19.02.10

By James Whitmore

Shares return 32.7% in 2009, and the US and Singapore lead the pack

Property company share prices around the world performed strongly last year, as credit market concerns eased and balance sheets were repaired more quickly and easily than expected.

The latest quarterly report from CB Richard Ellis Investors’ Global Real Estate Securities team shows that global property companies produced a total return of 32.7% in 2009, outperforming global equities and global bonds by 200 basis points and 3,000 basis points respectively.

The performance from property shares eased in the fourth quarter from the bumper 22% return in the third quarter to 4.5%. This was in line with global equities, which delivered a 4.6% total return and was well above global bonds, which produced -0.2%.

In general, the best-performing property companies in the fourth quarter came from the US and Singapore, while the worst were from Japan (see tables). Norwegian Property, one of the largest listed property companies in the Nordic region, was the top performer. The company benefited from a surge in trading volumes.

The Global Real Estate Securities team’s outlook is “overweight” in Australia, Singapore, Canada and the UK, of which it said: “Strong international and domestic interest combined with a lack of quality stock for sale is generating a strong rally in underlying property values.

“Balance sheets of selected companies are now sound, following recent equity issuances, and provide the opportunity for accretive acquisitions, while dividends have been rebased to sustainable levels.

“There are signs of stabilising or improving letting in the central London office market, while the retail outlook remains cautious.”

The team pronounced Hong Kong, Japan, continental Europe and the US as “underweight”.

The team said its outlook on US property shares was negative because valuations were “stretched”, adding: “It is our view that investors are pricing in job market improvements prematurely.

“Balance sheet issues no longer require significant warranted discounts, as access to capital in 2009 was pervasive, but we continue to view companies with strong balance sheets as optimally positioned to grow via accretive acquisitions.”

Steve Carroll and Jeremy Anagnos, joint chief investment officers at CBRE Investors Global Real Estate Securities, are wary of the strength of recovery.

“We remain invested in companies with solid balance sheets and defensive real estate assets, which we believe will drive outsized returns over the medium to long term,” they said.

“We are still concerned about the credit market outlook and believe that those companies with significant financial flexibility will be able to ride out the elongated recovery cycle.”

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Source: Property Week (www.propertyweek.co.uk)