European property shares outperformed the MSCI Europe Index by 19.9% in the year to date, led by Germany and Norway. The German sector has outperformed MSCI Europe by 55.6% year to date, dominated by companies WCM and RSE which rose 96.9% and 76.6% in 1999 respectively. In the second quarter of 1999 property shares outperformed the European index by 11.0%, and gained 9.6% in absolute terms.
The UK property sector has also been strong, outperforming MSCI Europe by 26.9% year to date, helped by consolidation and restructuring in the small capitalisation segment. Delancey Estates, in particular, proved active in June with disclosure of its stake in Tops Estates (up 37.4% in the month) and confirmation of merger talks with Milner Estates (up 2.9% in the month).
Canary Wharf Group
Canary Wharf is a focused, integrated pure-play property company with its assets located in the London Docklands. Fully built-out, the estate can support 947,600m2. A performance-based incentive program ensures that management’s interest are aligned with those of the investors.
Since its flotation in April, CWG’s share price has risen over 25%. Canary Wharf is London’s most cost-effective Grade-A office destination, with its rents 31% lower than the average for City space. Consolidating financial and service industries should attract tenants towards large, modern buildings. Limited new development and low availability rates in the City and the West End could drive more companies to Canary Wharf, particularly after the completion of the Jubilee Line Underground extension.
Unibail
Unibail is the largest listed French commercial property company with a focus on the Paris office and French shopping centre markets. Unibail is vertically integrated – it buys, sells, manages and leases its own properties, as well as undertaking third-party management.
With a free float of 93%, Unibail is the most liquid French property stock and is independent of any controlling shareholders. The senior management has share options to ensure investor and management interests are aligned. Since 1996, Unibail has invested approximately €2.4bn (FFr15.8bn) with Crossroads Property Investors, Coeur Défense and Vivendi.
Based on multiple-to-growth analysis, the company looks attractively valued compared with its French peers as well as to the European sector average. Unibail’s size and liquidity offers investors a way to play the recovering French property market.
European Property Conference
The MSDW second Annual Listed European Property Company conference last month highlighted the changes in the €3trillion industry. European real estate continues its recovery, change in ownership structure and consolidation. Investors appeared nearly unanimous in their view to increase their weighting of real estate shares.
Within Europe, the vast majority of the respondents felt that Southern Europe and Scandinavia would be the most attractive markets. The panel discussions also highlighted the need for companies to focus strategically and geographically. Delegates considered shopping centers the sector best suited to pan-European expansion.
The Morgan Stanley Dean Witter real estate index is derived from a pool of 120 quoted companies.
The real estate analysts can be contacted on tel 44 171 425 8000
