Profiles and GI 50 Stories
PERE’s seventh annual ranking of the largest institutional private real estate investors in the world has changed. Say hello to the Global Investor 50, which tracks equity committed to real estate through commingled funds, separate accounts, joint ventures, club vehicles and direct acquisitions. We decided to add 20 extra names to the list in recognition of the biggest trend in private real estate globally: that the sector is attracting record amounts of capital as it continues its inexorable march toward the mainstream of investing.
It seemed only fair, then, that we adjust our ranking accordingly to measure how this influx of capital is benefitting not just the industry’s marquee names, but also its lesser-known participants.
One thing that has not changed is the way in which we measure the industry’s largest players. A full explanation of our methodology can be found on the following page.
So, what has changed in the past 12 months? There have been shifts among the upper echelon of the ranking, with three of the top five trading places. However, no one has been able to unseat the Abu Dhabi Investment Authority, which once again retains top spot, having committed $46.95 billion to the asset class.
Stichting Pensioenfonds ABP, which invests in property via APG Asset Management, remains Europe’s heaviest-weight investor in second position. There are also no North America investors in the Global Investor 50 top five, with the highest ranked investor being seventh-placed TIAA Global Asset Management/Nuveen. That investor, however, jumped into the top 10 from last year’s 15th position after a strong showing following the restructuring of its US real estate operations under TH Real Estate.
In fact, compared with last year’s ranking, the North American investor contingent within the top 30 shrank from 18 to only 14. Stealing a march on these investors were the Europeans, which doubled their showing in the ranking from only six in 2016 to 10 within the top 30 this year.
The rise of European investors has come at a time of considerable political uncertainty on the continent. The UK is still working toward Brexit, while Germany, France and the Netherlands all have had to contend with distracting national elections where anti-establishment sentiment and populism posed a threat to real estate and capital markets more broadly.
In spite of the movement within the ranking, the trend of the world’s largest pools of capital increasing their commitments to private real estate continues unabated. The top 30 last year committed $683 billion – versus $659 billion for the whole of 2015 – whereas that figure has jumped up to $719 billion in this year’s ranking. The entire 50 investors listed make that figure $896 billion. It will be interesting to compare these figures next year to find out if it is only the largest investors seeing the value of real estate, or whether some of the lesser-known institutions are also making a beeline for the asset class.
What makes a top 50 investor?
Over the years we have been covering private real estate we have been asked a seemingly simple question: who are industry’s largest investors? But ranking the largest institutional real estate investors in the world requires rules, judgment and a willingness to dive into the gray areas of a non-transparent asset class.
So, here at PERE we have based the Global Investor 50 on the market value of investors’ private real estate investment portfolios both through third-party managed investment vehicles and direct property investments. It does not include investments in REIT or real estate company stocks and mortgages or mortgage-related securities. Please also note that it does not include real assets, such as infrastructure or energy assets; or assets managed on behalf of third-party investors, as can be the case with certain insurance companies.
And because the global real estate investment industry is huge, we have attempted to draw some lines around the kinds of institutions and investments that should be considered for the Global Investor 50.
‘Private real estate’: The definition of private real estate, for the purposes of the Global Investor 50, means any property used for commercial/business purposes, such as offices, hotels, retail, industrial and numerous other niche property types, as well as multifamily/apartment properties. It may include portfolios of single family houses, assembled via an institutional platform.
‘Market value of private real estate portfolio’: The market value of the investment portfolio covers capital definitively invested in real estate either directly or indirectly. In the case of direct investments, it means equity invested in a property or properties. In the case of indirect investments, it means equity invested via a private real estate investment vehicle operated with discretion by a third-party such as a separate account, joint venture, commingled fund or other structured vehicle. We count capital drawn down by the third-party manager for investment in real estate and not commitments made by the investor that are yet to be drawn down. It does not count capital allocated to but not committed to non-discretionary vehicles managed by third-parties, such as open-ended joint ventures whereby the discretion lies solely with the investor. In such cases it is deemed that no capital has in fact been committed.
What does not count?
REITs and real estate company stocks: We consider these to be stock investments and part of an institution’s equity portfolio, regardless of how an individual institution may classify it.
Individual single-family homes: These are rarely owned by institutional investors; more often they are owned by their occupier.
Mortgages and mortgage-related securities: Similarly, we consider these to be fixed-income investments and representative of that portfolio.
Structured debt: Again, these instruments, such as collateralized bond obligations and collateralized debt obligations, would be considered fixed-income investments and representative of that portfolio.
What does not count as ‘committed and/or invested capital’?
Committed capital not yet drawn-down: We do not count capital that has been committed to a private real estate fund but not yet drawn down by the fund manager.
Expected commitments: No matter how confident an institution is about its investment goals and/or allocation, we do not count pending or future commitments and investments or the uncommitted portion of an institution’s target allocation.
Opportunistic capital: An institution that has the ability to opportunistically invest in real estate deals as part of a larger allocation but does not have a dedicated allocation or personnel for doing so is not considered for the rankings. In other words, an institution that has the ability to invest $2 billion in alternatives will not be counted unless that capital has been segregated into a specific program for real estate and/or assigned a dedicated real estate professional that is actively scouting for investments.