Germany will become major source of property IPOs: Epra

Germany is likely to be a 'future major source' of real estate IPOs, the European Public Real Estate Association's annual conference in Amsterdam heard on Thursday.

Dick Boer, director of property research at Dutch merchant bank Kempen, said that the European listed sector is well positioned for strong expansion in the next few years via acquisitions and IPOs. On 1 September, the listed sector's total market capitalisation crossed the EUR 100 bn mark following the deep point of EUR 43 bn on 9 March this year.

Turkey, the UK and Germany are the three markets currently showing the strongest potential for new listings, he said.

Most German companies, Boer said, are trying to expand the duration of their loan books by rolling over debt with expirations until 2013 in anticipation of a shortage of liquidity following the expiration of EUR 26 bn of commercial mortgage-backed securities (CMBS) in Germany over the next three years.

A significant portion of these CMBS are likely to result in IPOs, particularly in the residential and office sectors, he said. 'Forecasts of a wave of new property listings in Germany, have, in the past, proved to be a false dawn. This time around we think the catalyst of the impending German CMBS expiries will result in a strong boost to the capitalisation of the European real estate equities market, particularly if it is combined with banks using the British REIT as an exit route for problematic property assets in the UK.'

In Turkey, three companies have indicated they want to list on the stock exchange following a change in legislation that reduced the free float requirement from 50% to 25%. 'It is very likely more companies in Turkey will come forward (to list),' Boer added.

The listed sector, he said, has proved to be more robust than non-listed property funds in the credit crisis. An increase in stock prices and some EUR 7.5 bn in equity issues have left the listed companies well capitalised and most of the majors are on the acquisition trail.

Boer noted that all the EUR 400 mln real estate transactions carried out this year have involved listed companies, usually working with large institutional players such as pension fund asset manager APG, insurer Allianz or sovereign wealth funds. Such institutional investors have an appetite for dominant real estate assets. Alliances with listed real estate companies provide the management capacity they lack.

For instance, the Korean National Pension Service (NPS) is acquiring a 51% interest in Hammerson’s O'Parinor mall in the French capital for EUR 217 mln. Hammerson will continue to manage the asset, though NPS has an agreement to acquire a further 24% next year.

'That investor is also looking in the Netherlands to buy retail parks,' Boer added.

The September edition of PropertyEU Magazine reports on the impendiing wave of M&A activity in the European sector. Click on the link below to read the preview.