During a panel discussion at the MIPIM property conference currently being held in Cannes, France, a group of investors discussed how alternative assets such as private equity real estate and infrastructure are quickly gaining acceptance among institutional investors.
The discussion, titled “Alternative today, mainstream tomorrow?”, was co-sponsored by PERE and included Blackstone Real Estate co-head Chad Pike, who is based in London; the chief investment officer of ING Real Estate in the UK, Stephen Pyne; and John McCarthy, the head of RREEF Infrastructure in Europe.
Not only are alternative asset classes becoming more mainstream, so too are alternative sectors within real estate, such as hotels and nursing homes, noted several of the panelists.
Blackstone, for example, has been one of the biggest investors in areas such as hotels, theme parks and student housing. Just last week, the firm announced the £1 billion ($1.9 billion; €1.5 billion) acquisition of Tussauds Group, which it plans to combine with Legoland theme parks, making it the world’s second largest owner of theme parks and tourist attractions behind the Walt Disney Co.
At the conference, Pike noted that brand and size plays a key role in Blackstone’s investment strategy. In addition to their position in the theme park business, Pike said Blackstone is currently one of the largest owners of office properties in the US; the second largest owner of hospitals in France; and, prior to selling its interest in Southern Cross, the largest owner of nursing homes in the UK. He added that to make such investments successful, Blackstone spends a significant amount of time focusing on each individual asset in the portfolio: For example, whether to expand a hospital, convert it to a different use or shutting it down.
“Most of the money is made at the property level,” Pike said.
ING, Pyne noted, has also been making a push into alternative real estate sectors as its shifts some of its focus away from more traditional investments, including core properties in the UK. from. The firm is also launching an infrastructure fund, in combination with its parent company, ING, which has a presence in infrastructure investment banking.
As ING’s entrance into the market makes clear, infrastructure, too, is quickly gaining acceptance among fund managers and investors alike. In terms of institutional acceptance, RREEF’s McCarthy noted that he sees similar trends taking shape in infrastructure as that which took place in private equity and real estate. Two years ago, RREEF started raising capital for its European infrastructure fund.
“Less than 25 institutions that we approached understood what the asset class was,” McCarthy said. “Today, it’s 100 percent.”
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