Blueprint: PERE’s latest Proptech 20, Tishman’s industrial JV, GIC & ESR’s India venture

Two of PERE's Proptech 20 weigh in on the rankings, Tishman Speyer and Mitsui Fudosan sense an opportunity for industrial, GIC and ESR continue partnership in India focused on industrial; and more in today's briefing, exclusively for our valued subscribers.

They said it

“For the first time in a decade, investors are asking not just about the reward, but about the risk associated with investments”

Marc Rowan, chief executive of Apollo Global Management, told investors on the firm’s Q3 earnings call, noting that alternatives “should shine” because they produce excess return relative to risk.

What’s new?

Top of the heap: Brendan Wallace’s Fifth Wall, the proptech firm he co-founded, sits atop PERE’s 2022 Proptech 2022 rankings.

Accelerating into the storm
Now in its second year, managers positioned in PERE’s Proptech 20 ranking are already publicly demonstrating their pride, first ranked Fifth Wall and third placed Gaw Capital Partners among them. Fifth Wall co-founder Brendan Wallace declared “We’re just getting started,” while Gaw Capital managing partner Humbert Pang stated “We are proud to be an early adopter in this space.” The aggregate capital raise for 20 constituents of this year’s ranking was approximately $10 billion, about 80 percent higher than last year.

Whether this early momentum sustains in the face of today’s hyperinflationary environment, where rising costs are pulling the focuses of many institutional investors and their managers, is the big question in PERE’s analysis of the ranking. Executives at proptech managers are confident of continued capital market support. PERE’s third iteration of the ranking next year will be a significant litmus test to see if they are right.

Sensing the moment
While many market participants are in wait and see mode, one of the industry’s most pre-eminent managers and a prominent Asian investor are remaining active. New York-based Tishman Speyer and Mitsui Fudosan, Japan’s largest real estate company, have formed a joint venture targeting industrial properties in the US. It is Tishman’s first dedicated vehicle targeting the property type, after having invested via diversified accounts previously.

Both parties sense an opportunity, with recently hired head of industrial at Tishman Andrew Burke telling PERE the market volatility creates an opportunity.

The timing works for Mitsui too. “What we invest in, when and with which partners are always key considerations for Mitsui Fudosan America,” Sean McSweeney, senior vice-president of acquisitions at Mitsui subsidiary Mitsui Fudosan America, said. “Our primary objective is to generate value and achieve growth and we see a significant opportunity in industrial assets today.” Read our full coverage here.

GIC and ESR eye on core industrial assets in India
Singaporean sovereign wealth fund GIC is expanding its logistics strategies in India by extending its existing joint venture with long-term partner ESR Group, according to an announcement. The pair have formed a $600 million joint venture to invest in income-producing core industrial assets in the country. Abhijit Malkani, chief executive at ESR India, thought the vehicle would upgrade the country’s industrial assets by increasing its operational efficiency. He explained in a release that the country is going through “a supply chain transformation” triggered by technology and government policy.

The 80:20 partnership, with GIC providing the lion’s share of the capital, is a continuation of the relationship, after the two firms’ first Indian logistics vehicle launched at the end of 2020. That $750 million joint venture targeted development and value-add industrial assets in the country.

Joining forces
South Korea’s KB Asset Management will scale up its overseas real estate investment by forming a strategic partnership with US real estate investment manager Bridge Investment Group, according to a statement. As part of the agreement, KBAM will invest at least $1 billion over the next four years in Bridge, including commitments to the firm’s multifamily and single-family rental strategies. In addition to that, KBAM is expected to bring additional third-party capital of at least $2 billion over the same period. In return, Bridge will help KBAM to enhance its deal-sourcing capabilities with its local investment network and human resources. With $1.1 billion of overseas operating assets, the Korean investor hopes to diversify its existing portfolio and further improve mid- to long-term returns.

Trending topics

Common ground for Canadians Down Under
What does Canadian capital and Australian real estate have in common? A recent propensity for coming together, evidently. The last week was a notable one for Canadian institutional investors expanding their presence Down Under. On Wednesday, Cadillac Fairview, the real estate arm of the Ontario Teachers’ Pension Plan, announced it had forged a partnership with Houston-based manager Hines for a A$1.5 billion ($971 million; €969.5 million acquisition and development venture focused on Australia’s build-to-rent sector. Seeded with three assets, the collaboration sees Cadillac Fairview realize on a “key area of focus” for the institution globally, said senior vice-president, investments Asia-Pacific, Karl Kreppner. On the same day, Ivanhoé Cambridge, the real estate business of Caisse de dépôt et placement du Québec, announced it had expanded with an office opening in Sydney in a bid to “consolidate its ties to its partners in the country.” The firm has made investments in the logistics, residential, life sciences and mixed-use sectors. The office will be headed by Rodney Fung, head of portfolio and asset management, Asia-Pacific.

