Blueprint: PERE Awards 2023 winners revealed, PERE Asia 2024 coverage wrap-up, Brookfield’s new European opportunistic vehicle

We unveil the winners of the PERE Awards 2023, including the inaugural Innovation Investor of the Year winner and nine first-time honorees. Meanwhile, our PERE Asia 2024 coverage round-up highlights the key takeaways from our biggest conference. Plus: Brookfield launches the first regional sidecar for its flagship opportunistic Brookfield Strategic Real Estate Partners fund series; and more in today's briefing, exclusively for our valued subscribers.

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They said it

“I have found that the people that do the best, just constantly ask, ‘Why? Why are we doing it that way?’”  

 Mike DiRe, senior investment director of private markets at CalSTRS and this year’s PERE Lifetime Achievement Award winner, on the importance of questioning existing ways of investing

What’s new

PERE Awards 2023: with our inaugural Innovation Investor winner as well as nine first-time honorees

Winners take all

The PERE Awards 2023 are now live and showcase the tenacity and perseverance of the private real estate industry amid a dislocated and challenging market. Familiar names dominated the roster of honorees, with New York’s Blackstone and Singaporean sovereign wealth fund GIC taking home the most trophies. The awards also included nine first-time winners, among them Maryland-based Artemis Real Estate Advisors and Toronto’s Slate Asset Management.

This year, PERE revealed a brand-new award, Innovation Investor of the Year: Global, which recognizes innovative approaches to improving investment decision-making, business operations, capital formation or deployment. The inaugural recipient was South Carolina-headquartered manager Greystar.

While winners in many categories beat the competition by a significant margin, some only edged out the runner-up by a very small percentage. You can see the full list of winners and read about the deals, markets and people behind them here.

PERE Asia 2024’s biggest highlights

The PERE Network Asia Summit 2024, which brought together more than 600 managers and investors at the Shangri-La Singapore last week, has now come to an end. This year’s PERE Asia had a distinct ‘Asia versus the West’ narrative, which appeared throughout the three days of the conference. If you missed out on attending PERE Asia, here is a round-up of our coverage featuring key takeaways from the event:

  • Asia may have a healthier banking system than the West, but that is both an advantage and disadvantage in terms of capital flows to the region.
  • Although “stay alive ‘til ‘25” is less of a market refrain in Asia-Pacific, the refinancing environment in the region varies significantly by market.
  • For the foreseeable future, many investors are pivoting from Asia to the West for higher-returning opportunities.
  • North American investors are staying away from China right now, but Mapletree’s Michelle Ling believes they will return to the market over the long term.
  • Qatar Investment Authority global head of real estate Navid Chamdia believes higher rates have helped improve the sovereign wealth fund’s access to opportunities.
  • Indonesia Investment Authority’s deputy chief executive Arief Budiman expects the investor’s real estate allocation to increase from less than 5 percent to 15 percent over the next five years.

Brookfield’s new euro vehicle

Investor appetite for opportunities arising from price dislocation in Europe is growing. Last week, PERE learned that Brookfield Asset Management had launched a new vehicle dedicated to investing opportunistically in Europe. This marks the first time the Toronto-based manager has sought to raise capital specific to opportunistic investment in Europe, and the first regional sidecar for any fund in its flagship opportunistic Brookfield Strategic Real Estate Partners fund series.

The euro-denominated vehicle is expected to be at least €1 billion in size, PERE understands, and will cater to both domestic and global investors looking for exposure to the region. Capital from the sidecar will be invested alongside BSREP V, which has an allocation to Europe of approximately one-third. Despite being a sidecar, the vehicle is fully discretionary and there is no requirement for investors in Brookfield Strategic Real Estate Partners Europe to also invest in BSREP V.

Trending topics

Aareal’s turn

It was always a matter of when, not if, more German lenders would articulate the implications of their exposure to US commercial real estate. Last week was Aareal Bank’s turn. As it presented its preliminary results for 2023, the Wiesbaden-based lender revealed how roughly one-quarter of its $4 billion in US office loans were subject to default last year. Aareal said it increased its loan loss provisions to US commercial real estate in the fourth quarter to €179 million, compared with just €22 million in the same quarter last year, blaming unexpected “issues,” per a report in the Financial Times.

