MARKET conditions in the European property sector are showing signs of improvement, which is expected to positively impact Singapore-listed real estate investment trusts (S-Reits) with exposure to this segment.
Global investment firm KKR noted that recovery for the European real estate market has started, after the market experienced one of the largest repricings over the past two years. This was driven by rising interest rates and inflation – similar but unlike the global financial crisis where the repricing was driven by an economic downturn.
Data from KKR also showed that property valuations have started to stabilise and recover, after eight quarters of decline. European property transactions are still 76 per cent lower from their 2021 peak, but the trend is reversing.
The European Central Bank (ECB) has also cut its policy rates by three times since June 2024, its first back-to-back cut in 13 years, lowering its benchmark rate to 3.25 per cent, and with further rate cuts expected till 2025.
Three European-focused S-Reits are listed in Singapore, with Cromwell European Reit (CEReit) being the largest with a portfolio valuation of 2.3 billion euros (S$3.3 billion) across 106 light industrial and office properties throughout Europe.
IReit Global (IReit) has 53 office and retail properties across Germany, Spain and France with a portfolio valuation of 855.6 million euros.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Elite UK Reit (Elite) has 149 office assets in the United Kingdom with a portfolio valuation of £415 million (S$706.3 million).
In its latest business updates, CEReit recorded a 7 per cent year-on-year growth in Q3 2024 net property income (NPI), boosted by the completion of Nervesa21 office redevelopment in Milan and Novo Mesto One Industrial Park I/III logistics development near Bratislava.
The NPI of CEReit’s office portfolio grew 13.8 per cent while the logistics/light industrial sector’s NPI grew 6.7 per cent with stronger rent reversion and gains in occupancy. Distributable income for Q3 2024 grew 4.1 per cent year on year and portfolio occupancy increased to 93.9 per cent.
With Stoneweg’s recent proposed acquisition of Cromwell’s European business, Simon Garing, the CEO of CEReit’s manager, highlighted that investors will benefit from the incoming new sponsor in providing enhanced European resources and the pivot to logistics.
IReit announced on Nov 28 that it has secured a 20-year hospitality lease contract with the UK’s largest hotel chain, Premier Inn, to operate 270 rooms in Berlin Campus. This marks a significant step towards repositioning the office property into a mixed-use asset.
In conjunction with the signing of the hospitality lease contract, IReit will be expanding its investment strategy to include hospitality, hospitality-related, accommodation and/or lodging assets which will allow diversification into new asset classes.
Peter Viens, the CEO of IReit’s manager, said that the Reit is also working on another hospitality lease concept in Berlin Campus which will be announced soon.
Elite announced that its 9M 2024 distribution per unit (DPU) increased 3.9 per cent year on year to 2.13 pence from higher distributable income and tax savings.
Occupancy rate increased to 93.9 per cent with the divestment of Sidlaw House, Dundee and completed lease renewal for Theatre Buildings, Billingham.
Joshua Liaw, CEO of Elite’s manager, noted that the Reit is in the midst of unlocking latent value within its portfolio of assets.
It has made progress with the recent submission of a planning application for a low emissions and low latency data centre at Peel Park, Blackpool.
The Reit will continue to explore various opportunities with its expanded mandate to focus on UK social infrastructure and living sector assets. SGX RESEARCH
The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.
