Merrill Lynch certificates to track EPRA

Merrill Lynch was attracted to the good performance and the country spread of the EPRA Index which it will use for its first launch of real estate certificates which will be traded on six top European stock exchanges including Luxembourg and Frankfurt Merrill Lynch is to launch tradeable certificates in real estate which track the performance of European Public Real Estate Association’s (EPRA) property index. The Europa Immobilia certificates are the first product to combine the characteristics of a certificate with an investment in pan-European listed property companies. It is also the first product by Merrill Lunch which takes its benchmark from an existing industry index. Minimum investment: €100 Merrill Lynch will launch up to €500m certificates on 22 June and expects to attract retail and institutional investors. The certificates are being marketed in Austria, Finland, Germany, Ireland, the Netherlands and Switzerland. The minimum investment is €100. Merrill Lynch has issued around €4bn of certificates since 1996 which have tracked other sectors such as the biotech industry. Usually, Merrill Lynch creates its own index for its launches, for example it created the Dynamic Biotech 20 for its biotech launch. In the case of the real estate sector, Ingo Heinen, equity strategy and product developer at Merrill Lynch, said the EPRA index “has brilliant performance against the MSCI Real Estate Index and the Dow Jones Europe STOXX Real Estate Index and giver diversification over 15 countries. Why try and outperform the EPRA index?” Since the end of 1999 the index has risen 18%. Certificates rival open-ended funds The EPRA Index tracks the performance of 80 European real estate company stocks from 15 countries. The stocks are selected and reviewed each quarter by experts on the EPRA committee. The focus of the index are those companies which develop, own and trade income-producing commercial real estate.” Merrill Lynch analysts are forecasting a property return this year of between 6% and 12%. Following the launch, the certificates will be traded like shares on stock exchanges including the Euronext Amsterdam, Luxembourg, Frankfurt, Munich, Dusseldorf and Stuttgart. The expiry date is 27 June 2008. A €3 fee is included in each €100 certificate. With issues in other sectors, Merrill Lynch has attracted around 80% retail investors and 20% institutional although with the real estate launch, Heinen expects a higher level of interest from institutions. “If you are a pension fund how can you invest safely in real estate especially if you want to track the European market.” Heinen said feedback from investors had so far been positive. Heavy marketing The certifcates have been marketed heavily in Germany in attempt to attract retail investors who invest in the open-ended funds. With many German investors reeling from share losses on the Neuer Markt, the certificates combines Germans’ appetite for real estate investment with a tradeable vehicle. Merrill Lynch says the certificates will also offer a higher level of transparency compared to open-ended funds. The certificates are also good news for EPRA, one of whose aims is to broaden the appeal of investment in the listed property sector. Selection of index companies Companies hail from 15 countries Company Country Immofinanz Immobilien Austria Cofinimmo Belgium TK Development Denmark Sponda Finland Unibail France IVG Holding Germany Green Property Ireland Beni Stabili Italy Corio Netherlands Steen & Strom Norway Sonae Inmobiliaria Portugal Vallehermoso Spain PSP Swiss Property Switzerland Land Securities UK Source: EPRA