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Listed real estate companies in Europe have been too passive in the face of potential cost of defaulting on loans and many should consider undertaking equity-raising exercises, according to a report from JPMorgan.

JPMorgan analysts Harm Meijer and Osmann Malik estimate that 34% of the companies out of the 32 European property stocks they follow will need to issue new shares, while just over 50% of the companies will have to cut dividend payments.

'We believe companies have generally been too passive so far, and we do not understand why equity raisings have been virtually non-existent given attractive pricing and generally modest amounts needed of only about EUR 100m on our estimates,' the analysts write.

The report suggests that the impact on the target price for companies in which an equity raising was included in an evaluation model was relatively small, with a drop of about 5% based on the assumption of a placing price at a discount of 30% to the current share price. 'We believe too many companies see an equity raising as a failure while we would highly welcome it as the stock market is expensive, 'crown jewels' do not have to be sold, only small amounts of about EUR 100 mln are generally needed on our estimates and the companies can look to the future again.'

Meijer and Malik also argue that companies that are unlikely to breach covenants should consider an equity raising to acquire properties in this downturn.