Analysts bite into European valuations

By Simon Packard  |   2008-6-24  |     NEWSPAPER EDITION

CORIO NV led European real estate stocks lower after HSBC Bank Plc and JPMorgan Chase & Co analysts cut ratings or price targets on property shares in the region.

Corio, the largest Dutch real estate company, fell as much as 4.9 percent after it was lowered to "underweight" from "neutral" by JPMorgan analyst Harm Meijer, Bloomberg News reported. Land Securities Group Plc, the UK's largest real estate investment trust, fell as much as 4.6 percent after John Fraser-Andrews at HSBC lowered his rating on the shares to "underweight" from "neutral."

The benchmark FTSE EPRA/NAREIT Europe Index of real estate stocks has declined 12 percent in the past three months on concerns about lower rental growth, banks' reluctance to lend, higher borrowing costs and as higher bond yields made stocks less attractive to own.

Real estate is suffering from a "triple whammy," London analyst Meijer wrote in a report dated yesterday as he lowered price targets on average by 13 percent for European real estate shares. "The market has lost its cool, does not differentiate enough and is too short-term focused," he said. Meijer also lowered his rating for Fonciere des Regions SA to "underweight" from "neutral," causing the stock to fall 3.83 euros, or 3.8 percent, to 80.32 euros (US$124) at 12pm in Paris trading. Corio fell 2 euros, or 3.8 percent, to 50.25 euros in Amsterdam.

HSBC's downgrade of Land Securities caused its shares to decline 59 pence to 1,280 pence (US$25) in London. "It is too early to look through the downturn," Fraser-Andrews said, reiterating an "underweight" rating for UK real estate stocks.