Kempen & Co sees more property IPOs and takeovers

Dutch merchant bank Kempen & Co expects a strong increase in the number of share issues and IPOs of European property companies in the coming year. The bank also expects to see more takeovers of poorly valued property companies, Boudewijn Schoon, director of European Property Research, told the European Property Seminar in Amsterdam on Tuesday. Kempen organised the seminar for 100 property investors and 50 European property companies.

The reason for the increase, Schoon said, is that the European real estate industry has recovered more strongly from the financial crisis than other sectors. Investors are focusing more heavily on property markets in northwest Europe, particularly Germany, he noted.

Schoon has calculated that listed property companies trade 4.5% higher on average than the value of their underlying assets. ‘That means that they can raise capital at relatively low costs to finance their growth,’ said Paul Pruijmboom, managing director of corporate finance at Kempen & Co. ‘Listed property currently offers investors even more advantages. Liquidity and risk diversification have traditionally been important, but now corporate governance is also becoming an increasingly strong factor,’ he said.

Meanwhile, Kempen & Co believes it has found a solution to the Basel III regulations which will entail banks facing more long-term (re)financing issues. ‘An interesting phenomenon is the recent surge in the number of convertible bond issues,’ Pruijmboom said.

Of the EUR 4.7 bn in convertible bonds issued so far in 2011, property companies accounted for 31%. In the past two months, French SIIC Foncière des Régions has issued EUR 550 mln worth of bonds, UK REIT Derwent London has raised EUR 201 mln and Belgian company Cofinimmo has placed a EUR 173 mln bond offering.