Editor's Choice: Deal downpour

The PropertyEU team has had an extraordinarily good summer - and not just weather-wise.

It may have been relatively dry in our neck of the woods in northern Europe – at least until recently - but in terms of news, it has been raining deals virtually non-stop over July and August. Indeed, the number of big transactions this summer has evoked memories of the boom years in our newsroom in Amsterdam and we have had no need at all to scavenge for a good story.

The deal flow has been remarkable, not just because of the size of the transactions, but also because of the source of the capital. Since the outbreak of the financial crisis, sovereign wealth has driven real estate deals in Europe and this trend was particularly manifest these past couple of months. The Norwegians, Canadians, Chinese and Qataris continue to hit the headlines and they are becoming more adventurous as well.

The flock of international birds looking for rich real estate pickings in Europe is also becoming increasingly exotic. Just this week, Singapore-listed IREIT Global told PropertyEU it plans to double its portfolio of European office assets to more than €500 mln in the next 12 months after building a portfolio of around €285 mln in four German cities.

Germany may have been the first place the Singapore-based company landed, but it is also eyeing the UK, CIO Adina Cooper said in an interview. ‘We like the UK as a market, it’s just that right now, many of the assets are too expensive for what you’re getting and we’re getting better value in Germany. Once the market can provide us with the kind of assets that we're looking for in the UK, then we may invest there.’

SPREADING THEIR WINGS
That strategy shows how far the market has developed in recent years. While London may have been the first port of call for many non-European investors, they have now clearly spread their wings and some of them are turning up in unexpected places. Canada's CPPIB is a case in point. At end-July, the pension fund heavyweight landed in Brussels where it has signed a deal to acquire a 39% stake in Interparking, Europe's largest parking lot operator, for €376 mln. The acquisition is part of CPPIB's strategy to increase the share of real estate (property and infrastructure) to around 20%.

The Koreans are likewise moving in different directions and splashed out on German office properties earlier this month via a joint venture with Dream Global REIT (formerly Dundee International REIT). Under the agreement, the South Korean pension fund POBA will acquire a 50% interest in seven of the Canadian company’s office properties for around €221 mln in Hamburg, Berlin, Frankfurt, Düsseldorf, Stuttgart and Munich.

Inevitably, however, London still continues to capture the bulk of capital from first-time investors in Europe, but the UK regional market is now generating interest from institutional and private Chinese buyers. A trend that adviser JLL expects to continue into the second half of this year with the likes of China Construction Bank, China Overseas Holdings, insurers China Life and PingAn all scouring the market.

Chinese state-owned fund Gingko Tree Investment has already gone down that route: earlier this month it picked up Fosse Shopping Park in the UK city of Leicester for £345.5 mln (€433 mln) in a joint venture with The Crown Estate. Meanwhile Taiwan’s Cathay Life has stuck to the blueprint for most of the institutional investors coming out of Asia for the first time, striking in central London with the acquisition of the Woolgate Exchange office building for a reported sum of £320 mln (€400 mln).

LISTED ROUTE
Direct investment is not the only route that the new wave of Chinese and Korean investors is taking. According to Icade's CEO and EPRA chairman Serge Grzybowski, the eurozone is the number one real estate investment destination for a host of pension funds, insurers, investment managers, property companies and sovereign wealth funds from these two countries. Gryzbowksi made the comment following a recent Asian Investor Outreach tour organised by the European Public Real Estate Association (EPRA). 'These investors have significant sums of capital to deploy and there was a real interest and desire from them, expressed during the EPRA meetings, to go into the eurozone and invest directly in listed European property companies,’ added Christophe Kullmann, CEO of French REIT Foncière des Régions and head of the French Property Federation (FSIF).

The good news is that some sources of sovereign capital from outside Europe are targeting a variety of segments. The Qataris, for example, have been scooping up hotels in Paris, offices in Milan and more recently residential in the Netherlands. Within Europe, the wall of sovereign capital is also swelling at a steady pace. Norway's giant oil-fuelled wealth fund remains the poster boy for this particular trend after recently outlining a more aggressive and independent strategy to expand its global real estate holdings over the next two years to about €20 bn. A tall order given that it started from scratch just four years ago, but it is certainly heading in the right direction.

The largest world's largest sovereign wealth fund with €651 bn in assets under management reported that the value of its real estate portfolio rose to NOK 63 bn (€7.7 bn) in the first three months of 2014. And that is excluding a number of chunky deals over the summer. While most of us were out enjoying the sunshine, Norges added another €1 bn of assets following the acquisition of a prime portion of Mayfair real estate in London together with The Crown Estate for £381 mln (€478 mln) and Le Madeleine mixed-use property in Paris from US fund manager BlackRock for €425.6 mln.

In Amsterdam, the weather has now well and truly caught up with the deluge of deals and the best place to be is indoors. Just as well given all the news that continues to roll into our email boxes!

Judi Seebus
Editor in chief

RELATED ARTICLES
Singapore REIT plans European office spree
Canadian CPPIB buys 39% of Europe's largest parking operator
UK-Chinese JV acquires regional shopping centre for €433m
London most popular with Chinese investors in H1 – JLL
Dream Global agrees €221m JV with Korean pension fund
Chinese, Korean investors target Eurozone markets, execs say
Taiwan's Cathay Life buys London’s Woolgate
Qatari SW√F bids €330m for Paris hotel Le Grand
Qataris close purchase of Credit Suisse's Italian HQ
Norges signals more aggressive real estate strategy
Norwegian SWF pays €426m for landmark Paris property
Norges-Crown Estate JV expands into Mayfair in €478m deal