At the heart of London-based manager M7 Real Estate’s sale of an approximately 6 percent stake to Hong Kong finance and advisory firm TTB Partners was a desire to tap Asian appetite for continued real estate investment in Europe.
“We sold this minority stake because we’re expanding our investor base and we have known TTB for a few years,” M7 chairman Richard Croft told PERE. “They have been both an investor and a partner of the firm, and they provide us with new distribution channels, so the formalization of the relationship made sense to both parties.”
TTB plans to utilize its Asian investor base to access new capital looking to invest in UK and European real estate, either through joint ventures or funds via the M7’s business.
Jonathan Bond, TTB co-founder, said: “Despite challenging current market conditions, we continue to see a strong trend of Asia-based capital pools searching for robust European assets with a particular interest in asset classes such as regional offices and retail warehousing.
“These asset classes are expected to benefit from an increased demand as working patterns and consumer habits continue to evolve as a result of the covid-19 crisis.”
TTB acquired the stake by buying out an existing shareholder, which held its stake in a special purpose vehicle. The vehicle was the entity holding the shares of a former partner of the business since retired, according to Croft.
Meanwhile, he revealed M7’s plans of expanding its fund business, including the launch of new funds this year. “The extra distribution capacity is key to our growth plans,” Croft added.
Pining for Europe
This is not the first cross Asian-European collaboration to be announced in recent months. In March, Singapore-based ARA Asset Management joined forces with Venn Partners, a London-based European real estate credit specialist, in order to expand its offering in European real estate on the debt line. ARA also credited investor appetite for its expansion.
“Our move into Europe was very much investor-led and we have seen significant quantities of capital progressively deployed, not only to the UK but continental Europe over the last five years,” said Mark Ebbinghaus, speaking to PERE. “We have seen a lot of interest in Europe and the UK from our Asian investors and a lot of demand on the credit side.”
In a recent Asia-Pacific investor survey by real estate consultancy CBRE, Asian investors displayed strong intentions to invest abroad this year, despite worldwide lockdowns and uncertainty on the back of covid-19.
Hong Kong-based investors in particular displayed a keen interest to invest in Western Europe, while Japanese investors on the other hand are mainly focused on North America.
Looking back, however, although cross-border investment was up in the first quarter of the year, Asian investors were noticeably less active, representing just 5 percent of the investment value compared to 14 percent last year, according to a report by fellow consultancy Savills.
In comparison, European cross border players were the most active, capturing 54 percent of the total cross border investment for Q1, followed by American investors at 35 percent.
“Domestic players and international funds with a good network of European offices should be the ones to progress farther,” said Eri Mitsostergiou, director in Savills commercial research. “Asian investors may be absent for a while, or act through European fund managers.”