Listed real estate companies located in peripheral Eurozone countries, or with sizeable exposure to those markets, are being punished by investors, new research presented at the European Public Real Estate Association's (EPRA) annual conference on Thursday shows. The stock values of these companies reflect fears the currency bloc may disintegrate, the research reveals.

The average discount to NAV for companies located in the PIGS (Portugal, Italy, Greece and Spain) was 48% and for those with a sizeable exposure to these markets 22%. Discounts to NAV for European firms outside this group were roughly half or a quarter in comparison, averaging around 11% to 13% for non-PIGS Eurozone, the UK and Sweden.

Real estate specialist Kempen, which carried out the research on behalf of EPRA, examined the performance of Europe's major listed real estate companies located either in four of the peripheral countries in the centre of the sovereign debt crisis storm: Portugal; Italy; Greece and Spain (PIGS), or with a minimum of 20% of the value of their property portfolios in those markets, since the beginning of June. These companies were then compared with real estate stocks with limited exposure to PIGS in the rest of the Eurozone; the UK; Sweden and Switzerland

Kempen said the varying impact of the sovereign debt crisis on European real estate stocks could be seen clearly by comparing two similar French companies: retail/office-focused firm Unibail-Rodamco, Europe's largest quoted property company, and retail property investor Klépierre.

Klépierre stock has been trading around a 28% discount to NAV, with 12% of the value of the company's shopping centre portfolio located in Italy and Greece and 9% in Spain and Portugal. Foncière des Régions, whcih controls Italian company Beni Stabili, traded at a 20.9% discount.

In contrast, Unibail-Rodamco was trading at a 11% premium to NAV. It has only 9% of its portfolio of shopping centres in Spain and no exposure in other peripheral Eurozone markets.

Greek company Babis Vovos was the worst performer, trading at an NAV discount of 58.8%. Meanwhile Dutch shopping centre specialist Corio, with exposure to Portugal, Spain and Italy, under-performed by 17.4% since June. Italian company Prelios (formerly Pirelli Real Estate) saw a NAV discount of 54.8%.

Dick Boer, executive director corporate finance for European real estate at Kempen told an EPRA news conference: 'Over the last few months we’ve seen an astonishing decoupling between the valuations of those real estate firms who are exposed to the full brunt of the sovereign debt crisis, and so also fears the Eurozone may disintegrate, and those who are largely sheltered from the storm.'

Boer concluded: 'If the apocalyptic scenario now being priced into European real estate stocks with an exposure to the Eurozone’s peripheral countries proves to be too pessimistic, then the current situation could also represent a great investment opportunity as these companies bounce back.'