PREA conference: US investors turn to global markets

This year’s Pension Real Estate Association’s (PREA) Institutional Investor Real Estate Conference had a distinctly global focus, with discussions covering markets in the US, Europe, Brazil and Asia.

There were in excess of 980 attendees at the event in Los Angeles, including 120 pension funds, endowments and other institutional investors. Their main takeaway was that capital is increasingly being invested on a global basis, although this can pose major risks in terms of legal and political concerns.

When it comes to their domestic property market, money is predominantly going into core and value-added opportunities in major and secondary markets.

Terri Herubin, portfolio manager at Cornerstone Real Estate advisors, a company known for core and value-added strategies, said: “We look for properties in markets where there is a lot of capital being invested in companies. These can be in major markets like a San Francisco or Los Angeles.

“It could also be in secondary markets. We have closed some recent deals in places like Austin and Orlando, where there is still room from rental rate growth. Most of our investments over the past year have been with office and industrial assets. This makes us feel good about an exit strategy for the asset.”

In Europe, meanwhile, capital is taking on a more value-added approach; so-called build-to-core strategies are proving particularly popular.

Dennis Lopez, global CIO at AXA Real Estate, said: “From a core standpoint, I think the best strategy is a build-to-core play.”

He added: “Existing core assets in Europe are very pricey. The returns of a build-to-core strategy can be 150bps higher than buying existing core assets.”

The real estate manager is looking to implement this strategy in London, Paris and Germany with CBD office building and logistics assets.

Lopez said AXA Real Estate was also intending to renovate existing assets. “We are looking at doing this with office buildings and retail assets,” he said.

“We recently closed on the acquisition of a shopping centre in the UK where we will be re-positioning the property.”

The company is still investing capital in Europe for its AXA Independence Fund with Teachers Retirement System of Texas that was formed at the end of last year.