REG - TR Property Inv. - Annual Financial Report

TR Property Investment TrustAnnouncement

11/06/2025 07:00

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RNS Number : 2846M  TR Property Investment Trust PLC  11 June 2025

 

TR PROPERTY INVESTMENT TRUST PLC

LONDON STOCK EXCHANGE ANNOUNCEMENT

Results for the year ended 31 March 2025

LEI: 549300BPGCCN3ETPQD32

Information disclosed in accordance with Disclosure Guidance and Transparency
Rule 4.1

TR Property Investment Trust plc, announces its full year results for the year
ended 31 March 2025.

 

Chairman Kate Bolsover commented

"The Company has delivered a solid rise in earnings, supported by disciplined
stock selection and a return to healthier dividends across the sector. The
Board is therefore pleased to continue a measured pace of dividend growth,
drawing on our healthy revenue reserves. Looking ahead, we are encouraged by
the renewed interest in value-driven parts of the market. With many
growth-focused areas looking stretched, we believe listed European real estate
stands out - underpinned by solid fundamentals, improving sentiment and
attractive valuations. The portfolio is well positioned to capture these
opportunities and we remain confident in our Manager's ability to deliver
sustainable growth over the long term."

 

Manager Marcus Phayre-Mudge commented

"We remain well positioned and agile, ready to respond as market conditions
evolve. Within the property sector, positive fundamentals persist: healthy
rental growth, limited supply and prudent debt levels are all amply evident
across our portfolio. M&A activity is also creating meaningful
opportunities to unlock value and build scale in the listed property market.
Meanwhile, the macro environment is clearly shifting and this defined the
second half of the year. Sadly, there is no law that says the more
unpredictable things become, the faster they will return to familiar ground.
But our portfolio's strength and flexibility mean we are well equipped to
navigate what comes next with confidence."

                                                      Year ended   Year ended   Change

                                                      31 March     31 March

                                                      2025         2024
 Balance Sheet
 Net asset value (NAV) per share                      327.16p      351.50p      -6.9%
 Shareholders' funds (£'000)                          1,038,237    1,115,503    -6.9%
 Shares in issue at the end of the year (m)           317.4        317.4        0.0%
 Net debt(1,6)                                        18.5%        10.8%
 Share Price
 Share price                                          294.00p      325.00p      -9.5%
 Market capitalisation                                £933m        £1,031m      -9.5%
                                                                                Change

                                                      Year ended   Year ended

                                                      31 March     31 March

                                                      2025         2024
 Revenue
 Revenue earnings per share                           12.98p       12.04p       +7.8%
 Dividends²
 Interim dividend per share                           5.65p        5.65p        0.0%
 Final dividend per share                             10.25p       10.05p       +2.0%
 Total dividend per share                             15.90p       15.70p       +1.3%
 Performance: Assets and Benchmark
 Net Asset Value total return(3,6)                    -2.5%        +21.1%
 Benchmark total return(6)                            -3.8%        +15.4%
 Share price total return(4,6)                        -4.9%        +22.9%
 Ongoing Charges(5,6)
 Including performance fee                            0.84%        1.81%
 Excluding performance fee                            0.78%        0.82%
 Excluding performance fee and direct property costs  0.76%        0.78%
 1.  Net debt is the total value of loan notes, loans (including notional
 exposure to contracts for difference (CFDs)) less cash as a proportion of net
 asset value.

 2.  Dividends per share are the dividends in respect of the financial year
 ended 31 March 2025. An interim dividend of 5.65p (2024: 5.65p) was paid on 10
 January 2025. A final dividend of 10.25p (2024: 10.05p) will be paid on 30
 July 2025 to shareholders on the register on 27 June 2025. The shares will be
 quoted ex-dividend on 26 June 2025.

 3.  The NAV Total Return for the year is calculated by reinvesting the
 dividends in the assets of the Company from the relevant ex-dividend date.
 Dividends are deemed to be reinvested on the ex-dividend date as this is the
 protocol used by the Company's benchmark and other indices.

 4.  The Share Price Total Return is calculated by reinvesting the dividends
 in the shares of the Company from the relevant ex-dividend date.

 5.  Ongoing Charges are calculated in accordance with the AIC methodology.

 6.  Considered to be an Alternative Performance Measure as defined in the
 Annual Report and Accounts.

Chairman's statement

 

Market backdrop

In the half year results (to 30 September) I was able to highlight what a
strong six months we had experienced and the growing sense of optimism within
our sector. I also cautioned in my Outlook how quickly sentiment and pricing
can change, particularly when macro headwinds return to the fore. That is
exactly what we then experienced in the second half of the financial year.
There have been a series of geo-political events, ranging from the new UK
Government's first Budget through multiple autumnal elections across Europe to
the all-important US election.

 

Whilst the geo-political winds are creating waves on the surface, we continue
to see encouraging signs in real estate fundamentals. The lack of new supply
in so many of the markets in which we invest means that demand from tenants
who are prepared to pay for quality buildings in the right locations cannot be
met. Rents are rising and as usual our Manager's report will go into much more
detail. Set against this has been enhanced volatility in the pricing of short-
and longer-term debt given the geo-political noise. However, it is also
important to highlight how far spreads have narrowed. Banks and other lenders
are clearly there to do business with borrowers. Access to capital -
particularly debt - has always been the oxygen of this leveraged asset class
and it is very encouraging to see those spreads tighten.

 

There are two related features of our positioning which illustrate our
Manager's optimism. Firstly, the level of gearing in the Company, which has
increased to close to record levels and as I write is at 17.0%. Our Manager
feels strongly that the combination of improving market fundamentals and
undervalued listed property companies (which is an under owned corner of the
wider equity markets) provides great investment opportunities. The heightened
level of mergers and acquisitions ('M&A') which we have previously flagged
continues almost unabated. Private equity has offered significant premiums to
broadly unchanged listed share prices and clearly sees even greater value
post-acquisition. Meanwhile, the alternative of public-to-public takeovers can
drive returns through economies of scale and deliver enhanced liquidity
through larger market capitalisations.

 

The second related feature is the continuing low level of physical property in
the portfolio. We have found it increasingly difficult to acquire physical
assets (at market prices) when listed equities have offered a compelling
alternative, trading on such large discounts to net asset value. However,
attractive opportunities are out there even if one has to analyse a huge
number of potential deals; the Company made two acquisitions, in Bicester and
Northampton, which are reviewed in detail later in this report.

Revenue Results Outlook and Dividend

Revenue earnings for the full year increased by 7.8% over the prior year to
12.98p per share. The growth in earnings seen in the first half continued for
the remainder of the year, although at a lower rate. Rental income from the
direct property portfolio significantly reduced following the sale of our
largest asset, the Colonnades in Bayswater. As noted in the half year report,
the record low exposure to physical property was expected to be temporary and
our two acquisitions will add to the rental income in the future.

 

Although the income growth for the year is relatively modest, we have seen a
number of companies who had previously suspended dividends return to
announcing or making distributions at various points throughout our financial
year. The impact will be more marked over the next financial year when a full
year of distributions from these companies is brought into account. Having
said that, with higher interest rates impacting overall distributions from
these companies as well as the cost to our own income account, the income is
going to take a while to recover.

 

I flagged at the half year stage that the dividend for the full year would be
uncovered. With healthy revenue reserves and a positive longer-term outlook,
the Board is comfortable maintaining growth in the dividend, albeit this will
be at a subdued pace whilst the dividend remains uncovered. Accordingly, the
Board is recommending a final dividend of 10.25p per share, which will bring
the full year dividend to 15.90p per share, a modest 1.3% increase over the
previous year.

Gearing and Currencies

Gearing increased from 10.8% at the start of the year to 18.5% at the close,
the average over the year was approximately 14.0%, increasing further towards
the year end. I commented earlier in my report that this high level of gearing
reflects our Manager's view of opportunities within the sector at current
pricing levels.

 

Details of our gearing and debt are set out in the Manager's report.

 

Sterling strengthened by 2.2% against the Euro over the year to 31 March 2025.
This is a 12-month snapshot figure; what is more important is the range over
the year which was 5.5%. The average for the year was therefore some 2.5%
stronger than in the prior year, providing a small headwind to the income
account as 60% of our income receipts are in Euros or other European
currencies.

 

As in prior years and in line with our longstanding policy, the portfolio
currency exposure was hedged to the benchmark.

