Michael Clarke, head of investor services for the EMEA region at CBRE Global Investors, tells us what he expects in the European real estate secondaries market.
How do you characterise CBRE Global Investors’ role in the real estate secondaries market?
CBRE Global Multi Manager manages $12.1 billion of equity on behalf of institutional investors investing in real estate funds across the world. They do that utilising primary investments, but also very importantly, secondary investments and co-investments. As a GP, CBRE Global Investors manages direct funds where we will support secondary activity when investors require some form of liquidity.
Moreover, as part of CBRE group, CBRE Capital advisors run a secondary trading platform called Property Match, which has done transactions across a whole range of UK and continental Europe property funds.
The opportunities are everywhere. The growth you’ve seen in the amount of secondaries traded has largely been a factor of the vintage of the fund. A lot of the 2006 to 2007 vintage funds – which were the peak years in terms of fundraising—are now getting close to termination and a lot of the activity has been within those vintage of funds. If you go into a fund from those vintage years that has distressed assets, you’ll expect a significant discount.
In Asia, the many of the funds of that vintage are now in the process of being realised, so the trade realisations have happened a lot earlier there and as a result, there will be fewer opportunities in that region in the near-term. In continental Europe, however, there’s still a substantial amount of funds, which have yet to reach their final liquidation phase.
Various investors recently sold their stake in the CBRE Dutch Office Fund to Blue Sky Group. Do you know the rationale behind the sale?
Over the last 18 months a huge amount of work has gone into modernising the terms of the Dutch fund. It’s been through a fundamental restructure, which modernised the terms and conditions and fund structure. These changes have left a vehicle today that has a top level of transparency and therefore offers improved liquidity arrangements.
As a result, a number of investors including Blue Sky have looked at the opportunity to buy into the newly restructured fund at a time where the Dutch office market is believed to have bottomed out and where there are opportunities for some attractive returns going forward.
Does the Blue Sky deal provide evidence that there are new buyers coming into the market?
The whole concept of secondaries has become more accepted by a number of players. I think it’s easier for secondaries to happen for those buyers that are looking at relatively core open-ended structures, who want access to market return rather than going into blind funds where there’s uncertainty when their capital will be called.
Our Dutch Office Fund was a semi-open vehicle so it was well-known by nearly all of the big Dutch investors so they can monitor it to see when they want to get exposure to that particular market.
So, yes, there’s increase in demand and some new players are coming in, but they’re investing in funds that are more widely held and better known. I wouldn’t extrapolate from our deal with Blue Sky that there’s suddenly lots of interest in secondaries in all types of funds.