Expected risk-free rate cuts can boost European real estate - Exane BNP Paribas

Unibail-Rodamco-Westfield SE

24/01/2024 13:29

** Exane BNP Paribas says expected cuts in risk-free rates
by central banks will likely benefit Europe's real estate
sector, especially stocks with solid earnings and those that are
relatively cheap 
    ** "As the risk-free rate comes down, the spread to real
estate yields increases, alongside real estate's relative
attractiveness," - Exane BNP Paribas
    ** Cost of capital used in real estate's DCF (Discounted
Cash Flow) models also falls as a result of rate cuts, the
broker says, adding this boosts present estimates of future cash
flow, and target prices 
    ** Asset values typically stop declining when rates are cut,
Exane BNP adds
    ** It raises VGP  VGP1.BR  to "neutral" from "underperform"
    ** It likes stocks that deliver strongest mid-term earnings
supported by sensible leverage and above-inflation rental
growth, such as Netherlands-based CTP  CTPNV.AS , and
London-listed Segro  SGRO.L  and Tritax  BBOXT.L  
    ** It also likes stocks with "deep discounts" such as 
Germany's LEG  LEGn.DE , and France's URW  URW.PA  which it
raises both to "outperform" from "neutral"
    ** The broker however cuts Gecina  GFCP.PA  and Land
Securities Group  LAND.L  to "neutral" from "outperform"

    




 (Reporting by Olivier Sorgho)
 ((Olivier.Sorgho@thomsonreuters.com))