ASI’s Slater: Next 12 months will define next five years of real estate

In late April, Aberdeen Standard Investments announced it had repositioned its real estate team to expand its global reach. The move was part of a wider restructuring of its private markets franchise under Neil Slater, who was named global head of real estate and deputy head of private markets in October 2019.

The repositioning involved the formation of a new global real estate leadership team that includes Anne Breen, who has been named head of real estate investment strategy; Andy Creighton, who will serve as head of real estate investment management; and Paolo Alonzi, head of real estate business management, finance, operations and structuring. All three roles are newly created.

Neil Slater recently spoke with PERE about the team’s reshuffle, the impact of the covid-19 crisis on ASI’s real estate business thus far and where it plans to focus its property investments over the next year.

What does this repositioning mean and how does it compare to how you were structured previously?

We are a global business, with £42 billion ($ 51.8 billion; €46.9 billion) of assets and around 1,600 properties worldwide. We realized we needed to be running as an international business, to better follow international trends, to increase the transaction capability and operate more effectively for our clients. Having one international team makes the business easier to run as we can make decisions quicker.

We have created new investment groupings that match what our clients are looking for, such as core, core-plus, residential, value-add, listed and multi-manager buckets.

As an example, we have realigned our residential business under one team to operate globally. Residential is 14 percent of our asset base, so it made sense to have a head of residential to run the entire global business.

Why have you chosen now to establish a value-add distinct offering for the first time?

We bought a value-add business about two years ago in Asia, leading to a very steady track record in this offering in the region, particularly in Korea and Japan. For example, our Ostara Japan Retail Fund, a 2004-vintage fund, is generating a fully realized return of 13.47 percent.

We also have a small number of value-add focused funds in Europe.

As an example, the Aberdeen Standard European Balance Property Fund has outperformed its benchmark by 1.7 percent per annum since its inception in 2006.

By calling out value-add as a distinct offering, it means we can offer more optionality to clients. I would hope to expand this in the UK at some point as well. This means we have the capability to offer different return profiles from the asset class, expressed with different risk/return dynamics, not only through direct equity but also through listed, debt and multi-manager.

What have the impacts of covid-19 been on your business so far?

It was important to me that we came together as one team, so we proceeded with the changes irrespective of covid-19. It is very timely to have an asset management team operating as one team internationally because it means we can see the sharing of data across sectors and countries much quicker. I have to say, in this environment, they are as busy as they have ever been.

We have dealt with many occupier/tenant engagements over the last month in various countries, including the UK, Germany, Austria and Japan, to sort monthly cashflows and rent deferrals. We have obviously seen a reduction in rental collection – not materially initially – although I think it will be harder for the industry at the end of Q2 particularly in those consumer-facing areas, such as shopping centers, retail parks, restaurants and hotels.

Interestingly, the residential collection rates have not been impacted at all at this stage in mainland Europe. While this has provided smooth income for clients at this time, we need to assess the ongoing impact of the macroeconomic environment on residential.

I think that the next 12 months will define the structure of real estate for the next five years. It will speed up the demise of certain areas of retail although this sector was changing anyway pre-crisis. What is really going to be fascinating is what the impact of covid-19 will be on offices. I am thinking about the future of our own offices across the 22 countries that we sit in. Playing a role in that is going to be critical for our business and what lies ahead will be difficult – but I think there will be a lot of opportunities.

What is your pipeline?

We have been buying large residential developments in mainland Europe in major conurbations and we continue to transact selectively across other sectors.

There is going to still be a strong focus on residential, particularly on the institutional side, with good income flow providing long-term cash duration. We continue to support clients in that regard. We will also have a focus on logistics and industrial, such as through our logistic-listed investment trust and the Standard Life investment property trust.

What will your strategy be focused on for the coming months? Where will you be investing?

Our focus over the next 12 months is working with occupiers to help protect income and ensure that our buildings are being used appropriately to provide income for the key clients, pension funds, insurance companies and retails investors that choose to invest with ASI.

We will aim to continue our successful expansion in Europe, as well as continuing to offer differentiated strategies, like the ones we have in Asia and our long income offering – eg our long-leased fund in Europe and a value-add strategy in Korea.

As well as growing in Europe, we want to further strengthen our depth in the UK. That might mean doing more residential or value-add or seeking secondary opportunities for our clients.

I also think we will see an even greater next phase push on environmental, social and governance positioning in real assets over the coming years post covid-19. When it comes to adopting ESG, real estate is far more advanced than any other asset class because of its impact in the built environment. We can really see the impact [real estate has] on the environment.