Jefferies says European real estate risk shifts from debt to property valuations

By Reuters News

** 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

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