London:The largest US property companies are cashing in on the troubles of their European rivals with a 3.5 billion euro spending spree that marks a rare bout of transatlantic real estate investment.
US real estate groups’ spending in the first nine months of 2012 represented a near five-fold increase on the total recorded for the whole of last year. It comes as Europe’s listed property companies battle to boost their share prices amid concerns about the impact of the eurozone crisis on property values.
Typically, property companies do not invest outside their domestic markets. In the most valuable transatlantic deal of the year so far, Simon, the largest owner of shopping malls in the US, bought up almost a third of KlEpierre, the French retail real estate investment trust, for $2 billion in March.
There have been smaller investments by US companies in their European rivals.
In June, Brookfield, the largest owner of offices in North America, acquired a portfolio of offices from UK Reit Hammerson for 520 million pounds. Data Realty, a specialist datacentre owner, meanwhile, spent 716 million pounds buying three sites around London covering about 761,000 square feet in July.
John Lutzius, a property analyst at Green Street Advisors, the US real estate research group, said: “The sudden increase in transactions reflects the difference in cost of capital between US listed property companies and European ones; US Reits have access of a lot more financial firepower right now.”
Lutzius added that he expected US companies buying into the European market to focus on specialist portfolios of assets, or stakes in companies operating in individual sub-sectors, such as healthcare or retail property.
One of the key differences between US property companies and their European peers is American groups tend to eschew diversification across real estate, preferring instead to specialise on a particular asset class. However, in an effort to improve share prices, many European property groups have begun pushing towards specialisation.
But in becoming more specialised, European property companies are, according to property analysts, more likely to be viewed as takeover targets by their US peers. Hammerson, which is now solely focused on shopping centres, is being widely touted as a target for US Reits wanting exposure to the UK retail market
According to data from Green Street, US Reits hold just 5 per cent of their assets overseas. Of that figure, Europe accounts for 42 per cent, with France and the UK representing almost two-thirds of the total European allocation.
Property values and transaction volumes have come under pressure in Europe during the past 18 months, as fears over the future of the single currency have driven investors away from fixed assets.