BlackRock Real Assets expects to begin investing in value-add property deals next year after a near two-year hiatus.
The world’s largest asset manager held a final close on €1.3 bn of equity from 39 investors for its latest real estate value-add fund, Europe Property Fund V, in May 2020. The group has an additional €200 mln of commitments for co-investments, taking the total dry powder to €1.5 bn, which means it has almost twice as much capital to deploy as in the fourth fund which closed early in 2017.
Wolfgang Koedel, director and BlackRock Real Estate’s country head for German-speaking countries and the Netherlands, said that the manager’s flow of value-add acquisitions had slowed down in 2019 and this year, but he expected that to change - ‘one hundred percent’ - in 2021.
‘In 2019 we took our foot off the pedal a bit in our value-add strategies and we were right to do so: we all knew it was an incredibly long real estate cycle. Now is probably the start of a new cycle so we don’t want to miss out on opportunities,’ he told PropertyEU.
Because the real estate sector had entered the pandemic with generally low leverage, low vacancy and modest supply, ‘we don’t expect to see a massive need for recapitalisation’, he continued, ‘but I do think 2021 will be an interesting year.’
In the office sector, ‘we will probably see some companies that have non-core real estate holdings who experience economic pain in 2021 and might want to create liquidity, and that might create opportunities.
‘I also think some product has been held back in 2020 but obviously as time goes on, some of those real estate owners might not be able to extend their leverage and that will bring properties to the market...2021 will be a challenging year and a tale of two markets: one tale, of liquidity; the other, of decreased occupier demand for office space.’
More cautious on offices
As well as investing dry powder from its value-add discretionary fund, BlackRock will continue to buy core assets, including offices, although like many other investors the manager had already begun a shift to more residential and logistics before the pandemic.
‘We are over-weighting the beds and sheds in our strategies,’ Koedel said. ‘I wouldn’t say we are downgrading offices per se because we have been very selective about what a future-proof office means to us in the past. I would say we are being even more cautious than before.’
BlackRock has a relatively young Eurozone core open-ended fund which began buying two years ago. The portfolio, including German office and logistics, an office and retail block in Helsinki, and an office building in Amsterdam, has proved very resilient through the Covid pandemic, Koedel added.
Last month, PropertyEU reported that BlackRock had sold IMPULS, a 12,000 m2 office building in a prime Berlin location - which the manager forward-funded 18 months ago, before it was leased.
The building was then let in its entirety on a long lease to a federal government agency and the sale is said to have been at a record price.
