In 2003 there were just 14 equity issues from the real estate sector, raising €787 million. The value of deals more than quadrupled in 2004 to €3.4 billion through 37 deals, and then almost tripled in 2005 to reach €9.3 billion, through 89 deals.
Already this year 11 deals have raised €1.1 billion and bankers say the pipeline is much fuller than it was this time last year. “We expect to see an even greater volume of deals in 2006,” says David Weaver, co-head of European equity capital markets at Deutsche Bank. “Over the past six months or so there has been a real change in investor sentiment towards real estate deals. Whereas demand used to be limited to a fairly narrow investor base, what we are seeing today is stronger demand from investors across the board.”
One reason for the increase in demand is that investors have started to feel more comfortable about valuing real estate companies from a cash generation perspective and not just in terms of their net asset value.
The supply of deals is expected to increase over the next few years as part of what investment bankers see as a macro-secular trend towards the institutionalization of real estate ownership in Europe.