(Bloomberg) -- Europe’s real estate firms have raised $5.6 billion this year via equity offerings as landlords gear up to bolster their finances.
The proceeds from initial public offerings and share sales in listed companies exceed the amount for the same period in 2023 more than three times, according to Bloomberg calculations. In the latest deal, beleaguered Swedish landlord SBB is offering 49% of the shares in its residential unit Sveafastigheter AB.
Rising interest rates and shifting work dynamics have plunged the sector into turmoil, forcing many landlords to sell assets to deal with higher borrowing costs and declining occupancy rates. Now, investor interest is returning with the onset of rate cuts and bottomed-out valuations, especially as opportunities for asset purchases and new developments are picking up.
“Anyone who needs to raise capital and can is doing it now,” said Antoine Noblot, head of ECM for Northern Europe at BNP Paribas SA.
Transactions for 2024 include property trust Segro Plc’s February cash call of more than £900 million ($1.2 billion), Great Portland Estates Plc’s £350 million rights issue in May and Merlin Properties Socimi SA’s €921 million ($1 billion) share sale in July. More recently, CTP NV raised €300 million while a Catena AB share offering took in 3.1 billion Swedish krona ($306 million).
This year’s “slew of aggressive secondary offerings” could be used to finance asset purchases, said Johan Henriks, a portfolio manager at insurance firm Lansforsakringar’s real estate-focused fund Fastighetsfond. Going forward, more firms could follow Sveafastigheters’s lead with listings while the acquisition of smaller firms could also become a trend, Henriks said.
Crisis Fallout
Despite the more upbeat outlook, the fallout from the recent crisis continues to ripple through the sector. Sweden’s Oscar Properties Holding AB narrowly avoided bankruptcy after clinching a deal with creditors last month.
Even so, the prospects of lower interest rates and stabilizing valuations are creating an ideal opportunity for landlords to raise funding in equity capital markets, said Andrew Saunders, a UK property stock analyst at Shore Capital Group Ltd.
“That gives equity investors confidence that the worst is now behind us, so there’s an opportunity for a land grab,” he said.
©2024 Bloomberg L.P.
