Property stocks remain volatile as eurozone woes continue

European property stocks may have ended October on an upbeat note, but volatility is expected to remain a key feature of the listed real estate market in
the coming period in line with the broader economic sentiment, according to Joël Gorselé, an analyst at Petercam in Brussels. On Tuesday, European stockmarkets nosedived following the surprise announcement by Greek prime minister George Papandreou to hold a referendum on the euro rescue plan brokered last week.

'I believe the listed sector has not yet entered into recovery phase,' Gorselé said. 'Some companies have seen a rebound, but the future trend remains uncertain and will be determined by the overall macroeconomic conditions as well as developments in the banking sector.'

Germany's IVG Immobilien was the biggest winner in October as recent news on two large debt refinancings helped sustain a 23% rise in its share price. The Bonn-based firm clinched the restructuring of roughly EUR 500 mln of debt securitised against the Squaire office project at Frankfurt International Airport and a two-year debt extension on its Pegasus portfolio. Despite the recovery of EUR 0.50 per share since end-September, the stock is still trading at a discount of roughly 50% to the company's Net Asset Value of EUR 6 per share.

In France, Paris-based REIT Icade led the listed sector’s recovery, posting a 9.28% rise in its stock price. In the first nine months of the year the real estate arm of Caisse des Dépôts reported an 11% increase in turnover which reached EUR 1.1 bn, mostly as a result of the impact from the acquisition of Compagnie La Lucette.

Shares in French retail specialist Klépierre also saw a steady rise in October after a 4.9% jump in revenues, which climbed to EUR 257 mln in Q3. Klépierre expects rents to increase 'slightly' in Q4 2011 versus the last quarter of the previous year. More importantly, the company indicated that cash-flow per share for the full year should 'at least' match the previous year's level.

However, the revenue results for Q3 were rather mixed, ‘showing a widening gap between the performance of Klépierre’s shopping centres in northern and southern Europe’, noted Kai Klose, an analyst at Berenberg Bank in London. ‘Of special interest will be the development of retail revenues in France, which accounts for some 40% of Klépierre’s total rents,’ Klose mused. On a positive note, the company has just signed a five-year credit facility with BNP Paribas for EUR 200 mln. ‘Another EUR 240 mln has still to be refinanced this year, but we appreciate that Klépierre has widened its debt financing sources,’ Klose added.