Discount and Share Repurchases

The discount widened towards the end of the year to close at 10.1%. The
average discount over the year was 7.5% with the Company's shares trading in a
range of between 2.9% and 10.8% through the year. This is wider than the
five-year average of 6.9%. Our Managers continue to market the Company through
an extensive programme of PR, webinars and monthly commentaries, all of which
are available on our website www.trproperty.com.

 

The Company did not repurchase any shares during the year.

Awards

I am pleased to report that the Company has won three awards this year, the
Active Property category at the AJ Bell Investment Awards; Quoted Data's
Investors Choice Award 'Best for Property'; and the Citywire 'Best Specialist
Equities' Investment Trust. The Citywire award is particularly pleasing as the
shortlist is a broad range of investment trusts and it is the fourth time we
have won this award in the last five years. As a Board, we are proud of the
continued plaudits that our investment team receives for their huge efforts on
behalf of us all.

Outlook

The new financial year is only two months old, yet we are back in superlative
territory with record-breaking price moves in all forms of risk assets as
investors battle both to protect themselves from so much uncertainty and also
to seek out mispriced opportunities thrown up by such high levels of
volatility. For our sector we must take comfort not only in the positive
fundamentals within so many of our chosen markets but also the financial
strength of our companies. The balance sheet discipline required by public
market investors has resulted in many of our companies having cash ready to
invest.

 

The sector is very much part of the 'value' end of the equity landscape and as
a result has been under owned for several years as investors have chased
'growth' stocks on ever increasing valuation multiples. The performance of US
equities in the first few months of 2025 will, we think, encourage investors
to look again at other parts of the equity market in terms of both geographies
and sectors. Pan European real estate looks attractively underpinned. Our
Manager certainly thinks so given the record level of gearing in the Company.

 

Kate Bolsover

Chairman

10 June 2025

 

 

 

Manager's report

 

Performance

The Company's net asset value ('NAV') total return for the 12 months to 31
March 2025 was -2.5%, slightly ahead of the benchmark which returned -3.8%.
Given that the respective figures for the first half of the financial year
were +10.9% and +9.3%, it was clearly a disappointing second half. The
midpoint of our financial year (September) was close to the peak for the year
under review. September also marked the peak of the recent recovery in pan
European real estate equity share prices which had got underway in late 2023
after two very difficult years.

 

This report covers the year to 31 March 2025 so the (potentially) epoch
defining geo-political events of April and May will be covered in the Outlook.

 

As I wrote in the half year report, the first half (April to September) saw
the market responding to the growing consensus that inflation was under
control and that central banks were once again able to dictate the monetary
policy narrative. We moved past 'peak' interest rates with the first cut from
the US Federal Reserve in September which had of course been broadly priced in
by then. The three European central banks followed suit as the inflation data,
whilst mixed (particularly sticky service sector wage inflation), generally
trended downwards. Encouragingly we also saw a dramatic improvement in swap
rates with a narrowing of spreads (as more lenders returned to the market)
which brought the cost of longer dated debt down (real estate generally uses
three-five years). The outlook appeared increasingly stable as we moved
towards the second half of the financial year but, in reality, investor
sentiment was fragile.

 

Investors returned from their summer breaks and immediately began to fret
about inflation and the impact on the rate curve. Longer dated swap rates
moved out and leveraged assets (such as real estate equities) sold off. To
compound matters, sentiment towards the UK deteriorated with the new
Government's first Budget which was widely viewed as anti-business and
anti-growth. Macro geo-politics continued to dominate with elections in both
France and Germany resulting in uncertainty as more extreme political blocks
(on both the right and the left) created instability in forming coalition
governments. The price of risk rose and that affects the value of assets.
Beyond Europe, it was the landslide election of President Trump and the
Republican control of the House of Representatives, the Senate and the Supreme
Court that had markets pondering on how many of his manifesto pledges would be
implemented. For Europe, the greatest impact during the first quarter of 2025
was the growing rhetoric from the US that Europe must rebuild its defence
capability. This required the largest country in Europe, Germany, to break its
self-imposed spending limit and deficit control which previous governments had
refused to do. It all looked like a traditional European stalemate. However,
the new German Chancellor, Friedrich Merz managed to force through a fiscal
package of historic proportions (€500bn) for infrastructure and defence
spending. This pushed 10-year Bund yields back up to 2.9% (last seen in June
2011). Whilst the rise in Bund yields was very unhelpful for the German
residential names (the sub-sector corrected -15% in the month), the fiscal
stimulus will be a crucial boost for Germany and the wider European economy.

 

The key message from your Manager is simply that the period was once again
dominated by a seesaw of market responses to macro events. Individual company
balance sheets, detailed reviews of portfolios and their micro growth
prospects played second fiddle to the swings in sentiment. Market fundamentals
continue to improve but the macro outlook has driven higher volatility in
share prices as demand for the asset class waxed and waned.

 

Reviewing the underlying performance of our companies and the sub-sectors they
are exposed to, we see plenty to be optimistic about. As I wrote in the half
year report, we have continued the rotation to businesses exposed to greater
rental growth after several years of concentrating on balance sheet
liabilities and risk to cashflows from the rising cost of debt. The collective
loan-to-value of our investment universe is in the mid-30s (%), a very
comfortable position. The result is a healthy expectation of further
improvements to earnings but with some instances of near-term debt refinancing
providing headwinds to the rate of net income growth.

 

The first half of the year saw a raft of offensive (as opposed to defensive)
capital raises taking advantage of market opportunities. Encouragingly, this
was across a broad range of sectors and geographies. The Company invested over
£30m (2.7% of NAV) in eight separate transactions in the first six months of
the financial year. The second half was more muted with investors in a
wait-and-see mode ahead of the UK Budget and national elections in France and
Germany. They were wise to be cautious, with sentiment deteriorating quite
quickly as the winter got underway. On 9 January, the UK 30-year gilt hit a
high of 5.3% (exceeding the Truss spike). The only raising in which we
participated in the second half of the year was for a Swiss property company
which raised a modest 3.5% of NAV. Swiss property companies are often viewed
as a safe haven with stable, cheap financing. Consequently they trade close to
NAV, hence the ability to raise capital.

 

M&A activity continued to remind investors that undervalued listed
companies will attract private capital even as market volatility increased in
the second half of the year. In fact, the weakening of prices through the end
of the calendar year and into the first quarter appears to have encouraged
private equity.

We believe that consolidation which leads to a smaller number of larger, more
liquid companies with improved operating efficiencies is a large part of the
solution for the sector. We supported the part cash/part paper bid by NewRiver
REIT (market cap £300m) for another retail minnow Capital & Regional
(market cap £151m). This also required a capital raise by NewRiver in
September. A post year end event has been the approach by LondonMetric to
acquire - in a mix of cash and shares - Urban Logistics REIT. More details
follow in the Investment Activity section below.

 

Whilst these consolidation plays are to be welcomed, the majority of the
M&A activity has been privatisations. Leveraged private equity buyers have
also been active in the UK, where Starwood acquired Balanced Commercial
Property Trust ('BCPT') for cash following the completion of a strategic
review. Whilst the price of 96p was 9% below the last published NAV,
shareholders voted for it. The loss of BCPT leaves LondonMetric as the
remaining large, diversified REIT with a sector agnostic strategy. Blackstone
had engaged with the board (and the largest shareholder) of Warehouse REIT
which resulted in a 'minded to accept' statement following Blackstone's
indication of a price which equated to a 10% discount to the last published
asset value. The portfolio is mixed, with a range of standalone logistics
assets, terraces of smaller industrial units, a sizeable development site and
a retail warehouse park. However, as this document goes to press, the
potential buyer has uncovered issues during due diligence and sought a further
extension to the deadline by which they must make a firm offer whilst also
confirming that they are no longer able to offer the previously identified
price. All quite messy and unresolved.

 

Our view is that Warehouse REIT's management has been unable to articulate a
clear strategy or deliver a sustained covered dividend. The board has
negotiated a new fee structure which is to be applauded, but have
disappointingly not altered the egregious two-year notice period on the old
(higher) terms in the event the REIT is taken private. Quite simply, this case
of failure is being rewarded and if the sale of the company does not proceed
then the board need to complete a more formal strategic review. It is no
wonder that investors have shied away from structures where alignment between
owners and managers is not a priority in the boardroom.

 

Of great significance, given its size, is the ongoing battle for Assura, the
£1.6bn market cap owner of primary care facilities all leased to the NHS
(together with a portfolio of recently acquired privately leased hospitals).
The board has announced, after receiving a series of incremental offers, a bid
very close to NAV from KKR. However, many long-term investors in this
healthcare sub-sector would prefer Assura's assets to remain in the public
domain. We would count ourselves in that group and have encouraged their
larger (and in our view, better run) competitor Primary Health Properties
('PHP') to counterbid. The situation was ongoing as we moved past the year end
and this remains the case as we go to press.

