Listed real estate still has a way to go

Listed real estate companies have still a way to go to become more professional and investible, according to Harm Meijer, co-founder of fund manager ICAMAP, and author of Real Estate Rules, a book on the sector.

Harm Meijer, co-founder of fund manager ICAMAP

“There is no denial that leverage should just be lower,” said Meijer in an interview with CRE Media Europe. “Most of them get it but there are still some out there, in Germany for example, pushing the boundaries.”

Too much leverage, he said, makes it almost impossible for companies to reduce their debts if they need to sell assets during a downturn. Meijer notes in his book that investors become cautious when loan-to-value levels approach 50%.

Meijer also believes that listed property companies should primarily focus on creating shareholder value instead of hiding behind other stakeholders, such as employees and the environment. “Some companies spend randomly on ESG, but it needs to be thought through,” he said.

What’s more, Meijer argues that companies should be more aggressive in buying stakes in each other. Of course, private equity fund managers such as Blackstone, Brookfield and TPG have been taking listed companies private, taking advantage of their shares’ deep discounts to net asset value.

“Why do you buy something in the market when you can buy your competitor at a discount?” said Meijer.

In his book, Meijer not only makes the case for investing in listed real estate – more liquid and transparent than unlisted real estate - he also provides readers with insights, tips and anecdotes on how to make the right investment decisions.

He notes that the sector has emerged from the shadows and become more mature, but that it has been quite a journey full of remarkable and turbulent times.

The idea for a book started 25 years ago when Meijer entered the real estate world as an analyst for ABN AMRO. Coming out of university, he was struck by how colourful and personable the sector was. On top of that, they were the golden years “when money came raining down”, said Meijer.

In Europe, there are around 400 listed property companies with a total market capitalisation of €470 billion. Meijer believes the sector provides good investment opportunities, particularly after the bottom of the market was reached in 2023.

He is not deterred by geopolitical and global economic uncertainty, pointing out the various threats the real estate industry has had to deal with in the past years, such as online shopping, the pandemic, working from home and rising interest rates.

“There’s always a risk, right?” said Meijer. “I see the implied valuations on the stock exchange and the risk-return weighting is just weighted to the upside.”

Because he is an investor himself, Meijer declined to name any favourite stocks. However, he noted that central London is “highly discounted”.

“That is just a value case that one way or another it will start to work over the coming two years, especially with rising rents, which will be faster than people realise,” he said.

In accessible language, Meijer’s book shows both retail and professional investors how to do their homework. Perhaps that is the reason why the book has been quite a success despite the fact it deals with such a niche topic. To Meijer’s surprise, and that of his publishers, the first print of 1,500 copies sold out within a month.

In the book, Meijer explains various key principles when it comes to investing in listed real estate, but the one overriding principle is “trust”. Once gone, it is hard to restore it, he argues.