The self-imposed taxman cometh
Copenhagen-headquartered manager NREP is taking the old adage of making your own rules further by making its own penalties too. Last week, the firm, which current manages assets valued at approximately €18 billion, announced implementation of a self-imposed carbon tax system “to incentivize rapid and deep emission cuts.” After famously declaring a notably near-term carbon neutrality target of 2028 at the turn of this year – PERE analyzed this extensively in February – the firm has determined this ambitious target would be better achieved by imposing a monetary figure on the cost of carbon to the business. Specifically, the firm stated it would adopt the EU Trading System as its benchmark to ascertain the price of its tax, currently €90 per tonne. That is three times the cost of “quality carbon offsets,” NREP said. Embodied carbon emissions tax will be paid as a one-off at asset completion while operational emissions tax will be paid annually. It is not all stick, though. NREP also said it would introduce a “green incentive” to financial motivate its project teams to exceed green market standards.

Consider all the risks
Today is an important day for the US, the Midterm elections. One page in StepStone Real Estate’s latest house view slide deck warns of a risk stemming from the fallout of the vote. States that have already enacted abortion bans face economic and real estate risks, the La Jolla, California-based manager and advisory service says. In a broader economic sense, a ‘brain drain’ from states where abortion is illegal could occur, leading to lower labor force participation and lower household income and GDP in those states. The knock-on effect for real estate investors are tenants moving to states where the practice is legal in order to better hire and retain employees, particularly women. This also has a larger ESG component, with the S firmly at the forefront as reproductive rights provide equal access to education and employment, human rights in the eyes of the UN, the report stated. While the issues in political adverts across the country focus on myriad things, the votes cast today could have consequences on the investments of tomorrow.

Data snapshot

Office woes, home highs
Office continues to lose its grip as the pre-eminent property type chased by institutional capital. According to CBRE’s Q3 investment volume report, office investment as a share of overall global investment volume is the lowest it has been since at least 2015. Meanwhile, multifamily continues to grow its share, attracting roughly a third of all capital deployed.

Awards season

PERE Global Awards season is officially under way. Last month, we launched the 17th edition of private real estate’s most eagerly anticipated awards, this time with 72 categories. Institutional investors, managers and advisers have the chance to battle it out for recognition of their exploits during one of the most challenging market periods in living memory. We are expecting a record number of votes for this year’s awards, which have been updated once again to fit with the times. Notably, we are introducing our first categories dedicated to data centers, given the asset type’s meteoric rise in stature and investment. Click here to learn more and, critically, find a form to submit ahead of our nomination selections!

People moves

Start spreading the news!
The New York City-based suite of investors have a new, but familiar, head of real estate. After more than seven years as a senior investment officer for real estate at the Office of the Comptroller, John Gluszak [his LinkedIn here] has been promoted to the top real estate job. He announced the change on his LinkedIn. Gluszak will take over real estate investments for five NYC pension funds – Teachers’ Retirement System of the City of New YorkNew York City Employees’ Retirement SystemNew York City Police Pension FundNew York City Fire Pension Fund and New York City Board of Education Retirement System – which currently have around $242 billion combined in AUM. Gluszak’s prior career stops will position him well for navigating this period of continued volatility, having previously served as director of CRE pricing at the Royal Bank of Canada and senior business analyst at Hipercept focused on portfolio, asset and risk management.

Investor watch

Filling the void
The Korea Investment Corporation has found a leader for its real estate unit after its former chief departed more than a year ago. The investor hired former Qatar Investment Authority executive Thomas Cho [his LinkedIn here] to fill the role that has remained vacant since Cha Hoon, the previous head of real estate, left in November 2021. Based in Seoul, Cho will oversee the firm’s global real estate investment and work closely with the sovereign wealth fund’s teams in New York, London and Singapore. He will report to KIC’s head of alternative investment Jongho Kim, who had been managing the real estate since Cha’s departure. Cha, a Carlyle Group and Goldman Sachs alum, resigned shortly after leading the unit for two months amid a wave of senior executive reshuffling at KIC last year.

This week’s investor meetings

Tuesday, November 8

Wednesday, November 9

Thursday, November 10

Friday, November 11

Today’s letter was prepared by Peter Benson with Jonathan BrasseEvelyn Lee, and Christie Ou contributing