The post regarding trends reported in the European scene-British land annual reporta few days ago and a major property research report for Europe-free form website listed below. Not what wed expect with our gloomy media reports. If GMG is looking to move into the UK, it looks like not a minute too soon. Opportunity all over, the tide has turned, how far to go?
Atenzione AEZ watchers: News from UK and Europe- dont be the last to find out.
UK British Land PLC reported a few days ago, its FY seems to end on 31 March. . It is a macro UK trust, investing in retail and offices. Following three years or more of write- downs and the resulting red ink, the latest report is very different, A big turnaround in the market is underway and accelerating, You can easily Google it (to verify what I am posting and get more info.) or www.britishland.com/media/pressreleases.
. Portfolio valuation up 13.5% & ERV growth contributed to 7.5% increase in Q4 . NAV per share up 27% to 504p benefiting from leverage.
.Total return of 33.5% (16.6%in Q4)
.Like for like rental income growth +1.4% (Retail +2.1%, Office -0.4%)
.Occupancy rate up to 97% (99% in retail and 93% in offices)
.BL is now actively buying selected retail and office assets, with 500 million pounds committed to develop 1.2 million sq ft of prime offices.
The demand for space in Belgium is strong with prime space in both office and retail at near 100% occupancy.
Now thats better, eh? Slight rental growth but more in occupancy, and a change in the market. This means the UK valuers are now using lower yield levels in their valuations. The gearing which was such a waddy when values were going down are now an accelerator in the size of NAV, as they rise again. A 16.6% rise in NAV in one quarter results from leverage applied to the increased total valuation. Also, the buyers are back for top end property in the UK. It will flow through with time.
Now, data for the Eurozone.
Have found a source for trend data in English for Eurozone- Cushman & Wakefield are a London based global property agency/ consultants, with offices around the world, plus right through Europe. They have a strong research department, and publish data on all main markets. A new report is just out on Eurozone trends. Economic Pulse May 2010. Their address is www.cushmanwake.com.
Highlights: Europes polarizing market HL. We are now seeing an increase in activity from both occupiers and investors into the European property market with growth rates varying among countries You can read it all, but Germany France, Austria, Belgium and Switzerland, are starting to lead and the central European countries are also in this category. Poland, Slovakia, etc. Sweden & Norway too are showing a change in trend, to slight upward. Retail sales are on a slow increasing trend especially in Germany. Buyers are beginning to appear again as finance is becoming gradually more available for the strongest buyers to but A grade property. Generally the major and capital cities are expected as always to be the first to rise. Economic conditions in Bucharest are forecast to rise faster than any other city in the Eurozone., from a lower base. Tenant incentives will likely be reduced or disappear in the western and central part of Europe, but rent will not rise much if at all except for the best space in the best centres. Occupancy is turning up,
In Spain, retail sales are very weak but have stopped declining and importantly, recorded a slight increase for the first time since the GFC set in the last few months.
B grade property is expected to remain bad and get slightly worse, in Europe in 2010. The new shopping centre pipeline is a lot barer than it was a few years ago.
But listen to this: With signs of falling yields, likely to drop by 50bp or more this year for prime centres, a modest increase in investment supply should lead to further growth in activity.. .. etc. see p9.
Retail yields-March 2010: selected from Table 2- for Retail-
Shopping centres . Austria 6.25. Trend down (yield) Germany, 5.4 trend down Italy 6.5, trend sideways Spain 6.0, trend down Romania 9.0, trend sideways Greece 7.0, trend up
It looks as if the next round of valuations could well result in increased valuations in Germany, Austria, possibly Spain and Romania, and Italy. Any gains will come from better occupancy, but particularly from a gradual improvement in the market for commercial property which is coming out of its paralysis. These reports are all May 2010.
This cant be bad for AEZ. We just might be now tacking slightly away from the rocky shore, but the operative word is away, not toward. Another half like the last and its all over, rover. I bailed a while back about 7c but now back in. The odds of survival look better, quite a bit better, from this news. AEZ is now 70% levered, after the last round of write downs. Even a small increase in valuation overall will be quadrupled in the NAV figure. Are we holding paper for A grade property? Thats what it hinges on. I think we are? An unfreezing market will see sharp valuation increases, heading toward more normal levels. The first increases will be the biggest. A la British Lands. 16%+ increase in NAV in three months-phew!
The news from Belgium is that things are improving there very fast indeed. Why? The fall in the value of the Euro is putting a rocket under Eurozone exporters (Economics 101, of course) Particularly in Germany, which is one of the worlds biggest exporters. Belgium etc. So who is buying? The BRICs mainly.
Dont be caught short, when the announcements come out. Ouch?
GMG Price at posting:
$2.93 Sentiment: None Disclosure: Not Held
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