European real estate investor TR Property Investment Trust said it expected earnings for the full year to be ahead of last year and that continental property retained good prospects for generating income.
First-half results from the FTSE 250 investment trust, founded in 1905, saw net asset value rise 3% to 261.82p and a total return of 4.5%, though this was less than the exceptional double-digit performance in the same period last year.
Chairman Caroline Burton highlighted the continued appreciation of property equity values in the first half of the financial year but that this was at a more modest pace than seen in the previous two years.
Net debt rose to 15.9% from 14% of net asset value as the company took advantage of the steadily lower cost of debt arising from fierce competition among banks.
"Despite the weakening economic outlook, continental property stocks outperformed those in the UK in the last six months as investors anticipated further monetary stimulus from the European Central Bank," Burton said.
But she added: "While it is not difficult to cite issues which make the overall economic outlook on the continent less than comfortable, we continue to believe that investment in property retains its attractions. Investors continue to seek income-producing assets and... the greater willingness of banks to lend to the property industry at a lower cost of debt, supports their ability to pay out that income."
Key to the trust's optimism has been the very low level of new commercial development since the crisis and the "genuine shortage of good quality business space in a number of key markets", which has seen renewed tenant demand translating into rental growth as this supply/demand disequilibrium swings in the landlord's favour.
The expected increase in earnings for the full year is thanks to an unexpected dividend receipt from Max Property, while the trust's largest investment, Unibail, has announced that it will return to paying both an interim and final dividend.
However, with some dividends due right on the cusp of the financial year-end, there is scope for some of these to slip back into the next financial year.
Looking further forward, Burton cautioned that development activity at London's mixed-use Colonnades project, although expected to increase the capital value of the asset, will "create some drag on the income generated for the next 12 months", while expectations of lower levels of indexation across the continent will also impact dividend growth rates.