IPE - Opportunistic investors are looking to development for the most attractive returns, suggested a panel audience at the IP Real Estate Investor Forum yesterday - as one of the pension funds on the panel announced plans to target potentially riskier CEE retail projects.
Healthcare of Ontario Pension Plan (HOOPP) real estate senior portfolio manager Lisa Lafave said she was seeking partners to tap off-market deals that would be difficult to close in the scheme's domestic market, where the scheme targets core investments.
"We're opportunistically driven in Europe because we have to be to generate returns," she said. "The question is how we find players. We're looking at development - and not just in office.
"In Canada, a couple of pension funds hold retail very tightly. We're underweight retail, and CEE is underserved, but we need a partner to tap off-market deals."
She said she expected those partnerships "to deliver the next 20 years worth of deals".
Meanwhile, AP1 real estate portfolio manager Tomas Svensson (pictured) said the Swedish scheme intended to move away from core towards logistics, retail and residential in the Nordics and CEE.
"We're looking at development not in specific parts of the country but in growing areas - though demographic growth doesn't necessarily translate into real estate growth," he said.
Svensson said the scheme would not necessarily invest to hold, especially in residential development.
"Being a long-term investor doesn't necessarily mean holding for the long term," he said. "We're not house-huggers."
Other panellists identified development opportunities within mature markets. AXA Real Estate head of opportunistic funds Laurent Vouin said he continued to see attraction in Paris development, rejecting the suggestion it was now too late to enter the market.
AXA launched its third development fund focused on Paris in 2010.
"Supply over the past few years has been low," he said. "A lack of finance is holding projects in cardboard boxes. We're still seeing strong tenant demand in Paris, and there's still room to launch new products.
"But you need to seize the right opportunities. A tender by public authorities where land prices are high won't deliver the best returns. We'd target IRR of 25% with decent exit assumptions, but that's based on some developments never happening and others delivering 40%."
Barry Blattman, senior managing partner at Brookfield Asset Management, questioned whether development was in fact an opportunistic investment, pointing out that Brookfield's City development joint venture with Great Portland Estates was meant to grow its office platform rather than generate opportunistic returns.
"There's strength in buildings that don't have nicknames but have great space," he said.