Richard Williams
Winners and losers in February 2025
| Best performing funds in price terms | (%) |
|---|---|
| IWG | 15.8 |
| Schroder REIT | 11.2 |
| Assura Group | 10.3 |
| Urban Logistics REIT | 5.5 |
| Supermarket Income REIT | 4.7 |
| Value & Indexed Property | 4.3 |
| First Property Group | 4.0 |
| PRS REIT | 4.0 |
| Helical | 3.3 |
| Warehouse REIT | 2.5 |
Source: Bloomberg, Marten & Co
| Worst performing funds in price terms | (%) |
|---|---|
| NewRiver REIT | (9.8) |
| Care REIT | (8.4) |
| Harworth Group | (8.0) |
| Workspace Group | (8.0) |
| Grit Real Estate Income Group | (7.1) |
| Custodian Property Income REIT | (6.4) |
| Derwent London | (6.2) |
| Great Portland Estates | (5.2) |
| Regional REIT | (4.9) |
| Ground Rents Income Fund | (4.6) |
Source: Bloomberg, Marten & Co
Macroeconomic uncertainty continues to weigh on the performance of the listed real estate sector, as the potential for a slower than anticipated interest rate cutting cycle grows with inflationary pressures expected from both domestic and international policy. The sector was down 1.7% on average in February, despite a raft of positive results indicating a turn in the valuation outlook (see page 2). Flexible workspace behemoth IWG saw impressive gains during the month and is now up just over 25% in 2025. Schroder REIT returned to positive territory having fallen in January, after posting a quarterly NAV uplift (see page 2). Over 12 months, its share price has risen almost 25%. Assura’s share price increased off the back of news of a bid for the company (see page 3 for details), while PRS REIT’s shares continue to make gains as a sale of the company moves a step closer (see page 3). Urban Logistics REIT’s positive start to 2025 continued after it reported a flurry of letting deals (see page 4). Its share price is up 12.9% in the year to date. Shareholders responded positively to Value & Indexed Property announcing a move to the UK REIT regime that it expects will boost its dividend and liquidity in its shares.
There was an eclectic mix of property companies whose share price returns over February made the list of worst performing, reflecting investors’ broad-brush attitude towards the sector. Retail specialist NewRiver REIT lost almost 10% in value during the month, even after reporting the successful integration of the Capital & Regional portfolio and a strong Christmas trading period. Care home provider Care REIT also saw a sizable fall in its share price despite strong occupational drivers giving it confidence to up its dividend target for 2025. Another company to report a positive trading update but frustratingly end the month in negative territory was Custodian Property Income REIT. Weak economic growth may be weighing on the London office developers. However, they are bullish about the core market given the complete lack of supply and robust demand for best-in-class offices. Regional REIT’s struggles continue after reporting a further write down in the value of its portfolio, with its share price now down 17.7% over 12 months. Having seen its share price bounce following a number of bids for the company, Ground Rents Income Fund fell back 4.6% in February after its suitor stepped away from talks.
Valuation moves
| Company | Sector | NAV move (%) | Period | Comments |
|---|---|---|---|---|
| Schroder REIT | Diversified | 2.5 | Quarter to 31 Dec 24 | Value of portfolio rose 1.5% to £473.9m |
| Target Healthcare REIT | Healthcare | 0.9 | Quarter to 31 Dec 24 | Like-for-like valuation increase of 0.6% to £924.7m |
| Custodian Property Income REIT | Diversified | 0.9 | Quarter to 31 Dec 24 | Portfolio value up 0.5% on like-for-like basis to £586.4m |
| Alternative Income REIT | Diversified | 0.8 | Quarter to 31 Dec 24 | Portfolio valuation increase of 0.6% to £106.2m |
| Grit Real Estate Income Group | Rest of world | (12.4) | Half year to 31 Dec 24 | Portfolio value dropped 2.3%. NAV fall mainly due to increased finance costs |
| Unite Group | Student accom. | 5.7 | Full year to 31 Dec 24 | 4.8% like-for-like portfolio valuation increase to £6.0bn |
| Shaftesbury Capital | Retail | 5.2 | Full year to 31 Dec 24 | Portfolio valuation increased by 4.5% on a like-for-like basis to £5.0bn |
| Tritax Big Box REIT | Logistics | 4.7 | Full year to 31 Dec 24 | Portfolio value of £6.55bn, up 3.7% on like-for-like basis |
| Derwent London | Offices | 0.6 | Full year to 31 Dec 24 | Portfolio valuation growth of 0.2% in 2024 to £5.0bn |
| SEGRO | Logistics | 0.0 | Full year to 31 Dec 24 | Portfolio value increased 1.1% to £17.8bn |
| Primary Health Properties | Healthcare | (2.8) | Full year to 31 Dec 24 | Investment portfolio valuation down 1.4% to £2.75bn |
| Hammerson | Retail | (27.2) | Full year to 31 Dec 24 | Valuations stable, NAV fall due to sale of outlet village business at a substantial loss |
Source: Marten & Co
Corporate activity in February
Assura Group rejected a bid for the company from a consortium comprising Universities Superannuation Scheme (USS) and US private equity giant KKR valuing it at £1.562bn. The most recent proposal at 48.0p per share was a 28.2% premium to the share price, but a 2.8% discount to its last reported NAV. USS has backed away from any further potential offers, while KKR said it was considering a further bid. It has until 14 March to announce its intentions.
