A report published in March 2013, “Stock Exchange Listed Property Companies; Building a Stronger Europe,” examines the unique role of listed property as a platform for the European economy, providing the space and infrastructure needed for the EU’s businesses, families, hospitals, schools and leisure activities.
Gareth Lewis, Finance Director at EPRA said: “Our research shows that listed real estate companies are leading the way in delivering investment and innovation into the built environment, customer focused practices, sustainable policies and providing long-term stable retirement income for pension plans. But during a time of austerity and slashed government budgets, these advantages are being under-utilised due to the relatively small size of the sector in Europe.”
The commercial property industry as a whole directly adds EUR 285 billion to the European Union’s economy – more than the automotive and telecommunication industries combined – and provides jobs for over four million people, as well as making up 6% of the investment assets of pension funds and insurers’ retirements plans. Yet only 1.8% of the EU’s investible commercial real estate is held within the publicly quoted sector compared with 6.7% in North America and 6.1% in Asia.
Listed companies major drivers of large development projects
EPRA’s research found that listed property companies are major players in the most substantial, ambitious, capital-intensive and longest-term projects, meeting the accommodation and infrastructure needs of European citizens. Relative to the size of their property portfolios, listed property companies devote two-to-three times as much investment to the development of new buildings and the improvement of existing buildings than the rest of the real estate industry.
Examples include: the Westfield Stratford City development in the UK (25,000 construction jobs, 18,000 permanent jobs, 300 shops, 70 restaurants, three hotels, 17 cinema screens); Unibail’s Le Nouveau Beaugrenelle urban regeneration project in Paris (45,000 sqm mix of retail and office space, which has created 1,000 retail jobs); and Alstra’s Alte Post development in Hamburg which fully preserved the external façade of an historic building, while adding a six-floor new development for a total of 9,800 sqm of retail and office space.
Listed property companies typically own and manage property portfolios on a substantial scale, with 32 of the Top 50 European shopping centres being in the sector. On average, in Europe, their portfolios each contain EUR 3.27 billion of property, which is 5.5 times greater than the average real estate investor and eight times bigger than the average non-listed real estate fund. The average size of a property held by listed companies within EPRA’s European market index is almost 50% larger than the average asset in the database of real estate bench-marker Investment Property Databank and for retail properties this is twice as big.
Transparent companies better for economic stability
According to EPRA, the combination of accessibility and transparency allows listed property companies to attract capital from the widest range of investors, whether this is through debt or equity, and this is a critical attribute during difficult times in the economic cycle. Capital raising in the listed property sector is more counter-cyclical than in other real estate vehicles, as company management generally decide when they wish to raise money in the market and shareholders are able to buy or sell their investments at any time. This contrasts with many fund structures where, for example, fund managers were subject to a 'wall of money' at the height of the last real estate market boom and mass redemptions in the subsequent downturn.
Almost a fifth of the 127 closed-ended real estate funds launched in Europe in 2007 have been wound up prematurely. In Germany, a third of open-ended real estate funds, with around EUR 30 billion in assets, are currently either in liquidation or are still closed for redemptions and facing an uncertain future. In contrast, there have been no insolvencies within the FTSE EPRA/NAREIT Developed Europe listed real estate index in the last ten years.
Philip Charls, CEO of EPRA said: “The EPRA report highlights the unique role that listed property companies play in delivering, enhancing and operating the built environment and its important role in driving up standards in the broader property sector. Most significantly, it identifies the huge opportunity that growth in this sector can play in building a stronger Europe and delivering smart, sustainable growth."
For more information, contact Andrew Saunders: a.saunders
EPRA welcomes BaFin's revised position that G-REITs should be assessed against the criteria for identifying funds in the same way as any other real estate company. This reflects the recent guidance provided by the European Securities and Markets Authority and supports EPRA's view.
EPRA has voiced alarm at an unexpected proposal by Germany’s Supervisory Authority BaFin to include domestic REITs within the scope of the EU’s AIFMD. The potential classification of listed real estate companies as part of the 'fund' sector is of most concern.
"If implemented, it would be detrimental to the future growth of the German listed property sector, the efficiency of the broader domestic real estate industry and hit the wider economy." EPRA.
Assets under management of real estate securities funds grew 68% to USD 250 billion from 2007 to 2012. Real estate securities funds increased 39% to 677 in the same period. Why? “Above-average dividend yields and secure long-term cashflows generated by listed real estate companies." Convincing new research evidence suggests that having listed real estate in a portfolio can also improve returns and diversify risk.
We look at the wave of new REIT legislation taking shape in Europe, and consider how the German listed property sector could well double in size over the coming two years. The predicament faced by savers is explore, and the how 'listed' can fit their needs. How could regulation generate new REIT waves in European corporate real estate? What is current thinking on the cost and transparency of listed investment allocations?
AIFMD regulatory clarity for real estate welcomed
EPRA has broadly welcomed the approach taken by ESMA in its recent consultation covering key concepts of the AIFM Directive. Our strong view is that listed property companies and REITs are commercial operating businesses, not funds, and should therefore fall outside of the scope of the AIFMD.
Ireland and Spain on the REIT course
Spain and Ireland, the two eurozone countries worst affected by real estate crises that have damaged their banking systems and plunged their economies into recession, are, despite very different approaches to dealing with their property problems, both implementing new REIT regimes in 2013, the European Public Real Estate Association (EPRA) said. Madrid and Dublin see real estate investment trusts listed on the equities markets as one of the most effective and transparent ways of recapitalizing their property sectors.
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Listed property sector plays vital role in economic recovery says new EPRA chairman.
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