University of San Diego MBA students attended the Global Private Equity Conference with Gaw Capital and AEW at MIPIM - here are key points from the session organized by PERE.
Representatives around the world came together to discuss how the global private equity market is evolving after the the financial crisis and how the macroeconomic situation has impacted PERE strategies. The session “The Global Private Equity Real Estate Market,” invited speakers Goodwin Gaw, founder of Gaw Capital and Simon Blaxland, Executive Director of AEW Europe. *Organised by PERE and moderated by Jonathan Brasse, Editor of PERENews.
- Jonathan Brasse stated that 102 billion dollars were invested in real estate in 2013, which represent the best year since 2008. This is a result of investors allocating more money to real estate.
- Although more money is invested in real estate, there are fewer managers in the market today with 10 managers representing 30% of the market. These managers are heavily invested in opportunistic assets and debt.
- The geographic investment allocation: 50% Asia, 20% Europe, 15% USA and 15% rest of the world.
- The geographic sources of capital: 50% North America (higher than the traditional investment), 17 % Europe, 17% Asia and Pacific.
- 50% of investments are made by insurance/pensions funds.
- Blackstone saw opportunities in the US in 2011 when the banks started to sell their assets, but now they see fewer opportunities because rents and prices are beginning to be “reflated” to 2008 levels.
- Goodwin Gaw said that Asia has less competition and bigger deals, but notes that it is very important to have a local expert partner for Asian investments.
- To achieve opportunistic returns in Asia is important to take advantage of government inefficiencies.
- Investors are increasing their investment allocations in Europe, since Europe is 2 years behind the USA cycle and the prices are in the lower levels.
- All the panelists agree that is important to have local people that speak the language to invest in a market and to manage the assets in that market.
- Funds investing in core real estate are receiving less fees, because less expertise is needed for this type of investment, but in opportunistic funds the fees are holding up since more expertise is needed for these types of investments.
- Blackstone entered in the core assets because their current investors asked them to.
- Crowdfunding is not on big private equity companies’ radar as a capital source. They see it as a structure for small operations which don’t compete with them.
The real estate global investment market improved in 2013, with its best year since 2008. The US market was the one that made the main contribution by representing 50% of the total investment. In 2014, the market that is being targeted as the best to invest in is the opportunistic market in Europe. Management fees are being reduced in core investment vehicles, as investors start to pressure the management companies.
-Written by University of San Diego – Burnham Moores Center for Real Estate
Image: Image & Co / S Halloy