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."

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.

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

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 and Company balance sheets

as at 31 March 2025

* 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

03 Earnings/(loss) per share

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

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 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.