A lot of real estate executives in Europe are doing nothing to add value to their firms, and buoyant property markets are helping to hide their failings.
The managers of about 40% of European real estate investment trusts have failed to take action that enhanced their companies’ returns over the past three years, according to a report by research firm Green Street Advisors. The management team at Intu Properties Plc, whose shares have plunged 68% this year, placed last in the study. Barcelona-based Inmobiliaria Colonial Socimi SA earned the highest grade.
The ranking filters out property price changes, which are largely outside management control and can affect metrics like shareholder return. It focuses instead on how executives managed their balance sheets and allocated capital, highlighting companies that outperformed regardless of the hand they were dealt.
“Total shareholder returns convey a lot of information about managerial performance,” Green Street analysts including Peter Papadakos wrote in the report published on Thursday. “But returns are primarily influenced by whether a given REIT happened to own the right type of real estate in the right location.”