Political uncertainty and lack of core product did not deter investors from striking mega deals in 2017. Multi-family and M&A are set to be big themes next year, brokers forecast.
Daring to make predictions in uncertain times can be a brave undertaking. Yet, Jos Tromp, head of EMEA research for CBRE, is quite forthright when predicting what lies ahead for European real estate in our annual Brokers Special. He says 2018 is likely to be the ‘year of residential’, with real estate investors turning their attention to building up portfolios
of pan-European multi-family assets. While lagging the US in this regard, the strong economic performance in continental Europe and the fast-paced growth of cities across the region may provide the impetus for a wave of capital to shift to the residential segment.
Catella and its investment business are also betting on the residential sector. In November Catella set up a new Berlin-based company – Catella Residential Investment Management (CRIM) – to oversee its European residential investment funds. The business currently consists of five vehicles with a total of €1.3 bn of assets under management across Germany, Austria, the Netherlands, Denmark, Spain, France, the UK and Poland.
Platform transactions
The residential story dovetails with another forecast trend: the increasing number of company and platform-level transactions. US asset management giant Goldman Sachs, operating via its Bricks Acquisitions subsidiary, agreed in early December to buy Polish listed residential developer Robyg in a public tender worth €244 mln. ‘The acquisition of Robyg represents an opportunity for Goldman Sachs to add value to a high quality real estate development platform, building on our local and global experience,’ says Tavis Cannell of Goldman Sachs.
And in Spain, banking group BBVA announced it was selling the bulk of its residential-focused real estate assets to another US-based investor, Cerberus Capital Management, for about €4 bn. The agreement covers 78,000 property assets with a gross book value of about €13 bn, plus the management platform.
Mergers & Acqusitions
Corporate transactions will be a big feature of the market in 2018, showing a clear acceleration compared to 2017, according to William Matthews, partner, global capital markets research at Knight Frank. ‘It is a good way of getting a lot of money into a market quickly. It is hard and time-consuming to assemble a portfolio on an individual asset basis,’ Matthews told PropertyEU’s Europe & UK 2018 Outlook briefing in London.
As if on cue, a string of major announcements hit the market in the last weeks of 2017. UK REIT Hammerson made a €3.9 bn all-share takeover offer for smaller peer Intu in a move which will create a group with a £21 bn (€23.8 bn) pan-European portfolio. Other examples saw Frankfurt-listed Patrizia Immobilien lift its AUM to €30 bn with the takeover of Triuva, IVG’s institutional fund management business; and US-based Principal Financial acquire Internos Global Investors as its pan-European platform.
Year-end whopper
But the year-end whopper was without doubt Unibail-Rodamco capturing Australian retail peer Westfield for $24 bn (€21 bn) in a deal which will create a global property leader with €61.1 bn of gross market value, located in 27 retail markets and cities in the US, UK and continental Europe.
For Unibail-Rodamco, already Europe’s largest shopping centre landlord, the tie-up gives it ready-made access to the US and UK markets. CBRE’s Tromp and senior analyst Raphael Rietema say moves like this reflect the current stage of the cycle, which is characterised by a lack of tradable product and abundance of available capital due to the low interest rates.
Clearly investors are becoming more inventive in the means they employ to target the underlying real estate.
Blackstone’s takeover and delisting of Sponda, the €3 bn Helsinki-listed property company, is a prime example. JLL acted for Polar Bidco, the entity used by Blackstone’s funds to buy Sponda. Another major M&A deal in 2017 saw Blackstone selling Logicor, its European logistics platform, to China’s CIC for €12.2 bn. Underscoring the nature of that transaction, the advisors were all pure financial houses, with the possible exclusion of Eastdil Secured which is a regular on the vendor side in property deals.
