PERE Europe Forum 2023
The private real estate sector is facing unprecedented levels of unpopularity across financial markets in the wake of spiking inflation and interest rates as well as accelerated secular trends. Finding a secure footing has therefore become a palpable concern for industry participants. This was one of the overarching takeaways from the first day of PERE’s annual conference in London yesterday. Here are three more items arising from the event, which attracted approximately 300 delegates:

Alignment issues: Want to know what Nathalie Palladitcheff, the chief executive officer of Ivanhoé Cambridge and the latest recipient of PERE’s prestigious Lifetime Achievement Award, is most worried about these days? Misalignment, she told the Forum yesterday. And, for her, at the heart of the issue is the people in the industry. For the steward of the real estate business of Quebec state pension Caisse de dépôt et placement du Québec, today’s private real estate market brings with it more misalignment than ever before. She listed the “different agendas” of managers, operators and lenders.

“The most difficult thing we have to do is construct a portfolio with the right people who we are completely aligned with,” she told delegates. “I have a lot of friends inside and outside this room, but everyone has an agenda which is very different from mine.” She referenced managers seeking to mix institutional capital with retail capital and developers trying also to run funds as two examples where misalignment has been an issue for the investor, which currently manages almost $60 billion in assets.

A contrarian voice on real estate debt: There was a chorus of PERE Europe speakers that sang the praises of investing in real estate debt during a time of high interest rates and heightened market risk. One such speaker was Stephane Jalbert, head of Europe and Asia-Pacific real estate investments at Canadian pension plan PSP Investments. “The best risk-adjusted [return] if you price something right now is probably in the debt space,” said Jalbert. Karim Habra, head of Europe and Asia-Pacific at fellow Canadian investor Ivanhoé Cambridge, agreed that debt deals are likely more attractive than equity deals, but only in one respect. For more on what Habra said about debt investments, check out our coverage here.

If you were given $100 million today, where would you invest it? This was a question posed to speakers on the keynote panel at day one of the forum. Common to their answers were in-demand operational real estate assets that drive long-term income, such as high-quality London office, student housing and senior living across Europe. Jay Kwan, managing director at Canadian manager QuadReal, said he would split his evenly between UK build-to-rent and UK logistics, where he would “call the bottom” on value declines. One sector he is steering clear of, however, is retail. Others held a candle to opportunities in the sector, Kwan said there was too much risk, effort and time involved in generating a similar return to other sectors: “If I had just one dollar, I’d probably put it in credit versus a retail project.” He was not the first, nor the last, speaker to suggest real estate debt was a more attractive risk-return proposition than many equity plays in today’s market.

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