 

In Continental Europe there have been fewer transactions. The board of Tritax
EuroBox, an externally managed portfolio of logistics and industrial assets
geographically spread from Spain to Sweden, initially accepted an all-paper
offer by SEGRO. This was trumped by a cash bid from the private equity giant,
Brookfield. In Spain, Arima (market cap €240m) was the subject of a cash bid
from a private property fund (backed by a large Brazilian bank). The deal was
announced in May and completed in November last year. The Company was the
second largest shareholder (8.1% of the issued equity). Whilst the bid was at
a 39% premium to the undisturbed share price, it was still a 20% discount to
the net asset value of this portfolio of high quality, Central Business Direct
('CBD') offices in Madrid. However, it was an important contributor to our
performance (33bps) which reflected the scale of the premium to the
undisturbed share price.

 

Reviewing our performance attribution data, gearing assisted our alpha
generation in the first half. The second half saw further investment in
physical property (as detailed later in the report) which resulted in reduced
geared exposure to equities later in the financial year.

 

German residential, now the second largest sub-sector, had enjoyed a strong
first half (seen as a Bund proxy) but this all reversed in the second half as
investor concerns around inflation and risk saw bond yields rise. Our relative
outperformance in this area was driven by our large position in Phoenix Spree
Deutschland. I have commented on this stock in numerous reports and it is good
to see the board's strategy of accelerated condominium sales bearing fruit. A
successful amendment to the debt structure, which did require some sales below
book value, has put the business on a much stronger footing. It was the only
listed German residential business to produce a positive total return (+8.6%)
in the year.

 

The weakest performing sector was Industrial/Logistics, but it is still the
largest sub-sector. The market theme, primarily experienced in the first half,
saw a number of highly rated companies suffering from a change in sentiment as
market indicators pointed to a slowdown in the pace of rental growth. Our
relative performance was flat and whilst we are not overweight to the sector
as a whole, our French small cap, Argan returned -22.8% in the year. The
portfolio is fully let with a pipeline of pre-let developments and steady
earnings growth baked in. Given the difficulties in delivering projects
through the convoluted French planning and regulatory bureaucracy we still
feel this is a great little company with strong prospects. We therefore added
to our position on share price weakness. Our two largest underweights which
serve to counterbalance the Argan holding was SEGRO (-20.5% over the year) and
Sagax (-24.6%). The latter is a highly rated, Swedish company with industrial
assets all over Western Europe.

 

In London Offices, we hold Workspace, the flexible office and light industrial
specialist, rather than the development focused companies, Derwent London,
Great Portland Estates and Helical. After a very strong first half which saw
Workspace return +31.0%, the price weakness in the second half saw a full year
total return of -14.6%. All the London companies followed a similar pattern,
Derwent London (the largest in the group) returned -11.6% in the full year
after posting +15.0% in the first half. Investors' desire to get back into
'bombed out' office names in early 2024 evaporated in the second half in the
face of macro headwinds. Offices will always be the most volatile sector with
the fastest rental growth (when the cycle turns) but they carry the greatest
risk given the risk of cost overruns (highest construction costs per metre of
any asset type) and the speed of depreciation. We can all picture a tired
looking office building which is less than 20 years old!

 

A minor success story was in our UK Residential group where we owned some PRS
REIT and did not own Grainger Trust. In the case of the former, shareholder
activism saw the removal of the Chairman and the announcement of a strategic
review. The board are in discussion with various parties over the potential
sale of the company and the total return over the year was +51.9%. Our
negative view on Grainger was based on valuation rather than concerns over
market fundamentals. Its total return of -18.4% over the year vindicated our
concerns.

 

Offices

The bifurcation between the best and the rest remains the overriding feature
of virtually all office markets. The structural shift in how and where
businesses want to use office space is compounded by the overarching need to
improve the energy efficiency of all buildings. This environment is generating
opportunities, particularly for well-funded property companies who have the
resources to carry out the required refurbishments, especially in prime
locations where there is increasing visibility on demand and rental growth. In
the half year report, I commented on the latest wave of pre-lets in London's
West End at record-breaking rents £120-130 per ft. These levels have been
substantially exceeded, with a number of large lettings recording headline
rents exceeding £180 per ft in the West End. Meanwhile in Docklands, you can
still have as much space as you want at record low rents. New developments in
the City of London have given occupiers options which did not exist 15 years
ago. Why be in Docklands when you can be close to a major rail terminus such
as Liverpool Street or Cannon Street station. London's newest tower, 22
Bishopsgate (62 levels) is now fully let with the top floor let at a City
record of £122 per ft. Helical Bar and their JV partner Orion have sold 100
New Bridge Street to an owner occupier (State Street) a year before completion
for £333m.

 

We see the same across Europe, with Gecina's Paris CBD assets massively
outstripping La Defence or other peripheral markets in terms of tenant demand
and rental growth. Paris continues to have the lowest vacancy of the 24
European markets covered by Savills European Cities Report. We continue to
remain overweight to Paris through Gecina. Across Europe, Savills report a 5%
increase in take-up in 2024 and forecast 4% in 2025. By the end of the year,
take-up will be only 10% below the pre-pandemic average. Average weekly
European office occupancy reached 60% in 2024, versus a pre-pandemic average
of 70%.

 

The return to office thematic has been augmented by occupiers adjusting their
demands. Tenants' priorities now include much more collaboration and amenity
space, coupled with complete 'end-of-journey' solutions such as bike storage,
showers and canteens.

 

Savills estimate average prime rental growth of 2.7% in 2025. Rents (inflation
adjusted) remain 10% below 2019 levels. Not much else in any business's cost
base has seen that level of deflation. It is these figures which are ensuring
very subdued development starts across all office markets. The development
appraisals only stack up for the very best in class off the corrected land
values.

 

Retail

The picture across retail markets remains encouraging and the performance of
listed shopping centre owners reflects this optimism. The consumer remains
resilient, buoyed by inflation-linked pay rises and savings accumulated during
the pandemic. More importantly for owners of bricks-and-mortar, the rate of
online sales growth appears to be slowing. Whilst that figure (ex-food and
fuel) is over 30% in the UK, across Europe it has only grown from 9% (2017) to
16% (2024). The retailer cohort has also been shaken out with virtually all
the major players (Primark the best-known exception) operating a sophisticated
omni-channel provision. Brand is crucial and physical stores are very much
part of the offer. Paris, Berlin, Madrid, Milan and Barcelona all saw more
store openings in 2024 than in 2022 or 2023.

 

According to JLL prime rents grew by 5.6% (year-on-year) through to the third
quarter of 2024. The most expensive locations (e.g. Bond Street, Milan's Vai
Montenapoleone, Paris' Avenue Montaigne) outstripped the average. We are now
more cautious on these super high-end locations given slowing global growth.
AEW Research remain most optimistic about France, citing lower vacancy and
tenant affordability driving forecasted shopping centre rental growth of 2.4%
next year. Their forecast for the UK is much poorer with growth of just 0.4%
for shopping centres.

Retail warehousing remains a strong performer and much in demand from
investors. The low operating cost and plentiful parking plays well into an
evolving click-and-collect/click-and-return world. CBRE's Prime Retail Parks
index saw rents grow by 5.3% in 2024 and are now just 8.6% below pre-pandemic
levels. Vacancy is at 5.6% nationwide and for prime parks it is less than 2%.
The Continental European data is almost as optimistic with vacancy levels at
their lowest since 2014. In these market conditions rents can only go up.

 

Sentiment towards all forms of retail assets continues to improve but we
continue to prefer Europe, particularly France and Sweden, over the UK. The
consistently high yields available from all our shopping centre owners remains
a key attraction in a period where income may once again be the dominant
driver of returns.

 

Industrial and Logistics

Whilst rental growth for this sector remains positive, the rate of growth has
slowed dramatically across all types of industrial and logistics property
Europe wide. The double-digit growth rates seen through and after the pandemic
were not sustainable. The combination of over exuberance in the investment
market, a slowdown in take-up as operators questioned the level of ERVs and
some supply response has all led to pressure on rental growth.

