• Leading investors at the EG Investment Summit discuss the likely destinations for the high level of capital entering real estate
• Opportunistic new capital may not understand property all that well
The main topic at Estates Gazette’s 8th Annual Investment Summit last week was how to use the unprecedented levels of capital in the market – and how to do that safely, having learned the lessons of the past.
Top investors gathered at the Waldorf Hilton in London to hear talks on subjects ranging from how to de-risk your portfolio to the careful use of insurance products and where foreign investors will look to place their capital in the coming months.
In addition, Helical Bar’s Duncan Walker examined the long-overlooked subject of the industry’s deployment of technology; and Frances Ketteringham of Mayfair Capital spoke of the advantages of multilet property in this cycle
But the day’s biggest highlights surrounded capital, and where it was, and wasn’t, being put to use.
Commercial property lending
John Feeney, global head of corporate real estate at Lloyds Bank, was joined by Peter Cosmetatos, chief executive of CREFC Europe, to discuss the lending market.
Feeney said: “It’s a hell of a lot more functional than it was a couple of years back. The supply of real estate debt filters through to every part of the UK.” Lenders were willing to listen to any sensible proposition, he said.
Niches such as development had seen alternatives lenders such as debt funds fill gaps left by the clearers, Feeney believed, aided by the “most open real estate capital market in the world”. The debt market was also attracting considerable overseas capital, he added.
Cosmetatos agreed, but cautioned that new capital was largely opportunistic and “may not understand the asset all that well”. The result could be transparency issues and interference with a “sustainable and balanced market”, he said.
PRS investment
Government policies encouraging home ownership are working in tandem with those supporting the private rented sector, said Melanie Leech, chief executive of the British Property Federation.
Partly because of this, the sector has evolved in the past few years and attracted new investors, she said.
Pension funds such as Aberdeen Asset Management and sovereign wealth funds such as ADIA are now investing, added Alan Collett, residential sector consultant at M&G Real Estate
He said: “The sector is much better researched than it was five years ago. And, crucially, it is much better understood than it was then.”
In particular, the build-to-rent sector was developing quickly.
Eyal Malinger, portfolio manager at Countrywide’s Vista Residential Real Estate fund, said this was because “there is almost no stock to invest in, so unless you are willing to do the development yourself and go into planning risk and development risk, there’s not a lot you can do with the money”.
The Chinese question
At the EPRA conference earlier this month delegates were united in saying the flows out of China were likely to continue, despite the country’s stock market shocks.
However, at EG’s summit last week Aref Lahham, managing director of opportunistic investor Orion Capital, did not quite agree. He said: “What seems to be happening in Asia is some hesitation, some people have put the brakes on or slowed down and are evaluating things more closely. So that has resulted in certain things not coming through.”
With certain deals in the UK not going to the initial interested party, funds such as Orion have benefited. “Post China’s stock market adjustment, things have picked up again for opportunistic funds,” said Lahham.
Orion does not deliberately position itself as back-up bidder to withdrawn equity, but operates in markets it sees as on the up. It was one of the first this cycle to enter Spain and Italy. Lahham said the lack of development and low-priced prime assets made the main cities in those jurisdictions just the right place for Orion’s capital.
At the end of the day, the summit posed the question: how should capital be deployed safely for best return? The answer was not to adhere to a simple universal strategy but instead to find your own niche and do it well.
