BUZZ — Jefferies says European real estate risk shifts from debt to property valuations

* Jefferies says that higher-for-longer interest rates have shifted the main risk for European real estate companies from refinancing debt to further declines in property valuations * Higher funding costs and wider assets value discounts are making acquisitions and other forms of external growth less attractive, increasing the importance of organic growth and capital allocation, it says * Even so, the brokerage believes much of the pain is already reflected in share prices, creating selective opportunities for investors * It upgrades Merlin Properties, Catena, Great Portland Estates and Target Healthcare REIT to "buy" from "hold", saying recent sell-offs have become overdone and now the stocks offer an attractive risk-reward profile * Land Securities and Derwent London get upgraded to "hold" from "underperform" on reduced earnings downside risks, improved operating performance and discounted valuations * It cuts Workspace to "hold" from "buy", citing refinancing and execution risks, and Icade to "underperform" from "hold" on weak earnings visibility and limited catalysts for a near-term recovery COMPANY NEW RATING OLD RATING NEW PT OLD PT Merlin Properties buy hold unchanged €16.00