GLOBAL - Real estate debt could become an increasingly mainstream asset class for institutional investors, according to panellists at this year's IP Real Estate Investor Forum & Awards.
Andrew Radkiewicz, managing director for debt funds group at Pramerica, told delegates in Amsterdam the investment class was a long-term market opportunity, not a "flash in the pan".
Pramerica has raised more than half a billion euro from institutional investors for its European real estate strategy, and Radkiewicz said the real estate financing environment was undergoing a structural shift that would facilitate greater participation from institutional investors.
Edward Chai, head of structured products at Henderson Global Investors, revealed that the fund manager was looking to set up a real estate debt fund that would see fixed income and real estate teams work together.
Matthew Ryall, group head of fund selection at Allianz Real Estate, said the company was in the process of issuing its first real estate loan as it sought to move into the sector.
Ryall said the move was based on the favourable risk-return prospects of real estate debt investments rather than incoming Solvency II regulations.
However, it was agreed that there were a number of obstacles to be addressed if institutional investors were to embrace real estate debt investments more widely.
Radkiewicz said there was a "need to demystify" the sector, which many investors associated with the causes of the global financial crisis.
He said it was better to understand debt as "an instrument with which to gain exposure to real estate", rather than an "investment in real estate debt".
Chai said investors often found it difficult to take the investment class on board because they needed to know whether it was technically real estate or fixed income.
Speaking separately at IPD's European conference the following day, Stephen Ryan, senior investment consultant at Mercer, said real estate debt investments were becoming increasingly popular among the consultancy's larger, "more adventurous" institutional clients.
