BRIEFING: European real estate funds reinvent themselves

Capital is flooding into European Real Estate funds, which are reinventing themselves and fast adapting to investors’ needs, market experts agreed at PropertyEU’s Future of Real Estate Funds briefing, which was hosted by Paul Hastings at the law firm's City offices in London on Tuesday.

‘We are in a sweet spot now, with massive volumes of capital coming in and the RE industry benefiting from the upturn in the global economy,’ said Ian Laming, partner and chief operating officer at Tristan Capital Partners.

‘What is noticeable is the increased confidence in the European market in the last 18 months, and the share of US and foreign capital Europe is picking up is testament to that,’ said Tiziana Galassini, COO, head of product development, Client Capital Group at LaSalle Investment Management.

The European market has changed in a positive way after the crisis, delegates concurred, as a lot more thoughtfulness goes into building a portfolio. ‘There has been a process of reinvention since the dark days of 2007,’ said Duncan Owen, head of Real Estate at Schroders. ‘The structures in place are more cautious and more risk-aware, and most importantly more transparent.’

Increased demand is generating a more varied supply: investors’ keen interest in increasing their exposure to real estate is leading managers to provide different services, create new structures and structure new specialist funds.

One size doesn't fit all
‘There isn’t a single model everyone has to fit into, and this is what the market needs. We are in a good place, in tune with what investors want and think,’ said Philip Cropper, chairman of CBRE Capital Advisors. ‘The more flexibility, opportunity and variety of methods we bring into the market, the better it will be.’

There is no single solution, Owen agreed: ‘Investors want good managers who deliver performance, and performance can be delivered with different fund structures.’

Different product types match different investors, and it is the manager’s task to find and deliver the perfect match. As Galassini emphasised, it is not a case of either/or: ‘Management expertise, transparency and attention to costs can and should all coexist.’

Patchwork quilt
Foreign investors can be baffled by the different realities they find in what Owen described as the ‘patchwork continental quilt’ that is Europe. They can also be more demanding, as Cropper pointed out: ‘Overseas capital wants more control, more access, more participation in decision-making. They want to make sure their capital is being employed where they expect it to be employed. A few years ago it was different, but this is the new reality.’

Asian investors in particular are driven by different factors, Owen said: ‘There are different considerations coming into play, such as diversification, currency exchanges and the will to invest in mature markets. It is not just a returns strategy.’