Despite a strong long-term record that has seen TR Property (TRY ) win five Citywire performance awards in the Specialist Equities category, the £1bn investment trust suffered a shocking 32.4% slump in net asset value (NAV) last year as investors dumped the real estate investment trusts (Reits) in which it invests on fears surging interest rates would hit commercial property valuations and their borrowing costs.

However, as inflation has peaked and started to fall, the fog of uncertainty has begun to clear, says fund manager Marcus Phayre-Mudge. In the month to 26 January, the trust’s NAV has rallied 11%, although the shares still trade on a relatively wide 9% discount.  

Returning to the Citywire studio after nearly two years, Phayre-Mudge (below) talks to Gavin Lumsden about where he is finding good value in a UK and European real estate investment trust (Reits) sector trading on a steep 27% discount below asset value after last year’s selloff.

While Phayre-Mudge says Reit and property valuations had to fall in response to rising government bond yields, and in some areas will continue to do so, that top-down correction is at odds with the rental growth and strong tenant demand evident in many, but not all, areas of industrial, office and retail real estate.

In this 36-minute interview, the fund manager also discusses the:

• two UK generalist Reits he bought for the first time;
• need for more mergers and consolidation in a fragmented Reit sector;
• importance of strong governance and due diligence following the suspension of shares in Home Reit (HOME ); 
• challenge of stricter enviromental standards for the owners of many office buildings.