CBRE Pan European Core Fund

Overview Key strengths Key risks Diversified €6.5 billion property portfolio as of Sept. 30, 2023, constituting mainly logistics premises (35.6% of the portfolio's gross asset value [GAV]), offices (24.8%), retail (16.7%), and residential assets (14.5%). Challenging economy and less-supportive financial conditions will continue weighing on asset valuations and refinancing costs. High-quality portfolio in the main European city centers for the company's retail, office, and residential assets (which account for close to 56% of the portfolio's GAV as of Sept. 30). Softer economic growth will weigh on consumer purchasing power and business sentiment, impacting occupancy rates in the retail and office segments. Growing exposure to the resilient and noncyclical nature of the residential asset class and good segment diversification, which should

...We expect CBRE Pan European Core Fund (CBRE PEC Fund) to maintain sufficient ratings headroom (in terms of S&P Global Ratings-adjusted debt to debt plus equity) despite the decline in its property valuations. In the 12 months to September 2023, the portfolio value declined by 11.4%, primarily driven by yield expansion. All segments in the fund's portfolio have been affected, but the revaluation was the most pronounced in the office segment where values have declined by 17.3%. We expect a decline of 10%-12% for 2023 overall and a further 5% in 2024 due to further outward yield movements, bringing cumulative asset devaluations in 2023 and 2024 to around 15%-17% (about 1 billion; S&P Global Ratings estimate). That said, we believe that the moderate albeit increasing debt level of up to 1.6 billion-1.7 billion in 2023- 2024 (1.2 billion at year-end 2022; S&P Global Ratings-adjusted)--supported by equity commitments broadly balancing equity redemptions--should allow it absorb the asset value...

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