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UPDATE 1-SocGen sees liquidity squeeze at Europe, UK property cos

Wed, 14th Sep 2011 11:09

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* SocGen cuts UK real estate sector to 'underwei
ght' from 'neutral'

* Maintains 'neutral' rating on European real estate sector

* Cuts target prices on European REITs by 5 pct on average

* Cuts target prices on UK REITs by 23 percent on average

Sept 14 (Reuters) - European and UK real estate companies will see their funding costs increase as the risk of a fresh liquidity squeeze rises amid threats from the sovereign debt crisis and a weakening economy, Societe General said.

The brokerage downgraded the UK real estate sector to 'underweight' from 'neutral,' saying the rising risk of a fresh liquidity squeeze and shortage of credit is casting a shadow over property prices and new property development launches.

'If cheap debt is important to property prices, the availability of debt is even more vital, particularly at a time when the UK is faced with refinancing a large part of the commercial mortgage-backed securities due to mature from September 2011 through 2013,' SocGen said.

It cut its ratings on Segro PLC to 'sell' from 'buy', and on British Land Co PLC and Land Securities to 'sell' from 'hold'.

'Our valuation model concludes that a mild recession is still not fully priced into shares, and the UK sector can fall a further 9 percent,' the brokerage wrote in a note.

SocGen downgraded European property companies Deutsche Euroshop and Metrovacesa SA to 'sell' from 'hold', and Mercialys SA, Corio NV, Immofinanz AG to 'hold' from 'buy'.

It, however, maintained its 'neutral' rating on the European real estate sector and upgraded Foncière des Régions SA and Beni Stabili SpA to 'buy' from 'hold.'

SocGen named Foncière its new preferred stock among European real estate companies, and Capital Shopping Centres Group PLC among UK companies. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Maju Samuel) Keywords: REALESTATE/RESEARCH SOCIETEGENERALE

(; within U.S. +1 646 223 8780 ext. 5218; outside U.S. +91 80 4135 5800 Reuters Messaging:

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