Few UK property analysts cover the larger European-listed companies as none of them own any assets in our fair isle. Before we kick off our whistle-stop tour, a couple of caveats: the euro exchange rate and lower levels of liquidity in some of these suggestions may not suit all investors. Nevertheless, there are some intriguing prospects.
Starting with the largest European-listed property company, Unibail-Rodamco (UL:PAR) which owns a E23bn portfolio of 100 prime shopping centres in 12 countries, in addition to Parisian offices. In the headlines for returning E20-a-share to investors last week, the giant plans to take advantage of investor demand for property and put a further E2.5bn portfolio on the market. It's already started to reposition its portfolio, buying Simon Ivanhoe's European malls in a E715m deal this year, earning its reputation as a leader, not a follower.
France's Gecina (GFC:PAR) boasts a E5.4bn market capitalisation, and a property portfolio containing everything from French offices and flats to hospitals. To quote one analyst, it has a "horrible shareholder structure" and is narrowly owned, but its shares still have momentum. On a smaller scale, UK-listed Hammerson (HMSO:LSE) also boasts French office and retail assets, plus a track record of sealing joint ventures with banks and other equity partners.
Another European giant flush with joint-venture success is Netherlands-listed Corio (CORA:AEX), whose E7bn retail portfolio stretches across the Netherlands, Spain, France and Turkey. It recently teamed up with German insurance giant Allianz to acquire Italy's biggest shopping mall for E440m.
A riskier Dutch play is VastNed Retail (VASTN:AEX), whose E1.9bn portfolio follows a similar geography to Corio. It has marked the value of properties on its balance sheet down to such a level that analysts and fund managers see value – and there's a 7.5 per cent dividend yield to compensate for higher risks. JPMorgan property analyst Harm Meijer forecasts 30 per cent potential upside to VastNed Retail's share price in time.
However, his top European property pick is German office giant Alstria (AEX:GER), which has come through a major refinancing, trades at a chunky discount to NAV (despite selling assets above book valuations), and in Mr Meijer's view could have share price upside of 27 per cent.
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In the fund space
Funds offer an easier way to access European property markets, not to mention a more diversified approach than individual asset-picking. There's Schroder's Global Property Securities unit trust (SZGPCA), which is suitable for retail investors and has outperformed property industry benchmarks.
The more European-focused Thames River Real Estate Securities Fund (TFRRET) launched this year, and its strategy of buying listed equities with property in the Nordic region and core European cities (including London) has proved prescient.
"We haven't got to the end of the eurozone story yet; sovereign debt worries continue, and there's bound to be further shocks," says co-fund manager James Wilkinson. "Sweden has done extremely well and we see continued strength there. We're also positive about Finland, but it's similar to London; stock prices are up with events, so now's not the right time to buy in."
His top picks include Stockholm-listed Hufvudstaden (HUFV A:STO), which has gained 15 per cent since May, and Atrium Ljungberg (LJGR B:STO), which holds retail, office and residential property.
A warning on Nordic stocks, though: they tend to be small, illiquid and dominated by family-related holdings. However, this hasn't stopped fund manager interest – TR employs two native Swedish speakers on its team.
Bolder investors seeking exposure to Russia and eastern Europe can consider several small (but potentially volatile) UK-listed routes. Raven Russia (RUS:LSE) specialises in logistics space in the Moscow region; on the retail front, Israeli developer Plaza Centers (PLAZ:LSE) has schemes across Poland. And the current wave of positive investor sentiment towards Poland is not lost on Aim-traded fund manager First Property (FPO:LSE). It launched an opportunity fund focused on Poland last week, seeded with £7m of equity, and hopes to amass £100m of commercial property assets with help from external investors.
Nor should investors forget UK-listed industrial real-estate investment trust Segro (SGRO:LSE) as 30 per cent of its portfolio is in Europe (mostly Germany, Poland and the Czech Republic) and its shares currently trade at an 18 per cent discount to NAV. Vacancy rates are a challenge, but the rest of its portfolio is centred around Heathrow – and London's economy can't stay in the doldrums for long.
