TR Property 17 January 2025
Disclaimer
This is a non-independent marketing communication commissioned by Columbia Threadneedle Investments. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
TR Property (TRY) is a specialist property investment trust that combines a portfolio of pan-European REITs with exposure to UK direct property. The trust gives investors access to all the property sectors in a single vehicle with a specialist manager able to adapt more dynamically than a REIT investing wholly in physical property.
Property is a geared asset class and therefore the direction of interest rates over recent years has been the main driver of, first, falling property values and widening discounts, and more recently, signs that the outlook for the asset class has turned positive. Property is not a single, homogenous asset class though, and TRY’s specialist team have a track record of navigating the divergences between sectors and regions.
Over five years to the end of 2024 TRY outperformed with an NAV decline of c. -16% compared to c. - 25% for the benchmark. TRY’s current Dividend yield is c. 5% and over the long-term the dividend has grown ahead of inflation, which sets TRY apart from many of the REITs in the Morningstar UK Commercial Property peer group that it competes with.
The trust's Management team is led by manager Marcus Phayre-Mudge, who joined the team managing TRY in 1997 and became lead manager in 2004, since 2011 working within specialist manager Thames River Capital, a joint venture with Columbia Threadneedle, giving the team access to the group's wider resources.
TRY is currently geared c. 14%, within its expected range of 10–20%, using a mixture of long- and short-term debt and CFDs. The team has allowed gearing to rise over the last year from 10% in response to the improving outlook for the asset class.
TRY has a Kepler Income and Growth rating.
Although direct property REITs can be an effective choice for some investors, typically those seeking to maximise starting yield, for many, TR Property will be the right choice, with a much more diverse portfolio, and the ability to make more dynamic changes than a REIT can. For example, as rate rises began to bite in 2022 the team quickly reduced holdings in highly geared REITs, and more recently was able to successfully increase exposure to highly discounted UK REITs. Furthermore, one of the drivers of returns in 2023 and 2024 has been M&A activity, and TRY’s broad portfolio has benefitted from this. The TRY management team is one of the largest specialist investors in Europe and has often been an influential voice in these transactions.
TRY’s discount, c. 6%, has been resilient through the downturn in property. The Morningstar UK Commercial Property sector is, in contrast, on an average 25% discount, but an investor choosing TRY is not turning their back on the opportunity to benefit from discount narrowing as TRY owns a portfolio of REITs that themselves trade on discounts. Thus, with a strong track record, we think TRY offers an excellent ‘one-stop’ solution to any investor wishing to allocate to property in their portfolio.
Bull
- TRY gives investors a simple way to access broad exposure to listed real estate
- REITs across Europe are beginning to report more positive results and a recovery in prices could be very positive for TRY
- M&A activity continues to drive performance while valuations remain low
Bear
- TRY’s yield, c. 5%, is lower than some direct REITs, albeit the trust has increased its dividend ahead of inflation over the long-term
- In the short term, TRY may see a shortfall in income, although it can use reserves to smooth dividends
- TRY uses gearing, which can amplify losses as well as gains