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Stults: Cheap Europe winning by default

A wave of US capital is entering the European marketplace caused by volatile equities, a low yielding bond market and the declining value of the Euro, the founding partner of London-based Orion Capital Managers said at seminar on Tuesday.

The competitive landscape for European opportunistic real estate fund managers is changing due to an influx of US capital, according to the founding partner and managing director of London-based real estate investment firm Orion Capital Managers, Van Stults.

Speaking at the London campus of The University of Chicago Booth School of Business, as part of its Chicago Conversations series, Stults said the European real estate market was seeing a “wave of competitors from the US with a shorter term focus”.

“It’s more capital markets driven today,” he said, adding that these US fund managers are typically looking to have realized their European holdings within 24 months.

Stults said the increased demand for European real estate from US capital was due to factors such the volatility of equities, bonds offering very little yield, a fall in the value of the Euro, as well as the European Central Bank’s (ECB) quantitative easing program.

“Real estate and Europe are winning by default, it’s because it’s relatively cheap,” he said.

Ian Whittock, chief investment officer at Knight Frank Investment Management, also speaking at the seminar, agreed with Stults and said investors’ hunt for yield means that allocations to real estate continued to rise.

“The sheer volume of liquidity, both equity and debt…I have never seen so much money from so many different sources,” added Stephen Barter, chairman, real estate advisory at KPMG.

Despite the increased competition for deals from the US, Barter and Stults said that the US should still be the first port of call for European fund managers raising capital.
“I still go to the States first,” said Stults. “When you go to the Middle East or China it’s like fishing for whales. There aren’t many investors but they are big. In the US there are much more [investors].”