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Oxford’s Hutcheson: ‘We can make money in any cycle’

The Canadian pension plan had been a ‘reluctant seller’ of the Cheesegrater building post-Brexit vote, but ultimately made more than £1bn in profit.

While political events like Brexit and the late-stage cycle may be concerns for many real estate investors, it hasn’t stopped them from making deals, industry executives said Tuesday.

“Historically, politics hasn’t had a material impact on investment markets, generally speaking,” said Tony Smedley, head of continental European real estate investment at Schroder Real Estate Investment Management, speaking at law firm DLA Piper’s “Investing in a time of global political turmoil” event in New York. “Generally, we’re trying to see through the cycle in our investment strategies. I do consider myself fortunate that I am operating in a physical asset class and our clients and our investors are sufficiently patient and of a long-term duration to be able to see through any short-term volatility.”

Blake Hutcheson, president and chief executive of Oxford Properties Group, agreed. “Frankly, seeing through cycles has to be on the top of everybody’s list if you want to be long term,” he said. “The truth is, we can actually make money in any cycle. The facts are if you’re nimble, studying multiple markets, have a big denominator and you’ve got a good team, you can make money.”

Moreover, Oxford, the real estate subsidiary of Canadian pension plan Oxford Municipal Employees’ Retirement System, has focused on cities in Europe rather than countries – namely Berlin, Paris and London, Hutcheson said – and only a few city blocks within those cities. “There’s lots of opportunities to do well in any of those markets. Real estate is so asset specific that you can be literal about blocks as opposed to countries.”

In the case of Oxford, Brexit has factored into the firm’s recent investment activities. For example, the vote was a trigger in one of the firm’s major transactions this year, the sale of 122 Leadenhall Street in London, also known as the ‘Cheesegrater.’ After the referendum vote in June, Oxford’s partner British Land opted to sell its 50 percent interest in the property, which the partners developed for £500 million and opened in 2015.

“Long story short, we were a reluctant seller,” he said. “A 600,000-square-foot building generates over £1 billion in profits; we had never seen anything like it.”

Hutcheson noted that there has been more disruption on a relative basis in continental Europe than in the UK. “The UK is getting more capital than ever,” he said. “So what’s our strategy? We’re selling in that market. And we’re actually developing new assets [in London] that will come on stream in the next 36 to 48 months, post-divorce. We think it will be timely to come to market at that time.”

Meanwhile, Smedley noted that “London is an extremely resilient market. But it will be a bumpy ride until we know what the terms of the exit will be.”