 

What has been very interesting is that the modest correction in pricing has
led to a flurry of investment transactions, the property market equivalent of
'buying the dip'. According to Savills' latest European Logistics Outlook,
investment volumes in 2024 reached €37.9bn, a 14% increase on 2023 and the
fifth strongest year on record. Not what you might expect given that take-up
at 27.5 million sq m was 7% lower than 2023, but the underlying structural
drivers remain intact - supply chain diversification, e-commerce growth,
automotive and wider electrification and broad desire to improve energy and
logistics efficiency. Investors have also noted the slowdown in speculative
development, reflecting not only growing cautiousness but also tighter land
regulation, particularly in France, the Netherlands and Spain whilst supply
remains less constrained in Poland, Hungary and Italy. Yields were stable for
most of 2024 and then we saw slight tightening in the fourth quarter. This is
encouraging for the sector which has returned to the top of our most favoured
(alongside European shopping centres).

 

Residential

Structural undersupply persists across virtually all markets. The exception is
Finland (and more specifically Helsinki) where oversupply is evident. The
governments in both Dublin and Edinburgh are realising that rent controls are
short-term vote winners but store up long-term issues as supply dries up.
Developers will not build uneconomic product in the face of rising
construction costs. JLL estimate that inflation in wages and materials has
resulted in average costs rising 27% over four years. Germany's situation has
been even more extreme at 44%, leading to developer insolvencies and planning
permits dropping 31% below 2020 levels. There is a crisis-level lack of
supply.

 

In the meantime, the low-yielding nature of the asset class (low voids, low
depreciation, lower risk) resulted in the collapse of leveraged buyers as the
cost of capital rose. The situation has only begun to improve in 2024, with
investment in multifamily totalling €53.9bn, 19% ahead of 2023 levels but
still 32% below the 2019-23 average. However, the market fundamentals are so
compelling that stability in the pricing of longer dated debt will lead to a
return of investment. JLL are confident of 2025's total exceeding €60bn.

 

We have rebuilt our position in Irish Residential Properties REIT following
the exit of a Canadian investor who attempted to take the company private. Our
central case is that the regulation on rent control will ease and thus enable
rents to rise to closer to market levels. In Sweden, we continue to gain
exposure to regulated rental property through Balder. Our largest relative
position remains Phoenix Spree Deutschland, as mentioned earlier, with a 100%
of its portfolio in Berlin. It is Germany's largest and 'youngest' city with
56% of the population under the age of 45 and residents from over 170
countries of origin. It remains the most affordable capital city in Europe for
those lucky enough to find an apartment.

 

Alternatives

This loose collective of all sectors which do not fall into office, retail,
residential or industrial/logistics continues to grow in importance. The
common denominator of all the alternative sectors is that they tend to be
operationally focused. In every case, we as investors are assessing the
operational capability of the asset and the management. Purpose-built student
accommodation ('PBSA') is a good example. Unite Group (our preferred exposure)
continues to refine its portfolio into those top-tier markets which offer the
greatest rental growth. Universities face a funding crisis and the over
issuance of lower value degrees amidst rising student debt issues will lead to
falling rents in some oversupplied markets.

 

Regulation is also a factor and the Netherlands has now introduced rental caps
alongside reducing the number of courses taught in English in a blunt attempt
to stem the flow of overseas students. Erasmus, the European student
programme, saw a 6% increase in students travelling to the EU in 2023 versus
flat domestic growth. The UK, encouragingly, has reversed its earlier rhetoric
about reducing overseas student visas and we saw a 15% year-on-year increase
in 2024 versus just 1% from domestic students.

 

Self-storage was under pressure as operators traded slower rental growth
(greater incentives) in order to maintain occupancy. Data from the Self
Storage Association showed falling occupancy nationwide (from 81% to 79% for
mature stores). I commented at the half year that the acquisition by Shurgard
of Lok'nStore (the UK's third listed operator) looked expensive and the stock
underperformed Big Yellow and Safestore over the year by 8% and 6%
respectively. More recently, the private equity owners of Access have pulled
the sale of the business, citing offers 10% below their desired price.

 

Healthcare, both primary and elder care, have been strong relative winners in
the year at the asset level where the Government-backed income remained
attractive for leveraged buyers. For the owners of the listed companies,
Assura and Primary Health Properties, the market saw very little topline
growth given that rent reviews were governed by a state entity (the Valuation
Office). The lukewarm response from equity investors changed dramatically
following the multiple bids from KKR for Assura. With a total return of
+18.6%, Assura was a top performing stock over the year. Target Healthcare, a
nursing homeowner has tangentially benefitted from the private equity interest
in the sector, returning +17.0%. The REIT is externally managed and we expect
more questions around cost efficiencies of the current contract which could
make the vehicle vulnerable to takeover.

 

Listed European healthcare companies are focused more on nursing homes and
elder care rather than primary care. Post the year end we have seen an
unsolicited all-paper bid from Aedifica for Cofinimmo; they are the two
largest Belgian listed healthcare companies and the combined business would be
the fourth largest healthcare business in Europe.

 

Debt and Equity Markets

Capital raised in 2024 across the UK and European real estate companies
reached €25.9bn, more than double the €10.1bn raised in 2023. It was the
third highest figure in the last decade and already in the first quarter of
2025 (€6.3bn) has exceeded the corresponding quarter in 2024. The majority
of the capital raised was debt (€21bn) and crucially the weighted coupon
rate has dropped from 4.7% in 2023 to 3.7% in 2025. In addition, only 12.9% of
all debt is due to refinance in the next 12 months, with CFOs clearly hoping
that refinancing will be cheaper in 2027 than 2026.

 

It should be noted that these figures relate to new issuance, some of which
will be required to replace existing/expiring lines of credit. There continues
to be a large amount of restructuring, extending and renegotiation given the
ongoing maturity of low interest vintage loans across our universe. However,
these published statistics are a useful indicator of the improving capital
environment for debt markets.

 

Equity issuance was also stronger than the previous two years as the sector
looked forward to more benign interest rate environment. The vast majority of
raises can be classified as 'offensive' (as opposed to 'defensive'). Companies
were using the capital raised to either deploy into new assets or to bring
forward development pipelines, rather than pay down debt or shore up balance
sheets. The one exception was Regional REIT where it had to carry out a hugely
dilutive capital raise at 10p (previous share price 40p) to restructure its
balance sheet after the repayment of a retail bond. We have never owned shares
in this externally managed company which owns regional offices (outside of the
M25) and had its IPO at 100p in 2015.

 

The Company participated in 14 separate capital raises in the year. These
ranged from a £9.9m investment in Unite, who raised £450m to fund a number
of new development schemes which are all pre-let in collaboration with various
universities, down to £1.3m in Pandox's capital raise of just £20m. The most
successful was our £6.2m investment into Swiss Prime Site at CHF102.5 in
February 2025 where the shares are now trading at CHF116 (at the end of
April). Swiss stocks are seen as safe havens in these volatile times.

 

Investment Activity - property shares

Portfolio turnover (purchases and sales divided by two) totalled £460m,
broadly in line with the previous year in absolute terms (£477m). However,
when viewed as a % of net assets, turnover was 45%, higher than the previous
year of 40%, which saw net assets grow substantially in the prior period.
Three main reasons: heightened volatility, M&A activity (where whole
positions were liquidated) and a significant amount of capital raised over the
year (as covered under Debt and Equity Markets above).

 

The adjustments in our largest overweights and underweights (versus their
respective positions in the benchmark, i.e. our greatest convictions) were as
follows. UK Commercial Property Trust was acquired by Tritax BigBox in an
all-paper transaction. I liquidated the position not wishing to increase my
net exposure to Tritax BigBox. Balder, our preferred Swedish residential play
just missed out on remaining in the highest conviction group as I took profits
post the huge summer rally in this highly leveraged name. The theme of
reducing exposure to the higher leveraged Swedish names persisted into the
year end with Catena, the Swedish logistics developer, dropping out of the
major overweights group. The additional increased exposure to European
shopping centres was via Unibail-Rodamco-Westfield which is now in the major
overweight group.

 

The exposure to Industrial & Logistics reduced over the year. I liquidated
our position in EuroBox once the SEGRO paper bid emerged (in hindsight I
should have held on for the small additional gain from the Brookfield cash
counter bid). Exposure to Sagax, the highly rated Swedish industrial owner was
also reduced based on both its leverage profile but also its premium pricing.

 

I do remain optimistic about the prospects for the smaller Continental
European logistics owners who have substantial development pipelines and a
solid path to earnings growth. This is reflected in our ongoing major
overweight to Argan with its particularly high implied earnings yield given
the subdued share price.

