Month in Review: Three Must-Read Pan-European Research Reports

Below are excerpts of three Green Street Research Reports that piqued the interest of our readers in 2023 July.

CTP (CTP): Gateway to Central and Eastern Europe
18 July 2023

In Mid-July, Green Street reached a milestone of 50 Listed PropCos under coverage after announcing that the firm initiated coverage of CTP (CTP), a €13bn-GAV Industrial PropCo. Key takeaways from the CTP report are listed below:

• Largest Continental Industrial PropCo; c.90% of GAV in Central and Eastern Europe
• Founded in 1998, listed in ’21, and has weathered the rise in real rates unscathed
• Strong internal growth; 5-yr LFL NRI CAGR of 4.6%, ~100 bps above Conti peers
• Voracious appetite for development-led growth – targets doubling GLA by 2030
• Development profit margins stabilised at ~30%; >9% yield-on-cost achievable
• Vanilla corporate structure, palatable balance sheet metrics and sufficient liquidity
• CEO’s c.75% holding warrants GAV discount, but ‘skin-in-the-game’ placates fears
• Offers the highest risk-adjusted five-year REIT returns across Europe at >11% p.a.

Pan-European Commercial Property Price Index: Still Waters Run Deep
7 July 2023

The Green Street Commercial Property Price Index remained flat during the second quarter of 2023. The index, which measures pricing across a broad swathe of B/B+ quality Pan-European commercial properties, sits 21% below its May '22 peak. Performance varied marginally across core sectors over the last three months. Retail property prices declined ~3% due to yield expansion, while office prices remained stable. Residential and industrial prices grew ~1% each, owing to positive cash flow contribution.

U.K. Self-Storage Sector: What to Make of Its Recent Underperformance
July 25,2023

The U.K. Self-Storage sector has underperformed the GPR Europe Index by c. 1,100 bps in the last three months. This is a stark turnaround in fortunes as the longer-term performance of storage REITs is exceptional (e.g., 3-yr outperformance of c. 2,900 bps p.a.). U.K. storage REITs have also lagged relative to their U.S. peer group recently (U.S. storage REITs have underperformed the RMZ by c. 700 bps in the last three months), which is somewhat odd as the deceleration in Net Rental Income growth from the boom times of the pandemic is transpiring at a much faster clip in the U.S. than in the U.K.

While the economic outlook for the U.K. in general is slightly gloomier, and the narrative of a ‘soft landing’ in the U.S. has helped boost the performance of storage REITs there, the U.K. storage sector’s poor relative performance recently is still noticeable. The key question now is whether U.K. storage REITs are sufficiently cheap? Whilst our long-term bullish outlook on the sector’s fundamentals is unchanged, our answer in the here and now is: “not as much as we would need to see to go net long the sector”.

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