"At these levels, a bit of bad news is in the prices. Nevertheless, I believe prospects for real estate remain ugly," said Giuseppe Sersale, fund manager at Anthilia in Milan. "I remain in the camp of those seeing a recession coming. Central banks tightening has been excessive and too fast"
Sweden's Castellum , SBB , Wallenstam , Aroundtown and Vonovia in Germany and Dutch-listed Unibail-Rodamco led real estate gainers, up more than 4%. Their month-to-date losses range between 11 and 42%. Some of these companies are highly shorted by investors seeking to make gains from a fall in their share prices and their bond prices are also sending warning signals.
Nordic markets are seen as particularly vulnerable and
Goldman Sachs said this week that access to funding for
outstanding debt there will be needed earlier than for peers.
Short interest in SBB, Castellum and Aroundtown is currently estimated at 18.7%, 21% at 26.7% of their free float, respectively, according to data from analytics firm FIS Astec.
The STOXX Europe Real Estate index was up 3.3% by 1355 GMT, leading sectoral gainers in the region, although it was still down 13 % so far in March. The broader STOXX 600 equity benchmark index was up 0.9% on the day. Citi warned this week the potential downside for real estate stocks in Europe could exceed 50%, should the market test 2009 trough price-to-earnings valuations. Analyst also see bigger risks that real estate companies in continental Europe may have to tap shareholders to beef up their finances. Angelo Meda, head of equities at Banor SIM, said he was overall positive on the sector, but expected more turbulence ahead until the pressure from higher interest rates cools down. "Companies have to refinance and their divestment plans carry execution risk; the worst will happen in the coming months. It is crucial to distinguish between those that will do better and the others," he said.
The value of the bonds of some of these companies have also been under intense pressure, with a number of them, such as those issued by Aroundtown, trading at distressed levels.
Aroundtown's 1.625% perpetual bond , which
has lost 60% of its value in the last six months, was last down
around 0.1 cent at just 27.7 cents on the euro, meaning it
yields around 52%, according to Tradeweb data.
Immofinanz's 2.5% bond , which has lost 8%
in value in the same time, was down 0.3 cents on the day at
83.95 on the euro, while Castelleum's 3.125% bond was down 0.3 cents on the day at 64.80 cents.
Vonovia's 0.75% bond, which has gained 10%
in value in the last six months, was down 0.3 cents on the day
at 83.94, for a yield of 6.72%.
(Reporting by Danilo Masoni and Amanda Cooper)
