Photographer: Angel Navarrete/Bloomberg

Fund Manager Shorts U.K. Property Firms, Prefers Spanish Rivals

Rodrigo Rodriguez, a fund manager at BlueCrest Capital Management LLP, prefers Spanish real estate companies to their Brexiting U.K. competitors.

More than a year after the referendum, British property companies and homebuilders are trading at prices that don’t reflect the risks associated with the U.K.’s departure from the European Union, according to Rodriguez, who said he is shorting some of the stocks without elaborating. Instead he’s investing in Spanish peers such as Inmobiliaria Colonial SA and Axiare Patrimonio Socimi SA, which he expects to benefit from rising rents as the economy improves.

“My big problem with U.K. real estate is that it looks like nothing has changed, and a lot of things have changed -- at least, a lot of uncertainty has come in,” Rodriguez said in a telephone interview. Many U.K. REITs and homebuilders are trading close to levels reached before the vote, said Rodriguez, whose firm is run by billionaire Michael Platt.

In October, hedge-fund investor Crispin Odey warned that a potential recession and higher inflation following the Brexit vote could lead to U.K. stocks slumping 80 percent. The most shorted U.K. real estate companies are Intu Properties Plc, Barratt Developments Plc and Berkeley Group Holdings Plc, according to data compiled by Bloomberg.

In contrast, Spanish real estate companies are attractively priced and, in some cases, trading at a discount to their net asset value, Rodriguez said. He favors Colonial or Axiare for offices properties, Lar Espana Real Estate Socimi SA for retail parks and warehouses, Neinor Homes SLU for houses and Hispania Activos Inmobiliarios Socimi SA for hotels, the fund manager said.

“If nothing changes from Brexit, the upside potential of U.K. REITs is limited,” Rodriguez said. “In Spain, you are buying companies on the cheap, and on top of that they benefit from plenty of other factors.”

Spain’s economy is expected to grow 2.8 percent this year, according to a Bloomberg survey, versus a 1.9 percent forecast for the euro zone, while the U.K. is seen growing 1.6 percent.

Madrid is one of the cities that’s poised to benefit as companies look to shift U.K. jobs to mainland Europe after Brexit. UBS Group AG was said to be in talks with the the Spanish government about moving its investment banking unit for the EU to the Spanish capital, Bloomberg reported in January.

— With assistance by Nishant Kumar

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