'Big boys' return to long-abandoned markets

AXA Real Estate's acquisition of an office portfolio in Spain was a prime example of how the largest real estate investors used 2013 to re-adjust their strategies in a way that is benefiting European markets that have been neglected since the outbreak of the financial crisis.

In June 2013, AXA Real Estate acquired 13 government-let offices in Barcelona for €172 mln. This was the French asset manager's first venture into Spain in six years.

Pierre Vaquier, CEO of AXA Real Estate, said the company has been actively looking to make acquisitions in the Spanish real estate market since the beginning of the year after signs that the risk of a eurozone break-up had abated. ‘The acquisition of the Generalitat portfolio is typical of the type of value-add transaction we want to undertake, being core quality offices that are well located within a major city and let on long leases to strong, preferably government backed, tenants, but which offer the potential for capital appreciation given the early stage of Spain’s recovery,’ he added.

The Barcelona deal was just one of 11 value-add investments by AXA Real Estate in 2012-2013. In the 18 months to January 2014 AXA Real Estate carried out 11 value-add transactions in six European countries totalling €1.4 bn on behalf of its clients over the last 18 months.

CBRE Global Investors, which had European assets of €26.9 bn at end-2013, spent the last 12 months clearing the decks with disposals of assets belonging to funds nearing termination for investment in 'new opportunities' in 2014. The company sold off close to €2 bn and acquired €1.2 bn of property as it wound down or repositioned certain funds across Europe and raised new capital for funds and from new separate account clients for deployment this year. The fund manager has increased its transaction target for 2014 to €6 bn as it believes that 2014 will provide a broad range of acquisition and sale opportunities across Europe as the region's economies recover.

M&G Real Estate, the UK-based fund manager with £15 bn (€18.2 bn) of assets under management, marked its 150th anniversary by posting a record deal volume of £3.5 bn over the previous 12 months. The activity was split between £2.5 bn of acquisitions and £1 bn of disposals - split between super-core London product and value-added plays outside the capital.

M&G Real Estate's largest transaction was the acquisition in October 2013 of Bankside 2 & 3 and the retail holdings of Bankside 1 in London's Southbank from UK REIT Land Securities. The investment volume of £315 mln (€371 mln) represented an initial yield of 5.2%. Other significant transactions included three Tesco superstores, 18 British Car Auctions sites and, in a pioneering move back into the UK residential sector, 401 market rented units at Stratford Halo and a portfolio of 534 homes acquired from Berkeley Group.

German fund manager Union Investment, in contrast, is mainly focused on stable markets. It carried out 50 real estate acquisitions and disposals totalling €2.8 bn in 2013. The new acquisitions were mainly in the stable property markets of Northern Europe. In addition to purchases in Finland, France, the UK, the Netherlands, Switzerland and Poland, Union Investment expanded its real estate portfolio in Germany in particular. With a total investment volume of some €1.35 bn, the investment manager secured 21 properties and new build projects in its home market, such as the MainTor Porta in Frankfurt/Main, the forum am Hirschgarten development in Munich and the Kröpcke Centre in Hanover.

As a sale-and-leaseback specialist focused primarily on a strong covenant WP Carey is no stranger to less-obvious markets. Its investments volume totalled €1.3 bn in 2013, including €350 mln in Europe and covering office, retail, manufacturing, R&D, hotel and self-storage assets. The transactions in Europe were in the UK, Finland, the Netherlands, Poland, Croatia and Germany.

Likewise Valad Europe, the European multi-let real estate investment manager, isn't wedded to core locations, but rather to where it can find value-add opportunities for its clients. Valad Europe manages €4 bn of commercial investment and development assets across Europe and it has grown by €1.6 bn in the last 18 months alone, with a further €1 bn to be spent in 2014.

'We have over €1 bn to invest in various markets where we see opportunities in Europe. The European real estate market is demonstrating attractive value qualities relative to other global real estate markets and we expect portfolio and single asset acquisitions activity to continue strongly in 2014 as we seek to invest early in the European real estate cycle,' Chief Investment Officer David Kirkby said.

PropertyEU is publishing an overview of the top dealmakers in 2013 in a special report due to be launched at Mipim in March. 'Top Investors and Locations' draws on our own database, an investor survey and supplementary data on European cities. A preview of the publication is available in the January/February edition of PropertyEU Magazine.