An activist investment company – Achilles – was launched, raising £54m from investors. Its focus will be on companies in the property, infrastructure, and renewables sector, where it aims to work with boards to realise value for shareholders. It is managed by Harwood Capital Management and led by its chief executive Chris Mills, with Robert Naylor on the board of directors. The pair worked together to achieve an exit for investors at Hipgnosis Songs Fund and more recently is working with PRS REIT on a strategic review.
The sale of PRS REIT moved a step closer, with the board announcing that it has received several non-binding proposals to acquire the company. The majority of these proposals were pitched within a price range representing a premium to the current share price and a discount to the latest published NAV. The board said that it intends to invite a subsection of parties to enter into a due diligence process, which is expected to be completed no later than March 2025.
Home REIT received a number of non-binding offers for the full portfolio from “credible parties” that have been selected to proceed to the next stage of the process. It had put its portfolio of 862 properties up for sale seeking £175m.
A firm offer for Ground Rents Income Fund did not materialise after the board rejected several approaches from Victoria Property and time lapsed on the offer period. GRIO said it was fully committed to implementing the realisation strategy approved by shareholder in November 2024.
Helical and its joint venture partner Transport for London entered into a development financing arrangement with HSBC to provide £125m to fund the construction of 10 King William Street, the over-station development at Bank underground station, in the City of London.
Warehouse REIT agreed to change its investment management agreement, with the basis of its fee calculation switching from NAV to the lower of NAV and market capitalisation, effective from 1 April 2025. This would result in an annual saving of around £2.1m and a boost in earnings of 0.5p per share. There will be a transition period to this new fee arrangement, with the fee in the first financial year only (ending 31 March 2026) being subject to a floor of no lower than 70% of EPRA NAV.
February’s major news stories – from our website
- Supermarket Income REIT grows French portfolio with Carrefour acquisitions
Supermarket Income REIT has acquired nine Carrefour supermarkets in France for €36.7m and sold a Tesco store in the UK for £63.5m. The company now has 26 Carrefour stores in France, representing around 5% of its gross assets.
- Primary Health Properties grows Irish exposure €22m
Primary Health Properties acquired a health & wellbeing clinic with urgent care and diagnostic facilities in Cork, Ireland, for €22m, at a yield of 7.1%. The company’s portfolio in Ireland now represents 9% of the total portfolio.
- Urban Logistics REIT makes significant letting headway
In a lettings update, Urban Logistics REIT announced that it completed new lettings on five units, totalling 301,000 sq ft of space and £3.0m of annual rent, since 30 September 2024. Portfolio vacancy reduced from 8.1% to 6.2%.
- Great Portland Estates makes premium lettings
Great Portland Estates made four new lettings for ‘fully managed’ office space at its Piccadilly Estate, in London’s West End. The space was let 13.7% ahead of ERV, securing £1.6m of annual rent at an average of £240 per sq ft, representing a net premium of 98% to traditional leases.
- Sirius Real Estate buys in Germany and the UK
Sirius Real Estate acquired a business park in Reinsberg in Saxony, Germany, for €20.4m and a 6% net initial yield, and the Earl Mill business park in Oldham, for £5.7m and net initial yield of 13.9%.
- Schroder European REIT gets Seville shopping centre off its books
Schroder European REIT sold its 50% interest in a distressed shopping centre in Seville, Spain. The asset had been marked down in SERE’s book at nil value and the sale reflects this, with the outstanding debt transferring to the purchaser. This strengthens the company’s balance sheet by reducing its net loan-to-value (LTV) ratio from 25% to 21%.
- Life Science REIT lets lab space at Cambourne
Life Science REIT let 17,200 sq ft at Building 1020 at its Cambourne Park Science & Technology Campus in Cambridge, to 42 Technology Limited, a product design and innovation consultancy. The company signed a 10-year lease, and is paying a rent of £25.50 per sq ft, ahead of the June 2024 ERV.
- Henry Boot wins planning battle for Kent scheme
Henry Boot secured outline planning permission on appeal for 112 homes on a freehold site in Yalding, Maidstone, Kent, after a lengthy planning battle with the local council.
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