European deal volumes in the first quarter of 2015 reflected the huge capital flows into the region as overseas investors almost matched their domestic counterparts in terms of total spend on large real estate transactions.
European deal volumes in the first quarter of 2015 reflected the huge capital flows into the region as overseas investors almost matched their domestic counterparts in terms of total spend on large real estate transactions.
PropertyEU Research identified some 70 investors who spent €100 mln or more on real estate in the UK, Ireland or Continental Europe in the first three months of 2015.
This group collectively invested €28 bn in commercial and residential real estate. Investors based in the UK and Europe accounted for €15 bn of the total, while investors headquartered in North America, the Middle East and Asia were responsible for €13.5 bn of the spend.
The research findings are based on an analysis of reported direct property transactions in which the investment volume was disclosed or known during Q1. Transactions for which the price was kept confidential have been excluded. A fuller report on the deal volumes will be published after H1.
Overseas capital flows into Europe may not be sourced 100% from outside the region. US private equity investment, for example, often includes funds sourced globally, including from European institutions, while European funds may include US or Asian capital. Nevertheless, it is clear that European property is no longer a local business when it comes to transaction investment sources. Buying and selling European property is very much a global affair.
Billion spend
Three investors from outside Europe and one domestic player were the only dealmakers to invest more than €1 bn each to acquire European real estate directly during Q1.
Qatar Investment Authority (QIA) was by far the largest dealmaker of the period, based on reported transactions tracked by PropertyEU Research, with a total volume of €4.7 bn in just two deals.
QIA's deals took the form of share acquisitions rather than direct property deals but they gave Qatar's €236 bn sovereign wealth fund control of two of the largest office-led business districts in Europe, Canary Wharf in London and Puerto Nuovo in Milan.
At end-February QIA acquired the 60% it did not already own in the 290,000 m2 Porta Nuova mixed-use development in downtown Milan for an estimated €1.2 bn. Around the same time QIA and North American investor Brookfield Property Partners obtained backing for their €3.5 bn bid for Songbird Estates, the majority owner of Canary Wharf Group, which in turn owns the majority of the Canary Wharf office estate in London.
The next three places in the provisional dealmakers ranking are occupied by US private equity firm Starwood Capital Group (€1.7 bn), Canadian pension investor CPPIB (€1.5 bn), and Legal & General Property/Legal & General Capital which invested €1.2 bn.
Starwood made its mark in the quarter largely due to the acquisition of large mixed portfolios in Sweden and Norway for €1.2 bn - the largest real estate transaction signed in Nordics during 2014.
Student living
CPPIB agreed to acquire the Liberty Living portfolio in London for €1.5 bn in February. This marked the entry of the Canadian pension giant into the student housing sector, which is fast transforming from a niche to a mainstream investment opportunity. Activity is primarily focused on the more mature UK market but market watchers agree investors are now looking at the continent as well, though portfolios will be smaller and backing development rather than buying existing assets may be the order of the day.
Russia’s LetterOne Treasury Services also moved into UK student housing in February by acquiring Carlyle Group’s 2,100-bed Pure Student portfolio in Central London for around €730 mln. The Luxembourg-registered firm also acquired another 250 student accommodation units in London for €193 mln.
See the May edition of PropertyEU Magazine for more on investment activity and the top dealmakers in Europe during Q1 2015.