PERE Growth: Focus on value-add in Southern Europe

Real estate strategies in Southern Europe are shifting from opportunistic to value-add, panellists at the PERE Growth Forum: Spain & Southern Europe said today.

“The opportunity is moving from opportunistic funds to more value-add,” Davide Arpili, partner at consultancy firm McKinsey & Company.

One such firm hunting value-add returns in Southern Europe is Cornerstone Real Estate Advisers. The Hartford, Connecticut-based real estate investment manager has been rapidly expanding its European footprint to enable it to launch pan-European funds. One is expected to be a core, open-ended fund and the other a value-add product. The value-add, closed-ended vehicle will have a target return of 11-13 percent and is expected to be up and running first.

However, opportunistic real estate investing is still in vogue within Southern Europe and panellists said that more attention is being directed at secondary cities in order to achieve returns.

“A lot of investors who have been frustrated in sale processes in the major cities are focusing on the secondary cities. They are seeing a gap in Valencia, Bilbao and Seville,” said Javier Kindelan Williams, president, CBRE Valuation Advisory.

“You are seeing a flow of investors moving into these areas and we expect them to continue to grow.”

There is also still an opportunity to get access to real estate via non-performing loans, agreed panellists. But, Francisco Milone, managing director at Värde Partners Europe said it is not an easy route to real estate.

“What has changed is that the opportunity has become much more granular. It is more complicated and management intense,” he said.