CONTRIBUTORS
Indraneel Karlekar, Ph.D
Global Head of Research and Strategy, Clarion Partners
Bruno Berretta
Head of Research, European Markets
Clarion Partners
Preview
We believe that the European Sale and Leaseback (SLB) market is ripe for investment.
Several factors are aligned in creating a fertile environment for corporates to unlock cash from their real estate. Assuming that interest rates continue to decline and rental growth continues to moderate, we believe that SLBs are well-positioned to benefit compared to other investment strategies. This combination of favourable market conditions makes European SLBs a compelling investment opportunity for real estate investors, offering the potential for robust, risk-adjusted returns while also providing portfolio diversification benefits.
This paper, the third in our series, explores why European SLB investments are especially compelling at this point in the economic cycle. With appealing day-one income yields, a strong deal pipeline, and a favourable macroeconomic environment, we believe European SLBs offer an attractive opportunity for investors.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results.
Equity securities are subject to price fluctuation and possible loss of principal.
Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Risks of investing in real estate investments include but are not limited to fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws. Furthermore, investments in real estate are also impacted by market disruptions caused by regional concerns, political upheaval, sovereign debt crises, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Investments in real estate related securities, such as asset-backed or mortgage-backed securities are subject to prepayment and extension risks.