Redeployment of capital is the biggest challenge facing investors

For many of the world’s largest real estate investors, the biggest challenge today is the redeployment of capital as they look to recalibrate their real estate portfolios globally, according to the investors’ panel at the PERE Asia Summit in Singapore last week.

Laurent Jacquemin, head of Asia-Pacific real assets at AXA IM Alts, the alternatives investment arm of the French insurer, pointed out investors theoretically should sell their assets when they have reached maturity, but finding new opportunities for redeployment have become more difficult in today’s market. “The challenge today is what’s next. It is always good to be on the sell side when the market is good. But how do you redeploy the equity? Before making a recommendation to sell, we need to make sure we are able to redeploy in [market] conditions as good as the one in which we are selling,” he explained.

Partner consideration is also a key concern when investors look to recycle their capital, according to George Agethen, co-head of Asia-Pacific at Ivanhoé Cambridge, a real estate subsidiary of Canadian pension plan Caisse de dépôt et placement du Québec. He noted the investor has made most of its investments in the region via club deals and is still quite dependent on the managers. “If we are disciplined in what we do, we will recycle 80 percent of our portfolio in the next three years because our investments have met their business plans. But there is this huge trend of recapitalization of portfolios where managers don’t want to lose AUM and convince us to hold longer.” Having said that, the investor still reassesses and makes hold/sell decisions annually.

Richard Massey, managing director at GIC, said the Singaporean sovereign wealth fund also assesses hold/sell decisions of its portfolio regularly. The investor will sell when it “has maximized the return of an asset” and sees opportunities to redeploy the capital. “We have done that in logistics and recycled that capital into other opportunities,” he said. The investor recently participated in a couple of large dispositions, including selling its stake in Dexus Australian Logistics Trust to Blackstone for A$2.1 billion ($1.5 billion; €1.4 billion) at the end of 2021.

When it comes to redeploying capital, some investors see opportunities to buy real estate operating platforms at a time when the market for hard assets has become very competitive. Jacquemin said that AXA IM Alts has been looking to buy more operating platforms with a strong investment pipeline. The firm entered the European life sciences sector through the acquisition of life sciences real estate specialist Kadans Science Partner in 2020. “We see similar opportunities here in the region. We have been looking at some developers in residential and logistics in Japan,” he said. “Going forward, if you have the ability to take over a platform, you are going to benefit from a good transaction.”