 

 

Within the UK Diversified space, I continue to favour LondonMetric as the
large cap play and Picton as our small cap exposure. The diversified sector
continues to shrink with the privatisation of both BCPT and more recently the
sale of Aberdeen Property Income to a private consortium. I have recently
acquired a holding in Schroders Real Estate Investment Trust (market cap
£242m), one of the last micro caps in this sector. This externally managed
vehicle will shortly need to name its new lead manager following the internal
promotion of the incumbent who becomes global head of Schroders real estate
business. I continue to believe that consolidation amongst these small REITs
will help their collective rating.

 

Hammerson, with retail assets in the UK, France and Ireland, completed the
sale of its minority interests in a range of outlet malls (which included some
exposure to the flagship Bicester Village). It has reduced its debt burden and
promises both buybacks of its shares and potential buyouts of some of its
co-owned UK malls. I still feel that owning a small number of assets in three
geographies will not deliver superior, market beating returns and sold our
position. If they are able to sell their two French assets then the UK /Irish
assets may well attract a domestic buyer.

 

I closed the underweight to Shaftesbury Capital after a period of sustained
weakness. This poor performance came to an abrupt end with the announcement of
the sale of 25% of the Covent Garden estate to Norges (who already own a large
stake in the REIT). This sale releases £570m for additional investment in the
estate.

 

In Spain, I participated in the placings in both Merlin (July) and Colonial
(November). Both companies were raising 'offensively' with uses for the
capital, as opposed to 'defensive' de-gearing or balance sheet restructuring
reasons. However, over the following months I made only modest profits as I
exited both holdings. I had become concerned that the use of proceeds, which
for Merlin was datacentres and for Colonial a series of mixed portfolios, were
not going to deliver enough return in the short run. In the case of Merlin,
the datacentre development programme is to be applauded for helping to
reinvigorate depopulated parts of Spain but the stock has developed a
correlation with the fortunes of the wider listed technology space which is
unhelpful.

 

In the Alternatives space I returned to buying Unite, participating in the
placing in July (at 900p) and subsequently adding to the holding (down as low
as 806p). Their ability to extract strong returns from their development
programme together with the relentless pruning of sub-scale locations and
weaker educational partners continues to drive returns. This is a classic case
(much like Industrials REIT or the self-storage names) where the equity market
is in danger of undervaluing the management platform where economies of scale
and operational efficiencies would be hard to replicate.

 

Central Paris remains a market to which we are very happy to have more
exposure to, not only through Gecina (4.2% of investments) but increasingly
through Covivio (3.8% of investments). It is a diversified business with c.40%
of investments in Paris, the rest is a mix predominantly of mid-market hotels
and Berlin residential, both of which are markets I am happy to have more
exposure to.

 

Our only meaningful office exposure outside of Central Paris was to Madrid via
Arima (1.4% of investments) which was taken private in November.

 

I have covered much of our M&A activity under Performance, the exception
being Urban Logistics REIT which requires some further explanation. This
externally managed REIT has focused on buying single let industrial and
logistics property across the UK. From IPO in 2016 through to November 2021 it
completed seven capital raises between 100p and 170p per share. My concern
with the vehicle centred on governance where the external manager earned fees
from both the management contract but also from a broker (a commercial estate
agent) which was partially owned by the external manager. This arrangement was
not hidden from shareholders but that does not make it more palatable in my
view. By January 2025 the shares had fallen back towards 100p and I began
building a position. In February, the board announced a proposal to
internalise the management contract. This would have required shareholders'
funds to essentially buy out the manager from the contract (which had a two
year notice period). There were allied proposals in the event that the REIT
was acquired by a third party. Quite simply the proposals were ludicrous and
financially incontinent with a very low return on capital employed. In my
view, the board had failed their shareholders in sanctioning such a proposal.
The vast majority of our engagement with managers and boards are undertaken
privately. However, there are occasions where shareholders need to make a
stand. The Company joined with Waverton (an institutional wealth manager) and
Achilles (a new activist vehicle run by Harwood Partners) to call for an EGM
with resolutions to replace three directors, including the Chairman. Within a
few weeks and before we received a formal response from the board, there was
an announcement that the board were 'minded to accept' an offer (if one was
made on the terms outlined) from LondonMetric. The potential offer is a mix of
cash and paper and therefore the exact value is a function of the LondonMetric
share price. This bid solves two problems for the board: it no longer has to
deal with the failed internalisation proposal and it avoids the embarrassment
of an EGM. LondonMetric's bid might be seen as opportunistic but judging by
the share price performance investors are keen on the idea. Given the timing
so close to the year end, any announcement will be a post balance sheet event.
The share price of Urban Logistics REIT at the end of April was 145.6p. Our
position was built primarily in January and February with an average book cost
of 114.3p. The impact on fund performance was modest as the total holding was
£13.4m but the internal rate of return was encouraging given the short
holding period.

 

Physical Property Portfolio

During the year the Company purchased two new properties. Launton Business
Centre, Bicester was acquired for £16.05m, which reflects a net initial yield
of 5.4% and a reversionary yield of 8.0%. This 10 unit multi-let industrial
estate was purchased off market and has potential to add value through
proactive asset management and targeted refurbishment. The average rent of the
estate is less than £8 per sq ft with an estimated rental value over £11 per
sq ft. The capital value of £145 per ft is close to rebuild cost. Bicester
sits in the heart of the Oxford-Cambridge growth corridor and we believe that
there are good rental growth prospects in both the short and medium term. The
second purchase was a small 30,000 sq ft light industrial unit in Northampton
bought for £3.25m, reflecting a net initial yield of 7.5% and a reversionary
yield of 9.0%. The building is of good specification with fixed rental uplifts
in the lease. The property was not widely marketed and we moved quickly to
secure it off market. Even after accounting for all purchase costs (including
stamp duty) the physical property portfolio produced a total return of 7.7%
for the 12 months, made up of a capital return of 5.3% and an income return of
2.4%.

 

During the year, our asset management activity was targeted at our property in
Wandsworth where we started the transformation of our ultra-urban industrial
estate. This has resulted in deliberate vacancy in much of the estate as we
conduct the rolling refurbishment and explains the low income yield from the
property portfolio given that this asset accounts for more than 50% of the
physical portfolio.

 

The aim of the refurbishment programme is to provide premium grade
specification and design alongside market leading sustainability
characteristics. Phase 1 was completed in September 2024 and immediately let
to a high-end fashion business on a 10 year lease at a market rent of £45 per
sq ft. Phase 2 was completed in February 2025 and is available to let. So far,
we have delivered five units with an EPC grade of -A7, meaning they are all
capable of being occupied on a net-zero basis. The first phase set a new
market rent in London industrials and we are excited about the interest in
phase 2. A case study on the Net Zero in use refurbishment of these units is
in the Responsible Investment section of the annual report. As mentioned at
the half year, we re-let the retail unit that fronts the estate to Joe &
The Juice following a competitive bidding process between three parties. As
part of the letting, we opened up four previously blocked windows, improving
the natural light into the unit and enriching the retail offer on Old York
Road, as well as enhancing the entrance to the estate.

 

Revenue and Revenue Outlook

Earnings of 12.98p were 7.8% ahead of the previous year. At the expense of
repeating the half year narrative, the impact of rising interest rates over
the last two and a half years had a significant impact on our underlying
companies. Companies were quick to cut or suspend dividends, alongside
introducing programmes to reduce debt through asset sales.

 

As I stated in the Half Year Report, most of the companies which had suspended
dividends have now returned to distributing or have at least announced their
intention to do so. As expected, this increased the level of income for the
year under review, although the timing of some recommencements resulted in a
limited impact for this financial year. We expect to see a further improvement
for the year to 31 March 2026 as we benefit from the full year impact of the
resumption of distributions, yet this is still not likely to match 2022/23
levels.

 

To compound the fall in dividend income described above, our own revenue
account has suffered directly from increased interest costs and rising rates
of UK corporation tax over the same period.

 

More recently, the sale of the Colonnades reduced our direct property
portfolio and rental income. The rolling refurbishment project at our 16-unit
Wandsworth industrial estate entails planned vacancies. We expect income from
the estate to decline for two years before the benefits in terms of increased
rental income from this asset are realised.

 

We have highlighted the opportunities for corporate activity, and as covered
earlier in this report a number of corporate actions are in play, with more
anticipated. Making the most of these opportunities has in some cases come at
the expense of income and will continue to do so as these play out but the
capital returns should compensate for that.

