European real estate in 'uncharted territory' - RBC slashes ratings

abrdn European Logistics Income

12/07/2022 09:00

** RBC cuts eight European real estate firms, saying higher
interest rates, deterioration in credit spreads and recessionary
trends put the sector in "uncharted territory"
    ** The broker says this recession scenario could lead to
higher vacancy, weaker market rent trends and lower variable
revenue
    ** "Landlords benefiting from polarisation in their markets
is a significant upside risk, but is unproven in weaker markets
and is unlikely to offset higher funding costs," it adds
    ** While RBC does not expect upcoming operating results to
be weak, it believes rising financing costs will be in the focus
in the next financial updates
    ** On these grounds, RBC cuts ASLI  ASLI.L , Empiric  ESP.L 
and Land Securities  LAND.L  to "sector perform" 
    ** It also slashes British Land  BLND.L , Hammerson
 HMSO.L , URW  URW.AS , Warehouse REIT  WHRW.L  and Warehouses
de Pauw  WDPP.BR  to "underperform"
    ** It reduces its EPS forecasts for December 2024 to March
2025 by 14% and NAV per share by 11% notably on sub-sector
exposure to lease structures and financial gearing
    ** URW sheds 5% at opening, worst performer on French and
Dutch blue-chip indexes CAC 40  .FCHI  and AEX  .AEX , while WDP
is down 5.8% at the bottom of Belgian blue-chip index BEL 20
 .BFX  
    ** Shares in URW are at their lowest since November 2020,
and WDP's are on track for their worst day in two months
    

 (Reporting by Olivier Cherfan)
 ((olivier.cherfan@thomsonreuters.com))