The European market might be ‘first out of the blocks’ when compared to other regions of the world, according to Heitman’s managing director and head of European Private Equity Tony Smedley.
Speaking to PropertyEU in an interview, Smedley said that he is seeing greater liquidity on the transactional side, while the gap between bid and ask in the private markets is narrowing more quickly. ‘We feel as though the market will pull out of the correction through 2023 and we need to be ready to capture the recovery phase. We begin to see the early stages of this now, there is quite a lot of deal flow and we continue to be active,’ Smedley noted.
With yields correcting rapidly across Europe, Smedley expects 2023 to be a very active year for many investors. ‘There is increasing interest in opportunistic strategies and in putting capital to work, and this is quite usual in the recovery phase of the market cycle,’ Smedley commented. ‘Prudent deployment into recovery cycles has historically proven to be positive for investment performance. Interestingly, for the first time in my long career, with respect to the timing of the recovery cycle, I actually think that the European market might be first out of the blocks when compared to other regions of the world.’
US-based global real estate investment management firm Heitman has been busy on the fundraising trail, and is approaching a final close of its €350 mln European value add fund, while also looking at other business lines in Europe such as real estate lending.
‘Our value-add fund is still open for investments,’ Smedley noted. ‘We haven’t competed the fundraising yet but we are getting close.’ The vehicle aims to aggregate a property portfolio with a focus on the alternative property sectors across Western Europe including opportunities in self-storage, rented-residential, senior housing, and student housing.
Smedley also sees ‘significant’ opportunities in the market in situations where assets are in need of recapitalisation or where the equity side is under pressure. ‘We have the flexibility in our capital sources to provide funding in different parts of the capital stack whether that be straight equity, preferred equity, convertibles or a more structured private financing arrangement to suit the particular circumstance,’ Smedley told PropertyEU.
While the office market is the largest commercial property sector globally and, being GDP correlated, by definition will benefit in the recovery phase, Smedley said that Heitman will continue to pursue the alternative sectors that have demographic, non-cyclical tailwinds like the living segments and storage. Smedley: ‘These are sectors that will continue to grow. I cannot say that with certainty for the office market.’
The firm invests through funds, discretionary accounts or bespoke investment solutions. ‘If we take the investments we made in European self-storage over 15 years ago, for example, we created a bespoke solution for our client while for more recent investments across the alternative sectors we have utilised co-mingled funds, separately managed accounts and funds of one – this reflects the increasing institutionalisation of these sectors’ Smedley noted.
Headquartered in Chicago, Heitman is a privately-held investment manager with $55 bn of assets and a global staff of 350 people (40 inEurope). The firm focuses on alternative asset classes rather than traditional real estate segments including self storage, senior housing, student accommodation, and multifamily residential assets.