 

The dividend for the current year is not fully covered, with an approximately
18.4% contribution from our revenue reserves. Looking forward, the dividend
for the year to 31 March 2026 is unlikely to be fully covered and we
anticipate making a small contribution from revenue reserves. After that, we
expect to see underlying rental growth feed through to distributions and the
benefits of our direct portfolio asset management initiatives (both the
refurbishment activity at Wandsworth and management initiatives on our newly
acquired assets) start to bear fruit. However, the headwinds from higher
interest rates (including our loan note refinancing detailed below) and higher
tax rates are not expected to abate in the short term. The precise timing of a
fully covered dividend is difficult to predict. However, we are confident of a
return to a fully covered dividend in the medium term, with any contributions
to our distributions from revenue reserves on a markedly declining trajectory
in the meantime. This assessment has given the Board the confidence to
maintain a modest level of growth in our dividend.

 

 

 

Gearing and Debt

At the beginning of the year our revolving credit facilities were undrawn. As
sentiment towards the sector improved, gearing was increased from 10.8% at the
beginning of the year to 18.5% at the close.

 

The closing level of gearing reflects our view of the corporate action
opportunities that the current sector rating presents, on which further
comments are made elsewhere.

 

Our facility with ING was not renewed in July 2024 as we were able to secure
more competitive pricing elsewhere. In October 2024 we finalised a
multicurrency facility of £30m with RBSI. This is in addition to the existing
£60m facility from RBSI. The loans have been deliberately arranged as
discreet loans with different maturity profiles.

 

Our Euro loan note is due to mature in February 2026 and we are at the early
stages of discussions for the refinancing of this. The interest rate
environment is not as favourable as when we entered into this loan note and we
expect to bear a meaningful increase in the existing 1.49% coupon.
Importantly, there is now a reasonable depth to this market which will help us
to minimise spreads.

 

During the year we also increased the number of providers of contracts for
difference ('CFDs'). This enhances our flexibility and ensures pricing remains
competitive.

 

We retain the policy of accessing gearing through a range of methods: loan
notes, revolving multicurrency credit facilities and CFDs, whilst maintaining
relationships with a number of banks and providers. Pricing is important but
flexibility is also a factor. The overall cost of debt has increased
significantly over the last two years and in volatile markets the ability to
move gearing levels quickly is increasingly valuable.

 

Outlook

In the Outlook section of the half year report I concluded that we would begin
to see listed property companies taking advantage of their balance sheet
strength and conservative 'loan-to-value' ratios to make earnings-accretive
acquisitions as the interest rate downward cycle evolved. Headline examples
include Landsec's acquisition of Liverpool One and Klepierre's purchase of
RomaEst, both centres are coincidentally the sixth largest in their respective
markets.

 

I also suspected that this more benign environment could attract more private
capital looking to snap up cheap assets and juice the returns of these lowly
geared listed portfolios. This has indeed come to pass. As we go to press the
outcome of the battle for Assura between privatisation (by KKR) or
public-to-public merger (with PHP) remains undecided. What is clear is that
M&A in our sector is set to continue reminding investors that discounted
valuations of listed companies whose underlying assets are priced privately
will deliver opportunities to make good returns.

 

The Chairman's Outlook referenced the level of gearing and our optimism. Given
the weakness of our sector's performance in the second half of our financial
year this may well appear brave. The message is one of focus. Focusing on
quality businesses which are correctly financed, exposed to markets and
geographies which offer fundamental growth, with management teams that have a
track record of delivery. Earnings growth is coming through indexation,
reversion capture and development gains. The dry powder for investment within
so many of our companies is a real opportunity when there are so many examples
of supply/demand imbalances for the right quality assets.

 

Marcus Phayre-Mudge

Fund Manager

10 June 2025

 

 

 

 

 

 

 

 

Principal and emerging risks

In delivering long-term returns to shareholders, the Board must also identify
and monitor the risks that have been taken in order to achieve those returns.
It has included below details of the principal and emerging risks facing the
Company and the appropriate measures taken in order to mitigate those risks as
far as practicable.

 

In 2023 interest rates rose sharply in response to inflationary pressures
created by the impact of increased energy and commodity prices. Inflation has
been slow to reduce and therefore central banks have been slow in reducing
interest rates. This provides an ongoing challenge for the property sector
which is particularly sensitive to interest rates.

 

 Risk identified                                                                  Board monitoring and mitigation
 Share price performs poorly in comparison

to the underlying NAV
 The shares of the Company are listed on the London Stock Exchange and the        The Board monitors the level of discount or premium at which the shares are
 share price is determined by supply and demand. The shares may trade at a        trading over the short and longer term.
 discount or premium to the Company's underlying NAV and this discount or

 premium may fluctuate over time.                                                 The Board encourages engagement with the shareholders. The Board receives
                                                                                  reports at each meeting on the activity of the Company's brokers, PR agent and
                                                                                  meetings and events attended by the Fund Manager.

                                                                                  The Company's shares are available through the Columbia Threadneedle savings
                                                                                  schemes and the Company participates in the active marketing of those schemes.
                                                                                  The shares are also widely available on investor platforms and can be bought
                                                                                  via a broker and held directly on the Company's main register.

                                                                                  The Board takes the powers to issue and to buy back shares at each AGM.
 Investment performance risk
 The Company's portfolio is actively managed. Sub-optimal implementation of the   The Manager's objective is to outperform the benchmark. The Board regularly
 investment strategy, for example through poor stock selection, inappropriate     reviews the Company's long-term strategy and investment guidelines.
 asset allocation, currency exposure or use of gearing may result in the

 Company underperforming its benchmark. It may also impact its dividend paying    The Board has appointed a Manager with the capability and resources to manage
 capacity.                                                                        the Company's assets through asset allocation, stock selection, risk

                                                                                management and the use of gearing.
 In addition to investment securities, the Company also invests in commercial

 property and accordingly, the portfolio does not track the return of the         The performance of the Company relative to its benchmark is a KPI that is
 benchmark.                                                                       monitored by the Board on an ongoing basis. Detailed reports that include

                                                                                information on stock selection, asset allocation and gearing decisions as well
                                                                                  as revenue forecasts, are provided by the Manager and reviewed by the Board at
                                                                                  each of its meetings.

                                                                                  The Management Engagement Committee reviews the Manager's performance
                                                                                  annually. The Board has the power to change the Manager if deemed appropriate.

 Market and geopolitical risk
 Both share prices and exchange rates may move rapidly and can adversely impact   The Manager has appropriate staff and controls in place to enable ongoing
 the value of the Company's portfolio. Although the portfolio is diversified      monitoring of, and efficient response to, financial/market crises.
 across a number of geographical regions, the investment mandate is focused on

 a single sector and therefore the portfolio will be sensitive towards the        The Board receives and considers a regular report from the Manager detailing
 property sector, as well as global equity markets more generally.                asset allocation, investment decisions, currency exposures, gearing levels and

                                                                                rationale in relation to the prevailing market conditions.
 Property companies are subject to many factors which can adversely affect

 their investment performance. They include the general economic and financial    The report considers the impact of a range of current issues and sets out the
 environment in which their tenants operate, interest rates, availability of      Manager's response in positioning the portfolio and the ongoing implications
 investment and development finance and regulations issued by governments and     for the property market, valuations overall and by each sector.
 authorities.

 Rising interest rates have an impact on both capital values and distributions
 of property companies. Higher interest rates depress capital values as
 investors demand a margin over an increased risk-free rate of return.

 Conflict in Ukraine and the Middle East, the ongoing market volatility as a
 result of the actions of the recently elected US administration and general
 political uncertainty more widely could impact economic growth, commodity
 prices, inflation and interest rate stability.

 An element of working from home became part of working life following the
 Covid-19 pandemic. This was most pronounced in cities with longer commuting
 times but there has been, for the majority of workers, a return to the office
 for a substantial part of the working week, with employers increasingly
 seeking to reduce working from home hours, therefore the impact on occupation
 rates is reducing.

 Any strengthening or weakening of sterling will have a direct impact as a
 proportion of our balance sheet is held in non‑sterling denominated
 currencies. The currency exposure is maintained in line with the benchmark and
 will change over time. As at 31 March 2025, 68.9% of the Company's exposure
 was to currencies other than sterling.
 The Company is unable to maintain dividend growth
 Lower earnings in the underlying portfolio putting pressure on the Company's     The Board receives and considers regular income forecasts.
 ability to grow the dividend could result from a number of factors:

                                                                                Income forecast sensitivity to changes in foreign exchange rates is also
 • Following interest rate increases through the year to                          monitored.

