portfolio.
Valuation moves
| Company | Sector | NAV move (%) | Period | Comments |
| Custodian Property Income REIT | Diversified | 0.6 | Quarter to 30 June 25 | Like-for-like portfolio valuation increase of 0.8% to £614.7m |
| Schroder European REIT | Europe | (0.2) | Quarter to 30 June 25 | Property portfolio valued at €193.9m, unchanged from the prior quarter |
| Harworth Group | Development | 0.8 | Half-year to 30 June 25 | Investment portfolio continues to grow as industrial developments complete |
| Real Estate Investors | Diversified | (1.4) | Half-year to 30 June 25 | Like-for-like, the portfolio valuation reduced by 0.6% to £119.4m |
| Phoenix Spree Deutschland | Europe | (1.7) | Half-year to 30 June 25 | Portfolio valued at €548.7m, a fall of 0.7% over the period |
| Social Housing REIT | Residential | (3.5) | Half-year to 30 June 25 | Portfolio valued at £611.8m, a 2.3% like-for-like reduction |
| Regional REIT | Offices | (3.6) | Half-year to 30 June 25 | Portfolio valuation of £608.3m, down 2.0% on a like-for-like basis |
| Life Science REIT | Labs/offices | (10.9) | Half-year to 30 June 25 | Value of portfolio fell 6.7% to £360.6m |
| Supermarket Income REIT | Retail | 0.1 | Full year to 30 June 25 | Portfolio valuation of £1,625m, which increased by 1.9% on a like-for-like basis |
Weak valuations in half-year results followed a slight outward movement in property investment yields across most sectors, with frustrating inflation data resulting in elevated gilt yields. Custodian Property Income REIT (CREI) was boasted by an uplift in the estimated rental value of its industrial portfolio, which makes up 43% of the wider portfolio by income. Social Housing REIT (SOHO) suffered a 20 basis point (the equivalent of 0.2%) yield expansion on its portfolio, mainly due to a group of properties let to troubled tenant My Space – the leases of which the manager is in the process of reassigning to another social housing provider. Supermarket Income REIT’s (SUPR) portfolio value was up almost 2% over 12 months, boosted by its inflation-linked leases to the largest grocery operators in the UK and France.
