REAL ESTATE - The second annual IPE Real Estate Conference – held alongside the magazine’s inaugural Awards Gala – drew a heavyweight collection of pension fund investors and consultants to the Amsterdam Hilton last week.

Conference chairman Robin Ellison - who also chairs the UK’s National Association of Pension Funds - welcomed over 200 delegates whose responsibilities included over 80 European pension funds controlling assets of over €800bn.

They enjoyed a range of presenters including keynote speakers Neil Crosby, professor of land management at Reading University and John Forbes, head of real estate tax at PricewaterhouseCoopers.

Crosby presented evidence suggesting the average error between market price and valuation was 10% and could rise as high as 25%.

He attributed this to return “smoothing”, lagging (ie running behind the market), and undue pressure on valuers to produce findings in accordance with asset managers’ goals.

He said the issue was particularly acute in Germany where the valuation system seemed designed to give absolutely “flat” (ie near-zero volatility) performance.

Forbes said tax can profoundly affect the “alpha” in investment performance. He made the point that asset managers may not be using the optimum vehicle for the type of fund they’re running as, for example, a core fund needs a different structure to an opportunity fund to maximise the tax position and managers may simply adapt a structure they used previously for a different type of fund.

He said it was crucial to know if the vehicle favoured tax payers or the tax exempt (such as pension funds, usually), as it was hard to optimise both.

He noted that increases in the volume or real estate deals, in their cross-border nature and in the range of fund vehicles chosen meant that tax complexity was increasing all the time. He suggested that in the rush to find new opportunity areas of the world, investors should be very cautious about lack of stability in tax regimes and the lack of consistency in applying tax rules. He urged investors to match their tax risk to other levels of risk in the fund.