EUROPE - Listed real estate companies in Portugal, Italy, Greece and Spain - as well companies exposed to assets in those markets - are seeing their shares trade at discounts, as investors worry that the so-called PIGS could be pushed from the euro-zone.

Speaking at a European Public Real Estate Association (EPRA) conference in London, Dick Boer, executive director of corporate finance for European real estate at Kempen, said the entire listed real estate sector had been deeply affected by the sovereign debt crisis in recent months.

At the same time last year, the sector was trading at a premium, he pointed out.

"Over the last few months, we have seen an astonishing decoupling between the valuations of those real estate firms that are exposed to the full brunt of the sovereign debt crisis - and so also fears the euro-zone may disintegrate - and those that are largely sheltered from the storm."

Kempen compared Europe's major listed real estate companies - either located in PIGS countries or with at least 20% of their property portfolios in those markets - with companies having real estate stocks with limited exposure to PIGS in the rest of the euro-zone.

While a euro-zone index of real estate stocks with limited exposure to PIGS showed negative returns of 17% since the beginning of June, other companies in the region have recorded even larger drops.

Listed Italian property firm Beni Stabili lost 35%, while Spain's Colonial lost 38%.

The average discount to the net asset value (NAV) for companies located in PIGS was 48%, while those having a sizeable exposure to these markets traded at a discount of 22%, according to Kempen.

However, discount to NAV for European firms outside this group was lower, trading at around 11-13% for non-PIGS euro-zone, the UK and Sweden.

Boer cited Spain as an example.

"If you are an investor in Spain and in the worst-case scenario where the country is going back to the peseta, you will clearly make important losses as the value of your property will now be in local currency, while your loans will still be euro denominated.

"The exclusion of Spain from the euro-zone would push the country, as well as all local listed real estate companies, into bankruptcy."

Boer went on to say that liquid real estate equities may be signalling future price moves in less liquid underlying physical property markets months beforehand.

According to Boer, investors seem to be offloading those stocks with the greatest exposure to a 'worst-case scenario' in the crisis, such as peripheral countries crashing out of the euro-zone.

"If the apocalyptic scenario now being priced into European real estate stocks with an exposure to the euro-zone's peripheral countries proves to be too pessimistic, then the current situation could also represent a great investment opportunity as these companies bounce back," he said.