German property share revival not yet adequate for capital moves, say CEOs

Despite the revival in real estate stocks over recent weeks, the time is not yet right to make capital increases and the gains may well prove to be only temporary, the heads of two German real estate companies say. The German MD of Italy's Pirelli RE added however that his group's announced e400m capital raising should go through smoothly. IVG CEO Gerhard Niesslein and DIC Asset CEO Ulrich Höller told a panel at the Handelsblatt annual real estate conference in Berlin this week that the rise in share prices in April still left a significant discount to their companies' net asset values. "We are very well aware that this could be a 'dead cat bounce' amid considerable ongoing economic problems and a difficult financing situation," Niesslein said. "At IVG we think business will remain problematic through to the end of this year and into next, so we cannot rely on this rise continuing." Höller added: "On the share price we are far away from the situation of 2004-2007, far away from our NAV value and so our joy over this rise is limited. We should not over-exaggerate the situation but just keep and eye on things and wait and see." German commercial property prices have probably reached bottom but insecurity remains high they could still fall further. However,l Wolfgang Weinschrod, MD of Pirelli RE Deutschland, noted that his group's capital increase should move ahead smoothly, helped by the partial conversion of debt into equity by the Pirelli tyremaking parent. (Full story to be published in 120 Property Finance Europe on Monday 11 May 2009)