This contributed to an almost 40 percent hit to the bank’s overall operating profit, which ended the year at €149 million. Nonetheless, the bank thinks it will turn a corner sooner rather than later, judging by its operating profit forecast for 2024 of between €300 million and €350 million. Furthermore, €350 million in loss provisions was set aside for 2024, compared with €441 million last year. Notably, the bank expects to restructure many of its US office NPLs by the end of the first quarter.

Private capital leads the way

In 2023, global commercial real estate investment dropped by 46 percent to $698 billion as investors grappled with increased interest rates and higher debt costs. Amid the slowdown, however, private investors emerged as the most active part of the market. Those capital sources, specifically privately held companies as opposed to public firms or institutions, invested $338 billion globally, according to broker Knight Frank’s latest Wealth Report, released last week. That figure amounts to nearly 50 percent of total investment in 2023, per the data.

Dislocation in the market often leads to private buyers taking a bigger bite of the commercial real estate market, according to Antonia Haralambous, a commercial research associate at Knight Frank. Following the global financial crisis, private buyers’ share of global commercial real estate investment jumped from 30 percent to 38 percent, she said in the report. Meanwhile, in 2021, that share grew to 45 percent from 39 percent before the pandemic.

Cross-border reshuffle

Private real estate’s pricing reset has affected investment strategies worldwide. But the degree of opportunity to acquire assets at attractive values varies considerably from region to region. Research from MSCI shows cross-border activity increased to a 23 percent share, or $29.9 billion, of total commercial property investment in 2023, up slightly from 22 percent the prior year. In its Global Cross-Border Investment Compendium published last week, the data provider revealed the US was the top destination for commercial property investment by cross-border capital last year, taking the top spot from China, which had slid to sixth place.

The UK was not far behind the US, receiving $22.2 billion in cross-border investment. With property market dislocation more pronounced in the US and Europe than in Asia-Pacific, investors in the latter region were also a bigger presence on the cross-border stage. Singapore, Hong Kong and Japan were all among the top five sources of cross-border capital last year – Japan invested 170 percent more capital overseas year-on-year.

Data snapshot

Resilient office demand

Despite expectations of falling office demand, around 85 percent of 163 prime office deals globally in H2 2023 were for the same amount or more space from occupiers, according to research from broker Savills. Among occupier groups, finance and tech companies ranked as the most acquisitive by amount of space.

People

Star(wood) power

Jonathan Pollack, the global head of structured finance at New York-based manager Blackstone, left the firm last week to become president of Miami-based Starwood Capital Group. Pollack will officially come on board at Starwood in 2025 and will be joining the firm at a time when alternative lenders are expected to significantly increase their market share as banks scale back their commercial real estate lending amid regulatory pressures that include the implementation of Basel III.

Pollack’s move to Starwood adds to the industry’s wave of senior management changes this year and caps an eight-year tenure running one of the most formidable real estate debt and equity teams in the market. Blackstone will not replace Pollack directly, a spokesperson said. Tim Johnson, who has been global head of Blackstone Real Estate Debt Strategies since 2021, will continue in that role. Johnson will be supported by Katie Keenan, the global chief operating officer of BREDS, and Mike Wiebolt, global head of real estate securities at Blackstone.

Investor watch

KWAP’s real estate ambition

Malaysia’s public pension fund Kumpulan Wang Persaraan is planning to double its real estate assets under management to around $4 billion by 2025. To date, KWAP has only invested in Malaysia, the UK and Australia. To expand its allocation, however, the investor will add the US as well as other markets in Europe and Asia to its real estate mandate this year. The investor is now halfway toward achieving its plan, unveiled in 2022, to double its real estate investment. Since then, the M$184.5 billion ($38.7 billion; €36.6 billion) AUM pension has expanded from core real estate to value-add and opportunistic investments and also added real estate fund investments, having previously only made direct acquisitions. Read the full story here.

This week’s investor meetings

Tuesday, March 5

Wednesday, March 6

Thursday, March 7

Friday, March 8

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