Jefferies says European real estate risk shifts from debt to property valuations
** Jefferies says that higher-for-longer interest rates have shifted the main risk for European real estate companies from refinancing debt to further declines in property valuations
** Higher funding costs and wider assets value discounts are making acquisitions and other forms of external growth less attractive, increasing the importance of organic growth and capital allocation, it says
** Even so, the brokerage believes much of the pain is already reflected in share prices, creating selective opportunities for investors
** It upgrades Merlin Properties MRL.MC, Catena CATE.ST, Great Portland Estates GPEG.L and Target Healthcare REIT THRLT.L to "buy" from "hold", saying recent sell-offs have become overdone and now the stocks offer an attractive risk-reward profile
** Land Securities LAND.L and Derwent London DLN.L get upgraded to "hold" from "underperform" on reduced earnings downside risks, improved operating performance and discounted valuations
** It cuts Workspace WKP.L to "hold" from "buy", citing refinancing and execution risks, and Icade ICAD.PA to "underperform" from "hold" on weak earnings visibility and limited catalysts for a near-term recovery
COMPANY | NEW RATING | OLD RATING | NEW PT | OLD PT |
|---|---|---|---|---|
Merlin Properties MRL.MC | buy | hold | unchanged | €16.00 |
Catena CATE.ST | buy | hold | SEK416.00 | SEK445.00 |
Great Portland Estates GPEG.L | buy | hold | 351.00p | 334.00p |
Target Healthcare REIT THRLT.L | buy | hold | 124.00p | 111.00p |
Land Securities LAND.L | hold | underperform | 593.00p | 462.00p |
Derwent London DLN.L | hold | underperform | 1,655.00p | 1,713.00p |
Workspace WKP.L | hold | buy | 367.00p | 390.00p |
Icade ICAD.PA | underperform | hold | €12.00 | €19.00 |