MIPIM 2016: APG seeks 'scalable' RE strategies

One of Europe’s largest institutional investors is prioritizing “scalable” investment strategies in real estate at the moment.

Robert-Jan Foortse, head of European property investments at Dutch pension manager, APG Asset Management, told delegates at a seminar hosted by the European Association for Investors in Non-listed Real Estate Vehicles (INREV) at MIPIM in Cannes Wednesday how it wanted to make fewer but larger investments in the private real estate market.

“We want to create bigger platforms in markets we can create scale,” he said, adding that APG’s top ten largest real estate investments were now each over €500 million in size. “Typically, we are now a large minority investor,” he said.

APG is one of the most active European private real estate investors with a property portfolio valued at approximately €37 billion. The majority of these assets are in Europe and the US, but the Asia component has steadily grown too.

At the seminar, private equity real estate firm GTIS Partners’ head of international capital markets, Dietrich Heidtmann, presented the findings of INREV’s latest investor sentiment survey, in which 90 percent of fund management respondents believed 2016 will continue a trend of post-global financial crisis record fundraising years. Nonetheless, despite his stated scalable investment aims, Foortse suggested investors might be a little more conservative than the data suggested.

“My sense is there is a bit more caution out there.” More specifically, he said: “The denominator effect must have an impact [on institutional portfolios],” acknowledging the impact on investors’ wider portfolios of volatile stock and currency markets and underwhelming fixed-income returns versus better performing real estate assets. “I am surprised at what this picture shows,” he said.

Fellow panelist, Ian Gleeson, chief investment officer for CBRE Global Investors’ partnerships-focused business, CBRE Global Investment Partners, added: “Our industry has a reputation for its optimism.”

Gleeson described today’s considerable macroeconomic and geopolitical volatility and said that real estate remains relatively attractive. “But at the same time, there are more risks out there,” he said, listing today’s oil prices, Donald Trump’s lead in the Republican party candidate race and the potential negative fallouts to Great Britain leaving the European Union as obvious points of concern.

To illustrate the point, APG’s Foortse said: “The consensus I’m hearing among sovereign wealth funds, for example, is there is no point of looking at London now until we see the vote on Brexit.”

However, the panel’s third member, Rainer Komenda, head of real estate funds at German pension fund manager Bayerische Versorgungskammer (BVK), said that in spite of the headwinds, it would continue committing more capital to the asset class than before, even if things like Brexit might slow down its near-term European investing. BVK currently manages €7 billion of assets outside of Germany and intends to ramp up its offshore investing as part of a bid to increase its overall allocation to the asset class from 14 percent currently to 16 percent or 17 percent over the year. “We are cautious in the near term,” he said, “but not in the long term.”