Friday Letter PERE goes to MIPIM

Last night, the three-day extravaganza known as MIPIM, the world’s largest property conference, came to a close. But as approximately 25,000 real estate revelers leave the south of France, conference delegates of a different sort will soon be streaming in. In a few weeks time, Cannes will host not only the legendary film festival, but also the Hot D’Or, otherwise known as the European adult video awards. Coincidence? Perhaps not. 

For there was plenty to titillate this past week in Cannes. The Palais des Festivals, located in the heart of the city, was ground zero for sensory overload: a veritable labyrinth of advertising booths, project models and firms hawking their latest ventures. Want to learn about A101, a 16 million-square-meter development that will be Moscow’s first “ecological suburb”? Interested in a 1 million-square-foot, build-to-suit opportunity in dowtown Miami? Ever thought of owning an apartment in the massive, Daniel Liebeskind-designed Keppel Bay project in Singapore? MIPIM has you covered.

The size and scope of this year’s conference was perhaps best personified by the Russian contingent, who were seeminly everywhere. Ever heard of Krasnodar? It’s apparently the “pearl of Russia,” at least according to the advertisements that dotted Cannes. Delegates also learned that Kaliningrad is known as the “investment crossroads” of Russia and that Sochi is a candidate for the 2014 Winter Olympics. How about Kazan? Well, that’s Russia’s “third capital.”

According to one private equity real estate investor, the story of MIPIM 2007 can be easily summed up: “The Russians are coming.” (Of course, that same investor noted that he had been unable to find Kazan on a map.)

Of course, the real spectacle of MIPIM lay in the nearby harbor. There, law firms, consultants, investment banks, property moguls and even private equity real estate firms moored their rented yachts along the Jetee Albert-Edouard. Apollo Real Estate, Colony Capital, Morgan Stanley, RREEF and Orion Capital all had a berth. Others, like the London upstart Brockton Capital, preferred the sanctuary of a villa up in the hills. Regardless of location, however, the message was clear: The fund managers stayed put and people came to them.

Amidst the glitz and glamour, there was still some serious talk about the state of the property markets around the world. At one panel discussion, co-sponsored by PERE, a group of investors including Chad Pike, the co-head of Blackstone’s real estate group, talked about the evolution of private equity real estate and how once “alternative” property sectors such as hotels and nursing homes are entering the mainstream.

How much longer will private equity real estate itself be considered “alternative”? That question was left unanswered, but judging by the scene at MIPIM—the flotilla of yachts sponsored by private equity real estate firms, the packed house at the panel discussion, the number of times the word Blackstone was mentioned—the asset class is quickly gaining a central prominence in the global property markets.

So forget about the champagne cocktail parties at the Hotel Martinez or the lavish party sponsored by WP Carey. The message of MIPIM 2007 (ignoring the Russians, at least for now): Private equity real estate is coming of age.