Mark Newman, founder of London-based real estate investment management firm Broadcliff Capital Partners and chairman of last week’s PERE Summit: Europe, painted a sobering picture of a European economy inflicted with a long-term structural downturn in his opening address.
On the sidelines of the two-day event, Newman told PERE: “The problems extended almost to the issue of whether or not, systemically, the current political system is going to survive.”
“That level of uncertainty, as it impacts currency, as it impacts financial institutions, and as it impacts the larger economy, is now so great that if it continues for any prolonged period of time, you’re going to see less and less investment activity and less and less business activity as people watch and see what the outcome is.”
Nevertheless, Newman, who founded Broadcliff in 2010 as part of the spinout of the private equity real estate business of failed Wall Street bank Lehman Brothers, the collapse of which he described as “clearly a once in 100 year event”, said there “is definitely a place for real estate private equity”. He underlined how, for a number of investors, the only way for them to access the world’s real estate markets is through “some form of fund structure”.
Private equity real estate funds have come under scrutiny from institutional investors following poor recent vintages and certain large investors have opted to invest in the asset class more directly. In particular, areas including discretion, leverage and alignment of interest have been attacked and in many cases, fund managers have been forced to relax these elements of their investment vehicles.
Newman agreed the private equity real estate fund has “room for improvement”. Setting aside large investors, who are able to access the market directly, he said: “In general, for smaller funds and a number of investors who want to pursue strategies away from their home turfs, I continue to believe real estate private equity, well managed, represents a very good alternative.”