31 March 2023 some companies announced a reduction or suspension of dividends,

 in particular in Germany and Scandinavia. Although most companies have now       The Company has substantial revenue reserves which are drawn upon when
 recommenced dividend payments, the timing and level                              required.

for some remains uncertain;

                                                                                The Board continues to monitor the impact of interest rates, and a wide range
 • prolonged vacancies in the direct property portfolio and lease or rental       of economic and geopolitical factors and the long-term implications for income
 renegotiations;                                                                  generation.

 • strengthening of sterling reducing the value of overseas dividend receipts
 in sterling terms. The Company saw a material increase in the level of
 earnings in the years leading up to the Covid-19 pandemic. A significant
 factor in this was the weakening of sterling following Brexit. Although this
 has now passed, the value of sterling may continue to fluctuate in the near or
 medium term due to a number of geopolitical and economic uncertainties. This
 could lead to currency volatility. Strengthening of sterling would lead to a
 fall in earnings;

 • adverse changes in the tax treatment of dividends or other income received
 by the Company;

 • changes in the timing of dividend receipts from investee companies;

 • legacy impact of Covid-19 on working practices and resulting changes in
 workspace demand; and

 • negative outlook leading to a reduction in gearing levels in order to
 protect capital has an adverse effect on earnings.
 Accounting and operational risks
 Disruption or failure of systems and processes underpinning the services         Third-party service providers produce periodic reports to the Board on their
 provided by third parties and the risk that those suppliers provide a sub-       control environments and business continuation provisions on a regular basis.
 standard service.

                                                                                The Management Engagement Committee considers the performance of each of the
                                                                                  service providers on a regular basis and considers their ongoing appointment
                                                                                  and terms and conditions.

                                                                                  The Custodian and Depositary are responsible for the safeguarding of assets.
                                                                                  In the event of a loss of assets the Depositary must return assets of an
                                                                                  identical type or corresponding value unless it is able to demonstrate that
                                                                                  the loss was the result of an event beyond its reasonable control.
 Loss of Investment Trust status
 The Company has been accepted by HM Revenue & Customs as an investment           The Investment Manager monitors the investment portfolio, income and proposed
 trust company, subject to continuing to meet the relevant eligibility            dividend levels to ensure that the provisions of CTA 2010 are not breached.
 conditions. As such the Company is exempt from capital gains tax on the          The results are reported to the Board at each meeting.
 profits realised from the sale of investments.

                                                                                Income forecasts are reviewed by the Company's tax advisor through the year
 Any breach of the relevant eligibility conditions could lead to the Company      who also reports to the Board on the year-end tax position and on CTA 2010
 losing investment trust status and being subject to corporation tax on capital   compliance.
 gains realised within the Company's portfolio.

 

 Legal, regulatory and reporting risks
 Failure to comply with the London Stock Exchange Listing Rules and Disclosure    The Board receives regular regulatory updates from the Manager, Company
 Guidance and Transparency Rules; failure to meet the requirements of the         Secretary, legal advisers and the Auditor. The Board considers those reports
 Alternative Investment Fund Managers Regulations, the provisions of the          and recommendations and takes action accordingly.
 Companies Act 2006 and other UK, European and overseas legislation affecting

 UK companies.                                                                    The Board receives an annual report and update from the Depositary.

 Failure to meet the required accounting standards or make appropriate            Internal checklists and review procedures are in place at service providers.
 disclosures in the Half Year and Annual Reports.
 Inappropriate use of gearing
 Gearing, either through the use of bank debt or derivatives, may be utilised     The Board receives regular reports from the Manager on the levels of gearing
 from time to time. Whilst the use of gearing is intended to enhance the NAV      in the portfolio. These are considered against the gearing limits set out in
 total return, it will have the opposite effect when the return of the            the Board's Investment Guidelines and also in the context of current market
 Company's investment portfolio is negative or where the cost of debt is higher   conditions and sentiment. The cost of debt is monitored and a balance sought
 than the return from the portfolio.                                              between term, cost and flexibility.
 Other Financial risks
 The Company's investment activities expose it to a variety of financial risks    Details of these risks together with the policies for managing them are found
 which include counterparty credit risk, liquidity risk and the valuation of      in the Notes to the Financial Statements.
 financial instruments.
 Personnel changes at Investment Manager
 Loss of portfolio manager or other key staff.                                    The Chairman conducts regular meetings with the Fund Management team.

                                                                                  The fee basis protects the core infrastructure and depth and quality of
                                                                                  resources. The fee structure incentivises outperformance and is fundamental in
                                                                                  the ability to retain key staff.

 

 

Statement of Directors' responsibilities in relation to the Group financial
statements

 

The Directors are responsible for preparing the Annual Report and the Group
and Parent Company financial statements in accordance with applicable law and
regulations.

 

Company law requires the Directors to prepare Group and Parent Company
financial statements for each financial year. Directors are required to
prepare the Group financial statements in accordance with UK-adopted
international accounting standards and applicable law and have elected to
prepare the Parent Company financial statements on the same basis.

 

Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Parent Company and of the Group's profit or loss for
that period. In preparing each of the Group and Parent Company financial
statements, the Directors are required to:

 

•  select suitable accounting policies and apply them consistently;

•  make judgements and estimates that are reasonable, relevant and
reliable;

•  state whether they have been prepared in accordance with UK-adopted
international accounting standards.

•  assess the Group and Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and

•  use the going concern basis of accounting unless they either intend to
liquidate the Group or the Parent Company or to cease operations or have no
realistic alternative but to do so.

 

The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.

 

Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.

 

The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

 

In accordance with Disclosure Guidance and Transparency Rule ('DTR') 4.1.16R,
the financial statements will form part of the annual financial report
prepared under DTR 4.1.17R and 4.1.18R.  The auditor's report on these
financial statements provides no assurance over whether the annual financial
report has been prepared in accordance with those requirements.

 

Responsibility statement of the Directors in respect of the annual financial
report

Each of the Directors confirms that to the best of their knowledge:

 

•  the financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and Parent Company and the
undertakings included in the consolidation taken as a whole; and

 

•  the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.

 

The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's position and performance, business
model and strategy.

 

 

By order of the Board

Kate Bolsover

Chairman

10 June 2025

 

Group statement of comprehensive income

for the year ended 31 March 2025

 

                                                                         Year ended 31 March 2025         Year ended 31 March 2024
                                                                  Notes  Revenue    Capital    Total      Revenue    Capital    Total

                                                                         Return     Return     £'000      Return     Return     £'000

                                                                         £'000      £'000                 £'000      £'000
 Income
 Investment income                                                2      44,666     -          44,666     39,956     -          39,956
 Rental income                                                           1,896      -          1,896      3,471      -          3,471
 Other operating income                                                  626        -          626        877        -          877
 (Losses)/gains on Investments held at Fair Value                        -          (67,339)   (67,339)   -          160,791    160,791
 Net movement on foreign exchange; investments and loan notes            -          1,635      1,635      -          (1,195)    (1,195)
 Net movement on foreign exchange; cash and cash equivalents             -          (1,289)    (1,289)    -          (2,755)    (2,755)
 Net returns on contracts for difference                                 6,156      4,997      11,153     6,522      16,719     23,241
 Total Income                                                            53,344     (61,996)   (8,652)    50,826     173,560    224,386
 Expenses
 Management and performance fees                                         (1,588)    (5,408)    (6,996)    (1,513)    (14,622)   (16,135)
 Direct property expenses, rent payable and service charge costs         (324)      -          (324)      (673)      -          (673)
 Other administrative expenses                                           (1,450)    (585)      (2,035)    (1,336)    (575)      (1,911)
 Total operating expenses                                                (3,362)    (5,993)    (9,355)    (3,522)    (15,197)   (18,719)
 Operating profit/(loss)                                                 49,982     (67,989)   (18,007)   47,304     158,363    205,667
 Finance costs                                                           (1,873)    (5,622)    (7,495)    (1,771)    (5,315)    (7,086)
 Profit/(loss) from operations before tax                                48,109     (73,611)   (25,502)   45,533     153,048    198,581
 Taxation                                                                (6,907)    4,968      (1,939)    (7,322)    5,088      (2,234)
 Total comprehensive income                                              41,202     (68,643)   (27,441)   38,211     158,136    196,347
 Earnings/(loss) per Ordinary share                               3      12.98p     (21.63)p   (8.65)p    12.04p     49.83p     61.87p

The Total column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards. The Revenue Return and Capital Return columns are
supplementary to this and are prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations.

