FINANCE: Mike Prew, one of the best-known property analysts in the UK, has said that current REIT pricing offers “buying opportunity akin to 2011-12”.
In a new note, REIT month: ‘Hot Town, Summer in the City’, the Jefferies analyst referenced recent “sturdy earnings” from Hammerson, Intu and SEGRO with NAVs 5% ahead of consensus estimates” on average.
The note said that with 10-year gilts at 2.5%, “we maintain real estate values are still adjusting to low interest rates” which “are likely to rise by only circa 0.25% by December”.
He added: “Share prices have dislocated to an average 15% discount to our forward NAV estimates and we reiterate that this is a buying opportunity akin to 2011-12.”
The note added that risk aversion is spreading throughout markets and that REITs, after initially recovering from Mark Carney’s “Ben Bernanke” moment on 12 June, are still -4% net down.
“This ‘correction’ is another dislocation from growing NAVs, and the evidence from recent REIT asset sales versus book value and industry data to our yield model and data analysis from the 1950s when 10y gilts last traded at 2.5%, all indicate continuing performance,” the note added.
bridget.oconnell@estatesgazette.com
