BLOG: Investors see inflection point at MIPIM 2013

‘Useful but underwhelming.’ That was how one visitor summed up this year’s edition of the MIPIM real estate fair in Cannes.

Like many visitors, Bryan Wilson, founder of Wilson & Partners, shared the general perception of lower attendance numbers and what he called ‘surprisingly poor stands’. Outside the Palais des Festivals, the Boulevard de la Croisette was less busy than usual and it was even possible this year to find a table for lunch at the nearby Majestic Hotel.

Although many delegates were hampered by snowstorms and bad weather in Northern Europe in getting to MIPIM, the organisers insisted that the international event drew more visitors than last year. According to the official stats, 20,000 visitors attended from 79 countries, up slightly on the 19,402 participants from 83 countries recorded in 2012.

These figures raised a few eyebrows on the last day of the fair, but the general consensus was that the mood this year was somewhat better than 2012 when fears of an impending breakup of the eurozone still had investors in their grip. These concerns have now largely dissipated, it emerged at the CBRE investment briefing hosted by chief economist EMEA Peter Damesick. Instead, investors are now more worried about the recession that is holding back rental growth in large swathes of Europe.

Despite ongoing concerns about the pace of economic recovery and tight lending conditions, several attendees expressed optimism that an inflection point may have been reached in the European real estate industry. This is certainly the case in the logistics sector, according to Philip Dunne, CEO and president of Prologis Europe. After years of relative inactivity, his company is now gearing up for a new wave of development, he told a PropertyEU Investment Briefing hosted together with IPD.

‘We won’t see an opening of the floodgates and we need to see some growth in rents. But I think this year will be a year of inflection.’

Ian Worboys, CEO of PointParkProperties (P3) is similarly upbeat about the logistics sector and believes that 2014 will be ‘a very different year’ to this year and last. ‘There’s lack of supply, rents are growing and more demand for built-to-suit and built-to-own. We can see real growth ahead.’

As usual, this year’s MIPIM saw the rumour machine churn out a number of interesting speculations, including a fresh IPO attempt by P3. In an exclusive interview with PropertyEU, Worboys confirmed the plans and said he was targeting Q3 this year for the flotation, almost exactly 12 months after the first aborted attempt. Elsewhere in the logistics sector, Canada’s Brookfield Asset Management is believed to be closing in on the takeover of UK developer Gazeley for a sum in excess of €400 mln.

Gazeley was by no means the only name on investors’ lips in connection with potential takeovers. A number of different names have been circulating for some time in fund manager circles and this year was no exception. The future of RREEF, which has been renamed Deutsche Asset & Wealth Management, remains uncertain following its failed acquisition by Guggenheim and an exodus of executives. The fund manager has also withdrawn from opportunistic investment where its smaller peer Catalyst Capital has also been signalled as a potential candidate for recapitalisation.

As big and small players struggle with the legacy of the global financial crisis, now is the time to strike in the opportunistic realm, according to Joe Valente, head of research at JP Morgan Asset Management. But, he added, it is an arduous task to find the right opportunities. Of the €250 bn worth of assets coming to market, about a third is not worth looking at, he said. Indeed, investors should tread carefully as the yield gap for the bulk of assets in that category compared to core should be closer to 800 basis points than the current average of 500 bps, he warned.

JP Morgan’s own experiences prove the point. The asset manager has looked at 300 assets in the last five years for its second opportunistic fund. So far it has acquired only nine and none at all between 2008-2011. But to end on a positive note, the bulk of the nine deals were completed in the last 18 months.