Alternative real estate is growing in popularity among institutions, but investors must not ignore the underlying risks, according to panelists at IPD’s Alternative Real Estate Investment Conference.
There is a danger of investors becoming complacent about the stability of quasi-governmental tenants such as the NHS, which may be vulnerable to cuts and austerity measures, said Paul A Richards, head of European and Latin American real estate at investment consultants Mercer.
“There is a widespread perception that sectors such as healthcare are less risky than they really are,” he said.
Pensions funds have an appetite for investing in alternatives but prefer a generalist rather than sector-specific approach, said Richards.
“There is no interest from funds in a single-sector approach to alternatives because of worries about an over-concentration of risk. I only have to say the words ‘Southern Cross’ for you to understand why.”
Care provider Southern Cross collapsed into administration in 2011 after failing to pay rents to its landlords following a rapid, debt-fuelled expansion.
Strong partnerships are the essential ingredient for real estate investors considering alternatives, according to Marcus Sperber, head of international real estate at BlackRock
“There are risks around alternatives, undoubtedly. The key is to pair up with companies with a deep understanding of the sector you are looking to target. You need someone who understands not just the assets but the whole business angle,” he said.
sophia.furber@estatesgazette.com
