London-headquartered manager Pantheon’s decision to launch a real estate platform with a focus on secondaries investing is indicative of the potential growth of the sector amid increasing institutional investor interest. Affiliate title PERE spoke to Roman Braslavsky, partner and head of Pantheon Real Estate, to understand the factors driving this optimism around the strategy.
Pantheon expects $10 billion of annual volume based on primary fundraising growth
Between the Global Financial Crisis and the pandemic, about $1 trillion in private real estate capital was raised. This is twice the amount raised during the last bull market, between the dotcom crash and the Great Financial Crisis, Braslavsky says.
Though real estate secondaries transaction volumes dropped off slightly in 2020 to between $8 billion and $8.5 billion, due to the pandemic, he expects swift normalisation: “As more primary real estate private equity capital got raised, it has naturally created more opportunities for secondaries, as it did in other alternatives like private equity and infrastructure.”
Offices, hospitality an attractive opportunity
Braslavsky cites offices in central business districts and hospitality as areas that could benefit from secondaries capital, sectors that have been “beaten up a little bit” by the pandemic. Pantheon also sees opportunities in assets that have proved relatively covid-resilient but have had their value creation plans pushed out a year or so by the pandemic.
“What attracts us to the secondary part of the investing market is that we do not need to see distress for us to find attractive deals and find solutions for GPs. There are dynamics at play across a number of different sectors,” he says.
Like Pantheon’s PE secondaries business, GP-led deals will take precedence
Braslavsky said at the time of the launch that “demographic shifts, technological advances and the disruptions caused by the pandemic” would drive GP-led opportunities. He confirmed to PERE that it this is the area of the market that Pantheon find most appealing, as such deals come to account for closer to 50 percent of the market.
“About seven to eight years ago, 80 -90 percent of all secondary transactions consisted of buying LP stakes. Now that ratio between GP-led and LPs stake deals is closer to 50 percent. We think that trend will continue, as sponsors are more proactive in trying to hold onto their best assets and trying to solve certain needs.”
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