Editor's Choice: New wave of property IPOs washes over Europe

The times they are a-changin' in Europe’s listed real estate sector. Just 18 months after Prague-based logistics company P3 was forced to abort its IPO plans, a wave of property flotations is washing over Europe.

While London continues to attract the biggest surf, the swell is spreading to a growing number of cities on the Continent. Just this week, PropertyEU reported that Rotterdam-based green office developer OVG is planning to raise €300 mln from investors through a 'blind pool' listing on Euronext Amsterdam. It is believed that the listing is pencilled in for May or June, and that the money raised would be invested in the office market in the Amsterdam region. The report, which was first flagged in Dutch financial daily FD, comes shortly after Domus, a Dutch-based owner of residential property in the Czech Republic, announced plans to list on Euronext Amsterdam sometime in the second quarter of 2014.

Market watchers have hailed the news of the two impending listings as further evidence of increased investor confidence of a recovery in the Dutch property market. But the phenomenon is by no means restricted to the Netherlands. Spain is also seeing a growing wave of flotation activity spearheaded by foreign investors looking to enter the property market through tax-efficient REIT structures. Later this month, Spain’s long-moribund listed property sector is expected to see the launch of the third initial public offering since the start of the year, more than any other European country so far in 2014. Merlin Properties, a newly created property company managed by Magic Real Estate, the asset management firm headed by former RREEF executive Ismael Clemente, has announced it expects to become the largest listed Spanish REIT, known as SOCIMI, by market capitalisation following its upcoming IPO.

Merlin’s planned IPO follows the listing in March of Hispania Activos Inmobiliarios, which currently has a market value of about €530 mln. The REIT, managed by investment manager Azora, received commitments from a number of international investors including Quantum Strategic Partners, Paulson and Co, Moore Capital Management, APG, Cohen & Steers and the Canepa group. Similarly, Spanish family-owned property company Grupo Lar’s newly-launched SOCIMI raised around €400 mln from the issue of 40 million new ordinary shares. Lar Espania Real Estate Socimi currently has a market value of €417 mln.

More IPOs waiting in the wings
The IPO route is not confined to home-grown players either. At end-February US investor Kennedy Wilson raised £910 mln (€1.1 bn) from its initial public offering on the London Stock Exchange. The proceeds were significantly higher than originally expected, another indicator of how market sentiment has turned in the past 12 to 18 months. Indeed, it took Deutsche Annington two attempts to get its IPO over the line in 2013. Nevertheless, a year later the German company is the largest residential property landlord in the country after forking out €2.4 bn to buy a further 41,000 units last February. Another resi IPO is waiting in the wings in Germany: Austrian-based CEE investor Immofinanz has positioned its Buwog residential unit for a spin-off after buying the 18,000-unit DGAG residential portfolio in northern Germany from Solaia Real Estate, a joint venture between Italian listed group Prelios and an investment fund managed by Deutsche Asset & Wealth Management.

The new IPO wave has also hit Italian shores. Rome-based fund manager Sorgente has confirmed that it is preparing the launch of an initial public offering. Sorgente, which has some €4.5 bn in assets under management, is the second Italian fund manager believed to be preparing an IPO. Earlier this year, Anima Holding, which controls Italian fund manager Anima SGR, was rumoured to be studying the listing of 55% of the group on the Milan stock market. Prospects for new listings in Ireland are also looking brighter following the flotation last year of Hibernia REIT and Green REIT. Earlier this week, Irish Residential Properties REIT signalled that it plans to float on the Dublin market and raise about €200 mln, according to a report in the Irish Times. The firm is a subsidiary of Toronto-based Canadian Apartment Properties Real Estate Investment Trust. Meanwhile Green REIT, which was the first REIT established in Ireland following the introduction of new legislation by the Irish Government, has just announced plans to raise another €385 mln for further investment in the Irish market.

In recent years, Europe's listed real estate sector has seen its size and relevance watered down in a global context. But new sophisticated investors of the likes of Quantum Strategic Partners, an investment fund managed by billionaire financier George Soros' fund business, have been spotted sniffing around Europe for bargains. A new wave of Asian capital is also heading in this direction and the European Public Real Estate Association (EPRA) is doing its utmost to ensure that it is channelled into listed real estate . Now that Europe has taken centre stage as a destination for global real estate investment, it may well succeed in regaining some of the lost ground.

Judi Seebus
Editor in chief

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