German insurer Allianz is moving towards expanding its major real estate investment business to the listed sector, the annual conference of the European Public Real Estate Association (EPRA) has heard.
Francois Trausch, CEO of the real estate unit of German insurer Allianz, said at the conference in Paris that he was targeting income yields of around 4% and indicated that investment in listed real estate companies could help his firm reach that target. At present Allianz does not invest in real estate stocks, but Trausch said he was working on this front. 'I hope that I will make some progress by next year. Listed real estate is a good complement to our strategy.'
Trausch pointed out that just a few years ago, Allianz focused exclusively on office and residential property and that 100% of the portfolio was then held directly. Now retail accounts for 30% of the total and the firm invests in different types of structures as well as real estate debt. 'The trend is towards a more diversified portfolio,' he said.
As a global investor, Allianz would then look more broadly at regions beyond Europe, he added. 'In parts of Asia, we would prefer to take a listed approach for liquidity reasons and because some of the markets are smaller. France has shown that a REIT regime can be successful. Countries like India and China should follow.'
Allianz Real Estate had some €33 bn of real estate under management globally at end-2015, with €30 bn of this in Europe, according to PropertyEU's Top 100 Investors ranking.
Best and worst
Commenting on opportunities in Europe's listed sector at EPRA, Blackrock's Rob Wilkinson said divergence between the best and worst performers was 'huge' and added that would continue. German residential property companies are currently trading at historically high levels, he pointed out. He singled out healthcare, student housing and residential in other geographies as sectors with the potential to offer better returns. 'I would look there to try and find a similar shaped return, but better value.'
Wilkinson said there was plenty of appetite for new real estate IPOs with big portfolios of €1 bn or even five or 10 times that figure, and that smaller companies would struggle to get off the ground. That said, smaller listed companies can offer good value, he added. 'Smaller companies can be great. We try not to be too dogmatic about the size of existing vehicles.'
Steve Buller, head of listed real estate at Fidelity, likewise sees little scope for floating real estate portfolios held by US companies in Europe and sees few IPOs on the horizon unless the pricing dynamics change. 'It's tougher to float that stuff in Europe, except for German residential. You'd probably get a better price selling that portfolio.'
