BLOG: IPD sketches a new paradigm

Attendees who managed to stay the course at the annual IPD conference in Lisbon last week were treated to an exclusive insight into the new paradigm emerging in the global real estate industry.

In the final 10 minutes of the two-day programme, moderator Piet Eicholtz skilfully steered the audience through the most pertinent points and conclusions and sketched a clear outline of the post-Lehman landscape in a concise, off-the-cuff presentation.

CHANGING ROLE
The role of real estate as an asset class is clearly changing. As Roger Urwin, global head of investment content at Towers Watson pointed out, it used to be that pension funds focussed on alpha for outperformance but that has proven really difficult, maybe even a mirage. Luck is needed to succeed with alpha and maybe even Warren Buffet is just simply lucky. A better idea today is to go for ‘smart beta’. To paraphrase Urwin and Eicholtz, different styles, exposures and betas will determine performance in the future, not alpha.

Is the wall of capital coming back? It would certainly seem so after listening to Generali Real Estate’s CEO Giovanni Paviera. He wants to invest and expand his €24 bn portfolio, but it’s very very difficult, he said with his emphatic and distinctive Italian diction. There are opportunities but it’s tough to get in with more and more heavyweight equity investors from Asia and the Middle East crowding the arena.

CANADIAN INVESTOR
Despite the threats and long-term changes, Ivanhoe Cambridge also wants to get bigger and better, according to the company’s executive vice-president for Europe Meka Brunel. The Canadian company is definitely not leaving real estate in Europe; on the contrary, it’s getting in deeper. (As an aside, Brunel does - as she herself declared - look much younger and fitter than her 57 years which demonstrates the point of Tobias Just, Professor of Real Estate at the University of Regensburg, that demographic drivers and other long-term social and cultural trends are changing the way we view and use real estate.)

In a world where spread sheet nerds and bean counters often call the shots, the risk versus return debate where PwC's John Forbes displayed his excellent oratory skills was an exhibition of German Gründlichkeit versus unadulterated emotion. Amazing to hear such strong emotional appeals from an accountant. As Eicholtz said, he should have been a politician. And to see emotion win from rationality! Isn’t that beautiful in this unemotional world of real estate?

IPD chose an enthralling and eloquent speaker for its gala dinner presentation - former Lebanon hostage John McCarthy who gave a moving account of his five-year long captivity in the late 1980s. In essence, though, the IPD world is not a touchy-feely one; quantifiable and comparable data is what makes its heart beat. True to the IPD tradition, Hélène Demay, head of client services, drilled deeper into IPD’s new global fund indices and the ensuing panel discussion on these new products provided insights on how they can be expanded and improved.

ASIAN WALL OF CAPITAL
Moving on to Day 2, GIC’s Bernard Phang provided some fascinating insights into how the Singapore-based investor has developed its real estate arm since 1982. The sovereign wealth fund, one of the oldest in the world, now sees opportunities in Asia and Europe, particularly real estate lending which is really attractive in terms of spreads.

The wall of capital from Asia and other regions outside Europe continues to grow and Simon Mallinson, executive managing director of Real Capital Analytics, provided a comprehensive overview of who the key players are. But although the number of new kids on the block is rising, in terms of deal flows, a lot of capital is still going to the usual suspects – the UK, Germany and France. That puts the new paradigm back into perspective! A brave new world may be emerging, but the speed at which that is occurring is not all that fast.

The conference programme ended with a bang – a lively debate between four high-profile industry leaders who each gave their view on how to invest in real estate. Christian Delaire, CEO of AEW Europe, valiantly took it up for comingled funds and Jon Lekander, global head of property multi-manager at Aberdeen Asset Management, put up a passionate plea for fund of fund vehicles.

Their arguments were not swept away altogether, but the cases put forward by Hans op ‘t Veld, head of listed real estate at PGGM Investments, and Mike Sales, managing director & CIO of Henderson Global Property, were more convincing. According to the audience poll, REITs and separate accounts are the winners in the new paradigm.

Judi Seebus
Editor PropertyEU