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James Carthew on TR Property

James Carthew on TR Property – James Carthew: Think there’s upside to property woes? Try this trust

Retail property companies are struggling to survive and the jury is out on how prolonged the slump in demand for offices will be.

We are some way away from knowing the full impact of Covid-19 on our economy.

It feels as though a major business is announcing job cuts almost every day and we have just seen a big jump in UK unemployment.

The chancellor has started to try to wean us off the furlough scheme (employers now have to bear national insurance and pension costs for furloughed staff and the scheme is supposed to end altogether by November). One of the sectors facing big question marks over its future is commercial property.

Industrial property funds are still relatively buoyant, helped by the demand for logistics space that is accompanying the shift to online retail.

However, retail property companies are struggling to survive and the jury is out on how prolonged the slump in demand for offices will be.

Trying to navigate all of this is Citywire AA-rated Marcus Phayre-Mudge, manager of TR Property (TRY). Looking at its NAV, relative to the AIC’s UK commercial property sector his performance looks quite poor.

TRY’s NAV return is -14.1% over the past six months against a median of about -0.8% for the sector).

However, that reflects the sharp widening of discounts on the funds and companies that TR Property holds. TRY’s discount has widened too but its share price return of -23.0% is about in line with the median share price return in the sector.

All that discount widening could be storing up another bout of outperformance for this trust in the future. I thought it might be worth looking at TRY’s portfolio.

Marcus was wary of the outlook for retail property well-ahead of the current crisis, so the portfolio is underweight here. TRY’s is a pan-European portfolio with about a third in the UK and a strong bias to northern Europe.

In practical terms, that means it has relatively low exposure to London offices. However, relative to its benchmark (an index of real estate investment trusts listed in Europe) it is overweight UK.

Marcus notes that… read more here

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