Deutsche Banks upgrades British Land, Land Securities

Deutsche Bank upgraded British Land and Land Securities on Friday as it took a look at the European real estate sector.

The bank lifted its stance on both to ‘buy’ from ‘hold’. It noted that British Land is already trading at a 35% discount to spot NAV and a 25% discount to FY22 estimated NAV and said the market is already pricing in too much asset value downside.

As far as Land Securities is concerned, DB said the market is assigning too high a discount to its non-office exposure. It noted the stock is already trading at a 40% discount to spot NAV and 30% discount to FY22 estimated NAV.

More broadly, the bank said that looking "beyond vaccines" - which are not a guarantee of a silver bullet - 2021 is likely to be a challenging year for the European real estate sector.

"The first year of a new presidency in the US, the Brexit impact in the UK, a big election year in Germany, and prolonged lockdowns and social distancing as the world fights Covid-19 could cause meaningful volatility," it said.

"While we do believe in a modest economic recovery this year, we do not think property companies can post ‘V’-shape recoveries as they did after the Great Financial Crisis."

Deutsche Bank kept its price targets on British Land and Landsec unchanged at 490p and 730p, respectively.