EUROPEAN EQUITIES
R-co Thematic Real Estate: key selling points to keep in mind
▪ The increase of interest rate since the election of M. Trump has wiped out the 2024 performance of the listed real estate sector, overshadowing the improvement of the fundamental (real estate markets) in equity investor risk appreciation.
▪ A look at 2024 real estate debt market leads to a completely different conclusion . The “spread” of debt issuance has printed the highest compression over the year, getting close to it is long term average!
▪ So, who is right? Can we expect any convergence in 2025 (and beyond), would that be favourable to equity investor ?
▪ The direct real estate markets have (on average) reached their bottom in 2024 , keeping with our scenario. Even if the liquidity is still limited regarding the volume of transactions, it has sent, coupled with the ongoing disposal of real estate companies a very reassuring signal to debt holders . It also should support listed real estate valuation regarding their strong discount to net asset value.
▪ Unless interest rates stay on a significative long-term uptrend from now on , leading to a second round of devaluation which in euro Zone seems unlikely regarding the macroeconomic trend, equity investor should reconsider the asset class, at least on compelling equity stories which are in favoured in the fund.
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Source: Rothschild & Co Asset Management – 31/12/2024
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