He said it
“It’s where the action is: apartments are doing their thing, logistics is shrugging its shoulders, retail and hotels are a disaster. But offices is both good and terrible. It just depends.”
Daniel Dubrowski, co-founder and head of capital formation at Lionstone Investments/Columbia Threadneedle Investments, gives his assessment of real estate’s main property types on a PERE Asia Week On-Demand webcast.
Film and television studios are private real estate’s newest alternatives. The initiation became official last week when industry leader Blackstone bought a portfolio of three prime studio lots. The movement has been years in the making. Hollywood’s sound stages have long been prime real estate, but short-term lease structures kept institutional capital at bay. Later this week, we will explore how the rise of Netflix and other streaming services changed the industry and opened it up to private investment. “We really view this as critical infrastructure for TV and film production, whether it’s for traditional or streaming media companies,” says Nadeem Meghji, Blackstone’s head of Americas real estate.
With covid-19 cases waning in most mature markets, governments around the world are encouraging economies to re-open. For real estate owners, this means re-opening properties. Fortunately, a handful of prop-tech innovations can smooth this transition while limiting exposure to the novel coronavirus. From remote worksite monitoring to payment tracking systems to hotel-cleaning robots, there is no shortage of market-ready technologies. See our list of the top trends here.
Still on the menu
Ongoing social and political unrest has not deterred institutional capital from buying into Hong Kong. London-headquartered asset manager Schroders has made the city a key part of its Asia-Pacific strategy by acquiring a majority stake in Pamfleet, a Hong Kong-based private equity real estate firm that primarily invests in the city. While the newly minted platform will be active elsewhere too, including Singapore, Schroders’ choice of Pamfleet as a partner demonstrates its convictions about the Chinese semi-autonomous region.
Uncertainty has given way to negativity as most respondents in RCLCO’s annual survey of real estate professionals feel worse about the market now than they did last year.
Office on pause
Patrizia knows offices have a big future in institutional investing, but like many of the managers interviewed for PERE’s cover story this month, Augsburg’s biggest real estate business is stumped about how to play the space in the near term, at least for its higher risk and return capital. Managing director Paul Hampton tells us the firm has pressed pause on new office outlays for its seventh TransEuropean fund, which closed at the end of last week. Patrizia’s investment team awaits a further instruction from its asset management and researcher colleagues.
While covid-19 has changed the capital markets landscape for managers of all shapes and sizes, it has undoubtedly wreaked the most havoc on firms in the middle of their capital raising campaigns. Managers that had already made deployments face the conundrum of how to true up new commitments with ones that closed pre-pandemic. We found that managers had essentially three options:
- Adhere to a traditional equalization formula: This means new investors pay in cash for their share of seed assets. While preferable for pre-covid investors, this forces new money to knowingly enter assets at an inflated basis.
- Segregate new investments and old: This can be done by putting all new commitments into a sidecar vehicle. This removes the barrier to entry for new capital, but it also leaves seed investors – often repeat investors that write large checks – holding the bag of overpriced properties.
- Find some middle ground: Ultimately, investors new and old both need to agree to any changes in fund terms and a reluctance to compromise leaves everyone worse off.
Back to management
The professional back and forth continues for industry veteran Will Rowson who returns to the manager world after a second stint in consulting. He was announced as the next chief executive at student housing manager Global Student Accommodation. Rowson left LA-mega manager CBRE Global Investors in 2014 to pursue a capital advisory career with New York’s Hodes Weill & Associates. His prior stint as a broker was with UK agent Strutt & Parker.
PSP’s Italian job
The Canadian pension manager PSP Investments has stepped in to help finance a 270-acre mixed-use scheme in Italy. The institutional investor committed €250 million to join Lendlease in developing part of Milano Santa Giulia, a €2.5 billion master-planned development (initial coverage on our sister title PE Hub). The investment nudges along a politically divisive regeneration project that was mired in controversy after the ex-chairman of the site’s owner, property company Risanamento, Luigi Zunino, had to fend off corruption charges in court five years ago.
Meetings this week
Tuesday, July 7
Wednesday, July 8
- Connecticut Retirement Plans and Trust Funds
- Los Angeles County Employees’ Retirement Association
- San Francisco Employees’ Retirement System
- Alameda County Employees’ Retirement Association (ACERA)
- City of Fresno Retirement Systems
- Nebraska Investment Council
Thursday, July 9
- Oklahoma City Employee Retirement System
- New York City Employees’ Retirement System
- Tacoma Employees’ Retirement System
Today’s letter was prepared by Kyle Campbell with Jonathan Brasse and Christie Ou contributing.