ULI PARIS: Cheaper euro will drive global investment into Europe

The recent fall of the euro is making Europe an even more attractive destination for global real estate investors, delegates at the ULI Europe conference in Paris heard this week.

‘The euro is a lot less expensive than it was just six to 12 months ago,’ noted Jack Chandler, chairman of US alternative asset management giant Blackrock Realty Advisors. Gateway cities like Paris are still on the shopping list, he added: ‘Paris is a big market like Tokyo. It may be an Illiquid, slightly illogical market but if you can get into the right assets, it doesn’t seem that bad.’

Europe is a great destination for ‘patient money’ riding the cycle, and even more so if it’s ahead of the capital flow, agreed Goodwin Gaw, chaiman and founder of Hong Kong-based Gaw Capital. ‘European cities are cheaper than tier-three cities in China,’ he pointed out. ‘On a relative basis they are cheap. Populations may be higher in Chinese cities, but European cities have higher purchasing power.’

Spain is not on Gaw’s list, however. ‘I don’t know enough about it and I think we may be too late.’ Blackrock’s Chandler echoed this sentiment: ‘There have been some good trades but we haven’t been that confident with the underlying economy.’

London-based opportunity fund manager Europa Capital is trying to cover as much of Europe as it can, its principal Charles Graham told the conference. ‘We do try to spread it out. We will put money into France and have already done so. Germany is quite competitive, but there are quite a lot of opportunities, for example portfolios that have been starved of capital.’

Central Europe has pockets that may be of interest but the difficulty, Graham said, is that generally speaking the individual markets aren’t big enough. ‘Hungary was mispriced but is now coming back. We see it improving a little bit.’

Europa Capital was one of the key investors to invest in Spain after the outbreak of the crisis, but hasn’t been a big investor in the country overall and is now withdrawing from the BBVA deal. Graham does, however, see opportunities in Barcelona, in particular residential. ‘Barcelona has a great climate, it’s a wonderful place to live. The higher-end resi sector is pretty interesting.’

For an opportunistic investor, development is one of the best opportunities at the moment, Graham said. ‘There are some interesting opportunities, but the ability to do it is another question. If you can get your head around it, development in Germany, the UK and some other markets will be interesting.’
Gaw also views development as an interesting opportunity. ‘The bulk of investment goes to the UK, because of the tax regime, it’s simple, it’s easy, especially compared to the US and New York. High net worth individuals from China are already buying houses in London. Now they’re starting to buy in Portugal and gateway cities.’

Chinese investment will grow significantly in the coming years, Gaw predicted. ‘Chinese developers are getting into big projects and are selling them back to people in China. We’re seeing the first wave of institutional investors coming, but it’s just the beginning…we will see 10 times the amount of capital. There will be a flood of equity.’

One of the key issues facing investors at present is indeed that there is an ‘awful lot of money fleeing other asset classes and coming to real estate,’ Chandler said. ‘Real estate is the least bad of a series of not so attractive opportunities…The good news is that there’s lots of money; the bad news is that a lot is competing with you… It’s a much better time to be a seller than a buyer.’