Sentiment improves across Europe's listed sector: LaSalle

The FTSE EPRA/NAREIT Europe index gained +5.8% in the third quarter of 2012, outperforming bonds (+3.8%) and utilities (+1.2%) while slightly underperforming European equities (+5.9%), according to LaSalle Investment Management Securities.

Europe outperformed the global property universe (+4.1%) in the quarter. Within Europe, companies on the Continent (+5.1%) underperformed the UK (+7.1% in euro terms).

LaSalle said the third quarter witnessed an improvement in market sentiment in Europe following positive announcements from the European Central Bank regarding potentially unlimited sovereign debt purchases in order to stabilise soaring interest rates in Southern Europe.

Investor appetite for high-quality assets remained strong as stable income in ‘safe haven’ countries dominated transaction volumes, driving yields for these assets lower. The strength of core investment volumes was also supported by the current low cost of financing, which helped drive pricing higher for these assets.

On the capital-raising front, companies with healthy capital structures (LTVs lower than 40-45%) and good quality assets in Western/North Europe were able to access debt or equity capital at attractive terms, LaSalle said. Interest rate margins were between 100-200 bps for well-capitalised companies and above 250 bps for the rest of the listed companies. Private companies with significant exposure to Southern Europe or LTVs above 55-60% enjoyed much less lenient lending opportunities with margins above 450 bps or not at all.