In an interesting note that speaks to the nature of safe-haven asset flows in Europe, SocGen’s Marc Mozzi refers to London Real Estate Investment Trusts (REITs) as the new “gold.”
Markets Preserving capital has become the universal rule as we just don’t know what might now happen or ‚drive the mood swings of Mr. Market‛, as our Global Strategist Dylan Grice coined it. Fundamentals no longer appear relevant and investors are turning to real physical assets like commodities and real estate in London and it seems anything that is not euro-related. London real estate and (in or view unjustifiably) the UK has largely continued to hold onto its ‘safe haven’ status. London’s REITs today trade at a nil discount to net asset value and have almost been accorded ‘gold status’ with 2.0% dividend yield (uncovered for some) where you can get a 6.4% yield from real estate names on the continent (and a 17% discount).
The U.K. real estate market has been sick for a while, but London real estate is a natural place for wealthy people all over the Eurozone to to park their cash. German real estate also holds similar appeal.
For an example of this phenomenon in action, check out this 6 month chart of London REIT Greater Portland Estates (orange line) vs. the U.K. stock index the FTSE 100 (green line). The outperformance, especially of late, as the stress in Europe has intensified, is clear.
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