The TR Property Investment Trust has been steadily building up its continental exposure after s...
The TR Property Investment Trust has been steadily building up its continental exposure after switching to a pan-European mandate last September.
The trust has just produced its annual report and its exposure to continental property shares grew from 4% of gross assets in March 2001 to 29% 12 months later.
The trust, managed by Chris Turner, changed its benchmark from a UK-only to a pan-European index and over the 12 months to the end of March the trust's NAV returned 8.9% against 4.1% from the benchmark.
To make way for this rise in overseas assets the percentage in UK property shares fell from 71% to 52%, UK directly held property dropped from 22% to 19% and other overseas stocks dropped from 2% to nil. In the UK, Turner has become more cautious on the London Property market, as it has the largest exposure of any European city to the finance, telecoms and media industry sectors which are all suffering in employment terms.
He added: 'We have been selling many of our London-office based stocks and are concentrating more on retail property, which has seen demand recover from a lethargic three years thanks to the strong consumer spending levels seen since last autumn. The out of town retail warehouse market has remained buoyant and tenant demand continues to be stronger than supply of new space.'
Turner is trying to be fairly cautious on the prospects for property going forward, following its recent successful run. He feels that while many are predicting that recovery in tenant demand is weeks away, his belief is that it is more likely about 18 months off.
He said: 'Our new financial year has started with our benchmark and our fully diluted NAV per share both rising by 10% before the end of May. While this appreciation is welcome, it is not sustainable.
'Looking forward the dilemma is that a strengthening economy promises higher tenant demand but also higher interest rates so reducing demand for property investments. If the economy remains weak then tenant demand will continue to suffer. I have reduced our borrowings again and am targeting fresh investment towards higher yielding shares.'
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