The average discount to NAV for companies located in the PIGS (Portugal, Italy, Greece and Spain) was 48% and for those with a sizeable exposure to these markets 22%. Discounts to NAV for European firms outside this group were roughly half or a quarter in comparison, around 11% to 13% for non-PIGS Euro zone, like the UK and Sweden. Real estate specialist Kempen, which carried out the research on behalf of EPRA, examined the performance of Europe’s major listed real estate companies located either in Southern Europe, the centre of the sovereign debt crisis storm: Portugal; Italy; Greece and Spain (PIGS), or with a minimum of 20% of the value of their property portfolios in those markets, since the beginning of June, 2011. These companies were then compared with real estate stocks with limited exposure to PIGS in the rest of the Euro zone; the UK; Sweden and Switzerland.  

Kempen said the varying impact of the sovereign debt crisis on European real estate stocks could be seen clearly by comparing two similar French companies: retail/office-focused firm Unibail-Rodamco, Europe’s largest quoted property company, and retail property investor Klépierre. Klépierre stock has been trading around a 28% discount to NAV, with 12% of the value of the company’s shopping centre portfolio located in Italy and Greece and 9% in Spain and Portugal. Foncière des Régions, which controls Italian company Beni Stabili, traded at a 20.9% discount. In contrast, Unibail-Rodamco’s NAV discount is about 11%, with only 9% of its portfolio of shopping centers in Spain and no exposure in other peripheral Euro zone markets. Greek company Babis Vovos was the worst performer, trading at an NAV discount of 58.8%. Meanwhile Dutch shopping centre specialist Corio, with exposure to Portugal, Spain and Italy, under-performed by 17.4% since June. Italian company Prelios (formerly Pirelli Real Estate) saw a NAV discount of 54.8%.

It seems obvious that over the last few months an astonishing decoupling between the valuations of those real estate firms who are exposed to the full brunt of the sovereign debt crisis, and so also fears the Euro zone may disintegrate, and those who are largely sheltered from the storm. If it results in a breakup of the Euro zone or even a growth-damping series of costly bailouts, it will echo from Beijing to Boston and back as Europe is the largest trading partner of both the U.S. and China and home to one of the world’s largest pool of wealthy consumers. So lets hope the Germans stay committed to the monetary union.

This webinar provide insight as many of us seem to rush to various up and coming markets like Brazil, Colombia and Peru. Obviously, success is not guaranteed and perhaps few and between. What constitutes an investment opportunity in those “hot” Latin American real estate markets vis-à-vis non-acceptable risk? Dr. Geurts discussed the current Latin American economic climate as well as the outlook for the coming years followed by a closer look at Brazil, Colombia and Peru considering its attractiveness as expressed by various investors including a perspective on current investment opportunities. Practical – hands on input was provided by our guest, John Druckman, Managing Director, Fontis Capital Group, LLC who assists investors in targeting Latin American real estate opportunities; their strategic geographic focus includes both primary and secondary markets within Brazil, Colombia, and Peru. The presentation was also be co-presented by Robert J. Meulmeester, MRICS, Partner, Cadence Capital Group, LLC. We would be very happy to answer any other questions, provide information and/or discuss business opportunities with you. Please contact Robert Meulmeester for any questions you may have. Enjoy ! 

Please click on the attach file to learn more on this webinar, your time zones and Cadence Capital Group. Please RSVP at your earliest convenience to rob.meulmeester@cadencecapitalgroup.com.  Cadence Capital Group will then provide you with a link to sign up at our hosting website which will provide you with a login to watch this live; audio and slides will all be virtual – no dial-in will be provided. A recording will be made available. Enjoy ! Cadence Webinar Invitation June 30 2011

“The biggest tail risk for global investors is Euro zone sovereign debt funding, which has displaced commodity price inflation as investors’ main preoccupation, according to a survey conducted by Bank of America Merrill Lynch of 285 investors managing a combined $814 billion. It finds over the past month a sharp increase to 36% of respondents citing European sovereign debt as the biggest ‘tail risk’. A month ago only 21% felt this way. Commodity price inflation, seen as the biggest tail risk by 36% of respondents in April, is now only flagged by 16%. Chinese real estate saw a modest increase in concern, with 12% rating it the biggest tail risk, up from 9% in April.

Framing this mood is a growing consensus that the US Federal Reserve will maintain very low interest rates throughout the year. Now 73% of respondents expect no change to US interest rates before 2012. Just one month ago, two-thirds of respondents predicted US rates would start to rise this year.  Although loose monetary policy in the US is being blamed for inflation, those concerns do not appear to be overly troubling most fund managers. That’s because investors have growing doubts about GDP growth prospects. As the US nears the completion of ‘QE2’, many fund managers are worried that the stimulants propping up the US economy won’t be replaced by commercial activity. Indeed, overall inflation expectations have moderated.

Despite this, risk appetite remains resilient, according to the survey’s blend of indicators. Hedge funds in particular seem more optimistic than a month before. Asset allocation has not changed much; the only notable shift has been a cut in the overweight position in commodities. Investors in aggregate remain overweight commodities, but by far less. Merrill speculates that any upside surprise this summer in oil or other commodity prices would see investors return quickly to greater overweight.  However, the survey finds global investors are making changes within asset classes. At a sector level, equity fund managers are rotating into more defensive positions, such as consumer staples, and out of resources, energy and banks (although in emerging markets, the favored sectors are consumers and energy; and among Asia-based investors, hot sectors are industrials, tech and energy).

And emerging markets, which had experienced net selling in the first quarter, are now definitely back in favor, with the average investor 29% overweight, from neutral in March. This is now halfway back to Emerging Markets peak overweight level recorded by this survey, in November 2010.  Merrill’s analysts suggest this reflects weaker global growth expectations, lower inflation expectations and elevated risk appetite. Investors based in Asia favor Taiwan and China, and have been trimming positions in India, the Philippines and most dramatically in Australia.  Most of the flows came at the expense of the US, which had been the main beneficiary in the first quarter, although investors are still modestly bullish on it.  Moreover investors consider the US dollar still undervalued; in fact, in terms of this survey’s history, investors say it is the most undervalued since August 2008. The Euro, in contrast, is seen as overvalued. Other currencies saw little major change in expectations.

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