As the global financial turmoil tore down enduring myths about the global economy, Bulgaria’s domestically-listed real estate investment trusts (REITs) have started losing their appeal as safe havens.
Almost all REITs are trading at 20 per cent and sometimes even 50 per cent discounts on their net assets, said Dimitar Georgiev, broker at Elana Trading investment intermediary.
Heavy sell-offs on fears of a property price crash have evaporated nearly half of the value of the BGREIT index that tracks the performance of the property funds. The gathering gloom pushed the price-to-book (P/B) ratio down to 0.69 over the past months.
The index ended at 53.54 points on November 7, down a staggering 48 per cent from a year earlier, but still less than the other indices of the Bulgarian Stock Exchange, which have lost 65-70 per cent over the same period.
The credit squeeze and dropping demand was forcing REITs to re-assess the value of their portfolios. BenchMark Fund Estates, for instance, wrote down the value of its investment properties to 12.8 million leva, compared to 15.1 million leva over the previous nine months.
The negative outlook has already been calculated in the current share prices, and portfolio quality and managers’ professional skills may help REITs come through, said Svetoslav Soltariev, board member of FairPlay Properties, one of the bigger funds on the Bulgarian market. The fund has cut the outlook for its 2008 distributable profit from 10.4 million leva to seven million leva.
