Institutional Real Estate Americas

October 1, 2014: Vol. 26, Number 9

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From the Current Issue


Climate change at land's end: Real estate investors like targeting coastal cities, but so does a seething Mother Nature

For centuries, coastal cities have been vibrant centers of economic growth. And this vibrancy has always been a magnet for capital, with real estate investors consistently gravitating to markets on the water. But more recently, the real and potential damages caused by the wrath of Mother Nature — increasingly damaging hurricanes, flooding rivers and sinking land masses — are beginning to cause concern.


We can do better: Some pension systems are shunning commingled funds in favor of customized investment structures

Lone Star State denizens like to boast that “everything’s bigger in Texas” — including some of the nation’s biggest public pension plans, such as the $130 billion Teacher Retirement System of Texas and the $26 billion Employees Retirement System of Texas. And these deep-pocketed plans are helping lead the charge among numerous large tax-exempt institutions aiming to leverage their financial heft into more attractive financial terms from their real assets managers, along with more customized investment structures. 


Uncharted territory: Economic vulnerabilities include

The economic and real estate market recovery cycles have been delayed but appear to be following a predictable recovery pattern. Normally these recovery cycles stretch for five to seven years. We are now in year five of this current recovery, but because of the slower pace, the cycle might be extended. Then again, it might not.


Investors, managers hot for Europe and real assets

Investors and managers are decidedly in favor of adding more real assets to their portfolios, investing more heavily in Europe and reducing their exposure to risk. They are also concerned a bubble is forming in core real estate.


REITs continue spanning the globe

Proponents of real estate investment trusts probably cannot help but feel that 2014 is shaping up to be the Year of the REIT.

In Mexico, where the first REIT was created in 2011, the market appears to be gaining momentum on the strength of international real estate capital flows, a growing domestic pension system, and new entrants preparing to join the ranks.


U.S. capital pours into Europe

U.S. capital raced across the Atlantic in the first half of 2014, acquiring $15.5 billion in European real estate, a 75 percent increase from the first half of 2013, according to the latest research from CBRE.


Challenges to a positive outlook: Not all indicators are pointing northward

Since the beginning of the year, I have believed that the second half of 2014 would be positive for both the economies and the equity markets of the developed world. Like many, I was surprised by the weak first quarter in the United States — real GDP was –2.9 percent — but I viewed that as a kind of mini-recession within an ongoing recovery and attributed it to severe weather conditions, accounting issues related to the Affordable Care Act and other factors. I expected that the following quarters would exhibit renewed momentum based on the economic data being reported.


Brewing storm: Climate change and brownfield development

Brownfield development has become increasingly important and attractive to investors in recent years. There are more than 5 million acres of abandoned industrial properties across the United States, much of which is ripe for development. Reclamation of these sites can make the environment safer, reclaim valuable land and create jobs. As a result, state and local agencies across the United States are offering economic incentives and funding assistance for the development of these sites. At the same time, the federal government is also offering tax incentives and direct financial incentives to promote their development. 


Global impact: Immigrant patterns have big implications for real estate investors

The population of the United States is becoming increasingly global. Real estate investors and developers should consider using innovative product design and positioning to target new populations and demographics.

While increasing and diverse international capital flows have forever changed the way real estate is financed, many investors and developers still overlook and undervalue the impact of globalization in the United States, and do not consider how to differentiate their product to achieve superior returns. As conventional U.S. market segments are increasingly well served, resulting in compressed yields, considering globalized markets may present opportunities to produce compelling returns with a risk profile consistent with domestic investment.


Asian insurers to step up property investment

It is no secret that more Asian investors are turning to real estate investment to enhance and diversify their portfolios, and Asian insurance companies are no exception. In fact, an easing of regulatory restrictions on property investing for insurance companies — such as allowing direct overseas investment, higher allocations to real estate and a simplified approval process — is leading to greater property investment, notes CBRE in its recent report Liberalization and the Rise of Asian Insurance Investment in Real Estate


Fanning the flames: Chinese efforts to quell NPL issues suggest the problem is actually heating up

Why is the Chinese government setting up national and regional asset management companies if the country’s nonperforming loans are under control?

Chinese government officials at the People’s Bank of Chinaand state council appear to be finally acknowledging that defaults on bank loans, trusts, wealth management products and bonds are steadily increasing. In just the three months ending March 31, NPLs increased by 54 billion yuan ($8.7 billion) — the biggest increase since 2005 based on official government statistics.


Shop Talk: A conversation with Alan Dalgleish

Alan Dalgleishis chief executive of ANREV, the Asian Association for Investors in Non-listed Real Estate Vehicles. Dalgleish recently spoke with Jonathan Schein,senior vice president and managing director of business development with IREI, about ANREV’s efforts to bring greater transparency to the Asia Pacific region through the organization’s index data of Asia Pacific non-listed fund performance.

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