Blueprint: CalSTRS’ and PGIM’s leadership changes, PEI’s Investor Perspectives survey opens, DWS calls for China’s property market to find balance

CalSTRS and PGIM name new heads of their real estate businesses following the ascension of Mike DiRe and Eric Adler to bigger roles, respectively; PEI's Investor Perspectives 2024 survey opens; DWS's Jesch calls for balance in a Chinese property market likely to be of decreasing significance to the country's economy; and more in today's briefing, exclusively for our valued subscribers.

-

What’s new

Julie Donegan, CalSTRS

CalSTRS’s new real estate boss
The California State Teachers’ Retirement System last week announced the promotion of Julie Donegan [her LinkedIn profile here] to real estate investment director. In her elevated role, Donegan will oversee CalSTRS’ real estate portfolio, which had a net asset value of approximately $50 billion as of Q1 2023 and comprised 15.8 percent of the pension fund’s total assets of around $316.5 billion, according to the investor’s semi-annual report for real estate. Donegan replaces and also reports to Mike DiRe, who was elevated to senior investment director of private markets – which includes real estate, private equity and inflation-sensitive assets – in January. She is CalSTRS’ first new real estate investment director in more than 20 years as well as the first female to serve in the role. Donegan joined CalSTRS – 11th on our latest Global Investor 100 ranking with equity in real estate of $42.27 billion – as a real estate portfolio manager in 2019 and most recently focused on residential assets while acting as interim director of real estate.

PGIM’s Marcus and Amabile to ascend too
There was senior change afoot on the manager side last week, too. At Newark-based manager PGIM Real Estate, long-serving president and chief executive officer Eric Adler’s time as boss of the business is coming to a close. As he ascends into the newly-created role of president and CEO of PGIM Private Alternatives, his real estate duties fall jointly to Cathy Marcus in the US and Raimondo Amabile in Europe. Their new roles come into effect on October 1, while their existing responsibilities as global chief operating officer and global chief investment officer, respectively, will be retained. In an announcement, Adler said investors should regard the changes as an effort to retain “strong, long-term returns.” He added: “outstanding service to our clients hinges on our ability to effectively develop our talent and execute robust succession planning,” PGIM, which has about $210 billion of gross real estate assets under management and advisement, is currently a PERE 100 manager, ranked 45th with closed-end equity raised of $5.33 billion.

GPIF’s head hunt goes on
One investor yet to make a long-anticipated senior leadership change is Japan’s Government Pension Investment Fund, which is searching for a new head of real estate. The role has been vacant after Hideto Yamada left for CapitaLand Investment in April. Yoshitaka Todoroki has been juggling dual roles as managing director of GPIF’s private market investment department and head of real estate for the past seven months, according to his LinkedIn post. The post noted the investor is looking for a Japanese-speaking real estate veteran with experience in both domestic and overseas real estate. Todoroki mentioned the hiring is “a top priority” of GPIF’s recruitment activity in the private market space. With a real estate AUM of ¥919 billion ($6.5 billion; €5.9 billion), the pension made its first direct commitment to a private equity real estate fund by investing $500 million in Blackstone Real Estate Partners X, according to its latest annual report for the fiscal year ended March 31.

Calling all investors
Our Investor Perspectives 2024 survey is now live, and we would greatly appreciate your participation as we seek to understand investor sentiment today in the private markets. Here’s the survey link.

Some pointers on this year’s survey:

  • Investor Perspectives is PEI’s annual study of institutional investors’ approach to private markets asset classes over the coming year.
  • The survey gathers insight on investors’ asset allocations, propensity to invest, performance predictions, and views on the wider market.
  • The results will be published across titles.
  • Respondents will be given the choice of which asset class results they would like to receive as a thank you for completing the survey. PEI will also donate $5 to UNICEF for each completed response.
  • The survey takes no longer than ten minutes to complete, and all submissions will remain anonymous.
  • The deadline for submissions is Friday, October 6.

Trending topics

China’s need for balance
DWS’s global chief investment officer Björn Jesch believes the indebtedness in China’s property sector will return to a healthy level if the government manages to find a balance between “confidence-building reforms” and deleveraging policy, according to a research document. Although the Chinese government has relaxed financing restrictions for the sector since H2 2022, Jesch expected credit availability would not return to pre-2019 levels while the sector’s significance in the country’s economy would decrease. He pointed to how real estate-related services’ contribution to the country’s GDP dropped from 7.2 percent in 2021 to 6.1 percent in 2022.

An incomplete picture in India
More institutional capital is expected to flow into India’s private real estate market despite a decline in the country’s commercial real estate investment volume since 2020, according to a PERE report. Against a global backdrop of rising interest rates, transaction volume in the country has decreased from $6.4 billion in 2020 to $2.25 billion in 2023 year-to-date, according to data provider MSCI. But PERE sources noted the transaction data was an incomplete reflection of the size of the real estate market as capital has been coming in different forms, including REITs and private credit. Indeed, more capital is expected to go into private real estate as the market matures. For example, Singapore-based manager CapitaLand Investment plans to grow its assets under management in India from S$4 billion ($2.3 billion; €2.14 billion) to S$8 billion in the next three years, while Hong Kong’s Gaw Capital Partners will also open an office in India later this year.

Data snapshot

UK loans break with tradition
Insurers and other non-bank lenders accounted for 38 percent of the UK’s outstanding commercial real estate loan balance in 2022, per data from Bayes Business School published in a report by Green Street last week entitled Refinancing Gap Crisis and Opportunities. This figure has increased each year since 2012, when non-bank lenders first took a share of the UK market – back then, they accounted for 9 percent. Domestic banks accounted for only 36 percent of the UK balance in 2022.

People

Weeks to go
After almost 14 years at the helm of Barings and its preincarnation, Cornerstone Real Estate Advisors, Charles Weeks is to retire. Weeks, his LinkedIn bio here, was latterly the firm’s head of European and Asia Pacific real estate debt and equity. Before that, he was CEO for Barings’ European real estate business. He leaves the Charlotte-headquartered Barings as a PERE 100 ranked manager, on 95th place with $2.09 billion of equity raised and a business increasingly weighted towards debt assets. According to the company, it had $27 billion in real estate credit investments, compared with $19.31 billion in equity investments. Among the platform’s recent achievements under Weeks’ watch was the acquisition of Altis Property Group, a manager with A$6 billion ($3.85 billion; €3.59 billion) of assets and 44 professionals on value-add investments across sectors in Australia and New Zealand.

Investor watch

AustralianSuper powers up in Europe
The Australian manager of superannuation funds has entered Europe’s hyperscale data center market with the €1.5 billion purchase of a “significant minority stake” in Vantage Data Centers EMEA, a platform managed by Boca Raton-based specialist manager DigitalBridge. The deal effectively sees AustralianSuper gain equity exposure to three assets, two near London currently in development and an operational asset near Cardiff. The investment is understood to have been made using only equity and on behalf the investor’s mid-risk portfolio, which contains real estate and infrastructure assets. Also contained in the mid-risk portfolio is AustralianSuper’s 50 percent stake in a masterplan development in London’s Canada Water led by UK REIT British Land. That development was understood to be valued at £580 million ($724 million; €674 million). Overall, AustralianSuper has a global real estate portfolio valued at £8 billion and a global infrastructure portfolio valued at £22 billion.

This week’s investor meetings
Tuesday, September 12

Wednesday, September 13

Thursday, September 14

Friday, September 15

Today’s letter was prepared by Jonathan Brasse with Evelyn Lee, Charlotte D’Souza and Christie Ou contributing