At press time, I was due to fly out to Amsterdam – not for recreational purposes, but to attend PERE’s Global Investor Forum. It will be a good chance to take the temperature of the LP community, although I go there armed with a couple of reports, both of which help understand the investor position today.
The first is PERE’s Global Investor 30 supplement, which is published alongside this issue. In it, we highlight the world’s largest institutional real estate investors. If you like things to be ranked in order of size, then this is the place for you. This time around, we also introduce analysis around the issues affecting big investors, helped by our partners at Macquarie Capital.
Second, there is the PwC and Urban Land Institute’s annual report, Emerging Trends in Real Estate 2013. The wide-ranging review carries views from real estate professionals, some of whom suggest that opportunistic returns are not viable. Meanwhile, investors apparently are still pushing for higher yields than may be reasonable or even possible, leading managers to struggle to come up with a formula that suits their clients and make sense for them.
This is the great struggle in private equity real estate and, against this backdrop, important elements of the industry step in, step away or step around.
Take placement agents, for example. As Evelyn Lee reports beginning on page 32, no longer can such firms rely purely on supping at the fundraising table once per year. Indeed, many are choosing to take on one-off advisory assignments as a means of adapting to the modern industry.
Speaking of adapting, we also take a look this month at the world’s biggest real estate market – the US – where James Comtois interviewed four real estate professionals who flagged up the way too many investors are chasing core product while opportunistic products are often mispriced. To understand how industry players are responding, turn to US Roundtable starting on page 36.
Still, none of the challenges facing the industry has prevented new players from arriving. For example, MetLife sees an opportunity to expand into third-party real estate investment management. This kind of industry development, analysed on page 12, is what makes private equity real estate fun.
There are plenty more examples of how fund managers and LPs are stepping around together. In particular, allow me to draw your attention to Jonathan Brasse’s commentary on Japan’s $1.4 trillion Government Pension Investment Fund (see page 26). The giant pension plan is slowwwwly moving towards real estate investing. Worth a flight to Tokyo?
Safe journeys, and enjoy the issue!