REAL ESTATE - Investment banks are building up their businesses in European real estate as property markets become increasingly sophisticated, cash-intensive and global.
In a trend described as the “Anglicisation” of property markets, investment banks are picking up where property companies left off because they have better access to capital and can easier move funds cross-border.
Anglicisation – or growing market sophistication – has seen a shift from institutions to public markets. “IPOs [initial public offerings] represent 50% of our business today,” said Lionel Botbol, London-based managing director with Swiss investment bank UBS. “Then you have mergers and acquisitions activity.”
UBS, Credit Suisse, Societe Generale and Citigroup are among investment banks building up their real estate businesses – incorporating not only M&A but also corporate finance, as companies look to finance acquisition through debt.
According to Botbol, “The real estate market is at all all-time high – first, from the standpoint of underlying values and second, from the standpoint of public markets. If you look at France, in 2002 there was a 20% discount average. Now we’re talking about a 20% premium average.”
He predicts further growth in real estate markets, with mileage left in Eastern Europe. “If you put just Poland, the Czech Republic, Slovakia and Hungary together, you’re talking about 100m inhabitants. That’s before you look at Russia and Turkey. I think we’re ahead of further growth.”
If some of these markets are higher risk, pan-European portfolios will generate returns by choosing slightly higher-risk assets, he said.