The Group does not have any other income or expense that is not included in
the above statement therefore "Total comprehensive income" is also the
profit/(loss) for the year.

As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The net profit loss after
taxation of the Company dealt with in the accounts of the Group was
£27,441,000 loss (2024: £196,347,000 profit).

All income is attributable to the shareholders of the parent company.

 

 

Group and Company statement of changes in equity

 Group
 For the year ended 31 March 2025  Notes  Share     Share     Capital      Retained    Total

                                          Capital   Premium   Redemption   Earnings    £'000

                                          £'000     Account   Reserve      £'000

                                                    £'000     £'000
 At 31 March 2024                          79,338    43,162    43,971       949,032     1,115,503
 Total comprehensive income                -         -         -            (27,441)    (27,441)
 Dividends paid                     5      -         -         -            (49,825)    (49,825)
 At 31 March 2025                          79,338    43,162    43,971       871,766     1,038,237
 Company
 For the year ended 31 March 2025  Notes  Share     Share     Capital      Retained    Total

                                          Capital   Premium   Redemption   Earnings    £'000

                                          £'000     Account   Reserve      £'000

                                                    £'000     £'000
 At 31 March 2024                          79,338    43,162    43,971       949,032     1,115,503
 Total comprehensive income                -         -         -            (27,441)    (27,441)
 Dividends paid                    5       -         -         -            (49,825)    (49,825)
 At 31 March 2025                          79,338    43,162    43,971       871,766     1,038,237
 Group
 For the year ended 31 March 2024  Notes  Share     Share     Capital      Retained    Total

                                          Capital   Premium   Redemption   Earnings    £'000

                                          £'000     Account   Reserve      £'000

                                                    £'000     £'000
 At 31 March 2023                          79,338    43,162    43,971       801,875     968,346
 Total comprehensive income                -         -         -            196,347     196,347
 Dividends paid                            -         -         -            (49,190)    (49,190)
 At 31 March 2024                          79,338    43,162    43,971       949,032     1,115,503
 Company
 For the year ended 31 March 2024  Notes  Share     Share     Capital      Retained    Total

                                          Capital   Premium   Redemption   Earnings    £'000

                                          £'000     Account   Reserve      £'000

                                                    £'000     £'000
 At 31 March 2023                          79,338    43,162    43,971       801,875     968,346
 Total comprehensive income                -         -         -            196,347     196,347
 Dividends paid                            -         -         -            (49,190)    (49,190)
 At 31 March 2024                          79,338    43,162    43,971       949,032     1,115,503

 

 

Group and Company balance sheets

as at 31 March 2025

 

                                        Notes  Group        Company      Group        Company

                                               2025         2025         2024*        2024*

                                               £'000        £'000        £'000        £'000
 Non-current assets
 Investments held at fair value                 1,024,826    1,024,826    1,073,719    1,073,719
 Investment properties                         61,519       61,519       38,388       38,388
 Investments in subsidiaries                    -            36,260       -            36,276
                                                1,086,345    1,122,605    1,112,107    1,148,383
 Deferred taxation asset                        1,809        1,809        903          903
                                                1,088,154    1,124,414    1,113,010    1,149,286
 Current assets
 Other receivables                             65,003       65,008        58,212       58,217
 Cash and cash equivalents                      11,676       11,674       19,145       19,143
                                                76,679       76,682       77,357       77,360
 Current liabilities                            (111,596)    (147,859)    (17,116)     (53,395)
 Net current (liabilities)/assets               (34,917)     (71,177)     60,241       23,965
 Total assets less current liabilities          1,053,237    1,053,237    1,173,251    1,173,251
 Non-current liabilities                        (15,000)     (15,000)     (57,748)     (57,748)
 Net assets                                     1,038,237    1,038,237    1,115,503    1,115,503
 Capital and reserves
 Called up share capital                        79,338       79,338       79,338       79,338
 Share premium account                          43,162       43,162       43,162       43,162
 Capital redemption reserve                     43,971       43,971       43,971       43,971
 Retained earnings                              871,766      871,766      949,032      949,032
 Equity shareholders' funds                     1,038,237    1,038,237    1,115,503    1,115,503
 Net Asset Value per:
 Ordinary share                         4      327.16p      327.16p      351.50p      351.50p

 

* In the current year, Investments held at fair value have been disaggregated
to separately disclose Investment property and Equity Investments held at fair
value.

 

 

 

 

 

Notes to the financial statements

01 Accounting policies

The financial statements for the year ended 31 March 2025 have been prepared
on a going concern basis, in accordance with UK-adopted International
Accounting Standards and in conformity with the requirements of the Companies
Act 2006. The financial statements have also been prepared in accordance with
the Statement of Recommended Practice, "Financial Statements of Investment
Trust Companies and Venture Capital Trusts." ('SORP'), to the extent that it
is consistent with UK-adopted International Accounting Standards.

The Group and Company financial statements are expressed in sterling which is
their functional and presentational currency. Sterling is the functional
currency because it is the currency of the primary economic environment in
which the group operates. Values are rounded to the nearest thousand pounds
(£'000) except where otherwise indicated.

Going concern

In assessing Going Concern the Board has made a detailed assessment of the
ability of the Company and the Group to meet its liabilities as they fall due,
including stress and liquidity tests which considered the effects of
substantial falls in investment valuations, revenues received and market
liquidity as the global economy continues to suffer disruption due to
political and inflationary pressures, the war in Ukraine and the conflict in
the Middle East.

In light of the testing carried out, the liquidity of the level 1 assets held
by the Company and the significant net asset value of the Group and Company
taking account of the net current liability position, the Directors are
satisfied that the Company and Group have adequate financial resources to
continue in operation for at least the next 12 months following the signing of
the financial statements and therefore it is appropriate to adopt the going
concern basis of accounting.

02 Investment income

                                                                 2025     2024

                                                                 £'000    £'000
 Dividends from UK listed investments                            4,191    2,029
 Dividends from UK unlisted investments                          798      577
 Scrip dividends from UK listed investments                      -        914
 Property income distributions from UK listed investments        13,578   13,031
 Dividends from overseas listed investments                      18,819   17,897
 Scrip dividends from overseas listed investments                6,981    5,014
 Property income distributions from overseas listed investments  299      494
 Total equity investment income                                  44,666   39,956

 

03 Earnings/(loss) per share

The earnings per Ordinary share can be analysed between revenue and capital,
as below:

                                        2025      2025      2025      2024      2024      2024

                                        Revenue   Capital   Total     Revenue   Capital   Total
 Total comprehensive income (£'000)     41,202    (68,643)  (27,441)  38,211    158,136   196,347
 Earnings/(loss) per share - pence      12.98     (21.63)   (8.65)    12.04     49.83     61.87

Both revenue and capital earnings per share are based on a weighted average of
317,350,980 Ordinary shares in issue during the year (2024: 317,350,980). The
Group has no securities in issue that could dilute the earnings per Ordinary
share, therefore the basic and diluted earnings per Ordinary share are the
same.

04 Net asset value per ordinary share

Net asset value per Ordinary share is based on the net assets attributable to
Ordinary shares of £1,038,237,000 (2024: £1,115,503,000) and on 317,350,980
(2024: 317,350,980) Ordinary shares in issue at the year end.

 

05 Dividends

An interim dividend of 5.65p (2024: 5.65p) was paid on 10 January 2025. The
Directors have proposed a final dividend of 10.25p (2024: 10.05p) payable on
30 July 2025 to all shareholders on the register at close of business on 27
June 2025. The shares will be quoted ex-dividend on 26 June 2025.

06 Annual Report and Accounts

This statement was approved by the Board on 10 June 2025. The financial
information set out above does not constitute the Company's statutory accounts
for the years ended 31 March 2025 or 2024 but is derived from those accounts.
Statutory accounts for 2024 have been delivered to the registrar of companies
and those for 2025 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.

 

The Annual Report and Accounts are available on the Company's website
www.trproperty.com (http://www.trproperty.com) and will be posted to
shareholders on or around 18 June 2025.

 

Columbia Threadneedle Investment Business Limited

Company Secretary,

10 June 2025

 

For further information, please contact:

Jonathan Latter

For and on behalf of

Columbia Threadneedle Investment Business Limited

020 3530 6283

 

Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.

Columbia Threadneedle Investment Business Limited

 

ENDS

 

A copy of the Annual Report and Accounts has been submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The Annual Report and Accounts is also available on the Company's website at
www.trproperty.com where up to date information on the Company, including
daily NAV and share prices, factsheets and portfolio information can also be
found.

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