Why invest in listed real estate?

Why invest in listed real estate and not into private equity/club deals?

• Liquidity: Shares offer greater liquidity than properties, allowing for easier leverage adjustments and shifts in asset allocation

• Lower Transaction Costs: Listed real estate transactions typically incur lower costs compared to private equity deals

• Improved Corporate Governance: Publicly listed real estate companies often exhibit better corporate governance practices compared to private equity structures

• Historical Performance: Research indicates that REITs have outperformed private equity real estate by 5.9% annually in the US 

• Access to Properties at Appealing Valuations: Investing in listed companies can provide exposure to properties not available for sale, potentially at more attractive implied valuations
  

Why now?

Between January 2022 and March 2024, significant fluctuations in government bond yields led to a repricing of real estate financing rates. This caused a 31% drop in the FTSE EPRA Nareit Developed Europe Index, presenting an opportunity to acquire listed real estate targets at discounted prices. This environment is particularly favorable for companies that:

• Trade at high rental yields, providing a healthy spread over financing costs

• Have leases indexed to support rental growth and future valuations

• Locked in fixed-interest debt with longer maturities

• Possess assets in high demand in private markets