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Insights
Those with shorter debt maturities face significant refinancing risks, while those with longer profiles are better positioned to ride out the storm. European real estate investment markets have experienced significant shifts in the underlying drivers in recent years. Mostly this has been driven by macroeconomic conditions, including rising interest rates as a response to spiking inflation, and a general economic malaise that has permeated most markets, though less so Ireland. This has dented confidence to levels not seen since 2011 or 2012, with the lack of available financing, at sensible pricing levels, one of the primary issues. An oddity that has emerged in this cycle is that market rents have continued to climb, even for offices, while investor confidence remains on the floor. The turnaround, which is edging closer and closer, will be driven by debt, not by occupier demand. As central banks tightened monetary policy to combat inflation, listed property companies (mostly REITs) and other property funds faced growing questions related to their indebtedness. Much of this was debated around Boardroom tables, with many conversations drifting to AGMs as investors began to air frustrations. Key concerns included soaring loan-to-value (LTV) ratios as property values fell, a situation outside the control of management, but it was how executives reacted to rising debt costs which became the key battleground. As debt began to edge towards maturity, the rising cost of refinancing became an issue that could push management teams to make hasty, and even rash decisions on what to do with...
The final quarter of 2024 could be an opportune time for investors, but they should still exercise caution I spent ‘back to school’ week meeting with leading institutional investors, family offices and private equity houses across Europe’s financial hubs, looking to gauge appetites for the final quarter of 2024 and into 2025. Almost all have been cautiously optimistic for the months ahead, while stressing they are still “not quite ready”. This is not universal by sector or investor type, and has very much depended on the route to market which they intend to take. Real estate markets, both public and private, and in both the United States and Europe, are exhibiting signs of stabilisation after a turbulent reset. Data from the US analytics house Green Street, as well as the London-based MSCI, shows that both regions are showing upward momentum on a year-to-date (YTD) basis, suggesting that the markets may be finding their footing. What is interesting is that this nascent recovery is being underpinned by improving discounted cash flow (DCF) values and not so much – at least yet – RedBook valuations. This is very much down to the type of investor exploring market opportunities, and the belief that certain markets are still overvalued due to a general dearth of distressed sellers. We are seeing a renewed investor interest in the long-term income-generating potential of real estate, especially where that income is derived from quality tenants with positive prospects. This is being played out in aggressive M&A activity in...
Hammerson, the London-listed retail property company and owner of Dundrum Town Centre, has had a very good week. To put this in context, good news and retail property are not words that have gone together often over the last 15 years, but the dramatic turnaround of Hammerson under its chief executive Rita-Rose Gagné has earned it deserved plaudits. Now it can get back into growth trajectory, and Ireland is likely to play a big role in delivering this growth. The first bit of good news, announced before markets opened on Wednesday, saw the completion of Hammerson’s disposal of its stake in Value Retail, the fashion outlets group that includes Kildare Village. This sale, generating proceeds of around £600 million has brought financial stability after eight difficult years, and the capacity to fund its refreshed destination strategy. This landmark sale, one of the largest retail property transactions in years, has helped reduce net debt significantly, improving its financial metrics, including a lower loan-to-value ratio (25 per cent) and reduced leverage. With the Dundrum refinancing complete, Hammerson has no major refinancing needs until 2027, enhancing its ability to raise new capital on favourable terms as rates come down. This strengthened Hammerson’s balance sheet, and has enhanced liquidity and flexibility for future investments. Timing of this cash injection couldn’t be better, with prime retail and the wider commercial property market on an upward curve. The exit from Value Retail allows Hammerson to focus on its now core strategy of transforming its retail destinations...
Has England's property industry got (mostly) what it wanted? It may be two years since Boris Johnson left Downing Street, but his most enduring political legacy lives on. Everyone recalls “cakeism” – not just for the sugary goods strewn across Whitehall’s pandemic party scene – but for the rampant dishonesty infecting politics. Even Johnson’s safe space (AKA the Daily Telegraph) called it out in this withering attack. Although the clowns have gone – for now – their cakeist rhetoric seems to have caught on in neighbouring governments. Interventionist housing policies promising voters rent cuts, better quality homes and increased supply in the same breath have shown a startling disregard for any sort of economic reality. Worse, there has been a total unwillingness to listen or engage with experts. Sound familiar? In contrast with many critics’ views and with the chaos being sewn close by in Scotland and Ireland, English housing reforms set out by Labour earlier this month, have no scent of market intervention at all. Put next to the planning reform also proposed – and the clear desire to rip up the unworkable elements of previous meddling – England’s property industry has got most of what it wanted. Almost. Let me come back to that shortly. Scottish rent caps stymie investment So what’s happening in Scotland and Ireland? In Scotland, a temporary 3% rent cap and evictions ban expired in April, with a predictable flurry of rent hikes and evictions following immediately thereafter. The Cost of Living (Tenant Protection)...
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A bi-weekly review of the latest developments in ESG from our expert Patrick Brown.
The report - led by our senior team - explores the future of high streets and town centres in the UK.
