Credit Suisse sees more property stock weakness

By William Kemble-Diaz & Peter Starck

LONDON (Reuters) - This year's slide in European property stocks has yet to run its course and sentiment is unlikely to improve soon, after a run of pulled initial public offerings (IPOs), a leading banker said on Tuesday.

"You know you're pushing water uphill, that sentiment is against you despite the strong fundamentals," Ian Marcus, chairman of European real estate investment banking at Credit Suisse said at the Reuters Real Estate Summit in London.

Marcus is also the incoming president of UK trade body the British Property Federation -- the first banker to hold this post in a further sign of real estate's shift into the investment mainstream.

He said the market was following a familiar pattern, citing a similar spring bout of property IPO indigestion in 2006 after a rush of deals in the first few months of the year.

UK hotel owner Vector Hospitality, Germany's Boetzelen Real Estate (BOEG.DE: Quote, Profile, Research, Stock Buzz), Dutch-owned Uni-Invest and Spain's Reyal Urbis and Tremon are among the property IPOs cancelled this month, against a backdrop of falling property shares.

The FTSE NAREIT/EPRA index of European property shares .FTUPRA is down almost 15 percent since mid-April, unlike the broader FTSEurofirst stock market index .FTEU, which is up 2.6 percent in the period.

CHANGE IN SENTIMENT

Marcus gave no assurances that the property IPO market might reopen soon, while the volatility in the market persisted.

"The change in sentiment this year is more significant than we saw this time last year," Marcus said, citing higher market interest rates. "Have we reached the bottom in property equities prices? No"

There was still no shortage of capital waiting to be invested in listed real estate. UK-based Greek property developer Dolphin Capital's DCI.L success this week in raising 450 million euros via a secondary placing also showed firms with a proven track record and the right structure could still access some of those funds.

Even so, there had been a negative change in sentiment towards property-managing companies, which had been prompted by higher rates and which reflected an unease about how the future might look now that an extended bull run in property values was close or, in some cases, past its peak, Marcus said.

The question for investors was whether market conditions now were akin to trying to catch a falling knife.

"Do you believe in the intrinsic value of the real estate? Have people overpaid on the way up? Is the time right to buy? I don't think it is," he said.

Despite their added volatility, though, Marcus said he was in no doubt that listed property -- specifically, low-tax real estate investment trusts (REITs), which had been introduced in the UK and Germany this year -- would become the real estate investment vehicle of choice.

"I am absolutely convinced that REITs will be the preferred methodology for investors to gain exposure to real estate," he said.

(See www.reutersrealestate.com for the new global service for real estate professionals from Reuters).